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Warren E. Burger: We will hear arguments first this morning in State of California against the State of Texas and original jurisdiction case. Mr. Falk, you may proceed whenever you are ready. Jerome B. Falk, Jr.: Thank you Mr. Chief Justice and may it please the Court. I should like to begin by identifying four of the factors which prompted California to invoke this Court's jurisdiction. For these same considerations in our judgment make the exercise of that jurisdiction appropriate and indeed imperative. The first jurisdiction, first consideration was the technical basis for jurisdiction under Texas versus Florida, point of which of course I will be elaborating upon throughout this argument and namely that the tax claims which have been asserted by various taxing entities exceed the available assets of the State. For the moment, suffice it to say that once we determined that this was a situation in which the tax claims did have that quality, we had a very practical and real concern that if California were successful in its own Courts, the judgment it came might not be as collectible. Speaker: Do we know as a fact that the tax claims do exceed the assets in the State? Jerome B. Falk, Jr.: Yes we assert that at our pleading and I think have demonstrated -- William J. Brennan, Jr.: But I mean do, has happened to established at all, is it agreed to? Jerome B. Falk, Jr.: I think it is not agreed to Mr. Justice Brennan by Texas and I am prepared to discuss the reasons why we think that that it is demonstrably so that they do it just as an arithmetical matter, the tax rates total a 101% on all of the major portion of the state-- Speaker: But we know what the size of the State, does anyone know about it exactly? Jerome B. Falk, Jr.: Well that State has filed a return and based -- we have attached to our pleading an Appendix, Appendix A which sets forth the calculations of the taxes under the various Federal and State rates based on the return filed by the State on their own agreed value, the problem becomes exacerbated if the rates, if the amount of the State is greater but even on those rates there is a short fall of many millions of dollars. Speaker: This is the Federal State Tax Returns -- Jerome B. Falk, Jr.: The Federal State Tax Returns and also the California IT 22. Harry A. Blackmun: Are the California assets and you do have a real estate in the Los Angeles area, and the State does not? Jerome B. Falk, Jr.: No the State does not Mr. Justice Blackmun -- Speaker: I assume the corporation does. Jerome B. Falk, Jr.: I assume it does but unless it is an alter ego we cannot reach it. Speaker: Are those assets sufficient to pay the California death taxes if it is determined that Mr. Hughes was not a California domiciliary? Jerome B. Falk, Jr.: No because we can't reach the assets of Summa unless it is proven to be an alter ego of Mr. Hughes. Speaker: Well that is in litigation is it not in Delaware? Jerome B. Falk, Jr.: I do not believe it is a litigation in Delaware and -- Speaker: Could it be? Jerome B. Falk, Jr.: I do not believe it could be in Delaware, I suppose we certainly could contend and I think would if compelled to but it is far from clear that such a contention would be accepted. Speaker: Has Texas intervened in the Delaware litigation? Jerome B. Falk, Jr.: Texas has been named as a party in the Delaware litigation and contends and I must say, I think rightly, that it cannot be made a party there provisions of Sovereign Immunity and I think for reasons of due process it is not voluntarily appeared as I understand that they made a motion that quash, if that motion is pending -- Speaker: California has made no appearance? Jerome B. Falk, Jr.: California has made no appearance and intends to make no appearance. Speaker: Mr. Falk, do you not suppose that may be some controversy over the values submitted in the Federal State Tax Returns. Jerome B. Falk, Jr.: I fully expect that there will, I believe that all of the taxing authorities will contend that the values are greater. Speaker: For example, Summa corporation. Jerome B. Falk, Jr.: Summa Corporation being the main asset and there is an Internal Revenue Service investigation and the States were doing likewise. I think it is quite unlikely that the values will be less, the values that were reported to put it mildly work were conservative we think and we think that the values will be larger but it would take a dramatic cut which is I think unconceivable for the problem -- Speaker: Well I just wonder on the issue before us, how that bears on whether or not we ought to accept there is no jurisdiction? Jerome B. Falk, Jr.: I think it that there is really no realistic possibility and Texas does not contend that the values are less and there is really no realistic possibility that the values would be such that lower rates of tax would apply, so we are in a situation in which I think it is safe to say that the tax rates combine to a 101% and that problem is exacerbated by a couple of factors that are mentioned in our brief. One, that some of the items which are expenditures by the estate, for example, for litigation expenses which are lawful figure are not deductible under California Law. As a result although they are losing the money in the form of these expenses, it does not reduce their California taxes and that again only exacerbates the short fall. The second problem is that has Summa has encountered really staggering law suits in the year since Mr. Hughes died. It was $29million of operating losses in 1976, and I think the figure was a 169 million if I recall correctly of reduction of net book values in that same year. 1977 is not formalized, we have been advised informally that the figure would be somewhere in the neighborhood of $15million. Speaker: Is there any controversy although whether all of the assets of Mr. Hughes have been marshaled? Jerome B. Falk, Jr.: I am not aware of any, I think they have pretty much been identified in our subject of administrations in several States -- Thurgood Marshall: Amount of money is that book value or just actual money? Jerome B. Falk, Jr.: Well the State Tax Return was based on appraisal of the value not on book value, and that will be the basis on which tax will be concerned, there was a pending controversy as to whether that appraisal is an appropriate one. That-- Warren E. Burger: For purposes of our evaluating whether this is or is not an appropriate case for original jurisdiction, in your view, would it make any difference whether the total of all the taxes would consume 95% of the entire assets or whether they would be a 105%? Jerome B. Falk, Jr.: Well, Mr. Chief Justice in my view it would not, but I think under Texas V. Florida the 100% mark has special significance. I do not think I have to persuade you of my alternative view but I might in response to your question suggest you briefly what it is. It starts with Massachusetts v. Missouri, 308 U.S. where the Court refused to entertain a suit to prevent Missouri from imposing a tax on a trust that had been established by Massachusetts domiciliary with Missouri trusties. The Court distinguished Texas v. Florida in that case, but on grounds which to me suggest that the 100% figure is not the end of the case. After noting that the trust assets of the Missouri Trust were sufficient to pay the taxes of both States, the Court went on to say and I am going to quote from it, “It was not shown that the tax claims of the two States are mutually exclusive” and that to the contrary again quoting, “The validity of each claim is wholly independent of that of the other” under which, there was not a central issue domicile. From this, we think that there is jurisdiction of a suit between States in this area, where two things are shown. First, that two or more States each seek to levy a tax on a mutually exclusive ground as there was in Texas v. Florida and as there is here, domicile; and secondly that the claim of the defendant State in some concrete way, in some real way, injures the plaintiff state. Now in Texas v. Florida that second element of concrete injury was shown by the fact that the tax claims exceeded a 100% and so you had a classic in the nature of interpleader situation. Even if that were not here, we believe that our pleading show another kind of concrete injury that satisfies the standing in case of controversy requirements and that is this. We found ourselves with an inheritance tax claim which it, which we and the estate mutually desire to compromise and thereby avoid years of costly litigation. Dependency of the Texas' claim was all that stood in the way of California and the estate, totally resolving the inheritance tax matter. It was dependency of that claim which prevented the estate from unconditionally agreeing to settle this case for a very understandable reason, if they agreed to pay a large tax to California and they are liable to it, Texas for a 16% tax, the result would be devastating and if they were unwilling and understandably so to agree, this is the problem with any situation of an interpleader type, where you cannot get all of the parties under -- into one Court. Speaker: There really was never a basis for classic interpleader, is it not? Jerome B. Falk, Jr.: No it is not, I do not contend that it is an interpleader, I say that it is, if you were forced to conclude,that they were not a 100% -- that the taxes did not exceed a 100%, there would still be a controversy between California and Texas, not in the classic interpleader mode but simply because Texas is asserting an inconsistent claim with California -- which is inconsistent with California, that would prevent California from resolving a major controversy with the estate. Speaker: Well now that in -- you say Texas is asserting an inconsistent claim and then you say that the cause of the assertion of that claim are California is unable to settle with the estate, those are two separate assertions you make and both of them would have to be upheld in order to support your alternative theory -- Jerome B. Falk, Jr.: You mean factually, it is factually up held -- Speaker: Well survive the pleading State? Jerome B. Falk, Jr.: Yes yes, now I do want to stress that this is not our primary submission, it arises and is necessary only if we are mistaken and the tax claims do not exceed a 100%. I am absolutely satisfied that they do but in response to the Chief Justice's question I wanted to develop that point. Potter Stewart: Now what sort of cause of action would that be? Or let me begin by asking you this, what if Texas asserted that the decedent had been a domiciliary of Texas at the time of his death and asserted a Class A tax claim successfully, based upon that fact that jurisdictional fact against all his intangible properties that amounted to say 40%, and let us say that California asserted an appropriate litigation that the decedent had been a domiciliary of California at the time of his death and based upon that jurisdictional finding asserted a tax claim that amounted another 40% of the decedent of State. What possible federal question would be involved? Jerome B. Falk, Jr.: I do not think there is a federal question. Potter Stewart: None and no lawsuit between those two States? Jerome B. Falk, Jr.: Well, I do disagree with this -- Potter Stewart: No controversy between those two States? Jerome B. Falk, Jr.: Well, the controversy that I perceive in that situation is not a federal question but it is a controversy. Both States cannot be right although, -- Potter Stewart: Certainly they can be. Jerome B. Falk, Jr.: No I think both States can successfully get judgments but as a conceptual matter one cannot have two domiciles that was the point of Texas v. Florida, then only one of the four States -- Potter Stewart: And as the point of the Dorrance case was just the point implied in my question. Jerome B. Falk, Jr.: I think the point of Mr. Justice Stewart of the previous cases including the Dorrance Litigation is that although one can have but one domicile, that our federal system permits -- Potter Stewart: Texas is entitled to determine where -- that he is domicile in Texas, California is entitled to determine he was domicile in California; and those two inconsistent determinations create no federal question at any time. Jerome B. Falk, Jr.: I agree they do not and that of course is why Texas v. Florida arises because there is no solution to the problem where the taxes exceed a 100% say, for an action in this Court. There is no other way to get a unitary adjudication. Potter Stewart: What Court – what law does this Court apply in such cases then? Jerome B. Falk, Jr.: Well I think in Texas v. Florida and I think it would be true here that the Court find, that the Court will have no choice of problem because there is no difference in the law that -- Potter Stewart: What if there were? Jerome B. Falk, Jr.: I do not know from any decision of this Court, I assume it would have to apply it's own principles of domicile. Potter Stewart: What if Texas had a one set of criteria for determining domicile and California had quite a different set? Jerome B. Falk, Jr.: If that were the law, Mr. Justice Stewart one aspect of Texas v. Florida would not be present and that was not emphasized in the Court's opinion here that the law was the same in all four States. Potter Stewart: What difference -- Why is that significant? Jerome B. Falk, Jr.: Well it -- as I understand an interpleader -- the interpleader concept, in the nature of interpleader concept it is that you have inconsistent claims and if the laws of the two States were substantially different so that it would be possible under the laws of both States for both States to be right, I am not sure in my own mind that the Court would then appropriately exercise jurisdiction to -- Potter Stewart: But what law should the Court apply? Jerome B. Falk, Jr.: Well I say -- if it would entertain jurisdiction it would have no basis for choosing between the two other than to pick the law that made the most sense. Potter Stewart: Why as a matter, will we be free to do that, will we? Jerome B. Falk, Jr.: I think you are, as part of the original jurisdiction but I want to stress that I do not believe Texas contends that, that is the case here. The law of the two States, really the law of the nation -- Potter Stewart: Would it not sound some sort of federal not federal, common law because this is a federal equity. Jerome B. Falk, Jr.: Well I think that it is the law of the States here, of all fifty States I believe that defined domicile in the same way. Speaker: On following through on Justice Stewart's question, it has always been assumed that inheritance of taxes follow domicile, do you think in our jurisprudence we have gone beyond that point or about to or not may be individual States can rest on something other than common law notions of domicile? Jerome B. Falk, Jr.: I think that there would be no due process objection to other basis for taxation and I think there are cases that support that statement; however the laws of Texas and California that have been invoked by our respective States do not assert taxes on any other basis. The basis for taxation in Texas and the basis for taxation in California that brings us here is domicile. So I do not think that we have to reach that question, that is what we are -- that is not what we are attempting to do. Speaker: Mr. Falk, are not there cases and decisions in these original jurisdiction cases, where this Court has fashioned a rule of law Jerome B. Falk, Jr.: Yes I think – I think there are many. Speaker: Well what -- when we do that, what are we doing? Jerome B. Falk, Jr.: Yes I think you are fashioning a federal rule, I assume that the -- Speaker: What is unique about our doing that in this situation? Jerome B. Falk, Jr.: Only that I do not have to because there is no conflict between (Inaudible)-- Potter Stewart: Why do you suppose in that Mr. Justice Stone's opinion for the Court in Texas against Florida, he emphasized the fact that the laws of the four States there involved were basically identical with respect to domicile, why was that of any important at all-- Jerome B. Falk, Jr.: I think it demonstrates that an appropriate in the nature of interpleader action because the claims are identical, you have two claims that cannot both be right as an independent matter and therefore it is an appropriate -- Speaker: We don't think it might also but read as making it easy to fashion that rule -- the federal rule -- resolution is dispute among -- Jerome B. Falk, Jr.: I do think that if you were confronted with a situation in which the laws of the States were different and it conflict -- then you would have to. Speaker: But may be Mr. Justice Stone's emphasis on the fact that the all four were the same. Just made it easier -- that is federal rule. Jerome B. Falk, Jr.: I think that is the answer, I think the escheat case is following Western Union V. Pennsylvania are perfect example of case in which in the Court made a decision which has to be federal in its origin as to which rule of escheat would govern the resolution of those several State conflicts. Speaker: And dividing inter state --? Jerome B. Falk, Jr.: I think that is the same, I think that the same. William H. Rehnquist: Do you contend here that there is a federal constitutional principle which says that a State may impose an inheritance tax or a State tax only on one particular set of criteria. Jerome B. Falk, Jr.: I have not contended that and I do not think it is necessary to do so because the laws of the two States base their tax on that ground. We are not challenging the basis for the Texas tax other than its factual basis. I mention Western Union -- Speaker: Mr. Falk, may I just question the proposition. I am intrigued by my brother Stewart's question. You say the law of the two States is identical, now may be the black letter law is the same but we all know that there are all sorts of gradations when you apply a rule, may be in Texas they attach greater weight to the place of birth in determining what element conclusion is and in the California that may attach greater weight to some other fact, their shadings which may produce inconsistent results which one could describe as differences in the laws of the two jurisdictions. Jerome B. Falk, Jr.: I think that is not so. I am no expert on Texas law, but I have followed their domicile trial here and of course I have read Texas v. Florida and that case was initiated by Texas, and it found its law to be the same as the other three States and I read that the papers there and I understood it to be the Texas law then and I think now was in agreement really with the common law of the fifty States of the Union on domicile. I am really aware of no difference. Speaker: The law of the two States is really completely identical, cannot we be confident that the two States will reach the same result and the same set of facts? Jerome B. Falk, Jr.: I am confident that they -- well at least we know this, we know that a jury in Texas has rendered a verdict that is inconsistent with the position California asserts now we are here -- Speaker: California asserts as a litigant. Jerome B. Falk, Jr.: I cannot tell you what the Californian Courts will do anymore than Texas could in Texas v. Florida, that litigation of course came here before any litigation had occurred in any State and the Court rejected Justice Frankfurter's suggestion that it was premature I had mentioned the first of the considerations and the second one has to do with Western Union and I think Western Union is an important case here. In our view, for reasons set forth in our papers in some detail, we think Western Union took Texas V. Florida one more step and made the exercise of this Court's jurisdiction mandatory and not simply optional. In cases where, and they are rare, where two or more States seek to tax the State beyond the point of confiscation. I have read and reread Texas's reply on that point and I do not understand that they seem to contend that Western Union is distinguishable because it involves the dispute over property, the location of which was in question whereas here in Texas v. Florida the property is located within the borders of Texas and thus it has exclusive interim jurisdiction over the property and for most part that is in this State consists of stock in a corporation which will be taxed in the place of domicile and so Texas's position assumes the answer to the question that has to be litigated. That really is the same problem as there was in Western Union and the Court said in that case that Pennsylvania lacked jurisdiction. As a matter of federal constitutional law lacked jurisdiction to proceed because it could not assure Western Union that it would not be liable inconsistently to the escheat demands of other States. I think that one passage in the Court's opinion on that point is quite significant. The Court said, the situation here in Western Union is in all material respects like that which caused us to take Jurisdiction in Texas versus Florida. So, as we read Western Union and as we read it today, that decision obliged us and indeed obliged -- obliged Texas to come to this Court rather than to proceed in our own State Court's. Once it became clear that tax claims were being asserted in excess of the amount of the State. Finally, another factor, I want to mention just briefly that brought us here and I think it is important for this this Court's exercise of Jurisdiction was our own sense of fairness to have proceeded independently to litigate the tax claim in our own Court's as Texas sought to do, even if we could do so, Western Union not withstanding, simply did not comport with our notion of a fair and appropriate process. It seemed to us that it would be incredibly inefficient to generate multiplicitous litigation which would only degenerate, into a -- but it really would be a three ring circus, without a ring master there would be litigation in California, Texas, and if it had a Delaware -- all proceeding without any ability to achieve -- William H. Rehnquist: Mr. Falk, are you familiar with Lord Canning's statement, Save, oh Save me from the candid friend. Jerome B. Falk, Jr.: Well, Mr. Justice Rehnquist, I do not pretend to have been looking out for the welfare of the areas that -- we were here, and acted of course in interest of the tax payers of California but it does seem to us that it is appropriate for Governmental officials, Taxing officials to be concerned with the fairness of there conduct. After all, we are accountable to that sort of standards as well and it seem to us that all of the decisions that are relevant in this Court and all of the literature in the last four years in Texas versus Florida condemned that a process by which, and a State can be wiped out by inconsistent domicile litigation in several States. That strikes me as unfair. It strikes -- I think it ought to strike, the court is unfair. I think, it would strike the public as unfair and we chose not to do it for all of the reasons that I have suggested and I do not mean to be sanctimonious about it. I think it was an appropriate factor for us to consider. Speaker: (Inaudible) Texas, impact of any of the agreement you have made, the States may have made? Jerome B. Falk, Jr.: Yes, I am. The position of Texas as I understand is that our agreement demonstrates, in some fashion, that we are here suing on behalf of private citizens and not on behalf of a State and that makes relevant, small number of cases New Hampshire versus Louisiana, Oklahoma Ex Rel. Johnson versus Cook, which disentitled a State to do so. On really, on the ground of the Eleventh Amendment and it is a limitation on the Court's Jurisdiction. That position of Texas is both factually and legally unsound here. There are two cases on that point that I want to call to the Court's attention. One is cited in our reply brief. South Dakota versus North Carolina, where the Court distinguished those earlier cases in a situation in which a small number of bonds of the State had been assigned to South Dakota and they have been assigned unconditionally. The motive of the donor was perfectly apparent from writings that are cited in the Court's opinion. He brought that suit for reasons of his, or he made that donation for reasons of his own. The Court said motive of the donor is irrelevant, South Carolina -- South Dakota is suing for interests, however small of its own and the action can be maintained. Another case not cited in our brief but I do want to call of the Court's attention is North Dakota versus Minnesota in 263 US at 365 and then another opinion at 584. There a suit was brought by one State complaining of flooding caused by the acts of the neighboring state. The loss caused by the flooding did millions of dollars of damage to private lands in the plaintiff State and something like $5000 of damages to the States on bridges and highways as I recall. The Court allowed the Act even though the interest of the State was rather small and even though it noted in the Second of the two opinions that the land owners of the plaintiff state who had been affected by the flooding and I quote “raised a fund to conduct a litigation” I think it is apparent that in that case the State was induced to Act by the private citizens who stood to benefit. Thus, as I read the case, as the State may sue in this Court, not withstanding that private citizens are benefited and even though, private citizens induce the lawsuit. Now, having said all that I want to say, that that is not what happened here. The record before this Court, I refer to an affidavit that I have filed at the time of the Application for a preliminary injunction shows that the decision to file the suit was made several weeks before we had had any conversation whatever with the State on the subject of settlement and in fact General Hill, I am sure will acknowledge, I personally told him in a meeting that I had with him in Austin, Texas on October 21, three weeks before this settlement and before we had any conversation with the State whatsoever that we had intended to initiate suit in this Court that we were drafting papers and so forth. So, I think that the suggestion that we here carrying the bag for the state acting for its benefit is just plainly false as a factual matter. I have just a few moments left and I would like to save that time for rebuttal, if the Court has no further questions to meet this time. Warren E. Burger: Very well Mr. Falk. Mr. Attorney General. John L. Hill: Mr. Chief Justice and may it please the Court. Let me first quickly address the few questions that were raised by the Court before I get into my prepared remark. First, it is not agreed that the taxes will exceed the estate to combine taxes. There has been no agreement as to the value of the estate. There has been one appraisal from Maryland which is highly in dispute. We think it ridiculously low. California can collect if it pierces the corporate veil and that is been done every time it is been tried. Were then the TWA litigation, Archaeo litigation, or that Mr. Hughes that you can not pierce the Summa (Inaudible) and if they do that they can get out a $ 112 million in land wrapped by the airport and on running along the beach highly valuable even if they do not establish domicile. Speaker: That is California. John L. Hill: Yes sir, the Satis (ph) rule would allow them regardless of domicile. Speaker: Right. John L. Hill: And there is a controversy, as to whatever asset has been Marshalled. The State compro is working on that diligently now and Summa's inability to make money and prosper is we think highly exaggerated and certainly not kind of speculation, this Court can indulge in to determine whether there's actually going to be more taxes than the state can stand and then finally Texas versus Illinois, does require clearly, that our inconsistent claim be such that it would impair California's right to collect on its own client, and if it has a meritorious claim and that case obviously does not require or contemplate that our inconsistent claim be such that it would simply impair California's ability to get this estate to settle with them, on some basis that they would consider favorable. That is not a right, that this Court's Jurisdiction is available to protect and they say Texas was all, it was in their way. All, that was in their way, to get it settled. That is what he forgot to add, and not in their way to try their case, not in their way to assert their claim or the merits of their claim, not in a way to impair their ability to collect on taxes but in their way to get a favorable settlement of a claim that they are very reluctant to try on its merits. That is what Texas is in the way of. Justice Stevens question is correct in suggesting that we should be confident that the Courts in both States would reach the same results on the same facts and certainly out of respect for the State Court's and their proceedings, we should at least not indulge in the opposite presumption. In order to try to sustain original jurisdiction here. He speaks of our own sense of fairness being the only thing that brought us here. Then, why did they wait nineteen months after we began our litigation to suddenly emerge in to an atmosphere of sweetness and light in fairness and why did not they try then early to come here and why when they come, do they not come on the strength of their own claim. If fairness is the standard, why do they come here tendering the limited issue and the only issue to this Court and that is Texas domicile. Now, it is Texas position that the agreement that was entered in to on November the 10th 1977, the day before this motion for leave was filed entered into between the state's administrator, certain here and there and California. Amounts relate to the estate and the heirs agreeing to pay California in money and services to bring this case and that therefore this court is prohibited both by the letter and the spirit of the United States Constitution from entertaining any suit arising any original Jurisdiction concept under these kind of circumstances. We say your holding here must be, that in no case, in no case involving and invoking or undertaking to invoke the original Jurisdiction based on article 3 section 2 in 28 USC section 1251 A1 suits between states. In no case, will that Jurisdiction be extended or an agreement had been executed prior there to providing that the petitioning state is granted the right to recover State death taxes regardless of the merits of its own case and where the petitioning state. Speaker: May I understand this Mr. Attorney General, is this an argument that in fact California's funding for the heirs -- John L. Hill: No question that is what taxes -- Speaker: Is that is what it is. Well I thought this agreement guarantees California the sum of 2 million dollars, doesn't it? John L. Hill: Two percent -- even if Texas wins. Speaker: That is what it is two percent -- John L. Hill: We will, we are not afraid to litigate the matter before -- Speaker: So I gather your argument is we ought not take this case in original Jurisdiction because if California is merely funding for heirs, that creates a kind of Eleventh Amendment problem that Mr. Falk referred to. John L. Hill: Absolutely, you see they can recover pursuant to this agreement solely if the Court takes Jurisdiction and takes action regardless of the quality of their claim. It is a border for the Jurisdiction of this Court here in Tampa. In short we think the -- Speaker: And is it that the heirs come out better at least inheritance tax wise under this California agreement and perhaps they are going to come out if Taxes can claim. John L. Hill: You see Annette Loomis is a co-administrator with Will Loomis in the administration in Texas. Speaker: I am sorry I do not know this. John L. Hill: Annette Loomis is Will Loomis' mother and under Nevada law and California Law, in case of intestacy, she would be the sole under Texas Law. If Texas is the domicile State, it opens up the possibility of heirship to some four hundred people that all have filed in that court. In short, the rule must be, we believe that if a state comes here under Article 3, Section 2, it must come clearly and unequivocally under its own statute or law on which its claim is based and unfettered by an agreement to come here for benefit to be bestowed regardless of the merits of the unclaimed claim. Speaker: Mr. Attorney General, if the agreement had not been made do you think the state of Nevada would be in here? John L. Hill: They are not a taxing State. Speaker: I know, but would they be in here? John L. Hill: Well, I do not think so. I have no reason to believe that the Attorney General of Nevada would have been entered in to this agreement. I have no interest at all, if shown no entries anymore than California did until the eve of our trial. That is when they kept this agreement and started showing an interest. They were really interested why did not they come here why did they permit us to spend hundreds of thousands of dollars, put in thousands of man hours, out in the wide open. Most of it and a lot of it, carried out, in California. With California counsel assisting us, travel all over the world and take 50 odd deposition and discover hundreds of thousands of documents out of three or four million documents that we were actually, both sides working with pre trial. Case set for trial, January of 1977 it was set for trial in September of 1977. All of which they knew about and let us go ahead and proceed and go to all that trouble and work in our own court and have a fair and square trial with overwhelming evidence and I cannot obviously retry it here but it is the case, that will be one wherever it is heard, and then from here and ask on behalf of the estate really, you re-litigate the Taxes domicile issue and that is all we are going to tend to tell you that very limited issue -- Speaker: Is that as you see is what the issue would be if this complaint is filed. Whether or not the decedent lived in Texas. Is that going to be the question or else the question is going to be where did he live? John L. Hill: All they tenders, they would not tender anything else. Their motion tenders only to this Court, the question of Texas domicile. You see they just simply want this court to take it, give to a master, hope that they can gang up on us and get the mastered offense. Speaker: Well, what will be the issue be before the -- John L. Hill: Texas domicile. Where the Texas was not the domicile. Speaker: Whether or not, Texas was the domicile of decedent at the time of his death or where was the domicile of the decedent at that time? John L. Hill: They win when you cut us off. Speaker: Quite different therefore from Texas and Florida. John L. Hill: Or you cannot take it with radar to try to fix up Taxes versus Illinois, in this case. It's using this court undertaking to for an inequitable and unjust purpose, clearly violates the provisions of the Eleventh Amendment, as a suit, which in reality is for the benefit of private litigant. It would also bring this Court, equitable Jurisdiction in to play without due regard to first, the necessity of the Court's participation. It would invoke it without due concern for the possible abuse of the Court's Jurisdiction in other cases, without first requiring California to utilize its own Court's to determine the underling merits of its claim, without due regard for the fact that Texas has already obtained a domicile verdict in its own Court. Thurgood Marshall: Alright, he could not ignore that Texas proceeding, could he? He would have to go into it. John L. Hill: We would certainly claim that he could not but I will tell you the Jurisdiction once taken here and a masters report is so often that I have found that in some cases, it does seems to wipe up a lot of things that have happened before. One thing you say we just want a little Jurisdiction for little purpose but once you appoint that master -- Thurgood Marshall: What did the master to do to that? John L. Hill: Well, he could conceivably find the Texas was not the domicile State. Thurgood Marshall: Then we would have a real conflict. John L. Hill: We would have a you have a honey (ph) of a situation. Speaker: As a matter of fact, if perhaps or in any event if it is a matter not at all of Law, it is a matter of State laws, was it not? John L. Hill: Clearly and they are asking you to come in here without regard or requiring California to really come and present a hard and concrete case to -- William H. Rehnquist: Well, General Hill, if there is a Federal Statute on the books, I purport of my brother Marshall's question, that says Federal Court's must give full faith and credit to the decrease of State Court's. Do you think that binds this Court as a Federal Court in a case under its original Jurisdiction. John L. Hill: We will certainly take that position, but I do not -- William H. Rehnquist: Do you have any reason to take it other than that you think it helps your case. Thurgood Marshall: Well, you do not need to -- John L. Hill: I would settle for that reason until another -- Thurgood Marshall: You do not need to take that position the way the case is lined up -- John L. Hill: Really not because we just have considerations here that have not been fought out, they do not even get in to all commit forums and this Court and I know I need not unduly cite your own opinion but this is so relevant to what I am trying to convey from Texas's standpoint is your statement recently made in Arizona versus New Mexico and may I please quote it, “we recently reaffirm that our original Jurisdiction should be invoked sparingly in Illinois versus city of Milwaukee, where we additionally stated, we construe 28 USC section 1251 A1 as we do Article 3 section 2 to honor our original Jurisdiction but to make it obligatory only in appropriate cases and the question of what is appropriate concerns a Court the seriousness and dignity of the client. Yet beyond that it necessarily involves the availability of another forum where there is Jurisdiction over the main parties, where the issues tendered may be litigated and where appropriately relief may be had. We incline to sparing use of our original Jurisdiction so that our increasing duties with the appellate docket will not suffer” Nearly forty years ago in Massachusetts versus Missouri to which counsel Falk alluded, this Court said, in the exercise of our original Jurisdiction, so as to truly fulfill, the constitutional purpose we not only must look to the nature of the interest of the complaining State, the essential quality of the right asserted, but we must also inquire whether recourse to that jurisdiction is necessary for the State's protection. Now then, with that in mind the narrowness of the issue tendered by California, that is a negative finding against Texas, is proof enough that the quality of interest attempted to be provided to California that is an 18% interest by settlement that she may not be entitled to under any merits. Is not of a kind to be entertained here by this Court and invoking that solemn jurisdiction. If California really wants to litigate its entitlement that issue of domicile can and should be under the circumstances here presented, litigated in California. If California is successful there on that issue it can repetition here if in fact, facts and information show that there is a more tax that they can not get there, their taxation and then you could decide whether take case or let it be heard in Delaware Forum where the question of similar corporation exists and where any problem that do in fact ever occur, are not pursuant to some settlement agreement but pursuant to on its claim being -- Speaker: Mr. Attorney General you want – are you willing to litigate in Delaware? John L. Hill: When we get to the position-- Speaker: The answer is no right now. John L. Hill: No, not now. We are clearly are not and we not anticipate it, if California does try the case. Speaker: Of course it might be a forum if both of you agreed to solve the entire problem? John L. Hill: Solve the problem it is-- that is true. Speaker: Would the Delaware Forum as you call it have jurisdiction over a lawsuitbetween the State of Texas and the State of California? John L. Hill: It could only come up and I do not want to be bound by this because, I do not think it is necessary for us to get into it in this proceeding. But as I see it the only way that it could possibly and underscore possibly come up would be if California in fact secured a favorable finding in its Court, on the merits and then the proof showed that it was impossible for us to get the matter disposed off or that harm of 120% and these sort of figures that I think are ridiculous and never will come to pay. So at most I think you are looking at a 101. If that, with a growing concern able to pay it out over ten years but in any event if all of those speculated problems finally came to rest then you would have the one piece of intangible property to which all would be looking and that is the Summa stock which you just – as you know only there is only one stockholder with 75,000 shares of stock but only one stockholder is presently being held and voted by Mr. Will Loomis under there argument. I think they would have the that would then be a forum where you could determine all rights between us, how do we tax the intangible? Speaker: And that forum would have jurisdiction, would it? John L. Hill: I think. Potter Stewart: Because this is my question over a lawsuit between the sovereign State of Texas and sovereign State of California? John L. Hill: If we are asserting if we come in there and assert that we want to get out the intangible stock asset which is cited in Delaware that being the corporate basis there. Potter Stewart: Whatever the lawsuitwas about, I am talking about any kind of a lawsuitbetween those two parties and I am talking about jurisdiction. John L. Hill: I think what I am saying is Mr. Justice Stewart if that would be an election, I think for these States to make. Speaker: Well, it will have to be volunteered? John L. Hill: I think so. Speaker: Neither can compel the other to appear in Delaware Court, could it? John L. Hill: No. I suppose you -- it would be a matter of two States-- two or more States filing competing claims to the same properties. Speaker: Right. John L. Hill: And then let me just close by-- Speaker: To a Delaware asset that is clearly within the jurisdiction of Delaware Court? John L. Hill: I think all these question about Delaware if I might say so that I do not go further here then it is obviously necessary, to cite what we are here about, is simply to say that that question can be addressed if it ever becomes proper to be addressed and this Court will have an opportunity to look at that if it ever become your --. Speaker: General Hill, a little while ago you said that California should go about its business and proceed in its own Courts and so forth and then come here when certain things were established, would you be opposing original jurisdiction at that time also? John L. Hill: I do not know. It would just depend on -- if they have a case at that time stated without reference to agreement under Texas v. Illinois and I thought Texas v. Illinois applied, I then have to make a determination, it would ask you to the deal -- we do not have to deal with it here, I might want you to ask you to deal with it if it ever came to that I make it-- and this Court might want to reconsider it. Speaker: General Hill at least the agreement accomplished the elimination of Nevada as a possible party, this is one thing it had accomplished. After all you are in a position here representing a State which itself brought the Texas against Florida litigation. Now you are representing the State which denies the original jurisdiction of this Court, you are hung with it, but there it is. John L. Hill: Well I am not, General McGraw, 45 years ago came into this Court with a lot of other Attorney Generals, pretty much by agreement. And once the Court would not let him in until I could go out and resolve the fact of what the tactic were going to be so that the master would not have all that foolish work to do and then when they came back in practically in agreed situation, the Court took it. Justice Frankfurter did not think much of it, but that neither here and there, they did take it and they heard it and they resolved it and Texas who brought it, lost and I think that General McCraw were he here today would be applauding what I am doing and believe that it is totally consistent with what I should be doing and it is an entirely different situation, this is not in any sense a Texas v. Florida case. Speaker: I take it, at a later time your first claim would be that the matter of domicile would not be open for any kind of reconsideration because it is clearly determined in the Texas Court and that would be true later if you all thought that you should go to Delaware to try to -- John L. Hill: Exactly. Speaker: Then you would say that, the everything might be opening but not that domicile. John L. Hill: Those are-- Speaker: That can be reviewable by this Court or any other Federal Court it is not a question of Federal Law is it? John L. Hill: And so I just conclude by reminding that if there is a slightest doubt about why we are here and that I say we are here out of the State's worry over the Texas domicile finding not only for State tax purposes but for other purposes that it ought to be perfectly clear when you look at this agreement that is why we are here because in addition to giving them the 2% guarantee they come back and say we will give you all of the lawyers you need, some of them here today in Court we will work with you hand and glove and we will give you all of our deposition, we will give you all of our work product and maybe together we can do Texas-- Warren E. Burger: Mr. Attorney General, a while ago you said that the figure of 120%, that is referring to the aggregate amount of taxes was absurd, ridiculous something like that and that in any event it was not more that a 101%. Now for the purposes of this, case what is the difference whether it a 100-- the taxes are 101% of all the assets or 98% of all the assets. John L. Hill: I think for today at least, for the purpose of this hearing, the answer would be that if it is a 101 and we do not know but let us assume for purpose of your question it is. Then California is petitioning here to get you to vitalize an agreement which would cut there, would harm them 68 % of what they say, they are entitled to under their figures and yet they want you to do it under the authority of the case that would say we are going to protect you from 1% of harm. So under this agreement, it is just simply immaterial inquiry, now as to whether it is a 101% ends up being 98%. It is not the inquiry, the basic inquiry before this court because the fundamental lies in their case is this agreement. You can not get away from it, Will Loomis and it is in our brief used the words, I have them written down somewhere where he said in affect that we are here pursuant to this agreement, that is his sworn testimony given in December. Now there cannot be any doubt about that we are here pursuant to that agreement and that is the full answer, a complete answer, a total answer to the denial of this motion for leave to file and invoke this Court's to original jurisdiction. Never should this Court tolerate that kind of a situation and you would rule to death (ph) if you did and open the gates for this kind of trading around between higher State tax cases, the States with weak claims, to try to get negative finding against 16% States with good claims. Speaker: General Hill, what is the present status of the Texas litigation? John L. Hill: We are trying the jury verdict and we will have an a judgment entered on April 4th. Speaker: I suppose that motion is to set the verdict aside then, are they? John L. Hill: The motion for judgment which we have filed, I am frank, I will have to ask my associates whether they have filed. I have not seen the pleading recently, I would not want to miss state if they have filed a motion to set it aside, I would be most surprised. They argued the case about thirty minutes although they had several hours to argue because when all the evidence was there, they did not have much to talk about and they have plenty of evidence to support the verdict. The case is cleanly tried. It is going to stand us without any question. Speaker: But there -- whatever the accuracy of your prediction there is, there will be an opportunity of an appeal in the National State Court system? John L. Hill: Absolutely, through our appellate process which is, I am sure under circumstances like we are faced with that is something we can contemplate. Thank you very much. Warren E. Burger: Mr Falk, you have anything further? Jerome B. Falk, Jr.: Yes I do Mr Chief Justice. First of all let me say that there is no doubt, I agree with some of the implications, some of the question, there is no other forum. If California and Texas each secure a judgment then we find ourselves in that situation that General Hill contemplates. There is no possibility absent consent of both States of litigating that in the Delaware Courts. They have no jurisdiction to decide controversies between States, only this Court does and as to everybody else those two State judgments are entitled to full faith in credit as Texas v. Florida, as the previous cases, make clear. Potter Stewart: Mr Falk if your complaint is filed and an answer is filed and the matter is referred to a master what will the issue be? Issue over issues? Jerome B. Falk, Jr.: Justice Stewart I suppose the Court could go beyond the pleadings and resolve the question of where he was domiciled. It is true that the pleading only asks the Court to determine whether or not the Texas claim is a valid one and the reason for that is as someone in the Court commented a moment ago that we have settled with your State the controversy vis-a-vis Nevada, the Bahamas, Mexico-- Potter Stewart: So they won't be very--? So Nevada certainly is not now and presumably will not be a party? Jerome B. Falk, Jr.: That is correct. Speaker: And yet as I understand the facts from reading these papers and from reading newspapers that the decedent spent in, as far as he lived in the United States from where he resided was physically in the United States of America and his last years of his life, most of those years were in Nevada, were they not? Jerome B. Falk, Jr.: No,-- he spent about 38 years in California. Speaker: No I am talking about final years of his life. Jerome B. Falk, Jr.: Then the last, I am sorry. The last three or four years were in Nevada. Speaker: The final years of his life were in as far as he was in the United States, he was in Nevada most of the time. Jerome B. Falk, Jr.: Suffice it to say that the parties recognized a very complex controversy close question on that issue-- Speaker: If there is a, generally in an adversarial system of justice, you have parties litigating and theory is from that litigation emerges the truth but if Nevada is not even going to be in this lawsuit, how can a very accurate assessment of the facts be made? Jerome B. Falk, Jr.: I do not think the Court has to do it to adjudicate this to finally resolve -- Speaker: Generally a lawsuit is not destined to determine a negative, that somebody did not live in a certain State. Jerome B. Falk, Jr.: But the problem here was that we were facing a very complex litigation with many alternatives. We undertook to settle that litigation. We could have settled all of it but Texas was not party to it, did not choose to be. We settled all that we could and we have this remaining part of the problem that has to be adjudicated-- Speaker: Well, do you not think that to answer the question you have put in your prayer, are you not going to have to decide whether, where he was domiciled? Jerome B. Falk, Jr.: I think we are going to put on evidence that will make it possible for the master to make that-- Speaker: Is it possible, how can you say -- Are not you have to conclude that he was domiciled somewhere else and therefore he was not domiciled in Texas-- Jerome B. Falk, Jr.: Well, I think we are going to show that he was domiciled in California for at least 30 or 40 years of his life, whether it is necessary to go on and disprove the contention, that in 1966 when he moved to Las Vegas. He then changed his domicile to Nevada. I do not know that we have to do that. Once we have disproved the Texas domicile I think we will have done enough but we will be prepared to do the other as well. Speaker: Do you think it is sufficient to show that he was domiciled in California uptil 1966 and then left California and never returned and spent the rest of his life in Nevada? Jerome B. Falk, Jr.: It would not be sufficient but for the fact that the State has agreed to pay us a tax if we can make that showing. Thurgood Marshall: Mr Falk, the truth in that is that Nevada and the Bahamas there by came in and California would not come in, which they have a privy right not to come in and that is why he filed this lawsuit. Jerome B. Falk, Jr.: I am sorry I did not follow your question Mr Justice. Thurgood Marshall: You said a minute ago before my brother White asked you a question that Nevada, Bahamas, and there by all came into California and joined in this agreement but Texas did not. Jerome B. Falk, Jr.: Well not as taxing authorities, the State. No, the State agreed to pay us a tax and in an affect to abandon this it is defense to the State of California. Potter Stewart: Unfortunately it was not to you personally. Jerome B. Falk, Jr.: I am sorry that it was not Mr Justice Stewart. To pay California a tax if we can establish that they are also not liable to Texas and in so doing abandoned the defense that they otherwise had available that he was a Bahamian or a Mexican or a citizen of the world or a citizen of Nevada. The domiciliary actions. Thurgood Marshall: Did you ask Texas to do same thing? Jerome B. Falk, Jr.: We in fact did that is why I went to Texas-- Thurgood Marshall: And Texas said no? Jerome B. Falk, Jr.: Texas said no. Thurgood Marshall: Which they had a right to? Jerome B. Falk, Jr.: Certainly did. Thurgood Marshall: And so then you file this lawsuit? Jerome B. Falk, Jr.: That is correct. Thurgood Marshall: So Texas has right to treat this lawsuit is to (Inaudible) of them to joining this agreement? Jerome B. Falk, Jr.: No, no they are not right Mr Justice. We had decided to bring this lawsuit, had the papers prepared before this settlement was even discussed. Thurgood Marshall: Once you have got lawsuit in California, I mean in Texas (Inaudible) Jerome B. Falk, Jr.: Well then we would have a settlement. Warren E. Burger: If the theory Mr. Falk is that a neutral forum was the only place for a controversy of this kind to be settled why should not your prayer have been to determine what you say now is the defactoral issue. Where was the domicile of Mr. Hughes at the time of his death instead of just attacking it on in terms of Texas? Jerome B. Falk, Jr.: Mr. Chief Justice, if jurisdiction turns on that question we are quite prepared to amend our pleading to ask the Court to do just that. And we were originally planing on doing just that papers were drafted that asked the Court to do that, papers had even been sent to the printer asking the Court to do that without discussion of a settlement because none had been discussed and we then entered into negotiations with your State and narrowed the issue that is what happened and I fail to see how that can alter the need to have a unitary adjudication. This is the only place to go for that adjudication. Speaker: If a master were appointed to determine this and he were to determine that domicile was Nevada at the time of Mr. Hughes death. Do I understand there is no inheritance this tax in Nevada? Jerome B. Falk, Jr.: That is correct Mr. Justice. Speaker: What then would be the effect of that determination that he was domiciled in Nevada upon the State's claims to inherit this taxes. Jerome B. Falk, Jr.: But for the settlement we would be entitled to collect no domicile based tax. Speaker: But under the agreement California would still have at least 2 million, is it? Jerome B. Falk, Jr.: No under the agreement if Nevada were found to be the domicile the State has in effect settled that controversy where they have agreed to pay us an 18% tax not withstanding that. So that would be -- Speaker: So California would not lose if the Master were to conclude that Nevada was the domicile -- Jerome B. Falk, Jr.: No, we compromised, our rate is 24%. Speaker: No, but am I right? Jerome B. Falk, Jr.: Yes you are right. And-- Speaker: California would not but Texas would. Jerome B. Falk, Jr.: Texas, if they found Nevada, Texas will of course not recover either if and that reflects a compromise from 24% to 18%. Speaker: The only one who would lose would be the United States because then the credit against the Federal State tax would apply. Speaker: Without the agreement there would be no credit for State taxes pays. Jerome B. Falk, Jr.: That is true, of course that is always true if in a domicile kind of regime falls in Nevada and the other. Certainly we are here with a very complex-- Speaker: Is it true with respect to Nevada domiciliaries ? Jerome B. Falk, Jr.: If they are found to be Nevada domiciliaries. Speaker: Well if Nevada was determined to be the domicile and the State nevertheless paid you $16 million or what is it 18%. Jerome B. Falk, Jr.: 18%. Speaker: 18%, which is how many million dollar? Jerome B. Falk, Jr.: We do not know the value of the estate. It is a substantial sum. Speaker: Would the payment from the state of that 18% be in a State taxes paid deduction? Jerome B. Falk, Jr.: I am not really qualified to say. I suppose the IRS has the final say on that, I think the answer is yes. The state and we have agreed to resolve that part of the controversy and we have compromised our tax. Speaker: Oh yes but then one party that controversy files a lawsuit as a part of which it is essential to determine domicile and it is determined contrary the claims and the party filling the suit. Jerome B. Falk, Jr.: Well, I think that kind of situation can happen in settlements, for example if you settle a lawsuit with several parties involved and some settle out, that settlement is valid even though other parties do not settle the litigation proceeds and there is a adverse determination to-- . Speaker: Now what do you state Mr. Falk in the same position of the executives of the Dorrance state where they volunteered the payment to Pennsylvania and then New Jersey interposed the claim and established domicile and collected $18 million against Pennsylvania's $16 million and then the when the executives tried to get back to $16 million from Pennsylvania they were told no that was a voluntary thing. Jerome B. Falk, Jr.: I think they would have no remedy, I think that is correct and I think they have no remedy and they would be in that position because they made a decision to opt for a lower tax rate and to abandon defenses that were otherwise available. I think that was a choice that they made knowingly and they will have to pay the consequences if that is what it turns out, I do not. Speaker: Well of course you will call Dorrance executive were surcharged for that. Jerome B. Falk, Jr.: I did not know that Mr. Justice. Speaker: And I just wonder here if it would determine that Nevada after all where there is no inheritance tax was the domicile. What about the State paying California? Jerome B. Falk, Jr.: Well I think. Speaker: This plus inheritance taxes. I think that would be entirely baseless assuming that you can pierce these Summa Corporation veil because you have some substantial taxes --. Jerome B. Falk, Jr.: It is not the bulk of the estate but there are substantial assets in California. Speaker: Mr. Falk, are you a full time Attorney General for the state of California? Jerome B. Falk, Jr.: No, Mr. Justice I am in private practice, I am special Counsel for the State of California in this matter. Warren E. Burger: Have you ever represented any other party to this case other than the State of California? Jerome B. Falk, Jr.: Absolutely not and I have filed a sworn affidavit with this Court which was presented to Justice Powell and I think referred to the entire court which I set forth under penalty of perjury that this decision was made and I will go further and say that the papers were prepared and ready to be filed, they were almost ready to go, they were at the printer before we had any discussion whatever with the estate on the subject of settlement so the charge is just false. Speaker: Well, except this complaint does not to ask the Court to determine that the decedent -- where the decedent was domiciled whether Nevada or the Bahamas or Mexico or where, simply that he was on the date of his death not a domiciliary of Texas. Jerome B. Falk, Jr.: That is correct. Now as I say we would be -- if we thought it were necessary, if the Court finds it necessary, we were prepared it to amend in and to take our chances with the broader question. I see no purpose to be served by that, the State has made its decision and we have agreed to accept the lower rate of tax in settlement of that aspect of the case and it seems to us that it serves the benefit of everyone to narrow the issue. We have really only one problem left, I thought that was a constructive thing to do. Speaker: It may well be I guess. Jerome B. Falk, Jr.: If that is, your statement is absolutely correct Mr. Justice. Speaker: But we have to reach our decision on the basis of the pleadings as they are now before us. Jerome B. Falk, Jr.: Yes I think that correct. Warren E. Burger: Not on the basis of some possible amendment that you may have in mind. Jerome B. Falk, Jr.: I think that is a fair statement Mr. Chief Justice. Warren E. Burger: Very well. Thank you gentleme. The case is submitted.

Warren E. Burger: We will hear arguments next in 75-552, Secretary of Interior against Sierra Club and the consolidated case. Mr. Randolph, you may proceed when you are ready. Randolph: Mr. Chief Justice and may it please the Court. This case, which is here on writs of Certiorari to the United States Court of Appeals for the District of Columbia, arises under the National Environmental Policy Act which I referred to as NEPA throughout my argument, this provides that an environmental impact statement shall be included in every report or recommendation on proposals for major Federal actions significantly affecting the environment. The Federal petitioners violated the provision I have just quoted, according to the respondents in this case. Because they have not prepared one of massive impact statement covering all Federal activities relating to coal mining, in an area respondents called the Northern Great Plains region. That is a 90,000 square mile area describing their complaint as comprising North Eastern Wyoming, Eastern Montana, Western North Dakota and Western South Dakota. I have had distributed to the Court two maps, both of these maps were taken from material on the record. I do not plan to refer to them now, later in my argument, I will refer to them directly. On cross motions for summary judgment, the District Court ruled in favor of the government in the interveners in this case. Among the Court's many findings of fact at this stage and on remand for supplementing the record, two findings of fact, we believe are crucial and dispositive in this case. First, that the Northern Great Plains region, defined by respondents is not “an entity, region or area, considered by the Federal Government for the purposes of any Federal program, project or action, second, that there is no existing or proposed Federal Regional program, plan, project or other regional Federal action for developing coal in the region respondents have defined”. The District Court with respect to these two findings of fact could not have found otherwise, our evidence was to this effect in the District Court and respondents with out offering any other contrary evidence not only conceded that no plan or program for development of their Northern Great Plains region existed, they stressed that fact, they argued to the District Court, they argued to the Court of Appeals that NEPA compelled the government to adopt such regional plan or proposal, an argument that in this Court they now have extensively dropped. I will mention briefly a number of the other District Courts findings of fact and then proceed in my argument and these were findings taken both from the original proceeding in the District Court and from the remand. One, that the government has prepared and will continue to prepare environmental impact statements for group of mines or individual mines within the area described in respondents complaint. These impact statements, the Court found to be, at page 114 (a) and 115 (a) of the petition appendix. These statements the Court found to be comprehensive and noted that they assess the cumulative impacts of coal mining and related activities. One of the statements, impact statements that the District Court considered is the six volume Eastern Powder River Basin impact statement and through the benefit of the Court, this is before the Court, but, I brought a copy in so the Court might see what an impact statement looks like, all six volumes, they -- it covers an area in Wyoming of approximately, I cannot lift it, I would but[Laughter] Speaker: (Inaudible). Randolph: This covers an area in North Eastern Wyoming of approximately 7500 square miles, which is about the size of the State of New Jersey, the focus is on four mining plans and a railroad right away. As I said, the District Court found that that statement was comprehensive and had such cumulative impacts of coal mining. The District Court found in addition that since of 1970, the government, the Federal government in cooperation with States Industry, private groups, other individuals, local governments had conducted various coal related studies in the Western States. This was studied only, I must emphasis. One of these which was primarily mentioned in the briefs and also in opinions below is the Northern Great Plains Resources Program, the NGPRP is sometimes referred, which was began in 1972. This was a joint investigation by the States of Wyoming, Montana, Nebraska, North Dakota and South Dakota that collected data on geology, minerals, including coal, and mainly coal. Air quality, social and economic conditions and so forth and analyzed all this material on the basis of possible development scenarios, the study or the program as I should refer to proposed no regional plan, it suggested no preferred development program, it suggested no development program whatsoever, it was not designed to the District Court so found. The District Court also found that since 1973, the Secretary of Interior had continued in effect but was a virtual moratorium a private coal development, a new private coal development in the federal coal reserves throughout the Country. During this period at a national impact statement or as it sometimes referred to a coal programmatic was prepared. This assessed, the old procedures that the secretary had utilize under the mineral leasing act and formulated a new process applicable Nationwide for implementing that same Act. On the basis of this evidence the District Court found that the government had taken action under NEPA, but it was National action in scope. The action was on a National basis as to the region, that we are discussing in this case, the District Court found as I stressed before, there was no special plan or program for that reason as such and certainly no regional action. The Court of Appeals reversed with one judge dissenting. The Court majority accepted the law records findings of fact but held that the government was and I used the Court's word contemplating a regional program. The relevance of this apparently was that under the lower Courts, Court of Appeals view an impact statement under the statute NEPA must be issued well and advance of any report on proposals for major Federal action, there ago contemplation could trigger the impact statement requirement, must stress though that the Court of Appeals did not hold that the government had yet violated NEPA. But only that it would if it kept following the course that the Court thought it was following and in light of this the Court issued a remand order, instructed the government to announce whether it would do one impact statement covering this 90,000 square mile area. In January, this Court staid the Court of Appeals injunction which had prevented the Secretary of Interior from taking action with respect to the four pending mining plans analyzed in the Eastern Powder River Basin impact statement. Thereafter in February of this year, the secretary approved those four mining plans. As I stated at the outset we think that the District Court's decision on this case is correct and we think that the District Courts findings affect in this case. The government has completed a national impact statement covering a coal leasing policies nationwide. It includes in analysis the four States here it includes an analysis of every State where Federal land is located. It has completed this massive impact statements covering the Eastern Powder River Basin in Wyoming. That statement has not been challenged in any Court, in fact the statement covers three quarters of all the economically recoverable coal by strip-mining in the area that respondents defined as the Northern Great Plains region. William H. Rehnquist: Does the government concede that it was required by the act to file a national impact statement? Randolph: Yes. It was a national program and it was major Federal action but it was Nationwide. It is been filed -- that government also has issued impact statements for individual mines, for clusters of mines and in fact will continue to do so. The argument here however is that none of this is sufficient, that an impact statement must be done for an area smaller than the United States but larger than the Eastern Powder River Basin which is the size on the State of New Jersey as I stated. Even if respondents are right that would be a good idea and we do not think it would be. We do think that the National Environmental Policy Act is not mandated. Potter Stewart: May I ask you proceed Mr. Randolph. As was pointed out in another case during the argument yesterday in the language of the 102 (2)(c) is little -- it does not say anything about filing an impact statement it just says, it shall include in every recommendation or report on proposals for legislation and other major Federal actions. I guess, the language recommendation or report on proposals for qualifies other major Federal actions or may be it does not but what has become, -- my question is, what has the government done with this big impact, national impact statement? It has filled anywhere? Randolph: No, it does not file, it distributes in a draft form to – Potter Stewart: Does it require, that it had to be done with it, except that it be included in every recommendation or report on proposals for legislation or other major Federal action just kind of language? Randolph: What it has done, Mr. Justice Stewart is published and I will give the Court this if I can find it. In 41 Fed. Reg. 11035 in March of this year, a series of regulations implementing the proposals and suggestions and the formulated policy that the National impacts statements prepares. So, in other words they did an impact statement, they assessed the National Coal policy and in 41 Federal Register they have now published regulations which the secretary expects to implement taking the suggestions and putting into the policy of the environmental fact. Potter Stewart: This is now a proposal -- William H. Rehnquist: Well. If it is simply a report, what was the proposal or major Federal action which required it under the Act? Randolph: The major Federal, the major Federal action would be the secretary's adoption which he did. I think there is an appendix to the green brief by the American Electric Power Company that shows on January of this year, the Secretary adopted the new Mineral Leasing Program suggested in the national impact statement. Potter Stewart: The report on proposal for major Federal action. Randolph: Of course that is not an issue in this case at all. Potter Stewart: No. Randolph: And what is an issue in this case, in fact, is whether he has to do an impact statement for the area that respondents have described in addition to the ones he has already done and as you pointed out Mr. Justice Stewart, what the statute says, is that a final impact statement must be issued with each report or recommendation on proposals for major Federal action. In this case. Potter Stewart: The and ought to be an or, should it not? Legislation or major Federal action? Randolph: Yes, there is no legislation that is involved in this case. The District Court as I stated, found that a regional plan does not exist and has not been proposed for this region that we are talking about. Certainly, if it has not been proposed, there is no report or recommendation on such a regional proposal for development, the District Court so found. The only proposals in existence here, private applications that the government must act on. The District Court found none of the private applications are for regional action. The grant of one coal mining lease does not commit the Secretary of Interior the grant on another any place else in that region. What then are the relevant major Federal actions in this case? The National Coal Leasing Program we have discussed but we have done an impact statement on that. At lease, only the approval of particular leases, mining plans, rights of way and so forth, to be sure these have to be the subject of environmental impact statements and they will be if they are not already the subject of environmental impact statement. But, in the absence of a proposal for regional action and a report on that kind of a proposal, NEPA does not require a regional impact statement, otherwise, realize what a Court is saying to the Federal Agency, it is saying, well, you do not have a regional development program but we are going to order you to do a regional impact statement evaluating the environmental effects of the regional action, you would have planned, if you have a regional a program. And, on top of that, since NEPA requires you to consider alternatives, we are going to ask you, direct you to consider the alternatives to the regional action, you do not have planned but you would have planned if you had. We do not think that makes any sense. John Paul Stevens: Mr. Randolph, it is true thought, is it not that in a challenge to a particular impact statement relating to a particular mining lease, the argument might be made that it is inadequate because it does not sufficiently discuss regional consequences? Randolph: Yes, that could be done. John Paul Stevens: And they might in such a challenge ask for the same thing seems to be asking for here? Randolph: They could and they have and environmental rules have asked for that in number of different cases and the circuits around the country. I have looked at the scope of the impact statement. Does it assess the cumulative affects of one more mine, one more mine. Is it comprehensive? Does it consider not only the effect of this mine but the secondary effects? That is the test; this statement has not been challenged. The statement does that according to the findings of fact to the District Court on page 114 (a) of the petition. So, we think that District Courts findings of fact, that there is no regional plan existing or proposed or conclusive and in this case. That is not a very complex analysis, we admit. But NEPA, I think I should remind, requires impact statements for actions not for areas, and we think, that our analysis is a proper analysis as to the other circuits including now the Second Circuit on remand from this Court reversing its prior decision in the conservation society case. We think that the paraphrase Chief Justice Marshall, we must never forget that it is a statute we are expounding here, and if that is forgotten, if a Court goes further than that as respondents’ ask this Court to do, it enters a never, never land. Suppose five or ten or any number of suits were brought in regard to the area that we are talking about in the Midwest, some pick the different area for study, some pick overlapping areas, others pick areas that were smaller, other’s larger, some independent. I submit there is absolutely no principled way for a Court to say, after shifting to all the environmental studies and statistics that here, this is the one area under NEPA that you must study, Federal Agency. Now, respondents have proposed a test to enable a Court to do that. A Court of three adverb test although I am not sure they are all proper adverbs and it is a test I must add that the District Court or the Court of Appeals itself did not adopt. Respondents say that the area they have chosen is mandatory because all Federal actions there are, now I use their adverbs geographically, environmentally and programmatically related. This is summarized in their brief at pages 28 to 29 and then expanded upon throughout. I will take the least likely adverb first, programmatically--- William H. Rehnquist: Geographically, programmatically and what is the third? Randolph: Environmentally. Potter Stewart: Environmentally? Randolph: Environmentally, I take the least likely adverb first, programmatically. Now, I suppose what they mean by this is that all Federal actions regarding coal development in the area take place under the same Federal program, if they are referring to the national program, for implementing the Mineral Leasing Act, their assertion is true but irrelevant. One could draw a line around any piece of Federal land in the United States and make the same statement. It does not lead to their region at all. If they are referring to some other program for development of their region, their statement is in flat, direct, contradiction of the findings of fact at the District Court that there is no such program existing or proposed. A finding of fact as I stated that respondents’ themselves conceded. Now, they make two other statements; they are geographically and environmentally related. I think these statements and we submit these statements are meaningless also, if one encircles any area within the United States, one can say that all the actions within that area are geographically related. It is likewise environmentally related in the sense that the effects on the environment from activities within the region will be of course, felt within the region. Respondent's answer to this is that our region makes sense because and I quote from their brief at 104 “It is a geologic fact, the extent of the region is defined simply by the presence of coal” for this they cite their map, and I would like to turn to that on page 103 of the respondent's brief. The shaded portion of that map at 103 respondents task represents and they say the Fort Union on Powder River Coal formations and that is the extend of the region. We submit that map is highly misleading and certainly inaccurate. In the first place, it admits all the coal fields in the States that they have dealt with here and I will get to that in a moment, first I would like to talk about the geologic fact -- William H. Rehnquist: Was the map an evidence in the District Court? Randolph: Well, there was a map that was contained in the back pocket of the Northern Great Plains Resources Program that was a geologic map. They referenced that map on the right hand corner page 103, and they say they have drawn this from that map, and that is what I am just about to discuss Mr. Justice Rehnquist. First of all, what is they talk about the Fort Union in Powder River Coal formations. In fact, what this map shows is the surface exposure only of a portion of the Fort Union rock formation. There is no such thing as a Powder River rock formation and in fact to be precise there is no such thing as a coal formation at all. What the error is the phrase is sometimes used I admit. What in fact you have are coal seams in rock formations. So, to get this straight they have drawn here the surface exposure of the portion of one rock formation, the Fort Union rock formation. Now, what they have left out even in respect of this is the fact that the Fort Union rock formation goes on for miles and miles and miles beyond this area they have drawn, in fact-- William H. Rehnquist: In fact you could go a long way before you find nine people at no less about the Fort Union rock formation The ones you are arguing to. We cannot resolve this as a question of fact? Randolph: I will make that point. But to sum this up as far as their map is concerned; they have left about a 100,000 miles of the Fort Union rock formation. There is coal in the Fort Union rock formation and I will give the Court the pages, pages 218 to 220 of the National Impact Statement reports coal in the Fort Union rock formation is far South as the Colorado Utah border that runs in to, I think it runs in the Idaho. It is a green river coal field. Anyway, they are about a hundred thousand miles off if they are drawing the Fort Union rock formation. John Paul Stevens: I had the impression from the Court of Appeals that they did not contrive this area though, that they found this area in a lot of work that had been done by the government one way or another and there is some basis for -- Randolph: Well, that is right, they found this in the geologic map, but, I think they -- John Paul Stevens: Well then you attribute this, the arbitrary selection to them or to the government? Randolph: No, they have in fact tried to, they have another line around this, they tried to duplicate the Northern Great Plains Resources Programs study area but they left out the State of Nebraska which that also studied and that study considered various different areas throughout the different States for different programs. It did not propose anything, it was a development program -- the reason we admit. John Paul Stevens: But the question is that, are you saying that the area they described is one that they defined initially without any reference to prior government tentative proposal or tentative planning anything like that? Randolph: The precise area that they defined is their area, yes. The area just the miles, square miles covered by the Northern Great Plains Resources Programs is a 140,000 square miles there, theirs is about 90,000 square miles. It takes in part of the area that this program is studied. Right before we break, I would like to refer to our map in the yellow portion. The under lay on this map is what we understand to be their region. If they had drawn the coal field rather than the rock formation which is not, so they do not correspond but the under layers is what we understand to be their region. They say the extent of our region is defined by the presence of coal. The over lay is the presence of coal and I do not think one has other coal fields that look like a boxwork, shocking block test, but there are other coal fields throughout the area. I do not think that one has to be versed, including Geometry to see that on that map, any number, countless numbers of lines could be drawn about around countless numbers of areas. Now, if it is simply the presence of coal that defines the region where does one draw the line? This map is a little misleading too, because that is a macro view, and if the Court gets the impression that all that coal is mineable, it is a wrong impression. I have to spell after lunch. Warren E. Burger: Mr. Randolph, you may from where you left us. Randolph: Mr. Chief Justice, may it please the Court. I was about to say that the photo of the map we have is kind of a macro view, not very well focus satellite picture coal field. The other map we have however is a very focused picture of the surface mineable coal deposits in the area, generally represented I think by respondents complaint. When one looks at this map in the blackened areas are the areas of the surface mineable coal -- Potter Stewart: (Inaudible) Randolph: The photographic reduction of a very large map that is --now, the blackened areas are the economically recoverable coal in the portion on the yellow map that is represented by the underlay. This map that I am referring to now shows the economically recoverable coal there. My point about this is that when one does focus down even more sharply into this area, where does one draw the line? Now, I would suggest just on a look at this map that one logical place to draw a line around is in the lower part of the map, in a series of mines that runs North to South with the number 71210834, the Courts sees that. In the lower portion of the map, on the left hand side towards West, there is a series of mines with numbers by 71210834 that is where the Secretary of Interiors draws line. He encompassed that area with the 50 mile wide swatch that runs a 150 miles North and South. That is the Eastern Powder River Basin. It is called that because it is to the East of the Powder River that lies in the shallow earth formation. As I said, not all the coal in this area is in the Fort Union rock formation, much of the coal there is in what they call the visage (ph) formation but again my point in all this, the conclusion from all these maps is that the kind of geological mistakes, I have been talking about, we think are inevitable, unless in the absence of a regional plan for development, it is left to the Secretary of the Interior who has the expertise in Geology, who has the expertise in environmental considerations, who has the expertise in administering his own program, that is just left to him to define the appropriate areas for study in his administration of Mineral Leasing Act? Thurgood Marshall: Mr. Randolph? Randolph: Yes. Thurgood Marshall: (Inaudible) Randolph: Some are under way, the -- Thurgood Marshall: I see you got three proposed? Randolph: Yes. I would – Thurgood Marshall: One of them is in your area, is it not? One is in the Powder? Randolph: These are two other mines for which individual impact statements are prepared for them. And also, I might add to the Court the -- there are two other clusters of mines on this map, one in the upper right hand portion of the map and another in the middle portion of the map. Impacts, regional impact statements considering all those mines are going to be prepared. The Secretary of Interior announce the Congress, the Senate Committee about two months ago. Again, my point in all these is that in the absence of a regional plan, the definition of the area to be covered has to be left to the Secretary, it is at his discretion. I think one of the curiosities of this case is that respondents rely upon a case called Udall v. Tallman which as the Court remembers as the case that says in regard to the interpretation of a statute by an official who administers that statute. It is entitled a great way. The statute in that case was the Mineral Leasing Act. The official who administered it was the Secretary of Interior. William H. Rehnquist: What if the Secretary simply decides to make a study of a say a region of four or five Western States without recommending or proposing any legislation or any major Federal action? Does that have to be accompanied in your view by an impact statement? Randolph: Absolutely not. Such studies Mr. Justice Rehnquist are under way all the time continuously. The very existence for the Bureau of Land Management, the very reason for the existence of Bureau of Land Management of course is to manage the Federal Lands and they are constantly studying the resources and so on and so forth. The Bureau of Mines is not really a regulatory agency, it is really a research agency and they conduct studies all the time. Various areas are constantly being studied. I think all the Federal land at one point or another is under constant analysis and study for coal mines, for various things. So, we do not think that would require an impact statement, I think the result of that would deter the governmental agencies from studying the material. Now, suppose, everything I have told the Court, at least in the argument portion so far, suppose I am mistaken, suppose I am wrong, suppose the Court of Appeals accurately detected that a regional development plan is in fact contemplated and that, it just so happens that this regional plan, the government is supposedly pondering corresponds. It just happens to correspond with the region that respondents have identified. Nevertheless, we submit the government still prevails in this case. The fact is NEPA does not say or even imply that an impact statement must be done on contemplation. NEPA does not say that an impact statement must be done when that contemplation somehow mystically arises to the level of a proposal. What the statute does say, Mr. Justice Stewart pointed this out early in my argument, it says that an impact statement must be done included in a report on the proposal and Scrap Two, this Court decision in Scrap Two said and held “the statute means what it says”, I quote from the opinion. The time at which an agency must prepared the final statement is the time at which it makes a recommendation or report on a proposal for Federal action. Even under the Court of Appeals opinion which said the only thing that exists here is some contemplation. That time has not arrived and we submit, it may never arrive, and matter of fact we go further. We said, we would submit it will never arrive. The Court below, we think therefore, should have affirmed. In the absence of a violation of NEPA and the Court below found none. It was improper for that Court to continue the injunction which prevented the Secretary of Interior from taking actions that have already been fully analyzed and what the District Court found to be a comprehensive impact statement that assesses the cumulative consequences of coal mining. That is the statement for the Eastern Powder River Basin. I would like to reserve the balance of my time Mr. Chief Justice. Warren E. Burger: Very well. Mr. Mendocino. V. Frank Mendocino: Mr. Chief Justice, may it please the Court. I am here today on behalf of the State of Wyoming and 21 other amicus States. Because we have a lot of stake we think in the decision that this Court reaches in this case. We believe that NEPA contemplates a major state role in the implementation of the Act. We know, from experience that the impact of the Federal Programs on our States are tremendous and we believe that program environmental impact statements are truly the only means that we have of determining the scope and the magnitude of these Federal programs. We think that interior, the Department of the Interior would defeat those objectives by preparing environmental impact statements under NEPA on a project by project basis, and that is our understanding of the real issue in this case. Now, let me tell you a little bit about the Wyoming experience and what is happening on ground in my State. At last count, we have no fewer than 134 coal leases, pending applications or prospecting permits in the Eastern Powder River Basin. Projections for the next few years in the North Eastern part of our State call for 34 strip mines, nine electric power and coal gasification plants. 225 miles of new power lines and 150 miles of new rail road track. We respectfully submit that it is ridiculous to think that a series of environmental impact statements on each one of those particular projects, all of which require either directly or indirectly Federal action before they can come into fruition. We think it is ridiculous to think that a series of environmental impacts statements on those projects will analyze what is going to happen to our State. In the same way that an environmental impact statement taking all of them into consideration and determining the cumulative effect of all of those projects would it have. Harry A. Blackmun: Mr. Attorney General, the neighboring State of Utah has not joined you in your briefs has it? V. Frank Mendocino: No sir. Harry A. Blackmun: As matter of fact, it is one of the brief from the other probably from the other side? V. Frank Mendocino: Yes sir, it has. Harry A. Blackmun: Is that because their experience is somewhat different than yours? V. Frank Mendocino: I believe that one of the reasons and I really cannot, I really perhaps can't answer that but I think that they have a facility which it sensed gone by the boards your honor that may have played a part in their decision not to join in the brief, that is really the only reason that I can give you for that. After this litigation was initiated there has been or have been indications that the Department will now agree to prepare sub regional impact statements. We suggest that, that is not a great deal better, at least the way that we understand and intend to do it and project by project basis. Let me use as an example of this Sheridan County Wyoming, there are few -- Byron R. White: What will you do with the language of the statute? Well, there have been a regional Federal Proposal? V. Frank Mendocino: We do not know your Honor. We submit that they should know. Byron R. White: Well, I know but if they say there is not? V. Frank Mendocino: We believe, we believe very strongly-- Byron R. White: No, the only time you submit an impact statement is when the Federal Government makes a report on a proposal and there has not been a report on a proposal on a regional basis? V. Frank Mendocino: Your Honor, we would differ with that. Byron R. White: Where is it? That is what I asked you, where is the report? V. Frank Mendocino: What we are saying in this case your Honor is that in the Department of Interior they do in fact have plans for an area larger in scope to the project by project basis or even larger than Easter Powder River Basin. We do not know where it is, but we do know as a matter of fact, most people do in this country face an energy crisis. We do know that we have enormous untapped natural resources in our State and we do know that the projects which I have suggested -- Byron R. White: How would you suggest the case go forward? Have a law suit and call people from Interior Department and ask them if they have a proposal or plan? V. Frank Mendocino: I think that the first thing that has to be done is a result of the decision in this Court. A determination be made as to the scope of environmental impact statement. If you agree that NEPA calls for an environmental impact statement on a project by project basis only, then I think that obviously you would necessarily decide that our argument is incorrect in terms of the language of the statute. Byron R. White: Well, do you not think before under the statute would you not have to find that there was a proposal somewhere for a regional plan? V. Frank Mendocino: Yes sir, I certainly do. I do not think that we have got to that point yet. Byron R. White: Well I know, but until you find that, is it not the requirement for an impact state limited to the project that has been proposed? V. Frank Mendocino: Not, if there is a plan. They have taken the position as I understand the issue and I cannot honestly say that I got this understanding from my brother’s argument. But as I understand the basic issue in the case, it is whether or not a project environmental impact statement is sufficient. If you agree that -- Byron R. White: Would it be sufficient if all I have in mind or if the only proposal that ever has been made is for a project? V. Frank Mendocino: If, if the only proposal that they have made but we say that the facts and the pronouncements from the Department clearly demonstrate that their plan goes much further than that. The leases that I have mentioned to you point that out. William J. Brennan, Jr.: As far as statute is concerned at least a few, just limit consideration to the words on their face, before they trigger an impact statement there has to be a recommendation or report on something, and it goes on the say -- there are enough proposals for legislation in other major Federal actions. But unless we can say that something or the Court could say that something constitutes recommendational report on one of those things, statute does not call for impact statements, does it? In other words what is major federal action that you rely on? V. Frank Mendocino: Well, I have got to confess your Honor that I have got to rely on Mr. Terris for that portion of the argument. Byron R. White: What is finding of the District Court quite to the contrary, that there was no -- that the only proposal there was, was a project proposal? V. Frank Mendocino: Yes, that was right. Byron R. White: Or did the Court of Appeals set that aside, find it was erroneous? V. Frank Mendocino: In the way that I read, contrary again to my brother's interpretation, the way that I read that is that Court of Appeals sent that back to determine whether or not there was a program that was larger in scope in than the project, specific project. That is I think extremely important. I started to mention Sheridan County and I think you could note this on the map, there is a little bit development anticipated in that county. Speaker: Where is that one? V. Frank Mendocino: That is in the Northern part of the State, your Honor. William J. Brennan, Jr.: That is left to your -- is it yes, on this map, left to the powder river valley? V. Frank Mendocino: It is in the area there where three small coal deposit shown on the left. Potter Stewart: There were five or six? V. Frank Mendocino: Right. The projections for the increase in the population in that County are only 9% by 1981. However, there are extensive developments taking place South in Johnson County Wyoming and North in Big Horn County Montana. If you take the anticipated development with the accompanying population increases projections for those two Counties in addition to Sheradin County. Projections are that there will be a population increase in Sheradin County alone of over 40% by 1981. I think the implications of that in terms of the need and demand for public services are obvious and that points out why we believe that the environmental impact statement has to take in the consideration more than a single project. Now as it is stated in the amicus brief and I repeat here, we have not taken a position as 22 States on what that geographical area should be. We do feel however, that it must be broader and that the act calls for to be broader than a project by project basis. Potter Stewart: Mr. Attorney General, we recently had an extraordinary increase in population down the Rock Springs area? V. Frank Mendocino: That is correct your Honor. Potter Stewart: Was that attributable to a coal development or to something else? V. Frank Mendocino: In part your Honor, some was coal and some was trona. Potter Stewart: Some was? V. Frank Mendocino: Trona, which is another mineral substance. Speaker: What was it? V. Frank Mendocino: Trona, your Honor. Potter Stewart: There is population explosion down there was it anticipated and-- V. Frank Mendocino: No sir, not at all. And this is why feel that we have such a stake in this case. Thurgood Marshall: But the real point is that eventually Interior is going to have to broaden its area and file a report broader than it has and when it does it will have to have an impact statement, all in the future. V. Frank Mendocino: That is in part correct your Honor. I suppose that I would – Thurgood Marshall: I do not know what statute you are going get that under? V. Frank Mendocino: We believe that the development of the West has got to be just because of the pronouncements and the statements that have been made. More, there is more to it than just a determination as to whether they issue one lease. Thurgood Marshall: You are relying on the NEPA Act, that is all you are relying on, am I right? V. Frank Mendocino: Yes sir. Thurgood Marshall: And you are not under it? V. Frank Mendocino: We believe that we are, your Honor. Thurgood Marshall: You think that Interior should be in a position so that they would have to follow the statement until they file a report or take and move in that direction, you lose. Potter Stewart: And our position in this case -- V. Frank Mendocino: Yes sir. And we believe that they have furthermore, we certainly -- Thurgood Marshall: What we have is that they have been studying it and that is all you have. V. Frank Mendocino: No, we think that we have gotten much more than that your Honor and the pattern of what has happened in our State and in the West in the last several months. Thurgood Marshall: What is Interior been doing? V. Frank Mendocino: They have granted all of these leases and permits and they have pending other applications for various types of coal lease permits. Thurgood Marshall: Exactly, the way they are doing it, that instead of doing it piece by piece they should do it all in a region then. V. Frank Mendocino: No, I am saying that the pattern of issuance of those leases demonstrates clearly that there is more involved than and simply a determination that is specific lease should or should not be issued. It is a part of a pattern to develop the mineral resources of the West. Thurgood Marshall: You do not have it. We do not know what it is. V. Frank Mendocino: Well, I-- Thurgood Marshall: That is problem that seems to me. Potter Stewart: Mr. Attorney General, is that big impact statement is not a view, does that relate to projects in Wyoming? V. Frank Mendocino: Yes sir, it does. Potter Stewart: Does it just relate to just one project as you have defined it? V. Frank Mendocino: No sir, but that was initiated. John Paul Stevens: How many projects does it run. V. Frank Mendocino: After the litigation commenced, it relates to four mines, four strip mines and the projector track which -- John Paul Stevens: Did you make any attack on the sufficiency of that impact statement? V. Frank Mendocino: No sir. John Paul Stevens: Why not? V. Frank Mendocino: Because that impact statement was not a part of this litigation when it was initiated. It was delivered to the Court of Appeals where as a policy matter, we were unhappy with that impact statement but we have not taken any action to attack it pending the disposition of this case. There is a separate question entirely and that goes to the sufficiency of the impact statement assuming that there is agreement on the scope. William H. Rehnquist: If you should lose this litigation, do you think you would have a future opportunity to attack this sufficiency of that statement or is that involved in this case? V. Frank Mendocino: It is not involved in the case your Honor. Yes, I think we would as to sufficiency. Warren E. Burger: Mr. Terris, before you proceed let me put to you the questions that I put to your colleague, the Attorney General, precisely what language of Section 102, do you call upon? Bruce J. Terris: We rely expressly on the proposal language and let me be very clear about that. William H. Rehnquist: Legislation for major federal action? Bruce J. Terris: No, no, for major Federal action. Your Honors, there have already been dozens, not a proposals but a Federal actions which have taken place since NEPA without an adequate regional, environmental impact statement. The issue in this case is not a matter of timing. If anything, we are getting too late in the process not too early. What we have is a set of proposals, some of which have already been acted upon and minds have actually been opened. We have in addition literally hundreds of additional proposals which are coming in front of Interior. The issue in this case, is whether in order to approve any of those proposals to take action, the Secretary of Interior has to have at that time a comprehensive regional environmental impact statement. Now, in our mind that is expressly under Section 102. William H. Rehnquist: Well, the keyword Mr. Terris, at least literally and I go back to Justice Brennan's question here, to your associates. It is a recommendation or report on a proposal. Bruce J. Terris: Exactly. William H. Rehnquist: That must be accompanied by an impact statements. Bruce J. Terris: Exactly your Honor. Now, what we have here let us just take, we can take any one mine of dozens that are involved. Let us take the four that were approved by the Secretary after this Court lifted the injunction in January. The Secretary of the Interior went ahead and approved four mines. Potter Stewart: (Inaudible) Bruce J. Terris: They are among I hesitate trying to tell you which of those numbers in the Eastern Powder River Basin they are but they are among those numbers. Speaker: (Inaudible) Bruce J. Terris: That is quite right your honor. And he approved them. Now in approving them we say, that in taking that actions, we have really going beyond the proposal. We have actually -- the proposal language of NEPA actually requires a statement on an earlier stage. We have really going beyond that, where to the point that he has acted and minds are going to be opened. William J. Brennan, Jr.: And in connection with each of those proposals, was there included in it, the report there on an impact statement? Bruce J. Terris: Yes. Now, let me come to express that -- William J. Brennan, Jr.: Why does it not satisfy -- Bruce J. Terris: Well, let me deal with that expressly your Honor. This is the document and it is the document that my brother has pointed you. That document is not in this case and I will tell you exactly why. It was not in existence at the time of the District Court, rendered its decision. A draft of this document was in existence when this case was in front of the Court of Appeals. The government submitted that draft as well as the draft of the programmatic statement to the Court of Appeals. The Court of Appeals, the Clerk acting for the Court wrote them a letter and said it to them, why have you given us this document? The government replied for your information it is irrelevant to this case. John Paul Stevens: Are the four leases that you rely on also irrelevant that -- Bruce J. Terris: No they are not Let me go one step further your Honor. John Paul Stevens: Does that mean, you can talk about the leases unless they can also talk about what they did as a condition to agreeing to the leases? Bruce J. Terris: Your Honor, let me be clear about this. Remember with the Court of Appeals decided here. The Court of Appeals did not make a final determination in this case. It remanded the case. If the government's position is today which I think maybe it is from my brother’s argument that this statement, now is relevant and does satisfy the requirements of a regional statement, then I submit that is a proper -- William J. Brennan, Jr.: Your argument was that that satisfies the requirement for the regional statement. That it satisfies the requirements of the statute in respect to these four leases? Bruce J. Terris: Well, let me then go back to step your Honor. Our argument is that in considering a proposal and in taking action, the Federal government has to do a statement which is regional that is the issue of law okay, okay-- William J. Brennan, Jr.: Where is that coming from? Bruce J. Terris: But, your Honor, to get to that question we have passed the question, is there are a proposal and is there action? Then the question, in which I think is where we are at -- Byron R. White: Assuming there has been some regional proposal. Bruce J. Terris: Your Honor let me, let me-- Byron R. White: Is it fair enough to take? Bruce J. Terris: Has there been regional proposal? Well, let me tell you exactly what there has been-- Byron R. White: Can you answer yes or no or not? Bruce J. Terris: They, I think in our view there has been a regional analysis and decisions made by the Federal government and let me be very precise on it -- Byron R. White: You said that the words of the statute are that -- Bruce J. Terris: There is a proposal, you see it is action I really -- Byron R. White: The regional proposal? Bruce J. Terris: There has been regional actions, proposals and actions. Let me be very express -- Speaker: (Inaudible) Bruce J. Terris: Your Honor, look at -- I would refer you to the finding 14 of the District Court. The District Court hold, finds as a fact, it is in the petition, it is in the petition for Certiorari of the government your Honor and it is in the back. The District Court finds as a fact that the government is attempting to control development, control development in the Northern Great Plains region, that finding is expressly based on an affidavit of Secretary Morgan that they have taken steps namely, the Northern Great Plains Resource Program and other actions -- William H. Rehnquist: Where is this in the referral, what number is it, I mean? Bruce J. Terris: 14. William H. Rehnquist: Finding 14. Bruce J. Terris: He says they are not part of a plan or program to develop or encourage development but our attempts to control development by individual companies in a manner consistent with the policies and procedures of NEPA. Now, I submit to you that if he is controlling development in the Northern Great Plains region, he cannot control development and analyze the situation on a project by project basis. Let me come back to Justice Brennan question-- Potter Stewart: (Inaudible) Bruce J. Terris: Your Honor, a proposal, I suppose, the way to put expressly in terms of this finding --yes, yes. William J. Brennan, Jr.: Try to get to it? Bruce J. Terris: Your Honor, I want to get to it. I want to put it in terms of finding 14, I think at the very least that an attempt to control development is a proposal and beyond it, it is an attempt, he has not actually proposed that he may do that, he has said -- the finding is he is attempting to do it. Byron R. White: He has no plan or program to develop or encourage development? Bruce J. Terris: That is quite correct your Honor. Now the question in this case, really the root question is. Can the government attempt to control development, issue dozens of mining leases, approve rail roads, start probably the largest industrial development in the history of this country in a rural area, all with its decisions, can it do that? And say, yes we would have to do in an environmental impact statement on the region, if we did planning, but, since we are not going to do any planning, we are excused from it. In other words the argument is the less we do under NEPA, the less NEPA requires us to do. Now, NEPA three separate times talks about Federal planning. Is it conceivable that the Congress in United States said, that if you are controlling development and issuing leases and doing all this things that is simply because you will not plan, that you do not have to so any regional analysis. Warren E. Burger: (Inaudible) Bruce J. Terris: Well, I am saying that, I am asking the question because that is the issue in the case. I do not think the Congress has said that either, your Honor. Thurgood Marshall: (Inaudible) Bruce J. Terris: I do not think you have to rewrite it your Honor. I think the issue is it seems to me in this case there has been clearly a proposal and we have going beyond the proposal. Now, the question is, when you have a proposal --. Thurgood Marshall: I mean, my idea of a proposal is not yours. Bruce J. Terris: Your Honor, I think that if you are attempting to control development, it is at least fair to say you are proposing to control development. Byron R. White: some proposal? Bruce J. Terris: I do. Potter Stewart: More than a proposal? Bruce J. Terris: It is more than a proposal. You are taking action, you are not in attempt is more than a proposal, it is an action. You are going forward with doing something. John Paul Stevens: Just to be sure I understand. You are saying finding 14, supports your view that there is program for regional development. Now, as I read Finding 14, most of the references are to national programs of one kind or another and the specific language you talked about are attempts to control development by individual companies? Bruce J. Terris: Your Honor, the specific studies that are mentioned in finding 14 are both regional studies on this region. John Paul Stevens: The first one is on a national basis and the second one is South Eastern Montana and North Eastern Wyoming. Bruce J. Terris: That is right. John Paul Stevens: which is different from the region you described? Bruce J. Terris: Your Honor, I want to--- John Paul Stevens: The third is the National Coal Leasing policy and then the fourth is the Indian lands and the NGPRP, the credit group of different thing, is this your strongest finding in support of your position that there is a regional program? Bruce J. Terris: Let me be clear your Honor. I do not believe that the Department of Interior has sat down and said here is our program for development in the Northern Great Plains, I do not believe that has happened. I do not believe they are planning. The question your Honor is when they do all these different things and they attempt to control development, I think the finding is very clear that is what they are doing and by the way, their finding your Honor, is based -- Let me just go to the underlying facts on which their finding was based. Secretary Morgan's affidavit says that the department has taken action to control development of coal on a national basis and in the Northern Great Plains. Now, that is what that finding is based on, there are some other facts too, that support that. Lewis F. Powell, Jr.: It is your position that the action that has been taken I think you have characterized that as study in other ways, focuses precisely on the same regional area that you are recommending? Bruce J. Terris: Your Honor, there are really two issues in this case and they are really sub issues. The first issue is do you have to do a regional statement at all, is there any requirements in NEPA that require you do anything more then look at the specific strip mine which is in front of you that I submit to you your Honors. William J. Brennan, Jr.: That will have to be yes, if in fact the Interior came up with a proposal for legislation or other major Federal action on a regional basis, of course there will be regional impacts. Bruce J. Terris: But, I am saying your Honor, but--- William J. Brennan, Jr.: Why are you saying they did do that, that is what -- Bruce J. Terris: I am saying that they both had a regional proposal and they had so many individual proposals that they have to be even separate from the first proposition, they have to be analyzed regionally. Let me go back to Justice Powell’s point because it seems to me it isolates the two basic questions here, one is do you ever have to look beyond a specific topic that government is considering at that moment, that is the first issue and I regard that as the basic issue. The second issue is if the answer to that is yes you do sometimes have to then what should the size of the region be here? William H. Rehnquist: Well, the statute itself, they require you to look beyond the particular project as what the Justice Stevens question this morning indicate but that can be done in an individual projects statement it may have to talk about other things than just the immediate consequences of that project. Bruce J. Terris: Your Honor, that is correct and if the government's position had ever been that what they proposed to do was in the context of an individual project to look at the entire interrelationship in the region there would not have been any litigation. The government position from the start and is still is today that they do not have to look beyond a specific project. William H. Rehnquist: You can challenge that if you disagree with it when they file an impact statement that everybody concedes is required for a specific project and you can say it is not broad enough? Bruce J. Terris: We could your Honor and there is a procedural question which was argued in the Courts below which has not been argued in this Court as to whether procedurally, the way we should have proceeded, instead of coming in and isolating this basic question which cuts across the board or whether we should have literally brought separate law suits against every single environmental impact statement, which is as -- because it does not look at the whole region. Now, that your Honor, I do not think is a basic question except for in terms for Judicial Economy. I think if we had ever brought one lawsuit after another of that kind, it would have been thought that that was a very improper way for us to proceed. But that is not the basic issue I quite agree, if your Honors believed that the way for us to proceed in the future is to attack each statement separately then of course we will do so. But I think the basic question in front of you. Is it not that procedural one that whether when the government makes clear that its position is that they are not required by NEPA to do regional statements that in that context, they do not have to look beyond an individual mine. Thurgood Marshall: Who is better qualified to draw the lines of a region in this area, the Interior Department or this Court? Bruce J. Terris: The Interior Department your Honor and the Interior Department drew the line. Thurgood Marshall: Are you not asking us to do? Bruce J. Terris: No. Let me be very clear about that. The line we want is the Department of Interiors line and let me go back to the map that was given to you because -- Thurgood Marshall: As is stated, their line is the Powder Basin, that is their line. Bruce J. Terris: No, let me go back – Thurgood Marshall: Is it not what they say? Bruce J. Terris: Well, your Honor, they do in one sense but let me go back to the map which is distributed to you. If you look on the left hand side under explanation it is said, there is a line there that says, outline of the Northern Great Plains coal field. Now, it is a very faint line in the map that you will see it winding around and that line is the identical line which is in our map in the brief, which is the Northern Great Plains Resource Program study area, the area that they have chosen to control development, a 1975 water study of the Interior Department, statements by Secretary Morgan, that you had to do study of this area in order to control and coordinate development, statements by the administrator of EPA, that this was the right area, statements by the council and environmental quality that this was the right area. Your Honor, I am going to a different question I believe when I go to this. I am going to the question if you assume that we have met the statute that there are proposals. Then I am going to the question, what is the right area for analysis? And what I am saying your Honors is I agree completely that the Department of Interior has considerable discretion in determining what is the proper region. What I am suggesting here your Honors is that they have repeatedly over and over and over again said the right region for environmental analysis under NEPA is the identical region which we have argued, there should be a regional analysis. Now, that is not a coincidence that we came to the same area, the reason that we came to it is because this are geological facts. The government has submitted a brief showing there are lots of other coal in the United States, that is true. But they are not in the same geological formation and the Department of the Interior made the decision, that the right area, the right geological formation was this one. Now, I want to go back to Justice Powell’s question, because I do not believe that is really the fundamental question in this case, I want to explain that. If this is the right region, let us make an assumption right now that the sub regions and I think that is what the way Interior describes them, that the sub regions are correct. John Paul Stevens: That is what I want to ask you just what we have been telling you project by project. But, really are we not talking about difference about one over all region in five sub region, and that is -- Bruce J. Terris: You Honor, that leads me I think to the basic point. John Paul Stevens: I will just ask one question about it, does the record tell us what are the five sub regional impact statements are all prepared in the same office, under the same supervision? Are they working entirely autonomously? Bruce J. Terris: I believe your Honor, they tend to be subdivided at least in the start, different regional offices and different offices of the Bureau of Land Management and other Federal agencies that are in the field. In other words, there is-- John Paul Stevens: Does it satisfy your purpose. If we had the five sub regional statements and then they bound them all together in one great huge volume with a long introduction sort of talking about the things that overlap them among the three? There is no harm in having the five sub regional statement I guess? Bruce J. Terris: No your honor. Let me explain the ramifications of what we are now dealing and this goes back to Justice Brennan’s earlier question. Everybody believes your Honor that you have to look beyond the individual project, I do not think there is any dispute about that. This statement, this sub regional statement makes the same assumptions that we do. Namely you cannot look at a mine by it self, you have to take a region. Now, they have taken a much smaller region but they have taken a region and we have cited in our brief at great length how one Federal agency after another EPA, CQ, Interior, all the other line agencies that deals with this problem have all agreed that you cannot look at individual statements by themselves. Now, the government, we set out by the way at great length in our brief, how Secretary Kleppe has essentially agreed with our position, on February, on January 26, he stated that he had made a determination, it is on appendix to our briefs, the documents. He had made a determination that indeed you did have to do regional statements. William H. Rehnquist: Where did he make that statement? Bruce J. Terris: It said its— William H. Rehnquist: I mean where in the briefs but what was the forum? Bruce J. Terris: The forum was your Honor, that when he makes final decision at least on big issues, he has what is called is a program decision option document. William H. Rehnquist: Is that press conference or— Bruce J. Terris: Well it was announced through a press conference your Honor. But, the document is in the back, it is not a press release, it is the actual decision document that he signed. It took them; he had a press conference in and he released it to the press. But we are not relying on a simply a press release. Now he then told the Senate committee the same thing a few weeks later that he decided to do sub regional statements. He has done one, two are about to be started in North Dakota and South Eastern Montana, two others are under consideration in a priority list. Now, at least we believe that he has made the determination, which we have argued for from the beginning. Speaker: (Inaudible) Bruce J. Terris: No, your Honor. I think there is one more issue to decide and I do not think it is the basic issue although, I think the government by the way will dispute that is mode even on the point I have just been making. They want to say that the secretary has started this process out of the goodness of his heart. NEPA did not require that he do this and he that means presumably could change his mind at any time. Warren E. Burger: The Interior and the whole management program would be doing this now and before NEPA was ever on the books? Bruce J. Terris: We are, they did not do it though however, before NEPA was on the books that is of course why need help -- Warren E. Burger: In the last 20 years, they have been doing this not only with the coal but timber and many other things? Bruce J. Terris: You mean it is kind of environmental analysis. Warren E. Burger: Not an impact statement, because the word was not invented but making that kind of study and keeping there study is going crap? Bruce J. Terris: Your Honor, I with all respect I disagree very strongly. I think the history of NEPA shows how little indeed they did this kind of thing before 1970 and that what NEPA has done, it has started really a major revolution in a way that Federal agencies proceed in terms of the environment and I this is a constructive step along that line. I would just point out that even if this document on Eastern Powder River Basin is adequate and your Honors say that is the right region. I would remind you that there had been no such statements on any other part of the region, that at least four-fifth of the region has not been analyzed at all and, that is what they are just beginning to do. Thurgood Marshall: (Inaudible) Bruce J. Terris: No, not only you do not have to, I think your Honor it will be improper to. Thurgood Marshall: I hope that you are even suggesting -- Bruce J. Terris: I am not your Honor.[Laughter] I remind you that I did not bring this pile of documents in front of you your Honor. I do not think it is relevant except for the fact that I think what is relevant is that the Department of Interior has decided. Yes, indeed, it does do regional, sub regional statements. But, it does not intend to do regional statements and I think the major issue you have fun you did is left. The major issue of dispute is the question whether we are correct in taking Interiors on lines and saying they yes indeed that is the right area. Because I do not think we have a major dispute with Interior, on the question of whether sub regional or regional statements have to be done. I do think we have a dispute with the Department of Justice to be very frank about it. William H. Rehnquist: But if the government is right that the secretary has done this out of the goodness of his heart and the law does not require him to do it, then you are not entitled to any judicial relief in a way of an injunction in the system -- Bruce J. Terris: That is quite correct your Honor. William H. Rehnquist: Which was wrong in issuing the injunction? Bruce J. Terris: That is correct your Honor. That is why I think that it is not moot in any kind-- William H. Rehnquist: Do you agree that the injunction issued by the Court of Appeals should be dissolved? Bruce J. Terris: Oh no, no, no your Honor, let me-- William H. Rehnquist: But that is what you said? Bruce J. Terris: No, Let me be clear about it, I rely on Interior's new found policy of doing sub regional statements, has confirming our view and that of VPA and CEQ that regional analysis is required by NEPA. In other words I think that is the Court--- William H. Rehnquist: They say that is not the case? Bruce J. Terris: Your Honor, the Department of Justice says that is not the case. William H. Rehnquist: Well, under the Department of justice represents the United States in all litigation before this Court? Bruce J. Terris: That is quite correct your Honor. But Secretary Kleppe said in his program decision option document I think it is very clear if you look at it, that t NEPA required these actions and I think it is very clear that is what the secretary was doing. William J. Brennan, Jr.: That is sort of an administrative interpretation of statute, which we should get that one? Bruce J. Terris: I think you should give deference to that, I think even more than your Honor. I think the proper interpreter of NEPA, the one that Congress and the President have both charge with interpreting NEPA happen to be EPA and CEQ, now I do -- I think that Interior is entitle to some deference too. Here, I think there is a coincidence which has occurred in which all three agencies have found that regional analysis is required by the Act. Byron R. White: Now, which are you saying that they say, that the regional, sub region statement is required because a sub regional statement is the natural requirement of a project proposal? Bruce J. Terris: No. Byron R. White: Or are you saying that the Department of Interior had said they have a sub regional proposal? Bruce J. Terris: I am not sure what the Interior thinks your Honor. Let me say what I think. Byron R. White: I am certainly relying on Secretary Kleppe's decision, now did he say they have a regional proposal or that for some reason or another we are going to do a sub regional statement? Bruce J. Terris: I think it is more accurate to say that NEPA that in order to carry out our NEPA responsibilities, we are going to do a sub regional statement, I think-- Byron R. White: Do you agree with the statement in the Court of Appeals, we hold a comprehensive major Federal action is contemplated in the Northern Great Plains and therefore, what, do you think that is enough that some of the major Federal action is contemplated? Bruce J. Terris: No, but I want to be clear the Court of Appeals did not think it was enough. The Court of Appeals expressly stated – Byron R. White: Well it went on from there; it went on from there to say that the District Court's contrary conclusion was an error and that then went on statute in order further proceedings based on that statement? Bruce J. Terris: Yes, your Honor. But you did not say that a contemplated action was enough, it expressly said the contrary. It said although it thought that action was contemplated it was going to remand the case to the District Court in order to be determine whether the Federal role, in other words the District Court was going to determine what kinds of actions really were going to be taken. Byron R. White: The District Court found that was no any proposal, any regional proposal? Bruce J. Terris: It did not use I do not believe, your Honor, those words because there was no plan or program. Byron R. White: Well, at the time the Court of Appeals acted there was a -- Court of Appeals seems to concede there was not, that they agreed that there was no any plan or proposal? Is that something that is contemplated? Bruce J. Terris: Your Honor, but it said that that is all they could find now. So, it was contemplated. Therefore, it was not making a determination that are-- Byron R. White: But how could they ever say that up to that very moment an impact statement was required? Bruce J. Terris: It did not. The holding is not -- Byron R. White: Why should they not have affirmed? Bruce J. Terris: Because your Honor they thought they that the issue was unclear about the role of the Federal government-- Byron R. White: It was very clear enough that it was only contemplated. Bruce J. Terris: At that point your Honor, it was contemplated. I think by the way that is a very conservative view with of the facts before the Court of Appeals but taking that conservative view, the Court of Appeals then said, we are remanding to the District Court to determining what the role of the Federal government actually would be. Now, that is directly consistent, I submit was Scrap. That you sent it back to the District Court to determine whether the Federal Government was really going to take these kinds of actions. Warren E. Burger: What the Court of Appeals did was to take a full series of relatively minor actions of the Federal government accumulated them and taking them all together this amounts to major Federal action? Bruce J. Terris: In part, you are right Your Honor. But, I think not completely, I think the fact -- Warren E. Burger: You say almost they would say almost exactly that? Bruce J. Terris: They have to change at least one part of that statement. The each individual part were not smaller actions. Each one of them is actually a huge actions. Each one of those actions, for example has, in a government I think conceives this that each one of those is a major Federal action under NEPA. So what the Court of Appeals was saying in a situation and the Court by the way expressly came down on this language about control development. We are controlling development, where you have dozen or hundreds of actions, where now it turns out the Federal government itself admits they have to do regional analysis. That in that kind of situation, you have to look at the entire region and I think-- Warren E. Burger: This language, that I was trying to paraphrase, the Judge Wright says, the question is whether the cumulative effect of various Federal actions, all individually minor could together constitute major Federal actions. He is acknowledging that these were each minor-- Bruce J. Terris: Your Honor, all I can say he was clearly wrong and I think he was clearly wrong your Honor on a proposition that I think the Federal government will agree with me because they are each individually your Honor actions in which they admit they have to do environmental impact statements. The mines were talking but just so we understand what were talking about, each one of these, each mine is among the largest mines in United States it has each one of the mines has several square miles of area. It is doubtful according to the Federal government itself that these lands will be reclaimed for dozens of years in prompt and maybe not forever. We are talking about power plants and coal gasification plants of a size that are among the largest in the country. John Paul Stevens: One thing we have not really address, you said, there should be one overall regional statement instead of five sub regions, why? Bruce J. Terris: Well your Honor, let me come back because I think I -- to the statute because obviously that is what we are talking about. Once we decide we have got a proposal or an action, that triggers the environmental impact statement requirement and I have argued at length about why I think that there is such a proposal and action. In fact, there are many of them and that they are tied together by controlling development. Now then the question, the question you have to decide that is what should be the scope of the environmental statement. Now, I submit that the way you determine that is to look to the five factors in 102 (2)(c) you look to what area you have to examine in order to determine the environmental impacts and the alternatives to the project. In other words, it is a practical question that one is dealing with at that point. And, CEQ has said the way you look at that giving a gloss on that is whether there was an inner relationship, the three adverbs that come from CEQ they do not come from us. Now -- Potter Stewart: The environmental and geographically and programmatically. Bruce J. Terris: That is right. Those come from CEQ and they are gloss on how do you look at those five factors and analyze them when you have interrelationships between projects. Now, we say you have to look at the whole area that I would not make that argument your Honors, simply analogical basis, I think it is true logically, we have argued link in our brief that it is logically true. But our basic proposition is they decided that you have to look to the whole region to analyze those five factors. You will see in our brief that EPA said you had to do that, Secretary Morgan said you had to do that, the Northern Great Plains Resource Program said you do that-- Potter Stewart: Just to know that the red light sounds to be very brief but, is it not correct that in order for us to say five sub regions are not adequate you need one overall region, we must conclude that the Secretary is arbitrary and determining that five radically, is not the stand point? Bruce J. Terris: I think that is correct your Honor. I think you only get to that proposition after you first decided whether regional analysis has to be done at all and then you get to that proposition. I think the question is whether he was arbitrary in the light of his own and other Federal agency prior decisions and actions. Thank you. Warren E. Burger: Very well, Mr. Terris. Francis M. Shea: Mr. Chief Justice, may it please the Court. First I would like to ask the Court to look at that finding 14 again. That is on page 98, yes in the petition for cert. Department of the Interior has taken action to control development on a national basis and they have with their programmatic on a national basis and their leasing policy on a national basis. That covers the whole nation including the Northern Great Plains, it says on a number of variable thing but what is this talking about is you will get down to the end. Those actions however, are not part of a plan or program to develop or encourage development or rather attempts to control development by individual companies in a manner consistent with the policies and procedure of the National Environmental Policy Act. I do not see how this can be relied on for the proposition that the Federal government of the Interior has undertaken to control development of the region. Except as they are controlling development of pursuant to a leasing program which applies to the whole nation. Warren E. Burger: Is it possible Mr. Shea, that even having completed which they have not done apparently, even having completed the study of the whole area and concluded that the development of the coal resources was in the public interest. We should proceed that they might then with respect to particular mines on particular areas. Say that that was an interference with the environment which was not tolerable and that particular project would not go forward is that? Francis M. Shea: Well, of course if the Court please, there has been no change of position on the part of the Interior, initial affidavit which was put in by Secretary Morgan set out that we completed this coal programmatic and we have the information from the Northern Great Plains Resources Program. We will decide possibly, we will have an impact statement from the whole region that possibly the purposes of NEPA will be better served by preparing an impact statement on an individual project or on certain sub regions or on the basis of basin boundaries et cetera. And, this is exactly what Secretary Kleppe is saying today. Now, indeed, of course the studies are going all the time and what they finally decide on is what subject they will, what major Federal action they will decide to carry forward. Now, I would like to ask the Court if it will to return to the statute and to Scrap Two which it seems to me says that the statute means what it says. And I would like to suggest to the Court that there is a very different question presented on what is, what interior is compelled to do, what they must do under this statute and what they find it wise to do. Now, they may find it wise to prepare particularly regional statements rather than the statement on a particular project. Incidentally, I think all the Secretary has said he’s going to do is to, is he thinks prepare a couple of more regional statements. I believe in his response to questions put to him. But that distinction it seems to me has to be kept in mind which I think your question posed and suggested and, I would like to -- I am not sure that these matter is not well in mind from the questions that the Court has put. But looking to 102 (2) (c), this is what compulsory and all that is compulsory that they will be included in every recommendation, a report on proposals for major Federal actions significantly affecting the quality of human environment and what is to be included, the environmental impact of the proposed action, any adverse environmental effects which cannot be avoided should the proposal be implemented. Alternatives to the proposed action, any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented. Now, if the Court please in Scrap II if I understood correctly, the tolling, stitching, the Court said that if we want to determine what kind of an impact statement is to be prepared we must first define accurately what the proposed major Federal action is, and secondly, that in circumstances such as exist there and exist here where the proposals where by private companies that the recommendation of the proposal for major Federal action is the approval of those applications for in scrap II in failure to suspend but the approval of those actions. Now, gentleman, I suggest that it is impossible to read 102 (2) (c), I should not say impossible but it seems to me very difficult to read 102 (2) (c) as relating to something other than a specific proposal. The approval of mining lease, but how you can read this as saying, that it covers prior action, that covers applications which are pending, which has no commitment to approve, can you read the environmental impact of the proposed action as saying the environmental impact of all prior actions and all applications for leases and for rights of way, for mining plants, can you say that any irreversible and irretrievable commitment of resources which would be involved in the proposed action that you can read in to that all the actions which have been taken in the way of leases and mining plants et cetera and all of those applications which are pending that there is no commitment to approve which may or may not be approved. I suggest the Court, that it is not to be so read. Now, to be sure as Mr. Justice Rehnquist suggested and I think as Mr. Justice Stevens suggested, when there is indeed the recommendation of a proposal, of a particular mining plant for instance, well, that is approved. It must deal with the situation which is approved if this adds further impact on the environment that breaks the camels back, a portion you got to look at what the circumstances are what the cumulative effect it is, and if it is claimed that impact statements is inadequate, it can be claimed that it is inadequate, because it does not give consideration to the cumulative effects but may I say again that this does not mean that the Secretary is under obligation. He may do it because it is the wise Course, it is the most desirable way of managing it but this is quite different from saying that these under obligation to prepare a regional impact statement. Now, he would be under an obligation of preparing regional impact statement, if that constituted if a plan had been, if he had a plan, which involved the entire region that he was carrying in effect except that as you know that the decisions of the Courts, the Court of Appeals have held that even where you had such as thing as two phases of tea tongs (ph) or where you have the simply Utah project, if part authorized by the Congress, if part of that has independent utility, a single impact statement on that part having independent utility and which does not commit you to go forward and finish the entire project, can be supported by an impact statement which is limited to that part. Now, therefore I would submit your Honors and I did have the feeling that this was brought in the course of the question. Then you have got to find a proposal, the proposal has not so far as I could hear, and brought your attention by opposing council nor by the Court below, and what he talked about, the Court below said was all of these prior approvals, all of these things in being, all of the applications which are pending and the studies which have been made, that these indicate that Interior is contemplating control. John Paul Stevens: Mr. Shea, before you leave that point that Judge McKinnon in his dissent made the point that the commitment of the granting of approval in one area does not necessarily involved in commitment to grant approval in other areas. In other words, he took the position of these five regions or perhaps even individual projects, are not sufficiently inter dependent to require any one overall statements. Your opponent argues that we need one statement for the entire area. But I like you to tell me is whether we need to decide that issue or not? You understand my question; do we have to agree with Judge McKinnon on the point that the entire area is not inter dependent in order to agree with his ultimate conclusion? Francis M. Shea: Well, I am not sure that I really fully understand your question, the findings of the District Court is that there is no planned program or other major Federal action, indeed. William J. Brennan, Jr.: (Inaudible) Francis M. Shea: Yes, and this was conceded by opposing counsel. William J. Brennan, Jr.: We agree with that then we do not have -- Francis M. Shea: I do not see what is left and I do not see how that is gotten around. Byron R. White: Well, it maybe that if one project necessarily determines the shape or form or outcome of another that having a plan for this project necessarily means you have a plan for the other one. Francis M. Shea: If they are integrated, certain. Byron R. White: What is exactly the question? Francis M. Shea: Is that the question? John Paul Stevens: Do we have to decide whether or not they are integrated? Francis M. Shea: Well, I think that, you know this in the first place -- John Paul Stevens: Certainly no, but Judge McKinnon apparently thought that he had to decide if you want you can do it. Francis M. Shea: In the first place you know, there is a finding that so far as these proposals of the private companies are concerned that they are not being constructed or carried out pursuant to any integrated plan, and also that the plans that these projects of the individual companies are not integrated or interrelated. Now, if I may try to get at it but, if I do not think I have been responsive, that is finding 31, if I may try to get at it in this way, if the Court pleases, it seems to me that unless you can find a proposal, unless you can find a proposal, there is no basis for acquiring an impact statement and the way they sought to get a proposal was to say that all of this is interrelated, I do not think -- in order to be dependent on what the interrelation was the fact it is interrelated, does not make it a single project. It seems to me that the tests which have been made by the Courts of Appeals are the proper tests. That is if you go forward with this particular proposal, are you committed to something greater or does it have independent utility. Now, it seems to me that I thought what Judge Mckinnon was saying was that there is no any kind of such inter relation as they are talking about. Warren E. Burger: Necessarily (Inaudible) Francis M. Shea: Right. Warren E. Burger: It is possible but not necessarily so? Francis M. Shea: Well, really not on 90,000 square miles is not even possible. Warren E. Burger: Well, it is possible that some of them near to each other? Francis M. Shea: Oh, but that is a very different manner, that is a very different manner. It might be that as Mr. Justice White suggested it might be that you have a particular proposal which if you carry it out, you are committed to carrying out something more. Byron R. White: On the other hand (Inaudible) a series of projects were wholly unrelated, if the Interior Department actually had a plan for the development or proposal of the whole area, there would have to have an area impact statement? Francis M. Shea: That raises I think somewhat difficult questions. I would be dubious about that because does that plan -- Byron R. White: It is a proposal. Francis M. Shea: If they have such a plan with that to remember, it is not just there must be a proposal from major Federal action but it must significantly effect the environment. So that you would have to find not only that it was a proposal for major Federal action but that it significantly affected the environment. Byron R. White: But at least there would be something that was not there before if you got a proposal? Francis M. Shea: Yes. Byron R. White: Before in your area— Francis M. Shea: But we do not have this, obviously. But this would raise -- you know. I cannot just-- Byron R. White: The Court of Appeals is against on you on that. Francis M. Shea: On what? Byron R. White: On they say over, they say that they apparently they think the possibility is that the Interior Department has gone far enough along the line and towards a proposal to trigger the need for an instance. Francis M. Shea: Well, what they say is all the actions have taken place in the past and all of the pending applications which may or may not be approved that, this in our view accept the Court constitutes major Federal action and thus it goes on to say. Thus, I do not know how it follows-- . William J. Brennan, Jr.: For the purposes of the statute, a proposal whether you call it a program, a plan or I think the language was or nothing at all. Francis M. Shea: Yes, that is right. And then it goes on to say that thus, but all it held was that there is contemplation that they contemplate controlling. It is the next, very next sentence in this, Justice White. They contemplate controlling the development of the region. Well, Mr. Chief Justice, I see that I have a red light. Warren E. Burger: Thank you gentleman. The case is submitted.

Earl Warren: Number 29, Junius Irving Scales, Petitioner, versus United States of America. Mr. Solicitor General. J. Lee Rankin: May it please the Court. There are three or four other matters that I would like to go into and finish up on couple that I don't think I got completed last evening. First place, I'd like to call attention to the statute of limitations that I referred to, counsel for the petitioner asked me about the section, and it's Title 18, Section 3282. It became effective September 1, 1954 and extended the statute for a period of five years. You recall the indictment here was November 18th of 1954. I also want to call the attention of the Court, however -- Felix Frankfurter: (Inaudible) the question? J. Lee Rankin: I don't think the -- the question is in the case -- Felix Frankfurter: I see. J. Lee Rankin: -- because the Court instructed the jury that was limited to the three-year period. Felix Frankfurter: And you say -- J. Lee Rankin: Yes. Felix Frankfurter: -- it doesn't help you any. J. Lee Rankin: No. Felix Frankfurter: It would help you. J. Lee Rankin: That's right. So we -- we don't have the question of whether or not it extends the period in violation of their rights. Now, with regard to the Internal Security Act, I'd like -- of 1950, I'd like to call attention to several things about the pattern of that Act. It seemed to me that Congress was trying to provide for the registration, not only of individuals which was one of the more remote provisions of the Act, but for registration of the Party and the officers of the Party, and there were important sanctions with relation to the failure of the Party itself to so register. There was also a provision that the Party did not register and those sanctions came into being. The officers were required to register. And if the officers failed to register, then the members themselves would have to register. But the provisions in regard to the officers require the registration as to their functions and duties in their office. That seemed to us that the problem that Congress had was whether or not by reason of recitals as to the character of the Communist Party as a conspiracy in detailed form as was set out in that Act. It might be construed by the courts as a provision in itself which, along with the registration or the membership, might establish the crime. And it was that they were trying to reach. Now, when Senator Kilgore made his objections to the form of this proposed 4 (f) in connection with the Internal Security Act of 1950, there was no provision in the Act as it then was in regard to per se. And in conference, they added the provision in regard to per se, limiting it to per se as well as the provision or of any other criminal statute. I'd like to call attention particularly to Section 17 of that same Act, which is set out on page 55 of our brief. There, Congress provided the foregoing provision of this title shall be construed as being in addition to and not in modification of existing criminal statutes. Now, we think regardless of anything else of our legislative history or any other interpretation that you could draw from the action of Congress in this matter that that should be conclusive because it seems to us, Congress said, “Whatever we do in this Internal Security Act of 1950, we just added on top of whatever we have done. And whatever you do with it, don't take it to try to reduce what we already have.” Now, I think you have a further problem if you adopt the construction that is advanced by petitioner's counsel in this matter in regard to Section 4 (f). Because if you recall, the language of that section does not refer only to members as had been treated largely by petitioner's counsel in the brief as though it did. But it also refers to officeholders and says neither the holding of office nor membership in any Communist organization by any person shall constitute per se a violation of these subsections or any other criminal statute. What is the effect of that? If you are going to say that regardless of the fact that Congress deliberately and carefully said this should be limited to per se membership and not membership with knowledge as the Smith Act said, then what about the provisions about an officer who is required to register and tell what his functions and duties in his office are with regard to the other provisions of organization and advocacy in teaching in a conspiracy in the other parts of the Smith Act? It seems to me that that forces upon the Court a construction that the entire provisions dealt within the Dennis Act were intended by Congress that was discussing the successes of the Government in dealing with this problem in the Smith Act prosecutions as an intention of Congress to wipe them all out, and I don't think that can be found. But regardless of all the other refinements to the argument, when you get down to a proposition where Congress carefully says, “In the same statute practically at the close, that regardless of what we have done here, this is not to modify or reduce any of the criminal statutes that we've got in regard to this up to this point.” Felix Frankfurter: Mr. Solicitor, does your view of 4 (f), the controversial clause gets down to the statement, gets down to this, that is merely a declaratory statement by Congress? J. Lee Rankin: That's -- Felix Frankfurter: Anything but declaratory, it must be a modification. J. Lee Rankin: That's my interpretation of it. And I think the Court can deal with it like it did in the Hutchinson case in applying the Norris-LaGuardia Act to the Sherman Act as a matter of trying to interpret this situation, but not to reduce the Smith Act which Congress was not, in any mood or temper, to do at the time it passed this Act. Felix Frankfurter: Are there anything if one goes beyond the statutory language and I know there's such a tendency going to legislative history that we now even (Inaudible) experience enable counsel to begin with legislative history (Inaudible) If one goes to legislative history at the end instead at the beginning, is there anything which discloses (Inaudible) of mind on the part of Congress that this was put in merely out of an abundance of courts? J. Lee Rankin: Well, that's the way we read the history, that Congress had this question brought up and it was a possibility. And in order to maybe stamp on this fly with an elephant, they want to eliminate and maybe even the fly wasn't there. And they were trying to eliminate it with great force. Felix Frankfurter: (Voice Overlap) the history legislation had been made a declaratory statement. J. Lee Rankin: That's right. And that's the way we view the Act in -- Felix Frankfurter: That's what your position that (Inaudible) J. Lee Rankin: That's right. Felix Frankfurter: Suppose if it's anything other than that, it must be a modification. J. Lee Rankin: Yes. Yes, Mr. Justice. Now, I'd like to turn to the next problem to the question that Mr. Justice Harlan asked which disturbed me and I don't think I answered adequately for him or for the Court. In regard to the person who writes a letter in -- into the Party who says that he's sending in the dues and he believes in the Party, in its objectives, in its purposes and its intent to accomplish a revolution by force and violence, we suggest that that has knowledge and that has intent, why isn't that a crime under the statute? And the thing that disturbed me about is whether or not you had membership in that situation. In fact, and I think that you have to start with genuine membership. We're familiar in -- in our activities in life that there's all kinds of membership, inactive, active, and the various organizations and many of them like various lodges or -- or groups you can't get into by merely writing letter saying you're for everything that they're intending to do or the objects and purposes that they have in mind in sending the necessary money. You have to comply with their requirements before becoming a member. And that is one -- that is the first step. Now, what does the Communist Party require in regard to membership? The Government's Exhibit Number 39 is a 1948 Constitution of the Communist Party of the United States was submitted in evidence in this case. And in Article 2, Section 3, it is stated, “A party member is one who accepts the aims, principles and program of the Party as determined by its constitution and conventions, who belongs to a club and attend these meetings, who is active in behalf of the party program, who reads, and circulates the party press and literature, and who pays dues regularly.” Now, that is the only evidence that I know of in the case as to the requirements of membership in the Communist Party except as you can deduce them from the actions of the petitioner and the witnesses in this case. Speaker: My question, assume a card carrying Communist, a card carrying member, so that he's a member in every sense of the term, but he's not an active one. He doesn't go around and preach. He pays his dues. He's carried on the roles. He carries the card. And I understood you say that you would not regard that kind of a member as being subject to the membership clause. J. Lee Rankin: Well, the thing that bothers me is there's another requirement in the -- in their constitution. He must -- it says, “Who is active in behalf of the party program, who reads and circulates the party press and literature, and who pays dues regularly.” Now, if you'll assume all of those things in your question, then I'll -- I think I can answer it. But you didn't seem to me to assume all of those things, Mr. Justice. Speaker: Well, let me make my question then more specific. Supposing a man has all of those attitudes of mind that are in that bylaw and he's admitted to membership on those premises and he gets a card and then either through inefficiency or through waiver of those requirements or because they like him, they tolerate him as a member in the Party, don't revoke his membership, don't revoke his card even though he doesn't become active in all those senses that you're talking about there, so that he remains a member, is he subject to the membership clause? J. Lee Rankin: Well, I think that we would have difficulty with the Court if he would prove that he did not -- he was not active in behalf of the party program. In defense, if we would prove affirmatively that he did all of the things that you described and he would prove that he was not in fact active in behalf of the party program, I think the Court could fairly conclude that he was not in fact a member of the Communist Party under the statute. Harold Burton: And yet you would say then he was a member per se? J. Lee Rankin: I think he could be a member per se. Harold Burton: Although by the Constitution, he's not a member. J. Lee Rankin: I think that's a possibility. But I think that the statute should be construed fairly to require the provisions of the constitution of the Party. Felix Frankfurter: We had a similar problem (Inaudible) with regards to immigration services relying on the statement by Senator McCarthy that membership -- for purpose of the deportation made was immigration one of the other, I ought to remember but I don't, that it -- it must -- there must be activity behind it. J. Lee Rankin: Yes. Felix Frankfurter: Am I right? J. Lee Rankin: That's right. Now, I -- I didn't answer yet the question that -- Felix Frankfurter: In all events, the problem put by my Brother Harlan is in the realm of the scope of statutory construction, is it not? J. Lee Rankin: Yes. And I -- I was going to -- Felix Frankfurter: And in this case, this -- this is not that case, is it? J. Lee Rankin: I was going to turn to that next. It seems to me that -- Harold Burton: Before -- before -- J. Lee Rankin: Yes. Harold Burton: -- you leave that on, is -- is it -- it's a previous question in answer to Mr. Justice Harlan, is it for that reason that you read the intent to this membership clause? J. Lee Rankin: No. We think that that -- the intent should be read in as a matter of mens rea and the usual interpretation of criminal statutes and find it there and -- Harold Burton: I understood you to say that so far as intent was concerned, that there must be an intent to carry out the purposes of -- of the Party. J. Lee Rankin: That's right. Harold Burton: But now if the member is purely (Inaudible) member such as (Inaudible) would it be because the intent was not -- he could not read the intent into his membership that he would not be liable or might not be? J. Lee Rankin: Well, it might be several factors. That might be one of them. The -- Speaker: But if he -- if he had intent, then would he necessarily be or would he, in your view, be necessarily be covered by the membership clause? J. Lee Rankin: Not necessarily because he might not comply with the requirements of the Constitution of being an active member in trying to further the purposes of the Party. He might intend it do it wholly, and I think that was the question that Mr. Justice Harlan -- Speaker: But bearing in mind that this statute is not in terms leveled against the Communist Party but is in the level in terms against subversive organizations, I mean, organizations believing in enforcing violence, there might well be organizations that don't have these requirements of these bylaws that don't insist on active membership. Yet, I take it you would say that as a matter of construction, the statute is limited to active membership even though the bylaws of another type of organization didn't have these provisions that the Communist Party mentioned. J. Lee Rankin: Yes. That was the next -- Speaker: So you read into the statute active membership in effect. J. Lee Rankin: Yes. We do that in -- in the way we think the Court did in the Dennis case in examining the constitutional question in which we think the Court dealt with the problem and said Congress covered this particular type of crime. Now, how far can the Congress reach constitutionally in limiting free speech in dealing with this particular situation? And is the threat sufficient weighed against the constitutional limitation to permit Congress to reach this far? And we then say that only for the purpose, not as a component part of the crime, but for determining the -- the limitations regarding the constitutional limitations, that we consider active as being an important portion. Of course, he would have to satisfy the organizational requirements. I'd like to briefly call attention to one more matter and that is the testimony in regard to the witness' statements as to when he expected this revolution to occur. And I -- we definitely disagree with counsel's statement it was any 20 years hence. I call attention to the statement of the testimony on page 16 of our brief and 41 of the record in which it was stated that the petitioner predicted to Klans when the revolution would take place. In the following language, he commented that in July of 1917, the Czar had driven the Communist Party of Russia underground and had outlawed them. He said that the very next October, the Communist Party, the Bolsheviks had managed to bring about the revolution. Scales said he saw a perfect analogy here in this country. He said that as soon as the capitalists drive us underground, there will be a revolution. He said that if the depression came along, that would accelerate it still further and would make the job easier. Now, the jury had before it, the fact that the petitioner himself told the witnesses that he had gone underground, so the underground movement had occurred. And this is when he predicted that the revolution would occur and it seems to me it shows his idea of the immanency of a threat of his action. Earl Warren: General Taylor. Telford Taylor: Mr. Chief Justice, the Marshal tells me I have three minutes left. I believe the argument on the statutory point on 4 (f) has been fairly joined and pretty fully explored. And I would like to spend my three minutes -- Felix Frankfurter: Spend one-half minute on 17, what is it? The -- the Section 17 on which -- which is what the basis of the Government's argument. Telford Taylor: Section 17? Felix Frankfurter: That's -- that's the no addition and modification. Telford Taylor: Oh, well, my -- my statement on that is -- is in my brief and it's -- it's my feeling that that is a general provision which is frequently in long and complicated statutes and which must necessarily give way to a special provision inserted, obviously, for a special purpose. Felix Frankfurter: There is a general provision (Inaudible) in the United States Code. Telford Taylor: There is. Felix Frankfurter: Yes. Telford Taylor: I would like to make two observations on the constitutional point arising out of the colloquy between the bench and the Solicitor General. Yesterday, Justice Harlan asked about the instructions given to the jury with respect to these added ingredients which may or may not be read into the statute. I might say that the charge itself is to be found in the record here, page 107 to 16, but I think the answer to Justice Harlan's question is as follows. That on the element of intent, which the Solicitor General wishes to read them, instructions were very clearly given that the jury must find intent. There is no doubt about that. But it is equally beyond doubt that no instructions were given on the added notion of the acts of membership much less where any instructions given on the idea that the Party must be a sort of quasi-conspiratorial body which is so much the basis of the Court of Appeals decision below. Now, Justice Minton asked the question along the same line, which was whether for a conviction here, there wouldn't have to be some kind of advocacy. Well, it is quite clear, I believe, Justice Minton, that -- that there is no such requirement of statutes. There is no such charge in the indictment. And there is no such instruction to the jury, that is the -- the conviction here must stand on the basis where the element of personal advocacy is entirely absent and it must stand or fall on that ground. Now, my other observation relates to the colloquy between the Solicitor General and Justice Frankfurter, in which Justice Frankfurter mentioned Bryant against Zimmerman, a case involving the Ku Klux Klan, and I thought with the suggestion perhaps that case was governing or relevant to the constitutional problem here. I do not, with all respect, believe it is. I have refreshed my recollection about the case this morning. There is no problem of advocacy involved there and indeed, it was not a prohibitory statute. That was a New York statute which related to societies bound by oaths. It is a lineal descendant of old British statutes directed to the same end, which are referred to in my brief. And there has always been a policy against those because such societies tend to punish their own members and oust the Court's jurisdiction varies to the factors like that. It was for that reason that they require registration like the Internal Security Act. It was not a prohibitory statute. In Whitney against California, I think quite clearly, the concurring justices regarded the statute such as this one as raising an acute problem of both assembly and free speech. Thank you.

William H. Rehnquist: We'll hear argument now in Number 93-981, United States v. Reshat Shabani. Mr. Seamon. Richard H. Seamon: Mr. Chief Justice and may it please the Court-- This case concerns the Federal drug conspiracy statute which is codified as section 846, title 21 of the U.S. Code. Respondent was indicted by a Federal grand jury in the District of Alaska on one count of violating section 846 by conspiring to distribute cocaine in Alaska. The indictment did not allege that respondent or any of his coconspirators committed any overt act in furtherance of the conspiracy. Respondent moved to dismiss the indictment on the ground that the Government is required, in a prosecution under 846, to allege and prove an overt act in furtherance of the conspiracy. The district court denied that motion, and subsequently, at the close of the evidence at trial, the court denied respondent's request to instruct the jury that the Government was required to prove an overt act. The jury found respondent guilty, but the Ninth Circuit reversed his conviction. It held that the Government is required by section 846 to prove that an overt act in furtherance of the conspiracy was committed. That holding conflicts with the holdings of all eleven other regional courts of appeals. The Government brought the case here on a writ of certiorari. The question presented is whether section 846 requires proof of an overt act in furtherance of the conspiracy. In our view, the answer to that question is no, section 846 does not require such proof, for three reasons. First, the text of section 846 does not expressly require proof of an overt act in furtherance of the conspiracy, and in contrast, many other Federal conspiracy statutes, including the general conspiracy statute, do expressly require such proof. In light of the many Federal statutes that set forth the requirement expressly, section 846 cannot be construed to impose the requirement by implication. Second, in United States v. Singer, this Court upheld the conviction under a conspiracy statute that the Court construed not to require proof of an overt act in furtherance of the conspiracy. Singer in an earlier decision-- Sandra Day O'Connor: Mr. Seamon, in the Felix case, I guess Justice Stevens in his separate concurrence argued that the overt acts didn't establish an essential element of the conspiracy, and the majority opinion did not seem to accept that view as expressed by Justice Stevens. Is that something we're going to have to explain if we agree with you on this interpretation? Richard H. Seamon: --No, Justice O'Connor. The majority opinion in Felix simply didn't address this question of statutory interpretation presented here. Felix was a Double Jeopardy case, and both courts agreed in this Court that section 846 doesn't require proof of an overt act, and the case was litigated in this Court on that assumption. Furthermore, the court of appeals in Felix, even though it decided the Double Jeopardy issue against us, also recognized that section 846 doesn't require proof of an overt act, therefore the majority's opinion in Felix was directed at explaining why, although a broad reading of Grady might have barred the prosecution, it was rejecting that broad reading. The decisions of this Court that do control here are Nash and Singer. Those decisions not only construe a conspiracy statute that is silent on the question not to require proof of an overt act, but they apply a rule of statutory interpretation that fully applies here. Ruth Bader Ginsburg: Mr. Seamon, this was an avoidable controversy, was it not, because the overt acts were proved, but the prosecutor insisted that the charge not include that specification? In other words, the overt act requirement in a case such as this is not difficult to show, it was in fact shown, and yet the prosecutor resisted the charge? Richard H. Seamon: It is correct that overt acts were proven in this case, and that as a general matter they won't be difficult to prove in a conspiracy case. In the... the prosecutor examined the state of the law and concluded that proof of an overt act wasn't an essential element of the crime and therefore didn't have to be alleged in the indictment. As a matter of fact, it was actually the district court that first raised the question of whether an overt act needed to be alleged, and it determined that one didn't need to be. Therefore, the district court submitted the case to the jury without instructing it that it was required to prove an overt act. Ruth Bader Ginsburg: But the prosecutor could have mooted this controversy by allowing the charge to be made? Richard H. Seamon: Yes, that's correct. He could have done so, and he chose not to, because after studying the law on this particular point, he concluded that section 846 doesn't require proof of an overt act. Ruth Bader Ginsburg: She chose not to do so, is that right? Richard H. Seamon: Actually, the prosecutor who brought the charge was different from the prosecutor who tried the case. She tried the case, and it was he who brought the charge. David H. Souter: But she could not have solved the problem of the allegation. I mean, she, if an overt act was an essential element, she could not have amended the indictment at that point. Richard H. Seamon: That's right. If the district court had concluded that an overt act was an essential element, the Government would have had to reindict, so it wasn't quite as simple a matter as simply amending the indictment, and in-- John Paul Stevens: Mr. Seamon, is it necessary to prove an overt act to establish venue in a particular district where the case is brought? Richard H. Seamon: --Yes. The burden is on the... to establish venue and one way in a conspiracy case to do that is by alleging an overt act in-- John Paul Stevens: So you have to prove it, even if you don't have to allege it? Richard H. Seamon: --It does have to be proven if it's a matter of dispute. Now... and as a matter of practice, prosecutors typically do-- John Paul Stevens: Normally does, yes-- Richard H. Seamon: --allege something to establish venue, and the question here-- John Paul Stevens: --Couldn't the formation of the conspiracy establish the venue, that the conspirators convened at a particular place? Richard H. Seamon: --Yes, Justice Scalia. Antonin Scalia: And that wouldn't be an overt act in furtherance of the conspiracy in the normal meaning of that term, would it? Richard H. Seamon: That's correct. Venue can be established either by the commission of an overt act in the district where the prosecution is brought, or the formation of the conspiracy in that district. The question here really doesn't have to do so much with whether the prosecutor could have alleged and proven an overt act, because overt acts were proven, but the question is whether conduct that Congress has made a crime can be punished in the Ninth Circuit, as it can be in every other circuit of the country. As this shows, the Government has lost what it considers to be valid convictions because of the Ninth Circuit's erroneous view of the law. Antonin Scalia: Or maybe you could put it, maybe, that it should not be punished in all the other circuits in the country, just as it is not in the Ninth. I mean, that's just as much the question before us, isn't it? Richard H. Seamon: I'm sure that's the way our opponent would phrase the question. [Laughter] The... and our primary argument is based on the text of section 846, which... and Congress' intent in enacting that statute. The text of section 846 is set out in relevant part on page 9 of our opening brief on the merits, and page 9 also sets out the general conspiracy statute with which it is useful to compare section 846. Section 846 is at the top of page 9. It does not expressly require proof of an overt act in furtherance of the conspiracy. It punishes "any person who conspires to commit any offense. " defined in the subchapter proscribing various drug offenses. In contrast, the general conspiracy statute, which is at the bottom of page 9 of our brief, does expressly require proof of an overt act. It makes it illegal, in relevant part, "If two or more persons conspire to commit any offense against the United States and do any act to effect the object of the conspiracy. " That language in the general conspiracy statute, referring to an act to effect the object of the conspiracy, shows that Congress understood that an act in furtherance of the conspiracy is separate and distinct from the conspiracy itself. Thus, under the general conspiracy statute, the overt act requirement is not implicit in the term "conspires". It is spelled out in separate language that specifically refers to the act. The term 846, and there, too, the term should not be construed to contain an overt act by implication. Such a construction would be especially unjustified in light of the fact that there are other Federal conspiracy statutes in which Congress used express language to require proof of an overt act. The construction of section 846 that we're urging also is compelled, I think, by the Court's decisions in Nash and Singer. In both Nash and Singer, the defendant was charged with a conspiracy under an indictment that did not allege any overt act in furtherance of the conspiracy. In both cases, the defendant argued in this Court that the indictment was defective because of its failure to allege an overt act and, in each case, this Court rejected the argument because the statute under which the defendant was charged did not expressly require proof of an overt act in furtherance of the conspiracy. The Court explained that because the statute was silent as to overt acts, it punished conspiracies "on the common law footing", which is to say, without requiring proof of an overt act. Nash and Singer provide guidance here in two ways. They give guidance to the court in interpreting conspiracy statutes that are silent as to overt acts, and they give guidance to Congress by providing a blueprint for it to follow when drafting a conspiracy statute, because they make it clear that if Congress wants to require proof of an overt act in furtherance of the conspiracy, it has to say so expressly. If it does not, the statute will be construed not to require such proof. And it's reasonable to assume that Congress followed the blueprint laid out in Nash and Singer, because Nash and Singer were on the books both when Congress enacted the earliest drug conspiracy statute and when it enacted section 846, and their validity has never been called into question by this Court. Nash and Singer support our position in another way. They apply a rule of statutory interpretation that applies here. The rule is that, when Congress uses a common law term, the Court presumes, in the absence of evidence to the contrary, that Congress intended the term to have its common law meaning. At common law, as the Court said in Nash and Singer, proof of an overt act in furtherance of the conspiracy was not necessary to establish the conspiracy, and there is no evidence that Congress intended to depart from the common law in punishing drug conspiracies. Now, respondent questions whether Nash and Singer understood the common law of conspiracy correctly, but in a sense, the question is beside the point. The point is that Nash and Singer were on the books when Congress enacted the Federal drug conspiracy statutes, and their understanding of the common law had not been called into question up to that point, or for that matter at any point later, for example, when Congress enacted section 846 in 1970. Thus, Nash and Singer furnish the background rule for Congress in drafting the conspiracy statutes, and they should also apply the background rule for interpreting the statute. Respondent's other argument is that Nash and Singer represented, to use his term, an illadvised expansion of conspiracy law, but Nash and Singer didn't break any new ground. Each began with the recognition that at common law it was not necessary to prove an overt act, and that principle had been recognized by this Court as early as 1879 in United States v. Hirsch, and it was reaffirmed in a decision that was issued just a few months before Congress enacted the first Federal drug conspiracy statute. Based on their understanding of the common law, Nash and Singer applied the rule of statutory interpretation concerning Congress' use of a common law term. That rule, likewise, had been applied in many earlier and later decisions. In short, this Court has never disavowed Nash or Singer or the principles underlying them, and so respondent cannot bear his burden of explaining why the Court should not follow Nash and Singer in this case. If there are no questions, I'd like to reserve the balance of my time for rebuttal. Speaker: Very well, Mr. Seamon. Mr. Riordan, we'll hear from you. Dennis P. Riordan: Mr. Chief Justice Rehnquist, and may it please the Court-- Both parties to this action agree that, if possible, the meaning of this statute should be settled on its face. Both parties agree that in this case it cannot be settled by simple reference to the text of the statute without reference to any other historical statutory or precedential source, and the reason for that is that it contains the term conspire, and conspiracy. If Congress had said... instead of using the term conspire had used the word agree, if you agree to commit a crime, we wouldn't be here today. We all agree that the term agree has a common meaning. It means a meeting of the minds. We all agree that a meeting of the minds doesn't require or imply further action. People agree with their doctors every day to stop smoking, and further action is neither necessary to that term nor, as we know, frequently none follows, but in this case they use conspire and conspiracy, and both parties agree that there is probably no term in the criminal law less... less capable of easy analysis or common understanding than the terms conspire and conspiracy. In an article relied on by both parties, by Benjamin Pollack, Professor Pollack stated that the crime of conspiracy "is the most difficult to define. " and it is almost impossible to confine the true law of conspiracy within the bounds of a definite statement. So we are left, then, with the terms, conspire and conspiracy, and the question, what do they mean in 846? The legislative history, we both agree, doesn't help us. There is no legislative history. There is no indication anywhere in the statute whether, when Congress used the terms, conspire and conspiracy, it meant by those terms the definition of conspiracy such as in 371, which contains an overt act requirement, or, on the other hand, it meant some different definition. William H. Rehnquist: You don't regard the comparison of 371 with the language of 846 as being legislative history? Dennis P. Riordan: We do in this sense we think it helps us, and here's why, Your Honor. If 846 was a statute that was intended to define the elements of conspiracy, it was intended to provide a selfcontained definition of conspire and conspiracy, then we would admit that the failure not to include an overt act requirement when it is included in 371 would be very significant. But one thing that's been missed here is that 846 is not a definitional statute, and it's not a conspiracy statute. It's called, "Attempts and Conspiracies". That's the title of it. It deals with two crimes, not one, attempt and conspiracy, and its function is not to define either attempt or conspiracy, but to set the punishment for attempts and conspiracies. William H. Rehnquist: But at least you have in 846 a prohibition against conspiracy which says nothing about an overt act, and you have in 371 a prohibition against conspiracy which does require an overt act. Dennis P. Riordan: Absolutely, Your Honor, and if, as I say, 846 was intended to be definitional, to contain... if we could discern from it an intent by Congress to state the elements of conspiracy, then that argument would be persuasive. But the Federal courts have looked at... for an example, the attempt portion of this, it says that the punishment for attempts and for conspiracies shall be the same as for the substantive offense either attempted or which was the object of conspiracy. The Federal courts have confronted the issue of what attempt means, and in a long line of cases they have said, there is no definition of attempt in 846. We have to look elsewhere for it. The Eighth Circuit in the Joyce case, the Fifth Circuit in the Monduhano case said, we can't discern what attempt means from looking at 846, so therefore we have to go to the Model Penal Code, to a Learned Hand opinion in 1951, and in the Joyce case to a 1901 Oliver Wendell Holmes opinion written when he was on the Massachusetts State courts, to find out what attempt means. If Congress did not, and it certainly did not, provide the elements of attempt, or a definition of attempt, in 846, then we can't assume that it provided a definition of conspiracy. What we can assume is it inserted the words attempt and conspiracy knowing that the definition of those terms would be located elsewhere. David H. Souter: Well, one place we locate it is under the general rule of following common law definitions. Dennis P. Riordan: Ah-- David H. Souter: If we do that, you lose. Dennis P. Riordan: --No, we don't, Your Honor, and here's why, because again, in the sources that we've cited, the Pollack article, the Sayre article, the Harno article, the definitive studies of the common law, there's a consensus that over 800 years of English history, and it hardly should come as a surprise, that conspiracy meant different things at different times. What the Government has done is said that the term, the meaning of the common law definition of conspiracy, is fixed by the 1611 Poulterers' case, and the Poulterers' case was not even before a common law court, it was before the Star Chamber, which was not... I'm no legal historian, but it was not a common law court, it was a prerogative court, a court of the king. And to suggest that when Congress in 1970 looked for a common law definition, if that's what it was going to do, it looked to a decision of the Star Chamber, when this country was founded on a rejection of Star Chamber precedent, that Andrew Hamilton thundered against application of the Star Chamber precedents in his defense of John Peter Zanger-- David H. Souter: The 1970 view was Sir Edward Cook's view, wasn't it? Dennis P. Riordan: --Well, I would suggest to you, Your Honor, if we could be certain of one thing, if there was a celestial magnetic resonance imaging machine that could produce a graph of what Congress was thinking in 1970 when it passed this statute, I'd suggest we'd find that it wasn't thinking about the issue of an overt act-- David H. Souter: Well, if we had a celestial resonance machine that could bring up the image of a common law lawyer, we'd get Sir Edward Cook right in the front of the line, wouldn't we? [Laughter] And his view was that you didn't need an act. Dennis P. Riordan: --But Congress-- David H. Souter: Isn't that right? Dennis P. Riordan: --Cook did say that. Cook did say that, Your Honor. David H. Souter: That counts for the other side. Dennis P. Riordan: But that was hardly the only definition of conspiracy given at common law, but more importantly, what the Government is saying is that when Congress didn't speak to this question at all, the overt act being in or out, it must have been thinking about the common law, and it must have been thinking about those precedents, Nash and Singer, which suggest that if you don't say anything about an overt act, then you're getting the common law definition. But in 1970, there were also 100 years of decisions from this Court-- Ruth Bader Ginsburg: If you go back to your first argument, the text of the statute, and you say that 846 was not an attempt to define the word conspiracy, that might be more persuasive if 371, the general conspiracy statute, had read, if two or more persons agree, but it doesn't. It reads, if two or more persons conspire, and one or more such persons do any act, so conspire... both statutes say, any person who conspires, two or more persons conspire. The overt act is added on as something additional. Dennis P. Riordan: --I'm lucky, because the answer to the two pending questions is the same. In 13... in 371, when it was passed in 1867, they used the term conspire, and they included the overt act requirement, but by 1970 there were 100 years of decisions from this Court which said, as Bannon and Mulkey said, as Hyde said, that Congress had decided to reject the common law, the Star Chamber definition of conspiracy-- Antonin Scalia: On the basis of statutes that did that. Dennis P. Riordan: --That's right. That's right. That's absolutely right, Your Honor, but-- Antonin Scalia: That is, on the basis of statutes that included an overt act requirement. Dennis P. Riordan: --That's right, and the question is whether, in 1970, after a statute, admittedly a statute which expressly included an overt act requirement, and 100 years of judicial gloss on that statute, Congress, when it was standing around putting two different offenses in a statute, assumed that the word conspiracy meant what it had meant for 100 years under 371, but-- Antonin Scalia: I assume that the majority of people in Congress really had no knowledge of those cases at all and wrote a... you really think a majority of people in Congress knew all the cases we're talking about? Dennis P. Riordan: --No, we're-- Antonin Scalia: Or even knew who Sir Edward Cook was? Dennis P. Riordan: --We're in complete agreement, Your Honor. What we're dealing with here... what we're dealing with here is legal... legal fictions which, in a situation where Congress-- Antonin Scalia: We're left with the language that Congress adopted, and we have to take our best shot at what the meaning of that language is. Dennis P. Riordan: --Right. Antonin Scalia: Now, in other instances where Congress has wanted an overt act, it's said it. In this instance, it didn't say it. Dennis P. Riordan: That's true, but as I say, Your Honor, if... if we can say that Congress was focused on the definition... we know that they did not provide... they did not suggest one element of the crime of attempt. The Federal courts have looked at the attempt side of 846 and thrown up their hands and said, Congress didn't... they didn't define it, they didn't give a hint what it meant, and they're all over the lot in attempting to-- William H. Rehnquist: 371 doesn't define conspiracy, either. I mean, neither-- Dennis P. Riordan: --Right. William H. Rehnquist: --of the two statutes we're talking about purport to define the offense of conspiracy. Dennis P. Riordan: I quite agree, Your Honor, which means that we're in the position of attempting to figure out whether Congress put all of the elements in there, and if it didn't put all of the elements in there, where do we look to find them? William H. Rehnquist: Well, but you're also faced with the question why Congress required an overt act in 371 and why Congress didn't require an overt act in 846. Dennis P. Riordan: Right, and I would suggest to the Court that we are in a situation where I think that we could be relatively certain that Congress didn't think at all about this issue. William H. Rehnquist: What reason is there to think that Congress thought about it in 1867 and put in the overt act, but didn't think about it in 1970? Dennis P. Riordan: Because according to the cases that have interpreted 371 from this Court, the Court said that in 1867 when they were writing a general Federal conspiracy statute for the first time, they made a conscious decision to reject the common law model, so we know that's why they did it. They were starting from the ground up. The question is, with a silent legislative history in 1970, is there anything to indicate that they thought about it at all, or when they used the term conspire and conspiracy, they could have well said that what they meant in the situation is whatever conspire and conspiracy has come to mean under the general conspiracy statute. If you're asking me whether I can demonstrate to you that that is what Congress was thinking, the answer is no. The burden, however, in this case is on a party such as myself to, and the defendant in this case to, suggest that there's a reason to doubt the Government's interpretation of the statute, because if there is a reason to doubt that the Congress expressly intended to delete an overt act requirement, then the Rule of Lenity kicks in, and we have to interpret it in such a way that's favorable to the defendant, knowing that Congress always has the option should we be wrong, should we find out that we have a position on the matter, to correct the statute. William H. Rehnquist: It always has the option to correct it the other way if we rule against you. Dennis P. Riordan: That's absolutely true, Your Honor, and what ultimately we are saying in this case is that there is not only a reason, there are many reasons to doubt the interpretation that the Government relies on here, that they are saying that Congress made a conscious decision to eliminate an overt act requirement. And let me point out-- Ruth Bader Ginsburg: Is it your argument that Congress would have to say, and there is no overt act requirement, in order to give a conspiracy statute that effect? In other words, there's not enough to leave out, as 371 has it, that there is an overt act requirement, but Congress would have to say, and we do not mean that there should be any overt act requirement? Dennis P. Riordan: --It sure would have helped. Ruth Bader Ginsburg: But is it necessary? If Congress doesn't want an overt act-- Dennis P. Riordan: Right. Ruth Bader Ginsburg: --what must it do to accomplish that intent? Dennis P. Riordan: If it doesn't want an overt act, the easiest and simplest thing to do, since we all agree that if possible this is the way we should interpret statutes, is to put it on the face of the statute. Secondly, if there was an express statement in the legislative history-- Ruth Bader Ginsburg: Putting it on the face of the statute means, and we do not mean that there be any overt act requirement, is that it? Dennis P. Riordan: --That's right. That's right. Then the whole question of what's the significance of 371, which contains an overt act requirement, would be omitted. Absent that, it could have a legislative intent that suggests that that was its clear intent. Thirdly-- Ruth Bader Ginsburg: How does it do that? Dennis P. Riordan: --Well, the committee reports could make clear that, unlike 371... I realize that the-- Antonin Scalia: Why do you look at me when you say that? [Laughter] Dennis P. Riordan: --I realize that there are some... there's doubt in some quarters of whether that's a reliable source, but it would be more helpful to either side if it were there rather than complete silence. Or, Your Honor, if the precedent of this Court, its decisions concerning conspiracy, were uniform as to what the terms meant, it would be something else. On the one hand, we have 100 years of this Court's decisions saying not merely that 371 has an overt act requirement, but saying why that's a very good thing. The cases-- William H. Rehnquist: But you also have Nash and Singer, which say otherwise with respect to different kinds of statutes. Dennis P. Riordan: --They're a very thin read, Your Honor, for this reason. In Nash, Nash dealt with a Sherman antitrust conspiracy statute, which is outside the purview of normal criminal law. In Nash, it does contain the statute that, absent an overt act requirement, we look to the common law, but interestingly enough, the rest of the Nash opinion says, reverses the conviction there, because the Government failed to prove an act. That is, in the antitrust context, the Government alleged the specific means by which trade was obstructed, and the Court found that the obstructions in that case were such that they permitted the jury to convict without finding that the means was proven, and the Supreme Court said, given what it says in the Sherman act, we don't have any reason to go further. Well, the Sherman act, as pled and proved in that case, required action, so it wasn't a case where Nash was saying, we're now going to have a conspiracy statute which does require the Government to plead and prove actions, because they did in the Nash case. William H. Rehnquist: But they did say in the Nash case that an overt act was not required to support a conspiracy conviction under the Sherman Act, did they not? Dennis P. Riordan: They most assuredly did. William H. Rehnquist: Why, then, is it a thin read? Dennis P. Riordan: Well, because we're dealing not with an antitrust statute or a selective service statute, we're dealing with a statute that's traditionally in the criminal area. William H. Rehnquist: What difference does it make whether... the particular substantive offenses that we're talking about? I mean, there probably weren't any prohibitions against the use of drugs in 1611, if you're talking about traditional statutes. Dennis P. Riordan: Right, but we're talking about, as this Court said in MCI, the really relevant period of time to figure out statutory intent is the time that the law was passed, which is 1970. William H. Rehnquist: At which time the Congress had the Singer and the Nash precedents which it could have relied on. Dennis P. Riordan: And had it been explicit in doing so, our task would be very easy, but-- William H. Rehnquist: You say, then, that Congress, in order to rely on the Singer and Nash precedents in drafting a statute, must say, either in the legislative history or in the statute, we're relying on these precedents, rather than simply following what they suggest? Dennis P. Riordan: --Well, if this legislative history indicated the slightest cognizance of Nash and Singer, no, they don't have to state it explicitly, but again, it would help if there was even the faintest footprint of Nash and Singer in the developmental process of this statute. There isn't, so we're again confounded as to where to go and what to look for. And let's remember the practical consequences of this in this sense Did Congress, could it be said that they felt it was necessary to eliminate the overt act requirement from the drug conspiracy statute? Federal drug laws right now criminalize every drug transaction that goes on in the United States. The Federal Government... or virtually. The Federal Government has no desire, nor any capacity, to prosecute anything other than the tiniest, tiniest fraction of those cases that literally come within the scope of the Federal drug laws. The notion that in order to enforce the Federal drug laws which already are far broader than the actual ambit that they're going to focus on, that Congress needed to eliminate from drug conspiracies the overt act requirement, which is satisfied by the most minimal, by the most minimal action, it doesn't even need to be an illegal action, I would suggest simply doesn't make any sense at all. And on the other hand, what it's doing is cutting up against the cases of this Court such as Yates, such as Hyde, such as Bannon and Mulkey, which say the function of the overt act requirement is to provide a locus poenitentiae, that is, a point where somebody knows they're going to be punished if they take even the slimmest overt act step forward. Secondly, to allow those who form a joint mental state but do nothing about it, terminate that evil thinking before they go forward, and to provide, to assure society that this action has gone forward in some way which begins to threaten its societal interest. Those are all very, very good objectives of the overt act requirement, and they, this Court has found them desirable in the context of 371. I would suggest that there's as much reason to believe that Congress read those opinions about the function of the overt act requirement as there is to believe that it read Nash and Singer, which are Sherman, you know, a Sherman antitrust case, or the selective service-- William H. Rehnquist: But they would have read the cases you're referring to and seen that those cases originated out of a statute, which itself required an overt act. Dennis P. Riordan: --Well, I think we-- William H. Rehnquist: Would they not have? Dennis P. Riordan: --Well, I think that we both agree that we're discussing a level of fantasy here, because this is all legal fiction. William H. Rehnquist: Well, you're the one that began fantasizing. Dennis P. Riordan: Well, I-- [Laughter] I am, Your Honor, but the difference is that I am not asking the Court to accept my view of the legislative history of 846. I am merely suggesting that it is a reasonable view of what Congress may have been thinking or not thinking in 1970, and if it is a reasonable view of what Congress may or may not have been thinking, if it raises a reasonable doubt about whether there's an element of an overt act in this statute, then we're in the situation of invoking the Rule of Lenity, which ultimately is really our entire case, that is, that the statute is uncertain. John Paul Stevens: Mr. Riordan, may I ask you this question? Is it your view that the overt act must be alleged in the indictment? Dennis P. Riordan: It is neither our view nor the view of the Ninth Circuit, and this came up during the argument before, because the Ninth Circuit has never held that the act had to be alleged, it merely has held that it had to be proven, and the Government has-- John Paul Stevens: And there has to be an instruction. The error here was a failure to give the instruction. The indictment was sufficient, according to them. Dennis P. Riordan: --That's right. The Government has-- Ruth Bader Ginsburg: Are you taking the position that even when the statute on its face requires an overt act, the Government doesn't have to allege it in the indictment, it's enough that they prove it? Dennis P. Riordan: --I don't know the answer to that question, Your Honor. I don't know whether... I suppose it would depend how it were written, but it is possible that if there were explicit statutory requirements it might well have to be alleged. I simply... it is not-- Ruth Bader Ginsburg: You have no rule for when it has to be both alleged and proved and when it suffices to have it proved even if it isn't alleged? Dennis P. Riordan: --That's right. The Ninth Circuit in this case has taken the position, in fact it did in this very case below, that there was no failure... the Government did not err in failing to include the overt act requirement expressly in the indictment, and therefore there would have been no need for a dismissal under Ninth Circuit precedent. They merely would have had to instruct. So therefore the error below is not the failure to include the allegation, the error was the failure to instruct upon it, and the Government has said a number of times that the overt acts here were proven. We don't know whether they were proven. We do know that the jury never made a finding. Anthony M. Kennedy: But given that explanation, your understanding of Ninth Circuit law is that it is still an element of the crime? Dennis P. Riordan: In the sense that it is something that has to be proven beyond a reasonable doubt in order to sustain a conviction, yes, that is the position the Ninth Circuit has taken. Antonin Scalia: Does the Ninth Circuit hold that any other elements of any other crimes need not be alleged in the indictment but must be proven? Dennis P. Riordan: Well, I should know the answer to this question, Your Honor, but I'll tell you as a criminal lawyer it's never been my impression that there's a statutory requirement that all elements of the offense have to be alleged in the indictment in order to go to the jury, either under State or Federal law. I'm relatively certain that Federal prosecutors as a practice don't include all of the elements of a crime in the indictment. We have essentially notice pleading. Antonin Scalia: Notice pleading for criminal offenses? Dennis P. Riordan: Well, in the sense... in the sense that each element of the offense, each mental state element, for instance, is not included within the pleading. There can be four or five-- Ruth Bader Ginsburg: I thought it was hard book law that essential elements of a crime must be pled in an indictment. That doesn't mean every detail of your proof, but the requisites to spell out the crime. Dennis P. Riordan: --It's a very good thing that the answer to that question isn't critical to the Court's decision of this case, because I will confess that I don't know the answer, Your Honor. Ruth Bader Ginsburg: I'm glad you clarified your position, because I thought you were disagreeing with the Ninth Circuit to the extent that they didn't require the act to be alleged, but you think the Ninth Circuit is right in its middle view? Dennis P. Riordan: I want to make absolutely clear that the issue of whether the Ninth Circuit was right in rejecting the contention that the elements had to... the overt act had to be pled is not before the Court, and I am taking no position on it. I am certainly not saying that the Ninth Circuit opinion below that says it doesn't have to be alleged is in any way incorrect. I'm merely defending the position that the overt act is an element of the offense that has to be proven beyond a reasonable doubt, which is the position that the Ninth Circuit has taken, correctly, we believe, in contraposition to Eleventh Circuit's. I prepared for the argument today by watching Henry Fonda, who argued against 11 in Twelve Angry Men. We acknowledge that other circuits have gone the other way on this question, but I would submit to the Court that I have seen nothing in those decisions that has focused on the fact that 846 is not a conspiracy statute, it deals with more than one offense, and that its primary function is to set penalty rather than to define the offenses, and that's a fact that those opinions simply haven't contended with, and we think it's absolutely critical to the correct decision of this case. William H. Rehnquist: But you're not saying it's any different than 371 in that respect? Dennis P. Riordan: I'm sorry, Your Honor, in which respect? William H. Rehnquist: Well, you say 846 is a statute that doesn't purport to define conspiracy, it just sets penalties. Dennis P. Riordan: Right. William H. Rehnquist: You're not suggesting that in that respect it's any different from 371, are you? Dennis P. Riordan: Well, it is different in this respect, Your Honor Many States have classified felonies A, B, C, and D, and there's a whole group of felonies that fit in each class. If we found a statute that said, Class A felonies will be punished by a sentence of death or life without parole, we would not be surprised that they didn't, in that same statute, list all the elements of those offenses. Even if-- William H. Rehnquist: Are you explaining now why you think 846 is different from 371? Dennis P. Riordan: --Yes, I am, Your Honor. I am, in the sense that 371 deals with the crime of conspiracy, and conspiracy alone, and 846 deals with more than one offense, and-- William H. Rehnquist: Why does that make any difference? Dennis P. Riordan: --Well, I suggest that since we know from the case precedent that Congress... the courts have uniformly declared that Congress wasn't focusing on the elements of attempt, I think it's fair to infer in this very statute that they weren't focusing on the elements of conspiracy. William H. Rehnquist: Well, and what makes you think they were focusing on the elements of conspiracy in 371? Dennis P. Riordan: Well, the legislative... the courts' interpretations of that seems to be that since this was the first general conspiracy statute in 871, they were focused on the fact that they wanted to create a statute that had an overt act requirement that didn't exist at the Star Chamber and at English common law, and we would suggest that, 100 years later, there may well have been Congressmen thinking the overt act requirement had worked its way into the warp and woof of the definition of conspiracy in this country, that that's the American definition of conspiracy. Antonin Scalia: Mr. Riordan, what Federal criminal statutes do define crime? My impression is, all of them just say whoever commits this shall be punished by that. I mean, this is not an unusual statute in that it, as you say, it does not define the crime. Most Federal statutes read like this, don't they? Dennis P. Riordan: Well, I-- Antonin Scalia: They use a common law term and say, the punishment shall be thus, or a common sensical term. Dennis P. Riordan: --I'm sure that's true, Your Honor, but in Joyce and Monduhano, the Federal court said, look, we don't get any guidance on what the term attempt means from the statute itself, and all we're saying is, we think the same is true of the conspiracy end of the statute, and that the courts have to look elsewhere to figure out what the heck this means, and we think that one reasonable interpretation is that Congress thought that when it uses conspiracy and conspire, it was referring to the kind of offense contained in the general Federal conspiracy statute. Admittedly, that is not... that is not... that's not the only reasonable interpretation of 371. The... of 846. We concede that the Government's reading of 846 is indeed reasonable. We could concede that perhaps there's a probability that it's right, but we think there's a very reasonable reading of the statute which suggests that Congress was not focused on deciding that one way or the other, and we have to look elsewhere for the answer to the question. William H. Rehnquist: Thank you, Mr. Riordan. Dennis P. Riordan: Thank you. Mr. Seamon, you have 16 minutes remaining. Richard H. Seamon: Unless the Court has further questions, I have nothing further. Stephen G. Breyer: I do have a question, actually. What do you say in response to Mr. Riordan's argument? That is, I take his argument basically to be that by the time this particular statute was passed, 846, by that time in 1970 it had become fairly widely accepted practice that, in the Federal law, conspiracy included overt acts. Indeed, the only exceptions to that were really criminal provisions that aren't even printed in what we think of as the criminal section of the U.S. Code, 18, 21, 26, et cetera, but rather, sort of outliers, the Sherman Act, which isn't in the West Publishing thing, the Selective Service Act, and so by that time anyone who was a drafter would have thought, of course it includes an overt act when we use that word conspiracy. Indeed, this particular statute doesn't define a crime. It seems to refer back to 371. It just says, those who commit this kind of offense shall have the same penalties, et cetera, and so at least the matter is ambiguous. After all, a drafter would have looked far and wide for any other normal criminal section with conspiracy if it didn't include overt act. I mean, that's, I think that's his argument, so that's at least a good enough argument to invoke the Rule of Lenity. Richard H. Seamon: We-- Stephen G. Breyer: So what is your specific response to that? Maybe you've made it already and you'd just be repeating yourself, in which case, I don't want you to repeat yourself, but I wanted you to have a chance to focus directly. Richard H. Seamon: --Thank you. Although the Court has focused on 371, the general conspiracy statute which was enacted in 1867, there were many subsequent statutes that expressly require proof of an overt act in furtherance of the conspiracy in so many words, including a number of statutes that were on the books in 1970 when Congress enacted section 846. Those statutes are evidence that the word conspire did not change to include implicitly an overt act element. I thank the Court. William H. Rehnquist: Thank you, Mr. Seamon. The case is submitted.

Earl Warren: Giacomo Reina, versus United States. Mr. Davis, you may continue your argument. Oscar H. Davis: Mr. Chief Justice, may it please the Court. This morning I should like to discuss, if I may first and briefly, the statutory question of whether the immunity provision of the Narcotic Control Act of 1956 does cover state prosecutions and secondly the constitutional question of whether Congress may so provide. And third, I would like to touch also briefly on the propriety of the two-year sentence which was given by the District Court. And then I shall return to the problem posed by the Chief Justice at the end of the argument yesterday as to whether there is a different rule with respect to such immunity provision as this for a man who has been convicted of a -- of a crime and is then sought to be questioned about transactions involved in that crime. Unless some justice should -- should desire me to, I do not propose to argue the alternative position of the Government which is, of course, that if either the immunity provision does not cover state prosecutions because Congress did not intended to do so or it does not cover it because Congress could not do so, then under the rule, the Murdock case in 284 United States, the immunity is sufficient though it covers only federal prosecution. We of course do not waive or abandon that argument. We think it is unnecessary to the Court to reach it and therefore, I -- I shall not seek to discuss it unless some Justice should wish me to do so. Going very briefly to the question, the statutory question of whether this provision does cover state prosecutions. The first thing to know is that the substantive provisions of the statute are the provisions which grant the immunity are in the same words as the compulsory testimony Act of 1893 which the Court held in Brown against Walker in 1896 did cover state prosecutions. And that those substantive provisions were carried forward into the 1954 statute relating to so-called subversive activities and into the 1956 statute relating to narcotic legislation as in this case. But perhaps more significant and we think absolutely conclusive is the fact that this narcotics provi -- this immunity provision of the Narcotic Control Act of 1956 was formulated and enacted after this Court had decided the Ullmann case. The Court decided the Ullmann case in March, 1956. In May, 1956, the narcotic subcommittee of the Ways and Means Committee of the House of Representative issued its voluminous report suggesting various provisions for the legislation which was to become the Narcotic Control Act of 1956. And it included in that proposal an immunity provision and a bill was thereupon drafted and presented to Congress which concluded the same immunity provision in the terms with the necessary changes to cover narcotic legislation, in the terms of the 1954 provision which the Court had already held in the Ullmann case some month before did cover state prosecution. Felix Frankfurter: Mr. Davis, am I right in my recollection that certainly affecting that no Attorney General has ever recommended and all embracing immunity statute, that is an immunity statute available for every kind of prosecution as in the jurisdiction. Oscar H. Davis: I think you are right, Mr. Justice -- Justice -- Felix Frankfurter: And it is always been ad hoc with reference to -- Oscar H. Davis: -- to particular statute. Felix Frankfurter: -- specific areas -- Oscar H. Davis: Yes. Felix Frankfurter: -- of penal -- penal liability. Oscar H. Davis: Yes and I'll take this opportunity to stress a particular point about this statute which unlike the statute in Brown against Walker and in many of the other cases as in the (Inaudible) case and others gave immunity with respect to a concerning transactions matters and events which were testified to in any grand jury proceeding whether the Government intended or personally intended to grant immunity or not, this is a new kind of statute which came into the books with the 1954 statute which is that the immunity is only granted by the statute if the United States Attorney with the concurrence of the Attorney General acting in the -- in the public interest should state that immunity was necessary. Now this statute has been on the books now a little over for four years. It was passed in July, 1956. In that four-year time, immunity has been accorded under the statute to only 13 persons, including this petitioner. The Attorney General did authorize that immunity be accorded to five other persons but it was not necessary for one reason or another to seek an order from the Court. So that actually only 13 persons have been accorded immunity under the statute in the four-and-a-half year period which has elapsed since its enactment. I think that is all that I need to say on the statutory question of whether this immunity provision does cover state prosecutions. Its history, its wording, its background going back to Brown and Walker I think make it clear that it does. Then the second question is whether Congress may validly so provide. Some doubt was cast upon this by the opinion of the Sixth Circuit in the Tedesco case. It is a doubt which I think need not have arisen and which I would like, if I may, to can -- to try to lay completely to rest. The short answer, the short answer for us is that in Brown against Walker, in 1896, repeated by this Court in the Ullmann case in 1956 and again in Emanuel Brown against the United States, a contempt case arising under the Motor Carrier Act in 1959, the Court we think indicated very clearly that when Congress is acting under the commerce power, there is no doubt of its -- of its authority to grant immunity which covers state prosecution as well as federal prosecution. The Court so said in Brown against Walker and this was repeated in the Ullmann case. Now what we have here in large part -- of what we have here instead of narcotic legislation, which rests on two bases; one, the power of a foreign interstate commerce and foreign affairs on the one hand, and the power over the taxing power on the other. And what I would like to stress for the Court, if I may, is the importance of the foreign and -- and interstate commerce aspect of -- of the narcotics legislation, particularly as applied to this case. The original -- this we think is the core and the basis of federal narcotics legislation and particularly appropriate here, Congress had it in mind as I shall point out when it pass -- when it enacted the immunity provision of this 1956 Act. Let me take you back into history. The first federal statute was the Opium Exclusion Act of 1909 which was -- which was so clearly valid under the Commerce Clause that is it prevented the unlawful importation of opium and thereafter prohibited the use of opium which had been unlawfully imported. It was so clearly valid that in -- in the Brolan case, when someone sought to take the constitutional issue to this Court, the Court dismissed the writ of error as frivolous. It said that the -- that the power of Congress to preclude the importation of -- of opium and similar bad products was so clear that it would not either consider the question substantially. Then there came the Harrison Narcotics Act which was based largely, though not completely upon the taxing power. But then in 1921, Congress did pass the Narcotics Drugs Import and Export Act which was wholly based upon the foreign and interstate commerce powers and related to the importation to this country of -- of narcotics, drugs and the exportation from the country of narcotics drugs. And in 1941, Congress enacted another statute, having to do with the carriage of narcotic drugs on American vessels in foreign commerce, which was also clearly based on -- on the interstate commerce power. And more than that, the central -- perhaps the most central bid in this -- in the complex of federal legislation is the presumption which Congress put it into the federal narcotics legislation that when a man is found in possession of narcotics on stand and without an order on stand that there shall be -- it shall be presume to have been illegally imported unless the defendant chose to the contrary. Now that presumption was upheld in the EEM case many years ago and has been consistently upheld and applied by this Court. I mentioned it to show that the -- that though it is sometimes said that the narcotics legislation rests on the taxing power and I hasten to say that a little later in my argument, I will support preemption if you can call it that even on the taxing power, but at this point in my argument, I want to lay bare for the Court the important role of the federal commerce power, the interstate and foreign commerce power in -- in the -- underpinning of federal narcotics legislation. Hugo L. Black: May I ask you Mr. Davis, if you make that the Government will have less power in one field and another and it has power to legislate in that field and create a crime? Oscar H. Davis: No sir. I -- I'm making this argument solely cause I think I can bring myself squarely within the decisions of this Court under Brown, Walker and Ullmann where they talked about the commerce power. And that's why I -- I do not and I will go on to say that where -- I will say that wherever the Congress has constitutional power to legislate, I think that it will have constitutional power to adopt an immunity provision like this. Felix Frankfurter: But at least -- at least whatever power it has about immunity is equally after the (Inaudible) power that comes to this. Oscar H. Davis: Yes. I hasten to say that the only reason I am making this argument now is because I think that I can fall directly within two or three decisions of this Court without any need even to extrapolate from the theories which have been laid down in those decisions. And I would like to take one moment, if I may, to point out to the Court how Congress took account of -- of the foreign and interstate commerce aspects of narcotic legislation in this very immunity provision. At pages 2 and 3 of the Government's brief, we have set out the immunity provision Section 1406 and the Court will note that -- that Congress referred to three types of federal statutes as to which if testimony were compelled, the immunity would be granted. Now the first part which remains to the -- Internal Revenue Code is basically the taxing legislation founded on the Harrison Act of 1914, but even that -- even in that portion of the Internal Revenue Code, there is interwoven interstate and foreign commerce powers. That is in that very section of the Internal Revenue Code there are provisions that people who get possession of -- of narcotics and then carried them in interstate commerce are committing a crime, so that interstate commerce enters into even that aspect of the -- of the provisions. Felix Frankfurter: Narcotics are produced in this country? Oscar H. Davis: Opium is -- is sometimes grown and Marijuana is -- is sometimes grown. Felix Frankfurter: What are the proportions? Oscar H. Davis: I think it is relatively small. I think the basic problem -- Felix Frankfurter: It has to be -- Oscar H. Davis: Yes. Felix Frankfurter: -- the nexus within (Inaudible) Oscar H. Davis: Well that's right. The basic problem is -- is to try to prevent drugs from coming into this country from abroad. That's the basic problem that the -- the Federal Narcotics Bureau and the federal congressmen have been trying to deal with. Now the second section, subsection of -- of this statute is the Narcotic Drugs Import and Export Act which as I've mentioned before deals wholly with foreign and interstate commerce. And the third section, the Act of July 11, 1941 deals with the carriage of drugs on American vessels in foreign commerce. And of course as I tried to point out yesterday in this particular case, foreign commerce and interstate commerce is the nub of it. This was a conspiracy to import large amounts of narcotics drugs into the United States. And as the Court can see from reading through the questions which were sought to be ask under this -- under the immunity statute, almost every single one of them deals with the question of importation of drugs into the country. They deal with -- dealing with French groups abroad, groups in Europe, means of -- of bringing drugs into the country, the obtaining of passports for the purpose of going abroad to obtain drugs and so forth. Now I would like -- like to argue the issue which Mr. Justice Black called to my attention and that is the power of Congress to grant this immunity regardless of the basis of its -- of its action in the Constitution. That is once it is assumed that Congress has constitutional power to enact the substantive legislation as this Court has held that the narcotics legislation was validly adopted either under the taxing powers or under the commerce powers then it is our position that there is no barrier to Congress adopting an immunity provision which covers state prosecutions. The Court has already held that -- that the narcotics legislation under the taxing power enable -- can use and make available for itself other kinds of reg -- regulations such as registration, the order forms, provisions for -- for stamps on packages. This is an implementation of the taxing power which the Court has held was appropriate. Now the Court has never held, in fact the Court has held the opposite, that -- that the Necessary and Proper Clauses of the Constitution, Necessary and Proper Clause and the Supremacy Clause of the Constitution applied for the taxing power, the commerce power all the powers in which Congress enjoys. I think the Court yesterday in the John Hancock Mutual Life Insurance case gave it -- the latest example of -- of upholding an action of Congress in that very field. It is in that case the Farmers Home Administration which had made the loan was acting under the -- the welfare -- the payments for grants under the Welfare Clause, the first section of Article 1, Section 8, not one of the so-called regulatory sections of Article 1, Section 8. And the Court -- and the property which -- which Congress was protecting and which the Court held could be protected was of course under the property clause of the Constitution, not under the one of the so-called regulatory clause is the Commerce Clause and war power. And in the John Hancock case yesterday, the Court held that Congress could constitutionally preempt, that is this place state rules and there, as I say, that Congress was acting on the two non, so-called non regulatory powers, the property power of the Constitution, the property clause of the Constitution, and the general power to grant farms under the first section, the same section which contains the power to lay taxes. And as I say, I think this is the -- the latest example, a holding of the Court that the power of Congress to supersede and preempt state legislation is universal, that is it is not limited to any power that Congress has. And I would go on to say that what -- what I think what the Congress has done here is a kind of partial or pro tanto preemption. It hasn't said, "No state narcotics legislation shall remain on the books as I think it could." And as I think the Court way back intimated this and I'll explain in a minute, it hasn't said that Congress has been very careful not to say that. In the 1956 statute, one of the sponsors of the legislation took the pains to put it into the legislative history a statement, though I don't think it was actually read on the floor of Congress that Congress did not want the 1956 statute to be considered a general preemption of state narcotics law so that they were still to remain concurrent power. But what an immunity provision is, I think, it's a pro tanto or a partial supersession or preemption as I say. Felix Frankfurter: (Inaudible) Oscar H. Davis: Pardon. Felix Frankfurter: It didn't have that, we have a (Inaudible) available, potentially available evidence. Oscar H. Davis: Well it -- it prevents -- no I think it prevents the -- the entire prosecution even if it's obtained through other -- other evidence. Felix Frankfurter: Yes. Yes, it does. Other evidence here -- Oscar H. Davis: -- related to this. Felix Frankfurter: Yes. Yes, but it doesn't prevent the prosecution. Oscar H. Davis: No, it doesn't. But in practical effect -- Felix Frankfurter: Well that's -- that's the different thing. Oscar H. Davis: Yes. Felix Frankfurter: That's what -- I don't think it's an ordinary kind of preemption. Oscar H. Davis: No, it isn't. But I -- but I think it -- if you -- it can be viewed possibly in that light and I think it maybe easier for some like the Sixth Circuit who found it difficult to accept the notion, if to put it in the light, the fact that Congress clearly has the power of preemption and -- and supersession even in the narcotics field and it hasn't gone that far here. It has gone much less. And I say -- I think quite accurately that Congress has the power to impose supersession preemption even in the narcotics field because back in 256 United States in the case of Wipple against Markinson, the question arose whether a state law, I think it was the narcotics law of the State of Minnesota, had been superseded by the Harrison Narcotics Act of 1914 and the Supreme Court held no, it had not been, but the whole intimation of the including part of the opinion is that of course Congress could, Congress could and if there were a conflict or there were some inconsistency, then the state law would have to fall but the Court found there was no inconsistency. Felix Frankfurter: But one doesn't have to decide that the (Inaudible) include the less (Inaudible) isn't that kind of a problem. Oscar H. Davis: No, it isn't but I -- I think that if I can later -- later to rest the -- greater problem or at least indicate that there's I think no substantiality to it, I think I will gone forward with my -- with my argument. I'd also point out that in the cases in which the Court has upheld immunity provisions against state legislation such as Brown against Walker and Ullmann, there was concurrent state power. The auditor in Brown against Walker claimed that he might be guilty of embezzlement or he might have defrauded some persons in connection with -- with -- connection with that the transactions about which he was being questioned. In other words the State of Pennsylvania might if he had really done such things, might have been able to prosecute him so it wasn't the case in which all the power over the particular transaction was in the Federal Government. Now the same thing is true in the Ullmann case. Though it's true that the Federal Government as the Court held later after on a week after on Pennsylvania against Nelson that the Federal Government had superseded state sedition laws of the -- comparable to the Smith Act the Court was very careful even in the Nelson case to say that the -- that Congress had not superseded a whole mass of -- of state legislation which impinged on that problem such as sabotage and other things or even a seditious legislation directed against the common law of Pennsylvania alone not against the United States Government. So the cases which the Court has already had, I think, indicate that there is concurrent power so-called in the States in those areas and nevertheless, that Congress has had the -- has been held to have the authority to pass a valid immunity provision which exclude -- covered state prosecutions. John M. Harlan II: I was curious as to whether the Court of Appeals is to bypass this argument, this question -- did you argue -- the Government argued there? Oscar H. Davis: Well, as I pointed out yesterday, the Government mainly argued that that Murdock is still a good law and then it's just a passing reference to the fact that the -- that the statute was valid -- a validly covered state prosecutions. Felix Frankfurter: Why isn't that appropriate advocacy for the lower courts? Oscar H. Davis: I think it is and that's what the lower courts have been doing in this field. I think perhaps that none of them realized the close connection of the statute in this case to the Ullmann case. I think none of them realized the statute here was enacted after the Ullmann case has been decided. In fact, it was being formulated after the Ullmann case and that made him -- made him a little hesitant about saying that it had the same meaning. In any case, we make the argument here that that it does cover state prosecutions and that it may validly do so. There is a suggestion I think perhaps in the Sixth Circuit's opinion that if Congress can do that here, it can do it everywhere, there can be a general immunity provision covering abolishing all state prosecutions. I think our answer to that would -- would stem -- would be first that Congress has to indicate that Congress is sensitive to the role of the States. Congress is after all composed in the -- in the upper chamber of representatives of the States and Congress has never sought to preempt federal legislation completely through the ordinary preemption power and I think there's very little likelihood that it would try to immunize all state prosecutions with res -- in connection with some federal criminal legislation. And if that were not answered enough, I call upon three statements that this Court has made in recently years and the first is what Chief Justice Taft sent an Ex parte Grossman. Ex Parte Grossman was a case in which the President had pardoned a man for contempt and the contempt consisted of disobeying an order of a Court, District Court of the United States and the President pardoned the man. And the argument was made is that it would violate still separation of powers for the President to be able to pardon a man who would compe -- committed a contempt of Court and it was said that if this were allowed, a President could completely impede the efficiency and the administration of the Court by pardoning people completely who would be violating Court orders. And Chief Justice Taft, of course, had been both President and was Chief Justice gave what I think is the -- the classic answer to it. I won't attempt to read it here though in the Grossman case, 267 United States at pages 119 and 121, he referred to the interdependence of all branches of the Government and he said there was no branch of the Government or no part of the Government which could be completely independent that Congress could refuse to make appropriations, the President can refuse to make appointments, the President could have refused to -- to enforce laws, but that you could not construe a power of -- granted to a -- a prior Federal Government in the Constitution while thinking of the ultimate breakdown of constitutional government. And they ended up by sa -- by saying, if it can be said that the President by successive pardons of constantly recurring contempt of particular litigation might deprive the Court the power to enforce its neighbors and its orders in a reconcile of neighborhood, it is enough to observe that such a course is so improbable as to furnish by little basis for argument. Exceptional cases like this, if it to be imagined at all would suggest to resort to impeachment rather than to a narrow and strained construction of the general powers of the President. We think by analogy, that applies here and I would also of course refer the Court to what Justice Stone said in his dissent in the AAA case, the Butter case that you cannot construe general -- general legislation which is properly founded in the Constitution on the basis of what possibly abuses my result in the future by someone malevolent or seeking to -- to do away with the structure of the Government. And last, I would rely of course upon what Justice Holmes said that in the ultimate analysis, this Court sits, in the ultimate analysis this Court sits and if the power is carried to extend in a particular case or situation, this Court will be sitting here. Now I turn -- I turn for a moment to the question of the two-year sentence. I won't again discuss the purge provision which I talk about yesterday. I just want to point out, if I may Mr. Chief Justice, how this case differs from the Emanuel Brown case in which on behalf of three other justices and yourself, you wrote a dissent from the -- the sentence in that case. That case was a summary case. It was not a -- this is not a summary case. This was not a summary proceeding. It was a full scale proceeding with days elapsing in which there was full opportunity for counsel to argue on the sense and he did argue on the sense. Also, that case, there was no purge clause, there was a purge clause which is inserted in this -- in this case and this I said yesterday, we construe the purge clause as running from the day of the -- the mandate of this Court returns the case to the lower court and if the Court should be unhappy about accepting our construction or making its own construction, we think it has power because this is a contempt case to revise the sentence explicitly to say that. Thirdly, we would point out that this is a narcotics case and narcotics of various -- narcotics violations are very serious offenses which Congress has laid down very severe punishments. In the Brown case, the -- the matters into -- into which the grand jury was inquiring, led to census of only a farm. And I think from the opinion of the dissenters in that case, indicated that this was an important factor. Here the issues -- the types of matters that are sought to be gone into are -- are important aspects of federal narcotic legislation. And lastly, I would say that in --in -- if you take the comparable sentences given to other defendants under this immunity statute in the last four years, they have been either two years or 18 months and so that if you look at the question of comparability, this is not out of line. Now I should like to return in the minutes remaining, if I may to the problem that the Chief Justice raised at the end of the day yesterday. I said in answer to a question, Mr. Chief Justice, that I didn't know of any case under immunity provision in which a man had been questioned concerning a matter for which he had already been convicted in the -- in an ultimate appellate court. There are cases in the lower courts under this very statute. There are cases in the lower courts and I think under some other statutes. The -- the Court of Appeals -- I mean the -- yes, the Court of Appeals in the last footnote of its opinion, cites three court cases in New York and the appellate division and the lower court in New York which are comparable to that. And I don't know of any such cases but I think I should say in all candor that it's hard to find because there are no cases as far as I can tell in which this issue has been raised in -- in that -- in this fashion. I don't even think this petitioner raises the issue in that fashion, because his argument was that if the Government pardoned him for the narcotics offense for which he was then serving a sentence and remitted the fine and if his -- he was immune from prosecution under status as well as federal law, then he could be compelled to answer. He did not take the position that once having been convicted; he could not be compelled to answer. His position was that he should -- that the rest of his sentence should have been remitted and the fine should have been remitted. So I don't think that even he has made that argument in this case. And as indicated yesterday, at the present posture of the case, he is no longer -- he has fully served his sentence and he is no longer subject to that sentence. But I would like to go further because I think that the -- that the possibility of a distinction under the Immunity Act between men who have been tried and convicted and men who have not, that is between this petitioner on the one hand and men like Ullmann or the Browns in the Brown against Walker and Brown against United States cases will not stand against the theory of the self incrimination clause and the general law which has grown up again -- around that clause in the last century and a half. The theory of the self incrimination clause is that it protects against criminality. It protects against criminality. It does not protect against disgrace or infamy or the kind of exposure or attack which people maybe subjected to if they're required to reveal that they have engaged in something which might otherwise be a crime or would be morally turpitudinous. This Court held that very clearly in the Brown against Walker case. Mr. Justice Brown in his majority opinion made a great point of it because Mr. Justice Field in dissent had said that the -- the clause did protect against disgrace and infamy. Felix Frankfurter: That is so in that case because James v. Carter and -- but I think it's one of the most powerful briefs ever written to this Court, (Inaudible) is stronger on this Court -- Oscar H. Davis: Yes Mr. Justice and that's why -- Felix Frankfurter: That the source of the discussion in Brown and Walker -- Oscar H. Davis: That's right. Felix Frankfurter: (Inaudible) James v. Carter's argument. Oscar H. Davis: I think Mr. Justice Field quoted part of Mr. Carter's argument or paraphrased it in his dissent, but it was rejected by the majority of the Court and then Hale against Henkel a few years later again explicitly rejected the same notion. And much later, in the Smith case in 337 United States, in passing the Court rejected it. And I think again in the Ullmann case, it was rejected because the opinion of the Court by Mr. Justice Frankfurter refers that Mr. Justice Frankfurter had just indicated to Mr. Carter's argument sets it out and paraphrases in footnote in which indicates that one of the arguments he made was the argument based on disgrace or infamy, and that said it was rejected in -- in Brown against Walker and has been -- and there's no reason to over -- overturn that finding that holding. Congress has rejected it insofar as appearances before congressional committees are concerned. Just long ago as the Act of January 24th, 19 -- 1862, 1862 almost 100 years ago, Congress provided that no person can refuse to appear and testify when validly called before a congressional committee on the ground that to so testify would tend to degrade or -- degrade him or lead to infamy. It said so explicitly. The State cases have -- have almost universally adopted this rule. I think there may possibly be one or two jurisdictions of the United States which do not follow. There's a recent opinion of the Supreme Court of New Jersey, Ray Vince and 2 New Jersey at 443, an opinion written by late Mr. Justice Berlin of the Supreme Court of New Jersey which surveys the law and indicate -- and adopts from New Jersey the rule that disgrace or infamy is not enough. Felix Frankfurter: What is that citation? Oscar H. Davis: Two New Jersey, 443, Ray Vince. Hugo L. Black: Ray what? Oscar H. Davis: Vince V-I-N-C-E. Now of course, Professor Whittemore has an elaborate discussion in his book in which he points out that -- that the rule -- what shall I say, the privilege against infamy or disgrace seem to have been -- have gotten started in the English Common law. It did not take route in the United States and by the end of the 19th Century and today, it has almost no routes in this country at all. And where it does, it only collaterally with respect to -- the privilege has always been said not to apply where the matter is directly in issue. That is you can't refuse to testify on the ground of disgrace of infamy where something is central to your testimony. It was a collateral matter. It's a collateral matter then you may, in those jurisdictions where this privilege shall maintain. Similarly, I think another -- another universally accepted rule, two other universally accepted rules indicate that disgrace or infamy is not the basis of the privilege against self incrimination. And the first is that if the statute of limitations is clearly run, the almost universal rule is that -- that the man can be compelled to testify without immunity statute, even absolute immunity statute. If the statute of limitations is clearly run, then -- then the man can be compelled to testify. And on that simply because I happen to find it and it's a very recent case, there's an opinion of Mr. Justice Brennan sitting on the Supreme Court of New Jersey called Ray Pillow, 11 New Jersey 8 which holds explicitly that if the statute of limitations is run, the immunity -- I mean the privilege cannot be afforded. And similarly, if a pardon is granted to a man, if a pardon is granted to a man, he can be forced to testify. That's the -- began on the famous case of -- Felix Frankfurter: He's been force to pick the pardon of -- Oscar H. Davis: Well that's what the Court held in the Birdie case and then I -- I'm not so certain if that rule still exist. Well Mr. Justice Holmes in the Pankovich case, I think somewhat cut into it in Pankovich against Federal, but anyway, if he does take the pardon, he can then be force to testify. Queen against Boyes was cited by my brother yesterday, an English case, says that explicitly, and that I think has been the rule in the United States. More than that, more than that, there seems to be the rule throughout the United States that even though there is no immunity provision, if a man has been convicted or acquitted, convicted or acquitted, he can be compelled to testify respecting the subject matters of his conviction or acquittal because the theory is he is no longer able to be tried under the principles of double jeopardy and res judicata. Therefore, he is not in danger of criminality and -- and he can -- he can be tried. This is absence in immunity provision. Whittemore says this is universally conceded and I have found no exceptions to it in the United States or hadn't made it actually exhaust to survey. The Second Circuit recently in three cases laid down this rule as well established in the same opinion I mentioned to Mr. Justice Brennan in the Supreme Court of New Jersey Ray Pillow. One of the grounds in which Pillow was forced to testify with respect to certain transactions he had pleaded guilty. And the Court there held that the immunity no longer -- I mean that the privilege no longer exists as far as he was concerned. In the -- in the opinion in Brown against Walker, famous opinion Brown against Walker, the Court cites and quotes from a decision of the Supreme Court of California Ex Parte Kone back in 104 California which says the same turning with a man -- man has been acquitted for convicted particularly if he server his sentence, particularly if he serve his sentence, he maybe compelled to testify. And the same had been true of other courts. So we think that there is no basis in the -- in the history or the theory, the principles of the -- either the privilege against self incrimination or this immunity legislation which would permit a distinction to be made between a petitioner like Reina here or a defend -- or a petitioner like Ullmann in the Ullmann case or Brown in Brown against Walker. They stand we think on the -- on the same basis. I think I have nothing further. Earl Warren: Mr. Stim. Allen S. Stim: Mr. Chief Justice, if it please the Court. First of all, I would like to point out in this particular case the petitioner Giacomo Reina had been convicted of the crime of conspiracy to violate the narcotic laws of the United States. He has never been charged or convicted of the substantive crimes from which he has been convicted of conspiring to violate. I have distinguished the facts of this case in my brief. A question was asked yesterday by the Court as to what prejudice there would be to the petitioner in the event that this Court construed the purge clause of the judgment as running from the date of final determination by this Court of the matter now before the Court instead of following the plain language of the judgment which commenced the purge clause as of February 2nd in 1959 that this -- such a construction would create more problems than it could possibly solve. It's apparent from the record of the Court and I refer the Court to page 25, 24 of the transcript of the record, the second paragraph down the second statement of Mr. Cobe who was the attorney for the petition at below. Mr. Cobe stated toward the end of the first paragraph that the order which this petition has been held in contempt on the order of Judge Edelstein was construed by Judge Edelstein that the petitioner should answer all questions referred to one before the grand jury including those which might not appear on these papers, therefore, even assuming that this Court would construe the purge clause as commencing as of the date that this Court made a final determination such a construction might possibly preclude this petitioner down below if called before the grand jury again to attack the reasonableness or materiality of certain questions propounded to him. In other words, it would put him on his own -- own peril that if he would challenge the materiality that he would not purge himself and that he would remain in prison and if any members of the Court raised the question that made -- that the Government might not digress from the purposes of the investigation, I refer the Court to page six of the record, the bottom questions propounded to Reina before the grand jury. I haven't raised this point on this petition but at the bottom, Mr. Reina was asked this question. Mr. Reina, was your father Thomas a member of an organization sometimes known as the mafia. I can represent to this Court from my own personal knowledge that Mr. Reina's father died 30 years ago. Reina was further asked that his father had a title Don in that organization, then he was asked after his father's death, did Reina take the place and title of Don in the organization and what are the names of the members of the organization? This I respectfully submit has to the deal with matters that occurred 30 years ago and could have no possible reference to any narcotic investigation or narcotic matter now under investigation. I would like to refer this Court in the conclusion of my argument that Title 21 United States Code Section 198, which does not appear in my brief, this makes it a duty on the part of the Government to make narcotic information available to the State Governments the use in the state courts. I would also like to bring to the attention of the Court, I omitted this from my brief, I omitted the State of California. The California Penal Code Section 1324, 1958 supplement by statute, and by statute the State of California has adopted the Michigan rule which disagrees with the Murdock decision. Thank you.

Warren E. Burger: We'll hear arguments first this morning in United States against Weber Aircraft Corporation. Mr. Alito, you may proceed whenever you're ready. Samuel A. Alito, Jr.: Mr. Chief Justice and may it please the Court: This case concerns the continued existence of an important part of the Armed Forces program of aviation safety. Specifically, the issue is whether statements made in confidence to military aviation safety investigators must be disclosed under the Freedom of Information Act, even though those statements would be privileged in civil discovery. When an Air Force plane is involved in an accident, two separate investigations are generally conducted. The first is called a safety investigation and, as the name implies, its sole purpose is to prevent future accidents. Witnesses are advised that their statements will be used exclusively for purposes of safety and will be kept confidential. In addition, Air Force members and employees are assured by regulation that their statements will not be used against them in administrative or disciplinary proceedings. Under present practice, the safety investigation compiles a two-part report. The first part contains facts except for those facts derived from confidential statements. This part of the report is disclosed under the Freedom of Information Act. The second part contains confidential statements as well as the findings, analysis and recommendations of the safety investigation. This part is not disclosed. Within the Air Force, the safety report is used, of course, for safety purposes and is distributed strictly on a need to know basis. In addition, to the extent practicable all identifying details are removed. At the same time, a second, separate investigation is also conducted. This is now called an accident investigation, but at the time in question here was termed a collateral investigation. Its purpose is to collect and preserve evidence for all purposes other than safety, for use in court-martial and administrative and judicial proceedings, in litigation and other purposes. Statements given by witnesses to the first investigation, to the safety investigation, are not disclosed to the accident investigation, but a list of the witnesses is provided. Therefore, the second, accident investigation will generally interview the same witnesses and is required to do so by regulation as soon as possible. This entire report is disclosed to the public. The other military services follow similar procedures. For more than 20 years now since the D.C. Circuit's decision in Machin versus Zucker, statements made in confidence to military aviation safety investigators have been privileged in civil discovery, and Respondents have not challenged the validity or scope of that civil discovery privilege. In hundreds of cases, Air Force safety-- Speaker: Do they concede its validity, Mr. Alito? Samuel A. Alito, Jr.: --I don't believe they expressly concede its validity, but I don't read their briefs as challenging the availability of that. Speaker: While I have you interrupted, are we going to have to decide, whatever is the scope of the Machin privilege, whether it's valid as a matter of civil discovery law? Samuel A. Alito, Jr.: I don't believe so, Justice Brennan. Speaker: Why not? We've never addressed that, have we? Samuel A. Alito, Jr.: The Court of Appeals assumed the validity of the statement and the question really before this Court is whether... excuse me-- Speaker: Have we ever addressed the validity under federal civil discovery law of the Machin privilege? Samuel A. Alito, Jr.: --I don't believe the Court has. But the issue decided by the Court of Appeals and that we brought here was whether these statements would be subject to disclosure under the Freedom of Information Act, assuming that they would be privileged in civil discovery. Since the recognition of this privilege in the Machin decision, Air Force safety investigators in hundreds of cases have compared the statements made by the same witnesses regarding the same accidents to these two separate investigations and, not surprisingly, this comparison has disclosed, human nature being what it is, that the statements made to the safety board, which are made under promises of confidentiality, frequently contain valuable information that is not disclosed to the accident board. Indeed, it is of course for precisely this reason that-- Speaker: Are the witnesses testifying under oath to the accident board, Mr. Alito? Samuel A. Alito, Jr.: --Air Force members and employees testify under oath in the accident investigation, but not in the safety investigation. Speaker: And what, do they swear to tell the truth, the whole truth, and nothing but the truth? Samuel A. Alito, Jr.: I assume they do, Justice Rehnquist. Speaker: Well then, isn't it odd that they would tell more to the safety board than to the accident board, if they have taken the oath in their testimony to the accident board? Samuel A. Alito, Jr.: Well, I don't think it's odd. I think that's human nature. People will protect themselves when there's a possibility that their statements may be used against them. When they are supplying information solely for the purpose of preventing injury to their colleagues, they will be more forthcoming if they are protected against any possible use of those statements against them. Perhaps it's unfortunate, but I think that that is a well recognized fact of human nature. Speaker: Is it a possibility that there might be better questions in one inquiry than in the other? Samuel A. Alito, Jr.: I think that's unlikely, Mr. Chief Justice. Both boards are composed of experienced rated officers and commanders are required by regulation to make all necessary technical expertise available to both boards. So I think there is no basis for concluding that the questions asked by the first board are better than the questions asked by the second board. And in addition, since the safety investigation precedes the accident investigation, if the safety investigator happened to ask a particularly... excuse me... the safety investigation happened to ask a particularly good question and the witness remembered it, he might well volunteer that information when he was questioned later by the accident board. Speaker: Mr. Alito, does the record show that these witnesses whose statements are being withheld actually were promised confidentiality? Samuel A. Alito, Jr.: I believe it does, Justice Blackmun. I think that both of the lower courts found that confidentiality had been offered. I don't believe that Respondents raised that issue below, but if they did raise it I think it was rejected by both of the lower courts. In any event, there was an uncontroverted affidavit filed in district court, which is reproduced in our joint appendix, in which the responsible Air Force official claims that these statements had been obtained under pledges of confidentiality, and as far as I am aware there has been no factual refutation of that. In any event, that was certainly not the basis for the Court of Appeals' decision. The Court of Appeals' decision was certainly based on the presumption that these were confidential witness statements. The information that is contained in these confidential statements has contributed to a dramatic improvement in military aviation safety. It is really no exaggeration to say that in many instances it has saved lives, it has prevented the loss of valuable aircraft, and it has contributed to the national defense. Now, in the present case an Air Force officer, Captain Richard Hoover, was seriously injured when he ejected from his plane. He sued Respondents, who are the manufacturers and designers of some of the ejection equipment, and they then sought release of the Air Force reports. The Air Force disclosed the entire accident report and the factual portions of the safety report, but under the Machin privilege withheld the confidential witness statements. Respondents then filed Freedom of Information Act requests and ultimately brought suit. The district court upheld the Air Force under exemption 5, but the Ninth Circuit reversed. Assuming that the statements would be privileged in civil discovery, the court nevertheless concluded that exemption 5 did not incorporate the Machin privilege. As I said, then, the issue before the Court is whether these confidential statements must be disclosed under the Freedom of Information Act, assuming that they would be privileged in civil discovery. But it's important to recognize that if statements of this sort are available under the Freedom of Information Act, then the civil discovery privilege is effectively abolished because litigants like Respondents will always be able to get those statements under FCIA. Let me stress at the outset that protecting documents like this would not in any way undermine the purpose of the Freedom of Information Act, because at least from a perspective looking forward the issue in this case, unlike some Freedom of Information Act cases, is not whether a certain type of information will or will not be available to the public. We are talking here about a kind of information that witnesses simply will not divulge unless confidentiality is assured, and this is demonstrated by the Air Force parallel investigation with almost scientific precision. The accident investigation serves as a sort of control group. As I said, a witness to an Air Force accident is generally questioned twice, first by the safety board and then by the accident board. The safety board promises confidentiality; the accident board does not. If the safety board could not make those promises of confidentiality, then the statements they receive would be essentially the same as the statements already received by the accident board and already available to the public, and therefore the public would not have any more information than it has at present, but those responsible for military aviation safety would have significantly less. In our view, neither the language of the Freedom of Information Act nor the statute nor the legislative history supports this senseless result. First, the statutory language. Exemption 5, of course, protects inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency. And what this means, as the Court has explained on a number of occasions, is that exemption 5 protects those documents normally privileged in civil discovery. Here, as I stated, the Court of Appeals correctly assumed that these statements would be privileged in civil litigation. Speaker: Mr. Alito, may I ask one question. Which of the two investigations takes place first? Samuel A. Alito, Jr.: The safety investigation... well, let me qualify that, Justice Stevens. The two investigations take place at essentially the same time, but the safety investigation has priority in examining witnesses and in examining tangible evidence. Speaker: It would seem to me... I'm just thinking out loud... that in response to your argument that the net result will be the same if you cut out the confidential investigation, that you'd get the other anyway, isn't it conceivable that the second investigation might omit some areas of questioning that they explored in the first, that they might not have if they just were starting from scratch? Samuel A. Alito, Jr.: I don't see that there's any reason to believe that the questioning in the second investigation will be appreciably different from the first. The second... the interviews by the accident board, as I said, are required by regulation to take place as soon as possible after the witnesses are released by the safety investigation. And I am informed that in appropriate cases witnesses have even been permitted to refresh their recollection by reviewing their statements to the safety investigation before they testify to the accident board. So, while of course it's always possible that two questioners will not ask the same questions and that one will omit an important question asked by the other, I don't think there's any reason to believe that that will occur in many instances under this setup. Speaker: Do the officers who conduct the accident investigation have access to the safety investigation report at the time they conduct the investigation? Samuel A. Alito, Jr.: No. They have access to part one of the safety investigation. Speaker: Just the public part? Samuel A. Alito, Jr.: Which is the public part. And they have access to a list of witnesses, so they can interview the same witnesses. But they are always different people and they do not have access to the confidential information. Speaker: Mr. Alito, at the time this Freedom of Information Act suit was brought the United States had not been joined as a party to the litigation brought by Hoover? Samuel A. Alito, Jr.: I believe the United States was originally a party and was dismissed. Speaker: So that the analogy, then, if the United States was not a party at the time this suit was brought would be a kind of third party discovery, whether the United States could have been subpoenaed to produce this stuff as a third party that wasn't in the litigation? Samuel A. Alito, Jr.: I am not completely sure of the chronology. I believe that the requests for discovery were made before the United States was dismissed, and I believe the district court expressed... I know that the district court said that he was inclined to deny those discovery requests. I don't believe that Respondents pressed their discovery requests. They then turned around and filed a Freedom of Information Act suit. Speaker: But the assumption of the district court and the Court of Appeals was that those requests would have been properly denied? Samuel A. Alito, Jr.: That's correct. Speaker: What if a witness... a witness, is he subject to contempt or some penalty if he doesn't show up? Is there a subpoena power? Samuel A. Alito, Jr.: There is not subpoena power. Members and employees of the Air Force may be ordered to testify before these hoards. Speaker: If they don't they're shot at dawn? [Laughter] Samuel A. Alito, Jr.: I don't know what the question is. Speaker: Well, is there some sanction? What if somebody says, I just don't want to answer that question, it's too embarrassing? Samuel A. Alito, Jr.: I assume there is a sanction for refusal to obey a lawful order. I could not tell you exactly what the punishment would be in this instance. I don't understand Respondents or the Court of Appeals to have made a serious effort to reconcile their interpretation of exemption 5 with the statutory language that I just discussed. Instead, they look past the statutory language to the legislative history. That is the heart of their argument. And yet what is curious is that even there they do not find any positive support for their argument. On the contrary, all the evidence in the legislative history indicates that Congress meant what it said when it enacted exemption 5. Both the House and the Senate reports state that the purpose of exemption 5 was to protect those documents normally privileged in civil discovery, and of course as I said the statements here were assumed to fall into that category. Now, it's true that both reports specifically mention a couple of exemptions, but there is absolutely no reason to believe that those passing references were intended to constitute an exhaustive list of the incorporated privileges. In addition to all of this, there is even specific evidence in the legislative history that Congress focused on the desirability of protecting the very type of statements involved in this case. When the hearings were held on exemption 5, that provision would not have protected statements of this sort. It was limited to documents dealing solely with matters of law or policy. At the Congressional hearings a number of witnesses pointed out that these statements were then privileged in civil discovery and should not have to be disclosed. Congress thereafter amended exemption 5 to protect those documents not routinely disclosed in civil litigation, and Congress accomplished this by recasting exemption 5 in language similar to exemption 7 as it was then framed. Respondents argue that these statements must nevertheless be disclosed because these facts do not conclusively establish that Congress had the Machin privilege specifically in mind when it amended exemption 5. But this argument really turns the usual rules of statutory interpretation upside-down. Respondents are arguing that exemption 5 must be construed in a way that is contrary to the legislative history, not because there is positive evidence supporting their interpretation in the legislative history... excuse me. They are arguing that exemption 5 must be construed in a way that is flatly contrary to the statutory language, and they make the argument not because there is positive evidence supporting that interpretation in the legislative history, but because in their view the legislative history fails to show with sufficient clarity that Congress meant what it said. This is really one of the oddest methods of statutory construction ever advanced. The basis for this method of statutory construction is dictum in this Court's decision in Merroll. But neither the Merroll dictum nor the holding in that case supports their conclusion. In Merroll the Court noted that it is not clear that exemption 5 incorporates every known civil discovery privilege, and the Court also observed that any claim that a privilege other than the two specifically noted in the legislative history was incorporated into exemption 5 would have to be viewed with caution. The apparent basis for this observation as we read the opinion was the recognition that with certain civil discovery privileges in other exemptions and may have intended to modify their scope. But here the Machin privilege does not substantially duplicate any other FOIA exemption, and I think that it is unreasonable to read the caution prescribed by Merroll as requiring that exemption 5 be construed in a way that is contrary both to the statutory language and to all of the affirmative evidence in the legislative history. Speaker: Mr. Alito, does the legislative of history reflect that the consideration by Congress these safety investigations and the request for making an exemption for them was addressed really to the exemption 7 provisions, rather than exemption 5? And of course, as exemption 7 turned out it was limited to law enforcement investigations. Now, would a fair reading of the legislative history indicate that that's the context in which the safety investigations were discussed? Samuel A. Alito, Jr.: The references by the Justice Department did not mention any specific privilege as I recall, any specific exemption. The references by the Defense Department did refer to exemption 7, but I think that that actually supports our argument because, as I noted, Congress amended exemption 5 by recasting it in language similar to exemption 7 as it was then framed. At the time of the hearings, both exemptions 5 and 7 read very differently than they do now. As I said, exemption 5 applied to documents "dealing solely with matters of law or policy. " and exemption 7 concerned documents compiled for law enforcement purposes, except to the extent available by law to a private party. What Congress did was to amend exemption 5 to protect documents that would not be available by law to a private party in litigation with the agency, which is language very similar to the language in exemption 5, as Justice Powell observed in his opinion in the Robbins Tire & Rubber case. So I think that if anything the Defense Department's references to exemption 5 tend to show that Congress was listening carefully to what the Defense Department recommendation was. But our essential argument is that the protection of these privileges follows from the statutory language, and since there is... whatever else one may say about the legislative history, it certainly does not clearly show that Congress had a contrary intent, and therefore the statutory language controls. Speaker: Do you think that courts generally have given the statutory language in Section 5 its literal meaning, or has there been some indication, not only in this Court, in others, that we have to be careful about applying it as it appears to be written? Samuel A. Alito, Jr.: I think the Court has expressed the view that exemption 5 may be unclear in ways that are not related to this case. But I see nothing unclear about it insofar as it applies here. It protects documents that would not be available by law to a party other than an agency in litigation with an agency. Weber Aircraft Corporation and the other Respondents are parties other than an agency. These documents would not be available to them by law in litigation with the agency, the Court of Appeals assumed, and they have not contested that. So I fail to see that there's any ambiguity in the language insofar as it applies here. And certainly there can't be a claim that this is properly dealt with in another FOIA exemption, because I see no other exemption that is related in any substantial way to the privilege at issue here. Speaker: Mr. Alito, you rely a good bit on the D. C. Circuit's Machin case, don't you? Samuel A. Alito, Jr.: Yes. Speaker: Am I correct in my impression that there the court held that the Air Force mechanic's factual statements were not privileged? Samuel A. Alito, Jr.: That's correct, Justice Blackmun. Speaker: How do you distinguish that from Captain Hoover's statements here, he being an employee of the Air Force? Samuel A. Alito, Jr.: Captain Hoover was a person who was involved in the accident and he made a statement under promises of confidentiality, because of course he had a good deal to gain or lose depending upon the nature of his statements. In Machin or Machin, the Air Force mechanics were people who examined the wreckage after the accident took place, and what they discovered was in the nature of the facts that would now be placed in part one of the safety report. They were simply disinterested technical people who were examining the tangible evidence, and they really had nothing identifiable to gain or lose by shading their statements one way or the other. I think the court's reference to private parties in that case was meant, as I think your question suggests, to distinguish between the statements of people who testify under pledges of confidentiality and people like the mechanics, who simply provide factual information and would now be placed in part one of the safety report. In conclusion, the statements involved here fall within the plain language of exemption 5. Everything in the legislative history indicates that Congress intended to protect documents of this sort, and requiring the disclosure of statements like this would not serve the purposes of FOIA because it would not make any more information available to the public or to the press than is available already. It would simply mean less information for those people trying to prevent military aircraft crashes. We therefore ask that the judgment of the Court of Appeals be reversed. Warren E. Burger: Mr. Soiret. Jacques E. Soiret: Mr. Chief Justice, may it please the Court: The materials at issue before this Court are two witness statements and a life science report that are ten years of age, that have previously been released. The Freedom of Information Act represented a dramatic legislative mandate and in our view a substantial reversal of the previous policy with respect to how Government agencies were to treat the materials with which they had cognizance. The principal objectives of this full disclosure I don't think need be gone into in oral argument. They're set forth very clearly the Court's opinion in Justice White's... through Justice White in the Mink case. Our position in this case is simply this: that the materials at issue here are not included within exemption 5. They are purely factual. Pursuant to Justice Blackmun's question a moment ago drawing the distinction between the mechanic's report in Machin and Captain Hoover's reports here, I don't think that there is a distinction. The mechanics of course don't simply look at the evidence. One of the things that they are required to do is to determine whether there have been maintenance or installation errors. You may characterize those as factual or not. We presume that they were given the same promises of confidentiality during their portion as were the rest of the witnesses. In reviewing the legislative history of exemption 5, I think we first have to look to what I consider to be, at least Respondents do, the lead case, and that's the Mink case, because that gives us the guidelines as to what we are to do to determine and what the Circuit Courts are to do. Speaker: Why wouldn't you look first at the language of the statute? Jacques E. Soiret: I think if you do look at the language of the statute, the Court reflected in Merroll that in order to determine the scope and what it means you have to make an examination of the legislative history. When the statute says you don't have to turn over in litigation with the agency not required by law, what does that mean? The Court in Merroll said we have to examine the legislative history to make that determination. So I think you do look squarely at the statutory language, but then you must determine whether or not that, the Machin privilege, is assumed into exemption 5. Speaker: What is it that you think is unclear about the statutory language? It says "memoranda or letters which would not be available by law to a party in litigation with the agency? " Jacques E. Soiret: It is not so much, Justice Rehnquist, that it's unclear. It's what meaning does it have. In Merroll, the same language was at issue and this Court said we must examine the legislative history to see what "available by law" means, and that's exactly what the Ninth Circuit did in Weber, and that's what I believe this Court did in Merroll. It searched the legislative history. Speaker: You say it's "available by law" that's unclear and that needs refinement by looking at the legislative history? Jacques E. Soiret: It needs a determination to see what is it that Congress meant when it used the words "available by law". What did it mean? The same common sense approach which was referenced in Mink and the no wooden formula caveat which that opinion contains are very useful. Exemption 5 does not incorporate a privilege for witness statements and factual reports. The Government argued in the Merroll case that 5 incorporated several discovery privileges besides the executive predecisional or deliberative privilege and the attorney privileges. The Court in its opinion said it's not clear that 5 incorporates all of these privileges, and Justice Stevens in his dissent indicated that the Court admirably recognizes the danger of incorporating all of the known discovery privileges. Speaker: Counsel, the Court of Appeals did assume that the statements were not discoverable in civil litigation under Machin? Jacques E. Soiret: The Court of Appeals made that explicit assumption. Speaker: And you didn't file, I guess, a cross-petition? Jacques E. Soiret: No, we did not. Speaker: So do we then have to make the same assumption for purposes of this case? Jacques E. Soiret: For the purposes of this determination, I think you have to be guided by the assumption that the Ninth Circuit made, and that assumption of course is arguendo, because they then went into the examination of the legislative history and found the Government's position wanting. Speaker: Yes, but do you concede that Machin is good law? Jacques E. Soiret: I concede that the Machin case established a privilege prior to the Freedom of Information Act. Subsequent to the Freedom of Information Act, in that context, I do not concede it's good law at all, because I think the Freedom of Information Act absolutely dispenses with the basis upon which the privilege in Machin was grounded, and I'll get to those comments in a moment. Speaker: Is there anything in the legislative history that suggests that Congress explicitly intended to modify that holding of the Court of Appeals? Jacques E. Soiret: There is tremendous legislative history, Mr. Chief Justice, which reflects not only with respect to number 5, but with respect to exemptions 7 and 3, that Congress very specifically gave us legislative history to indicate to us that they had no intention of incorporating this Machin decision in exemption 5. Just a last word on Merroll. Our understanding of the Merroll decision is the Court, after making a review of the legislative history, both houses, found support in that legislative history for the qualified commercial information privilege which the Court found in that case. And analysis of the privilege, or any other privilege, as the Court said, must be viewed with caution. If it's a privilege other than those recognized in the legislative history which the Court reviewed, we ought to look at it with caution. And it's the Respondent's position that the caution ought to become in the nature of a red alert when the privilege which is being offered for consideration is one based on an efficiency of the agency, public interest standard, which is the identical standard that was swept away by the Freedom of Information Act. We believe that the privilege here is a pre... that is, Machin... is a pre-FOIA privilege for non-Government witness statements, announced in 1963. And a review of the Machin rationale for that decision indicates that it is absolutely counter and directly contrary to the Freedom of Information Act and the cases of this Court which interpreted that Act. So Merroll says to us, let us look at the legislative history and what does it tell us specifically about the exemption at issue. It is our position that exemption 5 has nothing to do with Machin, never did, neither in its original form nor in its amended form, as the Solicitor General's Office points out. However, we disagree. We certainly concede it was amended, but it was amended, we believe, because it had to deal with the question of should the agency disclose or withhold documents not purely law or policy, but those which contained mix documents. That is the reason in our view for the amendment of exemption 5. It had nothing to do with Machin. A review of the legislative history for exemption 5 will reveal, we believe, no member of Congress ever referred to a Machin privilege nor was it suggested, nor indeed under exemption 5 did the Government ever even assert that it ought to be included. Congress specifically refused to attach any viability to the Machin privilege in this context. During the Senate hearings both the Department of Defense and the Justice Department specifically asked Congress to give them relief and to give them under amendment 7 the governmental investigation exemption, a Machin privilege. And during those hearings they argued before the Congress that there wasn't a provision protecting the material. What material? The Machin-type privilege aircraft accident material in the context of exemption 7. They specifically requested that relief. In addition, in addition to the testimony before both houses of Congress, there were written comments which were sent to the House and the Senate. The Departments of Defense and Justice asked for the Machin privilege to be incorporated into 7. Congress refused and left exemption 7 exactly the way it was, and refused to provide to them the specific protection that they asked for, and they left it only for the investigation files and confidential material for law enforcement purposes. The Government suggests in its brief that Machin was discussed during discussions concerning amendment 5. We pointed out in our brief that we believe that position to be in error and the legislative history in our belief indicated that it was 7 to which these discussions were concerned. The Government's reply brief makes a curious point. It appears to admit that the discussions took place with respect to 7, but nonetheless suggested that Congress must have amended number 5 to reflect the Government concerns. I just don't think that there's any support whatsoever in the legislative history for that position. And we don't only have to look to see that the Government refused to amend exemption 7 to give the Government... Congress to amend exemption 7, to give the Government that which they're seeking. In addition to going to Congress to exempt these materials under 7, the Government has gone to Congress twice and requested specific legislation pursuant to exemption 3, which allows the Government to withhold material if there is a specific statute authorizing the withholding; has gone to Congress and twice requested specific authorization, both in 1980 and 1983, and requested that there be statutory language passed allowing a Machin-type privilege so that the material such as at issue in this case could be withheld. In 1980 the Department of Defense sent a request for legislation and draft legislation to the Congress. It was never acted on by either house. In 1983 the Executive Branch sent to the Senate proposed legislation which found its way into the defense authorization bill without debate, but when the House and Senate Conference Committee got together the matter was struck out in its entirety and deleted and sent back for further study. The legislative history reflecting that further study is reportable to the Congress on January 15th of 1984. That, we believe, is the legislative history review that the court engaged in in the Merroll case in order to determine whether or not the materials were available by law to a party in litigation with the Government. There isn't any legislative history to support whatever that the 1963 opinion of Circuit Judge Washington was intended to be incorporated in exemption 5. The legislative history we believe is quite to the contrary. We note in footnote 2 of the Merroll decision Justice Stevens pointed out that it was indeed curious that the agency there before the Court sought relief under exemption 4 and was turned down, and the Court in its majority opinion found that relief appearing in exemption 5. We have a very similar situation in this case. Justice and the Department of Defense have gone to Congress under two other exemptions and tried to get the protection which they know in our view is not available to them under number 5. So in addition to the legislative history, which we think is clear that there just wasn't any intent, it's not one of the enunciated privileges of attorney-client, work product, the executive predecisional privilege, or the qualified confidential commercial privilege which the Court found in Merroll from a review of the legislative history. In addition, there are some analogous materials which I think are helpful in determining, did the Court intend a Machin-type discovery to be included. The Court will recall that after its decision in FAA versus Robertson the Congress reversed that particular case specifically, and what was really at issue here, the identical type of aircraft investigation materials that are available in this case, only under the cognizance of the Federal Aircraft Administration, the identical type material. And the Court... and the Congress in short order reversed that particular holding of the Court, although it was an exemption 3 case, and said that it would not permit the Federal Aircraft Administration to withhold aircraft safety information because it felt it was in the efficient interest of the agency and was in the public interest. They simply-- Speaker: I'm still confused, going back to the original question that I asked. If you felt that the material involved in this case is exactly the type that the Machin court would have released, why was no cross-petition filed, then, when the Court of Appeals said it's covered by the Machin privilege? Jacques E. Soiret: --Well, because the Court of Appeals indicated a remand and said the material that we were seeking would be released subject to the remand, and a decision was made not to file a cross-appeal. Speaker: But when it came up here then we're faced with this problem, of course. Jacques E. Soiret: That's true, Justice O'Connor. It was a tactical decision not to do that. In addition to the FAA versus Robertson situation, Congress has made other clear indications of its intent, and it mandated the National Transportation Safety Board in the Independent Safety Board Act to direct that the information be released, the identical type of information that the Air Force seeks to withhold in this case, information which concerns itself with safety and safety investigations. We think that the legislative history review which is called for in Merroll and which I believe is a cornerstone of the Ninth Circuit Court opinion in this case, a review of that legislative history will indicate that there isn't any support for the idea that a Machin-type privilege is one which ought to be included into exemption 5. Indeed, a review of the legislative history of the other exemptions in which the Government has sought protection indicates quite to the contrary. For these and the reasons set forth in our brief, we believe the opinion of the Ninth Circuit should stand. Warren E. Burger: Do you have anything further, Mr. Alito? Samuel A. Alito, Jr.: I have several very brief points. First, as a factual matter I think it is not true, as Respondents state, that the issue of the life sciences report is before the Court. We specifically did not petition on that issue. That is at page 8, footnote 9, of our petition. Second and much more importantly, Respondents concede that for purposes of this argument the statements at issue would be privileged in civil discovery. Yet they nevertheless argue that these documents must be turned over to them under the Freedom of Information Act. We fail to see what possible sense this argument makes. They are themselves litigants in a suit and they are seeking these documents for purposes of discovery. It just doesn't make any sense for documents to be privileged in civil discovery, yet available to litigants under the Freedom of Information Act. I think in argument Respondents have again reiterated this very odd method of statutory construction. Without making any serious effort to reconcile their interpretation with the statutory language, they argue that the statements must nevertheless be turned over because the legislative history in their view fails to show with sufficient clarity that Congress meant what it said in exemption 5. This is not the way statutes are usually constructed. And finally, I think it makes no sense to argue that the Defense Department requests for clarifying legislation in this area have elicited any Congressional skepticism about the validity of the Machin privilege. In the Ninety-Sixth Congress, with only a one-day hearing the House Committee reported cut favorably a measure much broader than the issue, the question at issue here. But unfortunately that measure died because the term of Congress expired shortly thereafter. In the present Congress the Senate, without conducting any hearings, passed the measure that would have provided equivalent relief, but no such provision was contained in the House bill and the conferees deferred passage pending the submission of some explanatory material. Certainly, I think one cannot read any Congressional skepticism about the need for protecting these statements into those actions. And I think it is also well settled that an agency's requests for clarifying legislation should not elicit adverse inferences, for otherwise agencies would hesitate to do that and the task of clarifying statutory ambiguities would rest even more heavily on the Judiciary than it does at present. Thank you. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Earl Warren: Number 315, Power Reactor Development Company, Petitioner, versus International Union of Electrical, Radio and Machine Workers, et al., and Number 454, United States, et al., Petitioners, versus International Union etcetera. Mr. Solicitor General. Archibald Cox: Mr. Chief Justice, may it please the Court. This case is here on certiorari to review an order of the Circuit Court of Appeals for the District of Columbia setting aside an order of the Atomic Energy Commission. The order of the Atomic Energy Commission continued, in effect, a provisional construction permit authorizing the other petitioner, Power Reactor Development Corporation to construct an atomic power plant outside Detroit, Michigan. The provisional construction permit authorized the continuance of construction. It did not authorize the operation of the reactor which could not be done until there had been a further proceeding followed by the issuance of a license to operate. The court below set aside the order of the Commission on the ground that its findings concerning safety did not satisfy the requirements of the Atomic Energy Act. I would like to ask the Court's indulgence to postpone any further discussion of the issues or decision below, although I recognize it's unusual, until I have given a rather lengthy exposition of the fact because I'm convinced that the issues in the case become quite clear and understandable once the factual situation has been thoroughly described. And I do assure you that I will come back to them later. All atomic reactors rest upon the fact that there are some atoms, chiefly in Uranium, which can be split into smaller particles. The nucleus of an atom is made up of protons and neutrons, smaller particles. In Uranium, the protons and neutrons usually total 238, but there's a very small proportion in which the protons and neutrons add up to only 235. And U-235, as it is called, has the capacity to split apart when it is struck by another free neutron, so that if you had one atom of U-235, getting struck by one free neutron, you would then have three results that are significant here. First, you would have the release of energy, chiefly energy in the form of flying fragments, the kinetic energy, which, when they bumped into each other and bumped into other substances around, would be transformed into heat. And the function of this reactor is to capture that energy in the form of heat, turn it into steam and then use the steam to generate electricity which is fed into or will be fed, in time, into a normal utility grid. The second consequence of the fission is radioactive waste, the particles that are left. And they are, for a time highly, dangerous to man or other forms of life and one of the problems, in building an atomic reactor, is to make sure that none of that radioactive waste, either at normal operation or as a consequence of any abnormal accident, will escape. The third consequence of a fission is the release of free neutrons. Now, if you had 100 fissions, to take a small number, actually, we're dealing with billions, if you had 100 fissions and then they release just enough free neutrons to cause another 100 fissions as they struck atoms of U-235, obviously, you'd have a self-sustaining chain reaction. If you had only 95 out of 100 in each generation, cause another fission, then the reaction would not be self-sustaining, it would run down. On the other hand, if you had 105, which would be terribly fast increase, you would have the number of fissions, multiply itself many times over in a very small period of time. The problem of the early atomic scientist was to achieve the self-sustaining chain reaction. The problem of the man building an atomic power reactor is to control the free neutrons in such a way that he can raise the level up to the level at which he wants it to operate and then hold it there, operating it just each generation of neutrons reproducing itself or to take it down later if he wishes to take it down. This is done chiefly by controlling the freight of the free neutrons. The various ways of doing that, one, is obviously to increase the number of U-235 atoms in your fuel because if you have more U-235 atoms, the chance that a free neutron will strike one in such a way to cause fission increases. Equally, if you increase the amount of fuel, the chance that a free neutron will strike a U-235 atom before it escapes from the fuel and becomes irrelevant is obviously going to increase. And just the amounts of fuel which will sustai -- create a self-sustaining chain reaction, you will find often in this record, called the critical size or critical mass. Another way of controlling the fate of the free neutrons, which becomes important here, is to put into the fuel something that will capture them without causing a fission. For example, if you put boron, another element, into the fuel, it will capture the free neutrons, so they can't strike other atoms and reduce or bring an end to the chain reaction. And all reactors have boron control rods, so that you can -- by inserting it, the reaction will be cut down, by withdrawing it, you can permit it to increase. And they also have, as I will show a little later with this model, boron safety rods, which can be suddenly inserted in the event of any mishap in order to shut the whole thing down. At the present time, there are operating in the United States some 115 reactors. The variant size from small experimental reactors to large-scale power reactors such as we have involved in this case. There are 90 more that are being built. Two of the large-scale power reactors are located near big cities, one outside Chicago, one outside Detroit and there are others near smaller cities like Albany, New York. Most of the large-scale power reactors are what are known as thermal reactors because they depend for the reaction on slow neutrons, which I'll describe in a minute, rather than the fast neutrons on which the PRDC reactor were built, it will depend. One of the characteristics of an atom of U-235 is that for some reason, it splits more easily when it's hit by a neutron going slowly than when it's hit by a neutron going fast. So what scientist does is to put into the reactor in and around the fuel something called a moderator that will slow the neutron down without capturing it and thereby increase the number of fissions that takes place for a given number of free neutrons. And those are called thermal reactors. The PRDC reactor will not slow the neutrons down. It's therefore less efficient in achieving fissions than a thermal reactor. But the fast neutrons have a characteristic that slow neutrons don't have. The fast neutrons, when they hit U-238, the non-fissionable Uranium, a certain proportion of them turn the non-fissionable Uranium into Plutonium. And Plutonium is itself a fissionable material. The result is that a fast reactor like this one will create more fissionable material than it burns. One of the witnesses in the record said this is like starting off an automobile trip with your gasoline tank half full, driving 500 miles, buying no gas and arriving at home with a full gasoline tank. The trick, of course, is that you are using up the non-fissionable U-238. You aren't really getting something for nothing. But U-238 is quite plentiful whereas U-235 is very rare. And therefore, as the Commission found in this case, the successful use of a fast breeder reactor would be a great step forward in increasing the amount of atomic fuel and therefore, increasing the amount of potential energy in the world. Of course, the great importance of such reactors as this is that they do hold out a great hope of enabling many areas in the world that don't have sources of energy now to obtain a cheap source of the electric energy which is necessary not only to economic well-being, but some people think to a stable political society because such communities don't have hydroelectric power and the expense of shipping in oil or coal would be very, very great indeed. And of course, atomic energy is, for ourselves, a reserve against the possible loss of oil or coal, both of which are being consumed that is very, very fast. The record of atomic reactors, the safety record in this country, seems to me to be very high, indeed. There has been no regularly operating reactor. I used "regularly operating" to exclude those being used to perform scientific experiments. There's been no accident with the regularly operating reactor which has resulted in any injury to anyone leaving aside -- in the regularly operating ones. Even counting the reactors in which scientific experiments are being performed outside of laboratories which don't have the usual facilities of a reactor, there had, until January 1960, been no accident involving either a fatality to anyone or an injury to a member of the public. Unfortunately, there was one reactor accident in Idaho in 1960 in an experimental reactor which did result in the deaths of three employees. Even there, however, there was no injury to any member of the public. No radioactive waste in significant quantities was found outside the reactor building and the building had none of the safeguards which would be associated with any developmental power reactor of this kind, none of the containment to keep radioactive waste in. The proposed PRDC reactor will be located at Laguna Beach which is about 35 miles from the center of Detroit. The whole plant, of course, comprises normal generating facilities, boilers and other things of that kind. But I have here an -- a model of the reactor. This is a scale of about 7-to-1. The reactor itself will be 60 -- 65 inches -- 65 inches high and this is about a foot high. And it will be 80 inches in diameter. In fact, it's rarely only a matrix -- Earl Warren: Could you put that back a little farther so -- someplace so we -- Archibald Cox: Can everybody see it there? That's -- oh, that's very convenient for me.[Laughs] Earl Warren: That's better. Archibald Cox: The reactor is really a matrix. It holds in place a large number of separate subassemblies, these are all removable. And this -- the whole thing, the whole cylinder is made up of things like this, separate subassemblies. The core section where the atomic reaction takes place is marked in blue. And the rest of it is what's known as the "blanket". Felix Frankfurter: The what? Archibald Cox: The blanket. Felix Frankfurter: Blanket. Archibald Cox: All around here. This, of course, is cut away. Now, I have also here a -- this is real life.[Laughs] This isn't a model. This is a section of one of the subassemblies, this correspond as it were to this, to the blue part of this. This is, in fact, one of the subassemblies from the PRDC reactor. They hang down, you see, the same as this does only they're locked in. The subassembly, the outside, is simply a cover of stainless steel. Inside it is this birdcage or honeycomb construction. It holds these pins which are removable. You can see them along the front here. These are made up of Uranium. These are steel so that we can handle them, but in the reactor, they will be made up of Uranium which has 27%, the fissionable U-235. And the whole thing is filled with the solid pins. Then this honeycomb or birdcage construction holds the pins rigidly in place, for a reason that I will explain a little later. And all that is in, when it's in place, you wouldn't be able to see the inside. It's in this stainless steel. The -- when the reaction is taken -- no, one thing more I should explain going back to this. What I had there corresponded to the blue of a single one of these. The non-blue, the silver part, is physically very similar to this. But instead of having the U-235 in it, the pins that are not in the blue, the upper and lower parts here and the outside pin are made up of Uranium that's nearly all U-238, and it's out in this blanket of U-238 that the breeding or creation of Plutonium occurs. Now, you see the fast neutron will -- some of them will go out of the core without causing a fission and then they will be captured by the U-238 in the outer section, forming Plutonium, which is later a byproduct and used potentially in other reactors. Over the reactor, I'm sorry, there's no physical way of I -- to show it, hang two control rods that I mentioned earlier made of boron and eight safety rods. The control rods, of course, are operated mechanically, so that they go into or out of the reactor in order to slow down or speed up the reaction. The boron safety rods are suspended from electromagnets. And then, if anything approaching a mishap occurs, the power is shut off and they drop into the reactor and shut the reaction down so that the mishaps do not go any further. Hugo L. Black: What is the general size of that whole thing made? Archibald Cox: The whole -- the whole thing is 65 inches high and 80 inches in diameter. When the reactor is operating, it generates, in through here, large quantities of heat. To carry the heat away, they're boiled up through. You see, it could go all through these birdcages even when pins are in, boils through sodium. The sodium carries the heat away, at one purpose it serves, the other is that through a series of heat exchanges, the sodium is used to heat water and the water is turned into steam and is used to turn the generators that make the electric power. William J. Brennan, Jr.: Well, Mr. Solicitor, is the reactor located in a building of any special character? Archibald Cox: Yes, the building -- William J. Brennan, Jr.: Don't -- don't tell us (Voice Overlap) -- Archibald Cox: Well, I was going to do it. I might just well do it now. The reactor is located in a series of containment vessels which, as a result of test, can be said to be such that they would contain an explosion equivalent to 1000 pounds of TNT. First, this outer part here is two inches of steel, two inches apart in separate lengths. Then outside of that is three feet of graphite with another steel tank all around it. Then there's another half inch of steel and two and a half feet of concrete. And all these, everything here is underground. The floor over this is five feet of steel and concrete. And then the whole thing is in a sort of a football-shaped building with, I think, its two-inch steel shelf, which is gas tight and which extends down again below the ground as well as going over the whole thing. This is built so that if by any chance there were an explosion in the reactor, equivalent to 1000 pounds of TNT, still, none of the radioactive elements can get out. Now, let me say now, I'm coming to the matter of explosion later, that the very maximum explosion, anybody has been able to figure out that happened, even if you made the serious or worst assumption, is in the order of being equivalent to 600 or 700 pounds of TNT. So that the containment is -- allows a very large margin over the worst explosion that anybody could imagine taking place in a building. The -- Potter Stewart: I don't understand. I've -- Archibald Cox: Yes. Potter Stewart: -- I'm -- there are many things I don't really understand, but I'm (Voice Overlap) -- Archibald Cox: Well, I'm -- Potter Stewart: (Voice Overlap) fair concept I think about almost everything that you explained so hopefully, except what happens to the Plutonium that's formed. Does this -- Archibald Cox: Well, each of these pins, I'm not going to explain the mechanism -- Potter Stewart: No. Archibald Cox: -- I couldn't to be honest, each of these pins, if we'll leave this with the clerk, you examine it, is built so that fingers can come around and take it at the very end just as I do and pull it out. And this is built so that all the fuel elements, this is one of the safety features of the fast reactor, each of the fuel elements will be removed at least as often as once every 12 weeks. This keeps down the amount of radioactive waste you have in here. They are then removed and shipped in various special containers to the Atomic Energy Commission which stores, or if it has occasion to use it, uses the Plutonium. You see, while I have only the front row removable, everything in here is removable in the same manner. And this can all be done at long distance. Their fingers would come down and take it off. They put in water for a time and then carried away. Potter Stewart: And the Plutonium is in the -- it's in the non-blue part. Archibald Cox: It's in the non-blue part in the axial and radial blanket as they call it. Potter Stewart: And -- and the blue part, I suppose, would have to be -- those are removed or -- and the -- and the process in which you mentioned of, that's deactivated entirely (Voice Overlap) -- Archibald Cox: Well, that's taken back and reprocessed by the Atomic Energy Commission. None of the processing of these things is done in Detroit or indeed will be done by PRDC. It's all -- that's all Government does. None of that is private. William J. Brennan, Jr.: You said they're coming back to the explosion -- Archibald Cox: Yes. William J. Brennan, Jr.: (Inaudible) Archibald Cox: Yes. I wanted now to come to the proceedings before the Atomic Energy Commission. And then in illustrating one of the questions before, I think the key question before the Commission. I'm going to come to the maximum possible explosion. The original application before the Atomic Energy Commission was filed on January 6, 1956. The Commission referred the application to the Advisory Committee on Reactor Safeguards which had no statutory standing at the time, but which now has statutory standing under the Act. The Commission made a report on the proposed reactor which was non-committal and certainly some people would say it was discouraging, although I think non-committal is the more accurate word. The Commission then had the staff make certain further studies about the safety of the reactor and in August 1956, the Commission issued a provisional construction permit. The issuance of that permit, let me say very candidly, gave rise to a great deal of criticism, both because it was issued in the face of a non-committal, if not discouraging ACRS report because that report had not been published, it was treated as an executive document, and because no hearings had been held. The point that I want to emphasize is that the validity of the original construction permit, the August 1956 permit, is not before the Court. That's not the order that was before the Court of Appeals and not the order which is here. After that permit was issued, the ACRS report was released. The labor unions, who are respondents in this Court, intervened. There were very long and detailed hearings at which most of the members, the ACRS testified. The Commission made findings, heard briefs and had oral argument and then issued the order which is before this Court for review, which was an order, making certain findings and continuing the construction permit in effect. So in our view, the earlier criticism is not pertinent at all to the later phase of the proceeding. Indeed, if you read the criticisms cited in respondent's brief with any care, you will find that most of them plainly and all of them, I think, by fair inference, applied to this original provisional construction permit and not to the findings which were before the Court of Appeals and are here for review. Now, when the original PRDC application was filed, it was not complete in the sense that it contained all the details of the final design of this reactor as it would operate. There's nothing unusual about that, let me emphasize, not only in the case of atomic energy but in the case of all kinds of research and development today. Frequently, science -- scientist can project a solution for certain problems long before the engineers are actually able to build something to test the basis and to try it out in person. And it also is a fact, which I think any engineer or scientist would agree to today, that frequently in the course of construction, you are able to solve problems that couldn't be solved until the construction had begun. And certainly, you are able to make test that could not be made until the construction had begun. This is especially familiar in the Atomic Energy Industry and the Commission has a regulation which bares directly on this point and which we think is the key regulation in this case. It's Reg.50.35, which you will find on page 135 of the Government's main brief. It says, in effect, I won't read it all because it's quite long, that where the applicant is unable to furnish full technical explanation, nevertheless, the Commission may issue a provisional construction permit. If the Commission finds, and I now quote, "That it -- right from the middle of 50.35, "That it has information sufficient to provide reasonable assurance that a facility of the general type proposed can be constructed and operated at the proposed location without undue risk to the health and safety of the public." But then the latter part of 50.35 goes on and says "That this permit and the issuance of an eventual license to operate is conditional upon the very end, an evaluation by the Commission that the final design provides reasonable assurance that the health and safety of the public will not be endangered." Now, there's one semantic problem that I want to come straight at here. You will note that the part I read first speaks of a facility of the general type proposed and speaks of reasonable assurance that a facility of the general type proposed can be constructed and operated at the proposed location. When these hearings were being held before the Commission, a reference to the PRDC reactor, in one sense, of course, was a reference to a specific thing. It was something at Laguna Beach that they wanted to build there and it was described by the application. In another sense, any reference to the PRDC reactor at that stage was necessarily a reference to a general type of reactor because within the plans that had thus far been filed, a number of variance were possible and indeed, there might be changes in the specification. So that when you -- so that this is a matter of degree of generality and it's very easy to slip here from speaking of the reactors if it were a specific thing, but when in fact, it's only a general type until the alternatives have been excluded by getting all the details of a specific set of plans. Potter Stewart: Was -- is -- is this or was this, at the time the application was made, for -- unique? Was this -- Archibald Cox: This -- this would be the first large-scale developmental fast breeder reactor. Now, when I say developmental fast breeder reactor, I mean the ones being used for the purpose of research and development in its use as part as a regularly operating part day in, day out of the utility grid system. I do not mean an experimental reactor used for carrying on scientific experiment. There was a -- had been, when the hearings were held since 1951, I think it was, certainly since 1955, an experimental fast breeder reactor that the Commission operated out in Idaho. It all -- Potter Stewart: Is that the accident? Is that where the accident was (Voice Overlap) -- Archibald Cox: That was where the accident -- no, that was a different reactor. The one that I referred to that had the accident in 1960 was not a fast breeder reactor. In addition, at the time of these hearings, there was scheduled to be built another Atomic Energy Commission experimental reactor, ERB II, it was called. And there's a fast -- there's a developmental fast breeder reactor in England at Dounreay, Scotland. So that before this came to the stage where anybody would talk about operating it, there would've been experience with two experimental reactors and some experience with the Dounreay reactor in England. But in terms of atomic power plants in this country, this would be the first of its type and the Commission found that that was one of the very important reasons for going ahead with it. Felix Frankfurter: You referred several times to the hearings before the Commission. I take it in due course, you tell with particularity the nature of the hearings, who sat on the hearings and the basis of determination in connection with the hearings. Archibald Cox: The hearings were -- Felix Frankfurter: In the long time. Archibald Cox: Well, this -- this, to say, this is a good time because I slid over it inadvertently. The hearings were before a hearing examiner. The Commission had a lawyer who was acting as separated staff conducting the examination of some witnesses. PRDC was represented by counsel and the intervenors and objectors, the labor unions that are respondents here, were parties. It was simply a hearing officer. He took the testimony. We have three printed volumes. They've -- actually, the hearings went on over 67 months I believe. And then the whole record was transferred to the Commission. William J. Brennan, Jr.: He makes no findings. Archibald Cox: He made no findings. The Commission made findings -- Felix Frankfurter: Now, before you get there, then this -- the -- the full report of the hearings before the hearing examiner and I take it leave -- leave only a fraction. Archibald Cox: That's correct. Felix Frankfurter: I looked at one of the witnesses and particularly (Inaudible) as they know something about it and that's the woman. His evidence in chief is not before this Court in this Circuit. That's (Voice Overlap) -- Archibald Cox: Well, you will find one is of the unfortunate thing -- confusing things about this record is that the first two volumes of it were the record as it was in the court below, as I understand it. Then the third volume contains certain additional things that the parties decided they want it printed. And if my memory is right, Dr. Wallmann's testimony appears in two different volumes. Felix Frankfurter: In this testimony? Archibald Cox: In this record -- Felix Frankfurter: (Inaudible) Archibald Cox: -- and that the direct testimony appears at Volume 3, although perhaps you were looking at the part in Volume 1 or 2. Felix Frankfurter: That wasn't the full. Is the -- is the full -- Archibald Cox: I made that same mistake this morning actually.[Laughs] Felix Frankfurter: Well, it so happens that I have to be interested in (Inaudible) Is the full -- the -- are the stenographic minutes of the hearings before the -- the hearing examiner with the clerk? Archibald Cox: They've been filed with the clerk, yes. Felix Frankfurter: Now, will you go on from -- and finish before the hearing examiner taking in six or eight months, will you? Archibald Cox: Then from the hearing examiner -- Felix Frankfurter: Step by step with the full -- full Commission. Archibald Cox: The case was transferred to the full Commission. The Commission -- Felix Frankfurter: And who are the members who sat on the grand? Archibald Cox: Well, there were two -- I've -- I've got to give a somewhat different answer before I come to that. There were -- the Commission made in December 1958 findings and rendered an opinion and they proposed order. Then since there was no intermediate report of the trial examiner under its rules, now, the parties had a chance to file exceptions in briefs to the December findings and opinion. And then in the spring -- William J. Brennan, Jr.: But I think that the -- December findings and opinion were based on the record without oral -- Archibald Cox: No -- William J. Brennan, Jr.: (Voice Overlap) -- Archibald Cox: -- I think there's been oral argument even before the December -- William J. Brennan, Jr.: There was, yes. Archibald Cox: Yes. William J. Brennan, Jr.: Before the finding. Archibald Cox: Yes. And then -- but they had a chance to file more briefs in exception. And then in the spring of 1959, the Commission rendered its final opinion, findings and decisions. Felix Frankfurter: Different (Voice Overlap) -- Archibald Cox: There were three Commissioners who took part, Commissioner Floberg, Graham and Vance took part in the final decision and as -- also in the intermediate decision, yes. There was only one of them, Commissioner Graham, if my memory is right, who took any part in the issuance of the provisional permit back in August 1956. Mr. Strauss was no longer on the Commission and neither was Mr. Thomas E. Murray who had dissented to -- Felix Frankfurter: Were any of these three the scientific members of the Commission? Archibald Cox: No, none of the three. Felix Frankfurter: I know -- I know Floberg wasn't. Were they -- Archibald Cox: No, none of the three are -- Mr. Libby unfortunately had not been able to hear the argument and therefore refused himself. I was mentioning somewhat -- Felix Frankfurter: May I -- may I trouble you. I don't want to interrupt you. The hearing before the three Commissioners was on the basis of the record made before the hearing examiner or additional witnesses? Archibald Cox: No. That was on the basis of the record before the hearing examiner. I called attention somewhat earlier to Reg.50.35 which said that a provisional construct -- says that a provisional construction permit will issue if the Commission has reasonable assurance that a facility of the general type proposed can be constructed and operated at the proposed location without undue risk to the health and safety of the public. And the -- one of the principal issues, of course, at the hearing, was whether that finding was warranted with respect to this reactor or not. And it's in that connection that I was going to speak, Mr. Justice Brennan, of the possible explosion. The Commission's safety standards are very high indeed. They require before issuing an operating permit that there'd be a showing that no credible accident, that's very remote, no credible accident can release significant quantities of fission products into the atmosphere. And as I understand it, they don't give you any credit for all these containment. You have to show that the accident, the explosion can't occur. In this case, the speculation about what is the worst possible thing that can happen in the reactor ran along these lines. Supposed that all of a sudden, the fuel elements, in the blue part here, were to melt, just like that and suppose that despite the fact, this upward flowing sodium that for some reason, the molten fuel all of a sudden, all of it, assembled in a mass in the bottom of the reactor. Neither of those things, anybody knows how they can happen. But suppose they did, then there would be an explosion because you'd have a critical mass of rather high quality of fuel. And that explosion is the one which I said might come to the equivalent of 600 pounds of TNT. William J. Brennan, Jr.: Well, what's that means, the equivalent of 600 pounds of TNT? Archibald Cox: Well, I'm -- I'm afraid if you get here beyond certain limits here, my knowledge runs out. William J. Brennan, Jr.: Well, at the -- Archibald Cox: I don't -- William J. Brennan, Jr.: -- an explosion of 600 pounds of TNT? Archibald Cox: That's an awful lot. It's -- it's -- it would be -- William J. Brennan, Jr.: Would it blow up the building? Archibald Cox: -- more than the ordinary boiler explosion. William J. Brennan, Jr.: Well, would it blow up the building? Archibald Cox: Oh, it would not get out. William J. Brennan, Jr.: That's what I'm trying to know. Archibald Cox: No, that's what the -- I'm sorry. I thought I've mentioned earlier. The building will contain 1000 pounder explosion. And this is only 600, so it wouldn't get out. William J. Brennan, Jr.: So that no -- and what -- as I get it, the conclusion is that no effects of the explosion can -- Archibald Cox: Get out of the building. William J. Brennan, Jr.: The judgment now is get outside the shell -- Archibald Cox: That's right. William J. Brennan, Jr.: -- which is the building. Archibald Cox: That's right. But nevertheless, and here is the point, I make, nevertheless, the Commission took the view that before it could permit such a reactor to operate, the applicant must demonstrate that such an explosion couldn't occur, that this hypothetical thing couldn't happen. Now, in theory, it shouldn't be able to happen because when the heat in a reactor goes off, a great many things happen. But one of the things that happen is that the fuel expands and each atom gets a little farther apart from every other atom. And therefore, it should take a little longer for the neutron to get to it and cause a fission. And this should slow down the rate of reproduction. Nevertheless, at the time of the hearings, ERB I, the first of these experimental fast breeder reactors, had partially melted down in 1955. It was during a time when a great many safety mechanisms were disconnected. But the fact was that it had happened and this seemed to indicate possibly that there was something about fast breeder reactors, which made the theory I just tried to state very simply, insufficient. Now, at the time of the hearing, the -- there was a theoretical scientific explanation for the meltdown at ERB I. If you conceive of a hotspot in the inside of the reactor here, the inside of the blue, then the pins and the entire fuel element, the side nearest the heat should get hotter than the side away from the heat, this might make it expand and this might make the whole thing bow inward. And this would bring the fuel closer together and might therefore cause a speeding up of the reaction. And this was what the scientist thought, at the time of the hearing, was the explanation for the meltdown in ERB I, but nobody had empirically proved it. It has been proved today. There's -- there's no question about it now, but at the time of the hearing, it hadn't been empirically proved and that's why the Commission said, "We think it's going to prove out a certain way, but at this stage, we can't be sure." There was also before the Commission at the hearing evidence of three ways of preventing any future bowing, upholding the fuel elements rigidly in place. But at that stage, no one had proved, again empirically, whether any what -- whether the three ways would be successful. They have now proved by very elaborate tests, although it came after the hearing that this honeycomb construction -- that's what the honeycombs do, they hold the fuel elements rigidly in place and the larger subassemblies are also locked in place in a way that they can't bow. Now, against the background of this illustration, I suggest to you that the Commission's findings, to which I now turn, become quite plain. And if the Court will look at page 706 which is in Volume 2, I'd like to call your attention to the concluding findings. In Finding 18, the Commission turned its attention to this very type of problem and found first, it has not been positively established that a fast breeder reactor of the general type and the power level proposed by applicant can be operated without a credible possibility of releasing significant quantities of fission products to the environment. William O. Douglas: Where are you reading? Archibald Cox: Page 706, folio 7018. It's at the bottom. William O. Douglas: Thank you. Archibald Cox: So that there, the Commission acknowledged that it hadn't been positively proved that this meltdown couldn't occur. I'm using the meltdown only as an illustration. There were safety -- other safety problems, I don't want to mislead you. But this was the most difficult and I think it shows the meaning of the finding. Then it went on and said there is reasonable assurance that theoretical and experimental investigations which have been undertaken, together with operating experience on these various other fast breeder reactors, will establish definitely whether or not the reactor proposed by applicant can be so operated. And then finally, there is reasonable assurance that evidence will establish that the reactor proposed by applicant can be so operated. In other words, it was making a judgment at this stage as to what further research and development would establish before the reactor could be operated. Felix Frankfurter: Well, now, that was on the basis of testimony elicited before the hearings, as I know it, is it not? Archibald Cox: That is correct. Felix Frankfurter: And I'd like to ask you as to that, the nature of that -- of the witnesses. Take for instance the one that's (Inaudible) at least to me for preservation. Was he a witness for the Commission or a witness for the -- for the PRDC? Archibald Cox: He is in -- he is in -- in a consulting capacity to PRDC. Felix Frankfurter: (Voice Overlap) -- Archibald Cox: The witnesses -- the -- there were some witnesses called by the Commission, others called by the applicant and others called by the intervenor. Felix Frankfurter: But the Commission itself called witnesses disinterested -- Archibald Cox: Oh, yes. Felix Frankfurter: -- insofar as -- Archibald Cox: Yes. Felix Frankfurter: -- PRDC is concerned. Archibald Cox: Oh, yes. Felix Frankfurter: Disinterested with (Voice Overlap) -- Archibald Cox: Oh, yes. Felix Frankfurter: -- of a (Voice Overlap) -- Archibald Cox: Nearly all the members of this Advisory Reactor Safeguards Committee testified. Felix Frankfurter: Those were -- those were well-known physicists. Archibald Cox: Well, Dr. Harvey Brooks at Harvard and whether a number of them listed in the -- they were well-known physicist and there was -- this is a very -- what I've giving is a very crude exposition of what the scientist testified to at great length. And they concluded their testimony using somewhat different phrases, but nearly all of them concluded their testimony by saying "We think that this thing will prove out before -- Felix Frankfurter: But this was not -- these were not conclusions based on contending claims by two selfishly interested parties. Archibald Cox: No. There was also independent witnesses from the Commission and the Commission's staff is constantly following this all the time and of course, is constantly following it all the time now. William J. Brennan, Jr.: Now, Mr. Solicitor, now, these -- these were in the nature of predictions of what would be the results of then are current theoretical and experimental investigations. I think you said one's advice was, to some of them, empirically, some of these things have been proved. Archibald Cox: A -- a number of them have now been empirically proved. William J. Brennan, Jr.: Now -- Archibald Cox: For example, let me use the -- just to be specific. Let me take this instance of the meltdown. They rebuilt the core of ERB I and they put it through with the proper instruments there through the same sort of conditions that it operated before and they found that the fuel elements did bow in. William J. Brennan, Jr.: Now, has there been any record made in the way additional hearing or otherwise -- Archibald Cox: No, because that -- that will come up later. You see, the provisional construction permit, while it is based on a finding that there was reasonable assurance that this thing would prove out, it is also conditioned upon the Commission's -- really make a number of determinations. First, it must be found that it's been built, this is in the statute. Second, it must be found that the necessary information has been furnished. Third, there must be a finding that it will operate in accordance with the statute and the Commission's regulations. And as part of that, because it's in the regulation, there must be this finding that the final design, that means every last job will operate in such a way that it will not cause a risk to the health and safety of the public. William J. Brennan, Jr.: Well, I suppose really what I'm getting at, is there anything in the record would support what you told us or are you telling us something would -- Archibald Cox: No, I'm -- would -- as the record stands before you, these were predictions -- William J. Brennan, Jr.: Yes. Archibald Cox: -- made by scientists in a contested case. William J. Brennan, Jr.: And you're (Voice Overlap) -- Archibald Cox: They aren't my predictions. William J. Brennan, Jr.: You're what -- you're -- you're now telling us what the Commission, I gather, as advised you, has been the results of this occurrence. Archibald Cox: And it -- but it -- I'd -- I again don't want to go beyond what's proper. This is informal information. And I'm simply -- I'm really giving it to the Court not to claim that this has proved safe because that's not the issue here. That'll come up on the hearing of the operate. I'm giving it to the Court simply to illustrate this process of saying that -- of inquiring first, is there a good enough chance that this will prove safe? That the -- William J. Brennan, Jr.: Well, we can't -- I -- I gather, we can't reach our decision based on what you have told us, namely, that these -- and that these experiments have in fact -- Archibald Cox: No, I -- I -- William J. Brennan, Jr.: (Voice Overlap) of the -- Archibald Cox: What -- what we're asking you to do is to find -- is to rule that this finding that there was reasonable assurance that a reactor of the type proposed could be operated without danger to the health or safety of the public -- William J. Brennan, Jr.: 50 years -- Archibald Cox: -- is enough under the statute -- William J. Brennan, Jr.: That's -- Archibald Cox: -- for the construction permit to issue. And I've got to come, if I don't' get too lost in the effect, I've got to come to argue that point, of course. Felix Frankfurter: Well, I don't want to pull you up on whatever further new provisions. The fact is necessary but it will help me very much. Indeed, I should have asked this question to you earlier. It will help me very much in taking in your fact or shaping my mind toward understanding the relevance of what you tell us. If you will tell without arguing just precisely what our function in relation to this problem is, (a) do we sit in judgment on the validity of the prophetic conclusions which the Commission drew, at the de novo, say, at a de novo judgment, (b) do we sit in judgment on the criteria which the Commission applied insofar as it revealed its criteria in passing judgment on the fact, bearing in mind that Learned Hand's admonition, when he was a very young District Judge, of the competence of judges to pass on these kinds of technical matter far simpler than these are. Archibald Cox: The answer -- your first question is that you clearly do not pass de novo on the Commission's findings or expert judge -- judgment as to safety. As I'll point out later, the question of those findings, and I will argue, the standards to be set up or all coveted by the Commission -- to -- to the Commission by the statute. I -- I should also say that as I understand it, there is no argument here that such findings as the Commission made were not supported by its substantial testimony. There is some argument about what the finding mean but there's ample -- I think it's conceded that there's ample evidence to support them. So you don't have to go behind them in any sense. Now, the second question -- Felix Frankfurter: As to the standard by which allowable judgment on the facts were based. Archibald Cox: I'm -- Felix Frankfurter: Do we -- Archibald Cox: I'm not sure -- Felix Frankfurter: (Voice Overlap) -- Archibald Cox: -- I really understand that question. Felix Frankfurter: Well, facts have to be -- the findings on facts are based on certain criteria for determining what the conclusion -- what the allowable conclusions from those facts are. What I want to know -- Archibald Cox: You're speaking of the scope of reviews, substantial evidences -- Felix Frankfurter: (Voice Overlap) the scope of review, but what -- how do they ascertain that? Maybe they made a wrong -- maybe they judged whether these safeguards were adequate by applying the -- the wrong notion of what a safeguard should be. Archibald Cox: Oh, well, there's -- it's been agreed all along that the Commission's standard of reasonably safe complies with the statute. There's -- there's -- Felix Frankfurter: Did they apply those standards in this case? Archibald Cox: It's a -- I -- yes, I think it's agreed that they applied those standards in this case by difficulty and perhaps, I'd better jump on to it, is that there is some argument about the meaning of the findings. Now, let me -- Hugo L. Black: May I ask just this one question? I don't want to disturb you. Have you stated your questions correctly in your questions presented? Archibald Cox: I think so, except that we have omitted one question that the respondent interjects. Now, if I might just get to the concluding finding of the Commission, I think that then, some of these questions -- the answer to some of these questions would become clear. I'd summarize the findings having to do with the safety of the reactor. Then, the next groups of findings, 19 through 21, have to deal with the site. And the Commission found that the site, if this problem of meltdown and other safety problems could be solved, that there reasonable assurance that the site would prove satisfactory. Then in Finding 22, the Commission finds, and this is the concluding finding, now, I think in here is the answer to your question, Justice Frankfurter. The Commission finds reasonable assurance in the record for the purposes of this provisional construction permit that the utilization facility of the general type proposed in the PRDC application and amendments thereto can be constructed and operated at the location without undue risk to the health and safety of the public. Now, it is agreed, Justice Frankfurter, that the Commission's standard of undue risk to the health and safety of the public is as high as the statute requires. That is phrased by the Commission in terms of a required showing that no credible accident will release significant quantities of fission products to the surrounding atmosphere. And it's agreed that that is high enough to meet the requirement of the statute. The point which is in dispute and the issue in addition of -- to the questions stated in our brief that is here, Mr. Justice Black, is whether this phrase for the purposes of this provisional construction permit somehow waters down or denigrates Finding 22. Let me be even more explicit and I will then move on to begin to argue some of the points of law. Section 50.35, which I referred to earlier, provides that a construction permit may be issued, this is one of the Commission's regulations under the statute, if the Commission has information sufficient to provide reasonable assurance that a facility of the general type proposed can be constructed and operated at the proposed location without undue risk to the health and safety of the public. Hugo L. Black: That's for construction. Archibald Cox: No. Constructed -- this is for issuing a constructed permit -- Hugo L. Black: That's what I'm asking. Archibald Cox: -- but the finding pertains to construction and operation. And -- now, if you look at Finding 22, you will find that it uses exactly the language of Reg.50.35 with one exception. The exemption is that 22 includes, for the purposes of this provisional construction permit, and as I understand Mr. Sigal's brief, he argues that the inclusion of that phrase watered down the kind of assurance that the Commission found and therefore, it prevents the finding from complying with Reg.50.35. So that in addition to the two questions of statutory interpretation posed in our brief, there is this additional question, whether Finding 22 and the other subsidiary finding complies with the Commission's own regulations. Felix Frankfurter: I'd like to ask you whether you will be considering a phrase that doesn't reveal itself, the meaning of which is not to reveal itself made by it. In Section 185, "All applicants for licenses to construct or modify production or utilization fact -- facilities shall, if the application is otherwise acceptable to the Commission," I don't know what that means, but does that play any part in this case? Archibald Cox: Section 185 does, yes. Felix Frankfurter: Yes, but that particular (Voice Overlap) -- Archibald Cox: No, I don't think that anybody rely -- Felix Frankfurter: -- if the application is otherwise acceptable. Archibald Cox: I don't think anyone puts any stress on that phrase because I don't think anyone knows what it means. Felix Frankfurter: It's quite cryptic, isn't it? Archibald Cox: It's very cryptic. I take it, it means is acceptable except in the sense that it's an application for a preliminary permit and is therefore subject to certain limitations that would not be true of an application for a final permit. Felix Frankfurter: And I suppose, does it mean that they may reject for -- for reason that isn't specifically spelled out in the statute? Archibald Cox: Well, it's a -- Felix Frankfurter: Anyhow -- Archibald Cox: Might I -- Felix Frankfurter: -- you say -- you -- Archibald Cox: -- postpone that for a moment. That I -- might I just, for a moment, speak further to the question of whether the findings comply with the regulations, then I will direct myself to the critical question as the Court of Appeals saw it, whether this two-step procedure conforms to the statute. We think that the answer to the question whether the findings conform to the regulations is supplied by simply putting Finding 22 next to Reg.50.35. It's conceded here that the Commission stated the issue in the notice of hearing in terms of Reg.50.35. It stated it, at those terms, several times in the course of its opinion. It states it in terms of -- in those terms in Finding 18, which I read, to illustrate the difference between general assurance as to what investigation would prove and a specific finding of safety of operation. And it uses the very language of 50.35 here in 22 except for this phrase, "For the purposes of this provisional construction permit". And we think to suppose that the Commission had followed a proper standard all the way up to this point, and then also, it used the words of the regulation to suppose that it suddenly had a different meaning here is simply to accuse it of nonsense. In fact, the -- for -- the parenthetical phrase serves a useful function. It states -- it modifies fines and states the purpose for which the finding is made. It has nothing to do with the quality of assurance or the quality of the safety. And that it says we're making this finding only for the purposes of the provisional construction permit. This saves the rights of the objector. It's a warning to PRDC that we aren't passing on anything more than the construction permit now. And when you read the opinion, you will find they said over and over again that you're going forward at your parent, that we are not committing ourselves beyond finding that this is likely enough to prove out for us to permit you to risk your capital, if you wish to do it, since that will increase our knowledge and your knowledge even if the reactor is never built. We think it's likely enough so that it isn't wasted. Felix Frankfurter: Is the suggestion that the capital at risk is very considerable in these things, isn't it? Archibald Cox: It is. Felix Frankfurter: And therefore, a provisional -- a provisional grant carries with it a momentum of future acquiesces. Is that the argument? Archibald Cox: That argument is made. I think the answer to it is two-fold. First, that everything possible to prevent the momentum has been done here, the -- the record replete with warning. And second, that when one is dealing with something as momentous as the health and safety of the public and the worst kind of accident, that the momentum of the financial investment wouldn't be very great. After all, we are reaching the point in science and engineering where people do expend large sums on research and development and sometimes it doesn't prove out. That's not an unknown -- Felix Frankfurter: And it isn't the Commission's money anyhow. Archibald Cox: It's not the Commission's money. Now, the second question and the one that the Court of Appeals was chiefly concerned with is whether this two-step procedure on the findings conforms to the statute. The Atomic Energy Act of 1954 made a new departure from the previous monopoly that the Government had had of all atomic energy and the aim is stated by Congress was to encourage private participation in the peaceful development of atomic energy. In order to set up the necessary regulation, the statute provides a very detailed licensing scheme for all transfers of fissionable material, for constructing or operating facilities for using them, even for an individual operator's license before you can be at the control board of a reactor. The licensing sections, you will find beginning at page 109 of our brief, Section 101 simply forbids all kinds of conduct without a license. Section 103 at the bottom of page 109 provides for the issuance of commercial licenses, and I would point out that in subsection (b), over on the page 110, “The Commission is authorized to issue licenses to people who are equipped to observe and who agree to observe such safety standards to prevent health and to minimize danger to life or property as the Commission may, by rule, prescribe." In other words, the safety standards under 103 are clearly delegated to the Commission's rules. Potter Stewart: Are these -- are these construction licenses are operation -- operating licenses or both? Archibald Cox: This applies to licenses for commercial facilities. Later on in a section that I'd like to postpone coming to, Justice Stewart, there is a declaration that a construction permit shall be deemed a license, and it would be license for a purpose of 103. Then Section 104b authorizes the issuance of licenses for developmental reactors, that's what we have here. And it provides that in issuing licenses, the Commission shall impose the minimum amount of such regulations and terms of license, as will permit the Commission to fulfill its obligations under this Act and to protect the health and safety of the public. And I emphasize again that it's the amount of regulation imposed by the Commission as will permit it to fulfill its obligations to protect the health and safety of the public. And over on a 112 down at (d), just before Section 105, there's a prohibition against issuing a license if, in the opinion of the Commission, the issuance of a license to such a person would be inimicable to the heath and safety of the public. And you will find in Section 161 a very broad general rule making power giving the Commission authority to make rules necessary to protect the health and safety of the public. Our view is, taking these sections of the Act first, that although Congress was obviously greatly concerned about safety as anyone would be, that it delegated that responsibility to the Atomic Energy Commission. And we think it's also quite clear from these provisions that the Commission was given full power to issue regulations dealing with safety, including regulations proscribing the findings to be made at the various stages of the construction and bringing up to power of a developmental reactor. And so that so far as these sections of the Act are concerned, it seems perfectly plain that the two-step procedure was within the statutory authority. The argument in the court below revolves very largely around Sections 182 and Section 185.182 begins over on page 123 of our brief. It describes what should be contained in license applications. You'll note at the very beginning, each application for a license shall be in writing and so forth. Then the second sentence, in connection with applications for licenses to operate production or utilization facilities, the applicant shall state such technical specifications, and I omit some words and such other information as the Commission, made by rule or regulation, deemed necessary in order to enable it to find that the utilization or production of special nuclear material will provide, on the next page, adequate protection of the health and safety of the public. Then, Justice Stewart, on page 126, you'll find the sections dealing with construction permits. The first sentence authorizes the issue of construction permits. Hugo L. Black: What page was that? Archibald Cox: 126 of our brief. First sentence says that, "Applicants for licenses shall, if the application is otherwise acceptable, be issued a construction permit." And then it goes on and provides what shall be in the permit, and finally that, "Upon the satisfaction of certain conditions," that I stated earlier, four of them, including meeting the requirements of the Commission's regulations, "a license to operate shall be issued”. Then you will find the last sentence reads, "For all other purposes of this Act, a construction permit is to be deemed a license." The respondent's argument is that relying on this sentence, one must read construction permit into the language in Section 182 which reads, "In connection with license -- with applications for licenses to operate production or utilization facilities, the applicant shall state certain information as will enable the Commission to find and so forth." Now, it seems to us that there are three self-sufficient answers to that contention. The first is that the second sentence of Section 185 is not applicable to licenses generally, but only to licenses to operate construction or utilization facilities. And we think the most meaning that can be given to this final sentence of 185 is that an application for a construction permit shall be the -- the equivalent of licenses generally, but not equivalent to any particular license or every particular license. Now, that at first blush may sound a little extreme. But I point out that the Act does set up specifications in some places for particular kinds of licenses. And in other places, it speaks of licenses generally. For example, is the section that deals with a license to be an operator of an individual, a reactor and clearly, a construction permit isn't equivalent to that kind of license. Hugo L. Black: May I ask you one question but I don't want to delay you at all. But do -- suppose you are wrong on this clause -- Archibald Cox: Well, that -- Hugo L. Black: -- and that this is a license permit, are there findings -- permit to operate, are there findings with which you say the findings would support that? Archibald Cox: Well, we don't -- the -- the Commission stated that it did not make the kind of finding that it deemed necessary for a license to operate. There's no -- there's no doubt about that. Hugo L. Black: Well, this is a crucial -- Archibald Cox: So I think this is a crucial point in the case. William J. Brennan, Jr.: Well, this is really a -- is this really what we have to decide in this case? Archibald Cox: This question in the statute? William J. Brennan, Jr.: (Voice Overlap) very question? Yes, this question. Archibald Cox: This -- this is certainly one of the major -- yes. William J. Brennan, Jr.: Well, one, what else is -- Archibald Cox: Well, the other question which I think is in the case, although I am not sure, is the alternative ground of opinion in the court below. The court below seemed to say that in order to issue a construction permit for a reactor near a large city, the Commission must make a special finding that there were compelling reasons for putting it there. William J. Brennan, Jr.: Rather than that in the deserts? Archibald Cox: Rather than that in the desert someplace and the Commission didn't make that kind of finding. Now, I don't really think this is a very serious issue. The respondent's don't stand on it. You can go all through the statute and try to find any mention of compelling reasons. And in addition, it's contrary to the established practice of the Commission. So I think in terms of the meaning of the statute, this is the critical issue in the case. My second answer, so far as the words go, is that the respondent's argument ignores the limitation at the end of Section 185 for all other purposes of this Act, a construction permit is to be deemed the license. Now, I take it that means purposes other than those implied by 185. It would seem to me quite clear from reading 185 that one of its purposes is to authorize a construction permit before you have got all the information. Indeed, it speaks of the case where the applicant isn't able to supply all the information and speaks of finding it later before the license to operate is furnished. Then the third answer, which, again, I think is complete, is that Section 185 -- 182a does not proscribe the making of any particular finding. If you will read it carefully, you'll see that it reads that in filing an application for a license for operating, the applicant shall include certain kinds of information that will enable the Commission to make a finding, but it doesn't say when those findings are to be made, nor does it say anything about what specific finding is to be made at any specific time. And it seems to me that the authority for the findings and the ruling the statutory provision is governing the findings that the Commission is to make are those in 104 that I called your attention to earlier and which it has detailed to some extent in its regulation. Now, if there is any doubt on the meaning of the statute, it would seem to us that that is clear enough by the uniform interpretation of the Commission and the Congressional acquiescence. It's perfectly clear that in all the other cases of developmental power reactors, this two-step procedure has been filed. We've quoted the permits in our reply brief one at a time, so there can't be any argument on that. William O. Douglas: Has -- has any license been refused where there was a construction permit issued? Archibald Cox: No, most of them -- let's see, I think they've only been three operating licenses issued. William O. Douglas: Well, I thought that there were 115. Archibald Cox: I'm -- I'm thinking of the developmental power reactors. William O. Douglas: Oh, oh. Archibald Cox: One of the reasons for that, Justice Douglas is that even today there is a constant review and laying down of requirements of what should go into this reactor. There's constant working together between the staff of the Commission, the PRDC and copies are all given to the intervenors, and they're welcome to participate in the discussion. So, I guess you really know pretty much before you come on to the final hearing of what the Commission is requiring. And that, of course, reduces the chance that it would be denied. Now, I said that all -- in every previous case, this same two-step procedure has been followed. It is also true that the two-step procedure on several occasions has been explained to the Joint Committee on Atomic Energy (Inaudible). There, I think, can be no doubt about that. And there has been the equivalent of acquiescence. The only way in which the consistent interpretation by the Commission and the reports to the -- to the congressional committee can be distinguished from this case is by that phrase, "For the purposes of this construction permit." That phrase did not appear in the hearings or licenses, construction permits issued earlier. This was, indeed, the only contested case, and it seems to me that anyone who reads the thrust of the whole findings will see that this was put in in order to make it plain that they were proceeding only a step at a time, and that they weren't either giving the company right or foreclosing any rights on the part of the respondent. Earl Warren: Mr. Sigal. Benjamin C. Sigal: Mr. Chief Justice, may it please the Court. I should like to review at the outset, some of the safety considerations which I fear were not adequately explicated by the Solicitor General. Hugo L. Black: Before you do that, would you mind stating if you agree with the Government that the issue before us is the issue stated in the Government's brief, as the questions presented? Benjamin C. Sigal: No, Your Honor. We think that the issue as stated in our brief -- Hugo L. Black: In your brief. Benjamin C. Sigal: -- is more clearly and explicitly sets forth the issue. Now, that -- on page -- page 2. Now, our -- our position is that the Commission failed to make the necessary findings with respect to safety and that it failed to make -- specifically to make a finding with -- at the time that it issued the construction permit, that there was information sufficient to provide reasonable assurance that the reactor could be operated at the proposed site without undue risk to the health and safety of the public. Felix Frankfurter: Your -- that question, your question presented, your number one was not directly, does it, by implication challenge the so called two-step procedure? Benjamin C. Sigal: No, Your Honor. I think it does not challenge it. There -- Felix Frankfurter: Do you challenge -- Benjamin C. Sigal: -- there are two -- pardon. Felix Frankfurter: Do you challenge it? Benjamin C. Sigal: We challenge the two-step procedure as defined and explained by the Government. We say that the two-step procedure, which is set forth in the law and in the regulations, is different from the two-step procedure which they -- which the petitioners claim is the procedure. Felix Frankfurter: Now, let me ask you this. Either requirements or findings -- absence of undue risk for the construction permit, are they eidetic from your point of view of those that you'd governed, granting an operation of permit? Benjamin C. Sigal: The formula is the same, that is, that when the construction permit is issued, we say there should be a finding that the Commission should make a finding that it has information sufficient to provide reasonable assurance that the reactor can be constructed and operated at the proposed site without undue risk. Then, when it comes to making the final inspection, they make another finding of the same kind, namely, that they have reasonable assurance that the reactor can be operated without undue risk to the health and safety of the public. Felix Frankfurter: Is yours -- is your view of the statutes permit the Commission to have a prophetic view or a tentative, a more or less tentative view, whatever your high standards may be, for determining that safety is safeguarded and a different or stiffer (Inaudible) with greater knowledge -- view when it comes to granting an operational ground? Benjamin C. Sigal: The statute itself doesn't spell this out with -- as much explicitness as might be desired. Felix Frankfurter: But that this spell out that there are two stages separated in time. Benjamin C. Sigal: It does set out in Section 185 that when the -- after the issuance of the construction permit, when the Commission is satisfied that the conditions of the construction permit have been complied with, then a license may issue. So that the second step, as we see it, consists primarily of a determination that the applicant has complied what the conditions of the permit. Felix Frankfurter: Well, this -- is the -- is the final grant merely a duty of ascertaining whether the conditions for the construction grant have been satisfied? Benjamin C. Sigal: Substantially, yes. That is the point. Felix Frankfurter: Well, I don't know what substantially means. Benjamin C. Sigal: Well, the -- Felix Frankfurter: We take into account additional or different or differently demonstrated circumstances. Benjamin C. Sigal: That is a matter of interpretation, Your Honor. We -- in our view -- Felix Frankfurter: A matter of what? Benjamin C. Sigal: I say it is a matter of interpretation, of course, as to whether they can consider other matters. But it is our view, as I will explain in greater detail, that both the Section 185 and the regulations of the Commission itself indicate that the primary conservation which the Commission should have before at the time that its -- permits operation to go forward is, has the applicant conformed to the terms of the construction permit. And if it has, then the -- a permit to operate should be granted. Now, of course -- William J. Brennan, Jr.: But the -- but the -- preliminarily, before the construction permit is issued, as I get you, the finding must be made which the Government says does not have to be made until the operating license. Benjamin C. Sigal: Exactly. William J. Brennan, Jr.: Is that it? Benjamin C. Sigal: Yes. Now -- Felix Frankfurter: Well, does the Government -- does the Government's argument state or imply that when they grant a construction permit, they can be indifferent to how the thing will work out by operation? Benjamin C. Sigal: Well, the Government argues -- Felix Frankfurter: Well, are they concerned -- are they concerned merely whether the construction of the thing sufficiently takes that light? Are you suggesting that they don't have to bother about a forecast whether that, which is to be constructed, is likely to be safeguardedly operated? Benjamin C. Sigal: Oh, no, no. We -- we -- there's no such contention. Our -- our position is that they must have a reasonable assurance that it can be constructed and operated safely. Felix Frankfurter: Does the Government deny that? Benjamin C. Sigal: The Government denies that that's our -- is our contention, yes. Earl Warren: You may answer -- [Laughter]

William H. Rehnquist: We'll hear argument now in Number 95-1268, Maryland v. Jerry Lee Wilson. General Curran. J. Joseph Curran, Jr.: Mr. Chief Justice, and may it please the Court: Nearly 20 years ago this Court held in the case of Pennsylvania v. Mimms that it was reasonable under the Fourth Amendment for a police officer in making a car stop for a traffic violation to require the driver to exit the car. The risk to the officer is such in these stops that it was also permitted for the officer to request the driver to get out without any suspicion that the driver would pose a danger to the officer. The latest figures that we have available demonstrate that the risks are real to police officers in traffic stops. The latest figures in 1994 show that 5,762 police officers were assaulted in traffic stops. Indeed, since the decision in Mimms there have been over 200 police officers slain in traffic stops. Because passengers, like drivers, have-- Antonin Scalia: Excuse me. When you say assaulted in traffic stops does that include those who were assaulted by people who got out of the car and physically assaulted them? J. Joseph Curran, Jr.: --The... yes. Yes, Justice-- Antonin Scalia: Well, that would cut the other way. I mean, that... they'd be better off to leave them in the car, if that... you know, if that's the assault you're talking about. J. Joseph Curran, Jr.: --Well, there were a total of some 52,000 assaults during that given year, '94, of which 5,700 were in traffic stops. Antonin Scalia: What I'm suggesting is that the relevant figure is how many of the assaults came while a person was in the car, so that they might have been prevented by making the person get out of the car. Many of them may have occurred by taking the person out of the car. J. Joseph Curran, Jr.: Those are figures are not available-- Antonin Scalia: Okay. J. Joseph Curran, Jr.: --Your Honor. John Paul Stevens: Isn't it true, General Curran... I remember this from the Mimms case... that there's a split of professional opinion on whether it is safer for the officer to order them out of the car or to tell them to stay in the car? Is there still a respected body of professional law enforcement opinion that says you're safer if you don't ask them to get out of the car? J. Joseph Curran, Jr.: Well, Justice Stevens, the typical practice, and I can refer to Maryland, of course, but I believe the briefs will show the typical practice is to control the risk. That's what the training is, to control the risk, and typically they keep the driver and the passenger in the car. However, having said that, as the New York v. Class case indicated, there is this discretion the officer can use, and what we're asking, of course, is the automatic rule for that discretion to be utilized in the Wilson case, as this Court granted in the Mimms case. Ruth Bader Ginsburg: General Curran, are you saying that if the officer made the decision to keep the person inside, it would be the officer's call, too? Suppose a passenger says, I want out. I'm going to take a car and go home... take a cab and go home. J. Joseph Curran, Jr.: The answer is yes, Justice Ginsburg. We want the officer to be able to require the passenger to get out or, where it's appropriate, to stay in, and in order to control the stop the officer should be able to control the location of the passenger, and the location can be outside the car, or it could be, in an appropriate case, inside the car. Sandra Day O'Connor: How far does the authority extend? Would you say that the passenger would be free to leave if the passenger chose after exiting the car at the officer's request? J. Joseph Curran, Jr.: No, Your Honor. We do not take that position. We want the officer to be able to control the risk, control the location. Sandra Day O'Connor: Well, you want more than the right to require the passenger to exit. You want to require the passenger to be detained. J. Joseph Curran, Jr.: Yes, Your Honor. We-- Sandra Day O'Connor: For how long? J. Joseph Curran, Jr.: --We want... there is no time frame as... I can tell you what the typical stop-- Sandra Day O'Connor: To be searched? J. Joseph Curran, Jr.: --No, Your Honor, not a frisk. Sandra Day O'Connor: To be asked any questions? J. Joseph Curran, Jr.: Could be asked, but not required to answer. To get out, to step aside, to show your hands. Anthony M. Kennedy: Well, you say there's no time limit. I assume the time can be no more than is reasonably required for the officer to complete the process of issuing the citation. J. Joseph Curran, Jr.: Yes, Your Honor. It would be within what is typically 10, or at the outside 20 minutes. Anthony M. Kennedy: Can he order some people in the car and some people out of the car? J. Joseph Curran, Jr.: Yes, Your Honor, he could. William H. Rehnquist: What would be the reason for detaining the passenger in a situation like that? I can see that safety reasons might suggest that you be able to... the officer be allowed to order the passenger out of the car, but for detaining them if they then wish to leave, what would be the Fourth Amendment reason for that? J. Joseph Curran, Jr.: The officer has to... Mr. Chief Justice, the officer has to be able to control the stop, to complete safely the transaction, getting the information from the driver, the registration, the license, et cetera, and in order to do that safely, he needs to be able to know where any potential danger to him or her lies. Controlling the location of, in this case Mr. Wilson, would have been the appropriate way to do that. He could have seen that he did not pose a particular danger by seeing his hands. We are suggesting that the balancing that this Court went through in Mimms is really the same for the Mr. Wilsons, the passengers. There is this compelling governmental interest of police safety, which has been acknowledged, against what is a de minimis intrusion against Mr. Wilson, where there has already been a diminished expectation of privacy by being in the car in the first place. Anthony M. Kennedy: This right to control the site, what's your best citation from this Court giving you that authority, Michigan and Summers, or-- J. Joseph Curran, Jr.: Well, Michigan and Summers, Justice Kennedy-- Anthony M. Kennedy: --Is that the closest case, do you think? J. Joseph Curran, Jr.: --Sir? Anthony M. Kennedy: Is that the closest case to support the proposition that the officer does have this authority to control the location? J. Joseph Curran, Jr.: Yes, Your Honor. To control the safe completion of, in that case the search of the house, he had to have the ability to make certain that he could safely and successfully complete the search, and the same weight goes here. The-- Sandra Day O'Connor: Well, but there is a difference. I mean, the driver was stopped because there was reason to believe he had violated a traffic law, or requirement, that the driver was speeding while making an illegal turn, or without a license on the car, or whatever. But there is no such suspicion on the part of the passenger, who was not driving the car, and I don't think Pennsylvania v. Mimms, which says yes, you can require the driver to step out and wait until the ticket is issued or a resolution is made on that question, but I'm just not sure what the authority is for detaining a passenger who is required to step out. The passenger is not suspected of an illegal driving offense. J. Joseph Curran, Jr.: --Justice O'Connor, we would respectfully suggest that it's the Mimms decision that required the driver to exit not because in this case he was speeding, as was the probable cause, or not because there was a faulty tag, but because the Court concluded that there was potential danger, and so for the reason that they wanted... police safety was the reason Mimms got out of the car, not because there was-- Sandra Day O'Connor: Yes, but nevertheless they had a right to stop the car because it was an alleged traffic violation by the driver, isn't that so, otherwise they couldn't have stopped the car at all, presumably. J. Joseph Curran, Jr.: --That is correct. Sandra Day O'Connor: Okay, and that reason does not apply to the passenger, so I'm trying to understand what is your authority for claiming the right not only to require the passenger to exit, but to detain the passenger. J. Joseph Curran, Jr.: If Your Honor please, when there was a stop of the Mimms car or the Wilson car by virtue of physics both are seized, or both are detained, so there the driver and the passenger are identical. They're both seized. They're both stopped. If, in fact, the rationale of Mimms is to be conveyed to the passenger, the safety of the officer, it is equally apparent that the passenger would have had much... just as much access to the gun as Mr. Mimms would have had. Anthony M. Kennedy: But it's not just physics, it's privacy and dignity, and we all know that the police will take our decisions as far as their language and logic permit, and I'm just concerned that you're going to have routine practices of whole families and four or five occupants of the cars being required to stand outside while the officer lectures the driver. I mean, that's just going to happen, isn't it? J. Joseph Curran, Jr.: Well, Justice Kennedy, that would happen now in Mimms, because without any discretion, or any guidelines, the officer now may in that case require someone to exit. Anthony M. Kennedy: Well, but that's what we're here to decide-- J. Joseph Curran, Jr.: And for the same-- Anthony M. Kennedy: --And you're proposing a general automatic rule that passengers can always be required to exit at the demand of the officers. J. Joseph Curran, Jr.: --Yes. Yes, Your Honor, that's the proposal that we have, and the rationale being that the order out in Mimms was not because of the traffic violation but because of the finding that there is... there's a compelling reason for police safety to require the officer to make that-- William H. Rehnquist: But you have a lesser interest on the part of the driver in privacy or not being free from whatever you... whether it's searching... the driver... there's probable cause to believe that the driver has committed an offense, whereas there isn't any probable cause to believe that the passenger has committed offense, an offense, so the calculus, if it's a weighing process, the interests of the passenger would seem stronger than the interest of the driver. J. Joseph Curran, Jr.: --Mr. Chief Justice, I would take the position that the privacy interests of the driver and the passenger are identical. However, if the Court should so find that there is a minor privacy interest difference, notwithstanding, there still is... as far as the passenger is concerned he already has a diminished expectation of privacy, and with that diminished expectation of privacy, we're talking about a very diminished intrusion. Sandra Day O'Connor: Well, not necessarily. Suppose it's a driving snowstorm, or a blinding rainstorm, the passenger is a mother with a very young baby, and the officer automatically can order her out of the car, to put the baby down outside where he can see the baby and raise her hands up, and real damage can occur, and there is no reason that the car was stopped because of what that passenger was doing under the circumstances here. Now, maybe an officer can see a passenger in the car holding a gun. Well, that's a different situation, isn't it. But is there any... and suppose the Court thinks there is a real difference between the driver and the passenger in that the driver can be stopped for what the officer perceives is a traffic violation. J. Joseph Curran, Jr.: Yes, Justice O'Connor, I see the point you're trying to raise, and obviously the question of a baby and a yound mother out in the rain is obviously not-- Sandra Day O'Connor: That's just one example and you want an automatic rule. J. Joseph Curran, Jr.: --Yes, Your Honor, we do want the automatic rule, and I might add, the same-- Antonin Scalia: And it will work automatically, too. J. Joseph Curran, Jr.: --Yes. Antonin Scalia: Because bureaucracies being what they are, in order to protect themselves from claims of discrimination, making some people get out because of their race or because of whatever else, to be sure that no such claims will be available they will make everybody get out. That will be an invariable rule. J. Joseph Curran, Jr.: With respect, Justice Scalia-- Antonin Scalia: Even the lady with the baby. J. Joseph Curran, Jr.: --With respect, Justice Scalia, I appreciate the question. That same scenario, of course, could happen under Mimms, and Mimms has now been with us for 19, almost-- Anthony M. Kennedy: The question is, do you have concerns about it? Do you, as the chief law enforcement officer of your State, have concerns about a rule where throughout your State, maybe throughout the country, all the occupants of every vehicle that is stopped for a traffic offense can be ordered to get out of the car and routinely are required to parade the... required to remain in public view while the citation process is going on? Do you have any concerns about that? J. Joseph Curran, Jr.: --Well, I obviously have. Yes, Justice Kennedy, I obviously have a concern. The point we're making, though, is that removing a driver doesn't eliminate the danger that we talked about in Mimms. The passenger has equal access to the same revolver that Mr. Mimms would have had, so removing the driver does not eliminate the problem. Yes, I admit, Justice O'Connor-- Sandra Day O'Connor: Or suppose the passenger has certain dementia. It's an old parent who, left to his own, will just wander away and not even understand what was being said to him, but automatically you're going to get this passenger out and require him to stay, and if he doesn't understand, shoot him. [Laughter] You know. I just... this can be carried to extremes, and you seem to don't even recognize that there might be a difference. J. Joseph Curran, Jr.: --I do understand, Justice O'Connor, there is a difference. I'm simply suggesting this, that removing the driver does not remove the danger. In fact-- Stephen G. Breyer: Everybody agrees with that. I just... everybody agrees with that, but the question is the risk of abuse. Now, I notice in the opinion, but I... maybe it's in the briefs and I didn't see it... it says several jurisdictions already have extended Mimms to passengers. Is there any indication that there are any of these problems, or there are not these problems, in the other jurisdictions that have already adopted the rule that you want? J. Joseph Curran, Jr.: --Your Honor, I am not able to say that I have researched the cases in the other jurisdictions, but indeed I will tell you that there are a majority... there are 20 States that have ruled the way Maryland wishes to rule, and there are five... including the District of Columbia, so there are 21 areas, including there are five, four or five Federal circuit courts, mostly in the-- Stephen G. Breyer: So we have to look at those. J. Joseph Curran, Jr.: --There is a-- Stephen G. Breyer: We have to look those up. J. Joseph Curran, Jr.: --A substantial majority have ruled this way. There's five that have ruled against us, to be honest with you. Stephen G. Breyer: I have another question which I wanted to ask, which is that I didn't know until this argument that you are suggesting that the police should have the right to detain the passenger. I thought that you were... after... suppose the passenger gets out of the car, and the policeman asks him to, and then he says, I'm fed up with this. I want to take a bus. And the bus goes along, and he takes it. Are you arguing that the policeman should be free to tell him no, you can't take the bus? J. Joseph Curran, Jr.: Yes, Your Honor. Stephen G. Breyer: Where is... I didn't find that in your brief, and I don't know what the rationale for that would be. J. Joseph Curran, Jr.: It is in our brief and in our argument in terms of the ability to control, Your Honor, the location. The individual may say, I wish to take a bus and go elsewhere. The officer need not accept that as real. The officer is still concerned about his genuine safety, and the only way he can really make certain it is a safe stop is to control the location-- Ruth Bader Ginsburg: General Curran, you did say that it would only be to show his hands, that he could not be frisked. The officer could not question the passenger without the passenger's consent. J. Joseph Curran, Jr.: --Yes, Your Honor. Ruth Bader Ginsburg: So once he shows his hands, then he can walk away and hail a cab? J. Joseph Curran, Jr.: No, Your Honor. Ruth Bader Ginsburg: Well, what can he do, then? Can you-- J. Joseph Curran, Jr.: Our rule would ask the passenger to get out, to stand in a certain location described by the officer, to show his hands, and to remain there for the 10 minutes while the information is obtained about the license and the registration. Ruth Bader Ginsburg: --So he just has to stand there. He can't be questioned and he can't be frisked, but he's not free to leave until the officer says, okay, I'm done, you can go. That's the rule you want. J. Joseph Curran, Jr.: Yes, Your Honor, or the officer may, with discretion, as we've talked about in Class, permit the passenger to remain in the car. John Paul Stevens: General Curran, can I ask this one question? You suggested as a justification for that that the passenger is already seized, just like the driver. They're both forced to stop. But the driver has been lawfully taken into custody during the investigation. There's no lawful authority to take the passenger into custody. He's seized in the sense the car had to stop, but he's not legally seized, is he? J. Joseph Curran, Jr.: No, sir. David H. Souter: General, as you have put the case, you really just want the officer to have the opportunity to exercise judgment in deciding whether the passenger ought to get out or not. J. Joseph Curran, Jr.: Yes, Your Honor. David H. Souter: Why doesn't Terry give you the authority for that? I assume, for example, that in this case under the principles of Terry, with all the movement of the car, the ducking around and so on, that the officer probably would have had the authority at least to go as far as Terry would have let him go in asking or satisfying himself that the passenger wasn't a danger. Why isn't Terry enough? J. Joseph Curran, Jr.: Your Honor, we would have thought that there was justification for a reasonable suspicion in the Wilson case. However, we don't believe it's appropriate to have the officer try to wait for some level of risk to arise if he or she waits-- David H. Souter: But I thought your argument was that the officer was going to exercise judgment, and if your argument now is that he doesn't have to wait for some indication of risk, then I think you're really saying the officer as a routine matter is going to order every passenger out of the car, so I think that's a difference in your position. J. Joseph Curran, Jr.: --I'm not so sure that's the case, Justice Souter, because as I say, the typical training in our manual, which indicates... and I believe it's typical across the Nation... is to require both the driver and the passenger to remain in the car. Sandra Day O'Connor: Well, my understanding was that you want a holding that lets the officer at the officer's discretion require all parties to exit or no parties to exit, but if he wants all parties to exit, they must, and you want the right, then, to detain the passengers who have exited. J. Joseph Curran, Jr.: That is correct, Your Honor, for this minimal-- Sandra Day O'Connor: Well, all right, but the Fourth Amendment, after all, is based on reasonableness. That's been the requirement all along, and should there be no reasonableness requirement on the matter of detaining passengers? J. Joseph Curran, Jr.: --We believe, Justice O'Connor, that the reasonableness factor is best weighed by the balancing test that the Court has used again and again, the high governmental interest against this minimal intrusion against what is already a de minimis privacy expectation of the passenger. Sandra Day O'Connor: And in circumstances where it isn't a de minimis intrusion. J. Joseph Curran, Jr.: Yes, Your Honor. May I be permitted to reserve the balance of my time? William H. Rehnquist: Very well, General Curran. We'll hear now from the Attorney General, Ms. Reno. Janet Reno: Mr. Chief Justice, and may it please the Court: Traffic stops present special dangers to police officers. They're faced with an unknown situation, an unknown area, they're faced with little knowledge, if any knowledge of the occupants of the car, and they are vulnerable to attack not just from the driver but from the passenger. In Mimms, this Court found that these safety concerns justify a per se rule that an officer in a valid traffic stop can order the driver to exit the vehicle. We submit that Mimms should be applied to passengers for three reasons on the issue of order to exit. First, the driver... the officer has to focus on the driver in implementing the traffic stop and in securing the information with respect to a license or to the vehicle. He cannot monitor the passenger's conduct at the same time. The focus in Mimms was on the inordinate risk, and the Court made specific reference to the inordinate risk as an officer approaches a person seated in the car, and the Court specifically said that the officer had no reason in Mimms to believe that the officer was suspect as to foul play, so it was the focus on a person seated in the car that created the danger. Antonin Scalia: General Reno, you want no reasonableness limitation on this. I suppose that means that a police officer could stop a bus and say, everybody off the bus. Or... you know, does vehicle size come into it? Janet Reno: Yes, Your Honor. That might be a more difficult question for the Court, but-- Antonin Scalia: Well, not for you. You want no reasonableness limitation. Janet Reno: --Again, the bus situation can be an unknown situation for that officer, and he needs the opportunity, under our position, to be able to size up the situation, to determine and observe the people involved, and he may determine that he wishes them to stay in or to exit. Police practices indicate that both are appropriate, depending on the stage of the traffic stop and depending on the circumstances of the traffic stop. We are submitting that under the... this Court's rule in Mimms, it is the persons seated in the vehicle that create the danger and the approach to that danger, and a police officer should not have to calibrate what is in... critical and what is not critical. He should be able to size up the situation, determine who's there, get full view of them when appropriate, get them out of the car to neutralize the situation, to get them away from the gun, and we submit that the intrusion is de minimis. David H. Souter: Well, why isn't Terry enough? I mean, your argument is that he ought to be able to size up the situation. Terry gives him a chance to size up the situation. Janet Reno: Terry might not have given, if the passenger had been in the same situation as Mimms with a gun in his... under his sports coat, he might not have been able to see that seated in the car. David H. Souter: Well, then I think what you're really arguing, and I think this was what the Attorney General from Maryland was really arguing, is you really don't so much want him to size up the situation. You simply want to have the right to get him out of the car, period. It's not going to be a question of judgment. It's going to be a question of routine practice, I assume. Janet Reno: No, Your Honor. As this Court has pointed out and as police practice points out, in many instances they will want them to stay in the car. If one officer is on the scene, he may want them all in the car so he can better control them, or if the lighting is such or the circumstances are such or the window is such that he wants the passenger whom he has seen looking at him in a curious way, he may want him out of the car to determine whether he has a weapon on his person. It's going to depend on so many different circumstances-- John Paul Stevens: But may I interrupt with just this one thought that crosses my mind? Do you think the officer is greater or less danger, if there's a passenger sitting in the car with the gun in his jacket as you describe, if he tells him to get out of the car? Is he less or... which situation would he be more apt to use the gun in? Janet Reno: --One cannot say when... how he would be more apt to use the gun. What he can say is that there would be situations where that gun may not be observed as the passenger-- John Paul Stevens: Right. It would certainly help to arrest people who carry guns, that's right. I see you would catch more gun-carriers, but I don't think that's the justification you're advancing. Janet Reno: --That is... the justification that I'm advancing is that that officer should have the ability to immediately size up the situation, determine if there is any reasonable suspicion to believe that a person is armed, and then advance to Terry frisk if that is appropriate, but that he should have the opportunity to control the situation if he is the single officer on the scene before the backup comes, to keep them in the car so that he doesn't have a person moving here, here, and here, or to get them out of the car if there are circumstances that dictate that they should be out of the car. Ruth Bader Ginsburg: General Reno, you are arguing for a bright line test, and I'm wondering how that squares with the very recent decision of this Court in Robinette, which said that reasonableness is always case-by-case totality of the circumstances, and yet here you're saying that it's reasonable in any and all circumstances for the police officer to say, everybody out, or everybody in. That doesn't go case-by-case. Janet Reno: In Robinette, Your Honor, the Court specifically cited it would favor the Mimms decision, and concluded... pointed out that Mimms, considering all the totality of the circumstances, that it was reasonable in light of the safety concern for the officer that was more than balanced against the de minimis intrusion into the passenger's personal security, that in those totality of circumstances it was reasonable, under Mimms, to justify it. Antonin Scalia: General Reno, how much of a problem is it in the States that haven't adopted this rule? How often does a citizen who has been told to stay in the car or told to get out, in those States that require a reasonable suspicion, at least, on the part of the officer, how often have those citizens sued and recovered? I mean, is it a real problem? Janet Reno: I don't have any information that I could provide to you, Your Honor. David H. Souter: Let me ask you a question on something that frankly I think I should have done some looking into before I came on the bench, but I didn't. Has this Court ever ruled on the authority of an officer to control members of the public generally when making, let's say, an arrest in a public place? Janet Reno: I'm not familiar with the opinion, Your Honor. David H. Souter: I'm not, either. There may not be one. There are holdings, are there not, on control of a crime scene, to require people to stay away while they assemble evidence and-- Janet Reno: At a crime scene, if someone entered in beyond the crime rope there would definitely be authority to control, and it would depend on the State law. Antonin Scalia: --Do you think a policeman is more at risk from a passenger in the car than from the bystanders who congregate when the stop is made? Why is he more at risk from the passenger, bearing in mind that the car has been stopped only for a traffic vio... I mean, if the car has been stopped because of suspicion of drugs, that would be something else, but let's assume it's just a speeding violation. Is an officer usually more at risk from the passenger than from bystanders? Janet Reno: The issue with respect to a traffic stop, Your Honor, is the unknown, the danger in approaching the vehicle. The danger in approaching people seated in the vehicle is what the Court in Mimms specifically referred to. In the instance where you have people who are bystanders you have an opportunity to observe them to make an appropriate decision, but in the situation with the automobile, he's approaching an automobile. He doesn't know what's in it. He can't see into it from his patrol car. He doesn't know who's there. He can't see their actions fully. That is the issue that makes this situation different than the situation of bystanders who may be in plain view. Anthony M. Kennedy: The concealment thing. Do you agree, General... Ms. Reno with the Attorney General from Maryland that the passengers who have been told to exit can be required to remain and not take the taxi or leave? Janet Reno: That's not the issue before the Court, but we would submit that it would be reasonable under the Fourth Amendment. Anthony M. Kennedy: So that this is a prolonged seizure. Janet Reno: It is not a prolonged seizure because this Court in Berkemer has referred to traffic stops. It applies to routine traffic stops. It applies to a brief, temporary stop, and under those circumstances the officer should be able to see the person as they exit the car. Anthony M. Kennedy: Well, we know that when they check licenses on their radio and hold the passenger it can sometimes take 15 or 20 minutes for a routine traffic stop, can it not? Janet Reno: It can, and the Court has recognized that is usually of that duration, but that is a limited duration in which the police officer can have the opportunity to size up the situation and see whether the person presents a threat. For example, if the person got out of the automobile, and this is not the issue before the Court, and suddenly ran into the bushes and... the officer, we submit, ought to be able to control that situation so he can first determine the risk to him before the person departs. David H. Souter: Let's assume for the sake of argument that we do not adopt the rule that goes as far as you have just suggested it should, that... let's assume our... under our rule, once the passenger is out of the car, if the passenger wants to go, he can. If that is the limit of the detention allowed, is the situation of the passenger in any significantly different... is the situation of the passenger significantly different from that of a bystander in the course of a public arrest somewhere? Janet Reno: May I-- William H. Rehnquist: Yes. Janet Reno: --complete the answer, Your Honor? In that situation, if the person were free to go, again the officer would have the opportunity to observe him, to see whether there was a basis for a reasonable suspicion that would justify a frisk, or justify action to protect the officer's safety in that situation. William H. Rehnquist: Thank you, Ms. Reno. Mr. Warnken, we'll hear from you. Byron L. Warnken: Mr. Chief Justice, and may it please the Court: The State of Maryland asks this Court today to draw a bright line that would permit a compelled detention essentially ultimately equalling perhaps the level of an arrest as to every single passenger in every single vehicle in every single circumstance for every single officer. David H. Souter: Well, Mr. Warnken, may I just ask you the same question that I asked Ms. Reno? Let's assume that the bright line rule allowed nothing more than requiring the passenger to get out of the car so that if the passenger then said, I've had enough of this, I'm leaving, the passenger, so far as the bright line rule is concerned, would be allowed to go. Assume that. In fact, the passenger says, thank goodness. This guy was speeding. I am so glad to get out of this car. [Laughter] Let me catch the nearest cab and go-- --You can see what Justice Scalia's passengers tend to feel like. Assuming that Justice Scalia is the one who has been stopped and it's his passenger-- --who is then free to go, would the bright line rule simply allowing the officer to say, get out, give the officer any greater authority than the officer has in the case of sort of the public arrest, in which people are congregating around and the officer says, stay back, or get away, or something like that? Byron L. Warnken: Justice Souter, I think the answer is that the bright line should not be drawn there. I certainly concede of the various places on the continuum that would be probably the next best place to the one the State of Maryland has asked for. David H. Souter: Okay, but I'm not sure that responds to my question, because my question is, if the bright line would allow the officer to go no further than to say either get out or stay in, would the officer have any... be having any greater authority there than the officer presumably does when making a public arrest, in which he is allowed to control bystanders in the crowd by telling them to stay away? Byron L. Warnken: Justice Souter, I think that would be different. The reason that would be different is that in the arrest scenario, where you are arresting one individual, the other people have nothing to do with that and simply you're using the crowd control of letting them not join where you are, if you will. But here we're talking something different in that, as was pointed out earlier, this individual has done nothing wrong. This individual already-- David H. Souter: No, but in the case of the public arrest the person who is being told to stay back 12 feet would normally... has done nothing wrong and would normally be able to walk up and down the sidewalk. That person can go back the 12 feet or whatever and say, I don't want to stay here any longer, and walk away, but at least within a certain zone in which the officer is operating, the officer can control people who come along, and those people who come along are no more or less innocent, I suppose, than the passenger, so why shouldn't the passenger be in the same boat with the bystander? Byron L. Warnken: --Justice Souter, on first blush it may appear that those situations are similar. I think the reason they are different is that the passenger, once being made to get out, if Your Honors draw the bright line there, as has been pointed out before, the police will push that limit and, in fact, once you have the valid stop of that vehicle, United States v. Sharpe and numerous other cases from this Court would probably permit about a half-an-hour, case-by-case basis, on how long you could detain, which means, Your Honor, that making the passenger get out would have the functional equivalent, particularly if there was a bright line and the police could do anything in any case, allowing the passenger to be detained, even though it started as-- William H. Rehnquist: Well, the passenger will be detained during the stop unless under Justice Souter's hypothesis the passenger is free to walk away, but it's a voluntary thing. It may not be too voluntary if you're out on the desert somewhere, but if you're in an airport, if you're being driven to the airport by somebody and you have a chance to catch a plane if you get a cab it might make quite a bit of difference. But I don't see why it would necessarily follow that the passenger is detained for 30 minutes if the driver is detained for 30 minutes, under the hypothesis Justice Souter proposes. Byron L. Warnken: --If this Court were to draw a bright line, Mr. Chief Justice, wherein the only authority that law enforcement had as to the passenger when there is no evidence of officer safety issues and no wrongdoing on the passengers, if the bright line were only to require that individual to get out of the car momentarily, that would perhaps be permissible. But, Your Honor, once we've got the stop, as Your Honor points out, in most cases the individual would not have the opportunity to walk away. It simply wouldn't-- William H. Rehnquist: But under your rule he'll be detained anyway. He's sitting in the car rather than standing outside. Byron L. Warnken: --Your Honor, although it is not the rule we are asking for, I concede that Justice Souter's drawing... potential drawing of the bright line is the least onerous of the bright lines that would be possible. John Paul Stevens: And then you-- --It doesn't help the mother with the baby in the snowstorm very much. Byron L. Warnken: Absolutely correct, which is why, Your Honor, we have urged that to draw a bright line at all will have the unintended effect of overruling Terry v. Ohio and its progeny, Mr. Justice-- John Paul Stevens: Isn't the practical answer to this case that officers really aren't going to ask everybody to get out. They're only going to ask them to get out when they're a little worried about the high crime neighborhood, and the darkness, and so forth. Then they've got Terry justification. Byron L. Warnken: --Your Honor, that is absolutely correct. Antonin Scalia: Is that correct? Do you know what the practice is in those States that have adopted a you-can-do-it-all-the-time kind of a rule? Do they do it all the time, or don't they? Byron L. Warnken: Justice Scalia, there is no firm information. We have tried to obtain training manuals from various jurisdictions, and it seems to be relatively vague, and seems to extend discretion to the officer. Ruth Bader Ginsburg: Mr. Warnken, I think that General Curran told us that the more usual practice is to tell the people you must stay inside. Are you disputing that that's so in the cases that give the officer the option? Byron L. Warnken: Justice Ginsburg, I absolutely agree that the custom and usage within law enforcement agencies is, if given the option, to not have the people get out of the car. Keep the people in the car. Antonin Scalia: But you say that's no good, too. Byron L. Warnken: What I'm saying, Your Honor... Justice Scalia, what I'm saying is that to give the police the unfettered standardless discretion is the problem. Antonin Scalia: To... either to keep them in or to make them get out, either one? Byron L. Warnken: Yes, Your Honor. Justice Scalia, if we examine the case law we already have-- Anthony M. Kennedy: I just want to make it clear. In your view, the passengers have a right to exit whether... even if the officer does not want them to? Byron L. Warnken: --Justice Kennedy, that is correct, in that there is-- Anthony M. Kennedy: I'm not sure we're just... we have to decide that case here, but it... I'd like to know what the rule would be. That, it seems to me very... could be very dangerous to the officers. Or if he was to say, well, we're getting out to see what's going on here, you've got two or three doors opening... I think that would be a very dangerous rule. Byron L. Warnken: --Justice Kennedy, let's examine the continuum. I think that in that this Court must balance, in that this Court has already held that there is a legitimate and weighty interest in public safety for the officer, that's the one side of the equation. The other side of the equation for balancing, Your Honors, is where must the Fourth Amendment and where must the individual interests of the individual be balanced to accommodate that need. And what we are saying, Your Honors, is that the one place this Court's prior case law would not let that line be drawn and the one place reasonableness would not be accommodated, would be to draw the line all the way at the bottom, saying-- Stephen G. Breyer: What about the Attorney General's view? What I heard her say was a brief, temporary stop. I.e., you can tell the passenger to stay inside, you can tell the passenger can come out, as long as it's brief and temporary. I mean, I take it... I don't know the minutes. It sounded like minutes, not 30 minutes. It sounded like the time it takes to write up a traffic ticket. What about that as a line? Byron L. Warnken: --Justice Breyer, one of the potential problems with that as the law is that brief to all of us sounds like, stand outside for a few moments, and I think, Your Honor, that what would happen would be, under the case law from this Court, that will pretty much defer to the natural steps that an officer must take to effectuate a traffic stop, effectuate an arrest. The case law has indicated there is no bright line on time. Stephen G. Breyer: So what's your line, then? Your line... is your line that if the man who is the passenger wants to stay in the car he can do it, regardless? If he wants to get out of the car, he can do it, regardless. Is that your line? Byron L. Warnken: Justice Breyer, that is... that is my line on this case. Antonin Scalia: Yes, but I thought-- --No, it's not. No, that's not your line on-- --You say he can keep him in if he has a reasonable suspicion, at least. Sure. Byron L. Warnken: Your Honor, I was saying Justice Scalia, in this case-- Antonin Scalia: Ah. Byron L. Warnken: --because we already have plenty of case law that if there is any evidence of officer safety, if there is any evidence of-- Ruth Bader Ginsburg: But what is that any evidence? I mean, here there was evidence that the officer testified I saw the passenger, and even more so the person in the back seat, ducking, bobbing up and down and making suspicious movements. That was held by the trial judge, or at least some judge in Maryland to be insufficient to allow for a Terry stop. Byron L. Warnken: --Justice Ginsburg, you are correct on both counts. That is to say, the judge held it not to be sufficient here, but I certainly agree with Your Honor's implicit statement as part of that that on this record-- Ruth Bader Ginsburg: But I would like to know what would be sufficient, since you said that a passenger fidgeting, ducking, making ducking motions, that wouldn't be sufficient. What would be sufficient to allow the officer to apprehend the passenger? Byron L. Warnken: --Justice Ginsburg, I did not necessarily mean that that would be insufficient, because, Your Honor, if the trial judge had on this record determined that there was reasonable suspicion under Terry v. Ohio and its progeny, on this record, probably on appeal that would not have been found to be clearly erroneous. Anthony M. Kennedy: Well, you see, that... part of that illustrates that... and sometimes bright line rules actually help our citizens. If we rule in your favor, and it becomes generally known the Supreme Court says you do not have to get out of car, and then there are some ducking motions and the officer says, out, and the citizen says I don't have to get out, what do we have? We have litigation. We have doubt. We have uncertainty. And this is not always helpful to the citizen. Byron L. Warnken: Justice Kennedy, this Court can easily paint... draw a line to fashion a rule that will fully accommodate the legitimate and weighty interest of Government in the safety of officers and still balance Fourth Amendment interests of the individual. Ruth Bader Ginsburg: But you just told me-- --You mean Terry-- --it would be case... it would be judge by judge, that on this very record one judge might have said, that's enough for Terry, and another judge might have said, no it isn't, and we would have this diversity in practice. Byron L. Warnken: Justice Ginsburg, ever since Terry v. Ohio and its progeny, that's what we have had, and yet the States, the officers, the courts have not had a problem with that. William H. Rehnquist: You don't have it in Mimms. Mimms is a bright line rule. Byron L. Warnken: Mr. Chief Justice, that's correct, but the reason Mimms is a bright line rule is a combination of officer safety and the valid underlying stop of the driver. Mimms really requires the both of them in order to work. This, Your Honors, would be I believe the first time this Court would ever draw this type of bright line. David H. Souter: Well, it might be the first time that we did it, but I'm not sure that it would be much of an innovation, if at all, because it seems to me that the argument you're making, and in particular in your response to Justice Breyer's last question, you're saying in effect that an officer who stops a car on a highway has less capacity to control the people around him who might hurt him or interfere with what he is validly doing than he does if he makes an arrest in a public shopping mall. And if I'm wrong, tell me, but it seems to me you said he couldn't make him stay in the car, he couldn't make the passenger get out of the car, the passenger basically would have total freedom... in the absence of a Terry suspicion, articulable suspicion, the passenger would have total freedom to decide what to do. If I'm walking down the street outside this Court and an arrest is going on, I presume I don't have complete autonomy to decide whether to walk up to the officer or between the officer and the person who's getting arrested and circle the scene, so why isn't it the case that on your answer the officer is in a worse position if he stops a car on the highway than if he makes an arrest on the sidewalk? Byron L. Warnken: Justice Souter, my answer to Justice Kennedy must be taken in the context of where I think this Court should fashion a rule. I'm suggesting to Your Honors that if there is, on the limited circumstances where there is no evidence of officer safety, and where there is no-- David H. Souter: No Terry suspicion, in other words. Byron L. Warnken: --That is correct, and again, this Court has deferred to the first level fact-finders. If the fact-finder finds that there is on that record no evidence of officer safety, no evidence of reasonable suspicion of criminal or administrative wrongdoing, then the best place to draw the line, I believe, is the Fourth Amendment would be violated to intrude upon the passengers. David H. Souter: Okay. Let's assume we've got an arrest going on on the sidewalk, and I used to be an Attorney General, now I'm a judge. I'm interested in how these things work, so I want to get right up close and hear exactly what's being said between the officer and the person being arrested, so I walk up within 2 feet of what's going on. Does the officer, consistent with the Fourth Amendment, at that point have the authority to say, uhoh, it's Souter. [Laughter] Let's get him back where he isn't going to mess things up. Doesn't the officer, consistently with the Fourth Amendment, have the authority to tell me to get back 6 feet? Byron L. Warnken: Justice Souter, the officer probably would have that authority, because, Your Honor, in the alternative to our asking you to draw no bright line at all, what this Court could do to fashion the rule would be to say, all of our continuing case law exists wherever we have any evidence of reasonable suspicion or fear of officer safety, and in addition, we will do as we did in cases like Florida v. Wells and United States v. Sokolow. We will say that even when there is no evidence on that record, we will defer to the expertise of administrative agencies, law enforcement agencies in a profile-type situation. If, based upon their experience, a certain set of scenarios does cause what many courts have referred to as the heightened caution, the heightened caution may be-- Sandra Day O'Connor: Mr. Warnken, this Court itself in dicta in Michigan v. Long referred to the right of officers to require all persons in a vehicle to exit, and many courts around the Nation have similarly thought that it... the Mimms principle extends to everyone in a vehicle at a traffic stop at least to get them out if the officer wants to get them out of the vehicle. I don't think the Court has ever addressed the additional argument raised here by Maryland that it also includes a right to detain. I don't think that has been addressed, really, has it? Byron L. Warnken: --Justice O'Connor, you are correct. Sandra Day O'Connor: Have we had any particular problems with the many jurisdictions that say Mimms does allow an officer to require everyone to get out? Have there been problems you can refer to, or statistics that you can indicate that this is a worse situation in such jurisdiction? Byron L. Warnken: Justice O'Connor, I... as to your last part of your question, I cannot, and that is because the way the statistics appear to be maintained on a national level, it includes all types of situations such as stops as well as pursuits. Sandra Day O'Connor: But you admit that many jurisdictions have followed what this Court at least said in dicta in Michigan v. Long and allowed officers to order people out-- Byron L. Warnken: Justice O'Connor-- Sandra Day O'Connor: --in a traffic stop. Byron L. Warnken: --Justice O'Connor, you're absolutely correct, there are a number of jurisdictions, as General Curran pointed out-- Sandra Day O'Connor: Yes. Byron L. Warnken: --that believe that your earlier decision-- Sandra Day O'Connor: Right. Byron L. Warnken: --in Mimms was extended to-- Sandra Day O'Connor: And that doesn't appear to have offered any particular problems. I think what really troubles me is the point about how long can such a passenger be detained? Byron L. Warnken: --Justice O'Connor, you're correct that there's no hard evidence as to one way or the other. There is no hard evidence that having the power since Mimms has caused officer safety to be affected negatively or positively or not affected at all. Your Honor, this Court's dicta in Michigan v. Long was just that. The Court had before it a very different context, determining whether, when you had not only reasonable suspicion of criminal activity but you also had reasonable suspicion of armed and dangerous. In that scenario, the Court was merely addressing what would be the scope of that armed and dangerous, and the Court adopted the rationale from Belton to say that it would be the lunge, reach and grasp. Antonin Scalia: Mr. Warnken, I'm not sure I agree with you... in this balancing of the various interests you portray the passenger as being, you know, a wholly innocent individual as much a stranger to the whole incident as somebody who was standing on the curb and watched the traffic violation. But in fact, unless you're being kidnapped you have voluntarily placed yourself in a vehicle driven by someone whom you know, and who violates the speed limit. Why isn't it a reasonable consequence of that that when you do that you may trust this driver with a certain amount of your inconvenience? He may cause you to have to get out of the car sometimes, even in the rain. Byron L. Warnken: And Justice-- Antonin Scalia: Serve you right for driving with this fellow, or not saying, you know, you're going too fast, or whatever. It's really not a totally innocent person as, oh, gee, you know, how did I get here? Byron L. Warnken: --Justice-- Antonin Scalia: He drove with a person. Byron L. Warnken: --Justice Scalia, he may or may not be a totally innocent person. He's certainly not a total stranger in most cases, as Your Honor just correctly pointed out. I dare say that probably the vast, vast majority of the people in this room within the last 3 to 4 hours have been either a driver or a passenger in a public or private conveyance, and I think when we get in a vehicle as a passenger we certainly have an expectation that in the event that the driver were to violate a traffic rule or regulation that in fact that vehicle will be stopped. What we don't have is an expectation that we can be compelled, demanded to get out of the vehicle and, were we to resist that, we could be forcibly taken from the vehicle. William H. Rehnquist: Maybe if you had that expectation passengers would exert some influence over the drivers to drive more safely. For Pete's sake, it's raining out. I don't want to have to get out of the car. [Laughter] Byron L. Warnken: Mr. Chief Justice and Justice Scalia, that we do have an expectation-- John Paul Stevens: What we really want is more back seat drivers, I guess. [Laughter] Byron L. Warnken: --We do have an expectation that we will not be arrested, and I think if you have unfettered discretion, standardless discretion, no requirement as in Wells or Sokolow that the agency promulgate any, some guidance to its officers, you may well have the equivalent of Dunaway v. New York, where this Court has to say that the way an individual has been forcibly detained would become the equivalent of an arrest. Ruth Bader Ginsburg: Wouldn't one expect to be some kind of witness to what occurred? For example, one would have knowledge whether the driver had a seat belt, whether the driver was engaged in conversation... one would be a witness to what is a violation of the law. Byron L. Warnken: Justice Ginsburg, I think the example you give and the example many members of this Court have given proves the very point that Justice Stevens noted in his dissent in Pennsylvania v. Mimms, and that is, passengers are not fungible goods. There are a myriad of situations, and in fact we probably have... and we cite the statistics in our brief as to how we get to this number, but you probably have about 25 millionish passengers in this country per year who are, in fact, in a vehicle where there is no evidence of officer safety and no evidence of any wrongdoing other than a traffic violation of the driver, and that is why-- William H. Rehnquist: Where do you get the 25 million figure from, since figures seem to be hard to come by in this situation? Byron L. Warnken: --Your Honor, as we conceded in our brief, Mr. Chief Justice, it was an interpolation, taking... using Maryland as a State where statistically it does have 1/50th of the population, 5 million out of 250 million, and taking the number of traffic cases that actually get as far as court to be docketed, and then assuming, as we did in our brief, that on the average there would be a passenger in a car probably one time out of two. And of course our numbers could be wrong, but the point is, it shows the extent to which the single biggest probably police-citizen encounter in our society today is a vehicle. We don't have the officer that walks the beat. We don't have the constable in the way we once did, and most of us, when we next meet a law enforcement officer when that individual is in the line of duty, it will be when we are driver or a passenger in a vehicle. John Paul Stevens: May I ask if... I just don't remember your brief well enough. Do you discuss the hypothetical that Justice Souter gave you about maintaining order near an arrest scene? Byron L. Warnken: No, Justice Stevens. John Paul Stevens: Isn't the proper distinction there... and I'd just like you to comment on it, because I've trying to think it through as he raised the question... that in that situation nobody's seized? They're told to stay away. In your situation, the passenger is seized. He's told to stay where he is, which is a very... at least analytically a different concept. Byron L. Warnken: Justice Stevens, that's correct. William H. Rehnquist: I had not understood Justice Souter's hypothesis... I thought his hypothesis you can be told to get out of the car but you can't be detained. Once you're out of the... once you've complied with that request, you're free to leave, unless there's... there is some Terry suspicion. I didn't express that when I put the hypo to you as distinct, I think, from the way I put it to Ms. Reno, but that's what I was assuming, that the passenger could go if he wanted to. But if the passenger chose to stay at the scene, the officer could say either, you stay in the car or you get out. That was the hypothesis that I-- --Well, that's the hypothesis I was talking about, too, because by giving that order the police officer is exercising control to tell the person where to be at that particular moment by getting out of the car where he would rather stay in, but that's not true of the bystander who can't approach the scene. Byron L. Warnken: Justice Stevens and Justice Souter, I certainly concede to this Court that were this Court to fashion a rule saying, State of Maryland, we reject your absolute, bright line, unlimited, unfettered discretion in all circumstances, but we will draw a line that would permit unfettered discretion, meaning a bright line to the limited extent of having the passenger exit the vehicle, and then the passenger having the complete discretion whether to get back into the vehicle, whether to leave, or any other reasonable steps the officer would take-- Sandra Day O'Connor: Well, how about getting identification of who the passenger is and where they could be reached if they're needed to be a witness? Byron L. Warnken: --Your Honor, Justice O'Connor, I think the case law from this Court already would probably give an officer, if that officer had reason to believe that an individual were a witness to the crime, to try to seek that information. Sandra Day O'Connor: Well, we're talking about a traffic stop. Obviously, the passenger is a witness to speeding, or making a wrong turn, or something like that. Byron L. Warnken: Justice O'Connor, that is correct, which is why I stated earlier that this Court could fashion a line between the one end of the spectrum that we would like to see, which is, you need reasonable suspicion in each case, and the other end of the spectrum that the State of Maryland asks for, which is, you need nothing and anything, to say, the line is as follows: Our existing case law applies. Any reasonable suspicion of any wrong activity or officer's safety, of course the officer can then take reasonable steps; in addition, take all of these hypos that we discussed today and defer that back to the law enforcement agencies for them, based upon their expertise, just like you did in Sokolow, just like you did in Wells, for them to say, based upon their experience as experts in the area, what are the kinds of situations that truly create a heightened caution that would permit some type of activity, notwithstanding the failure to have any facts in that particular case. And in fact that's what this Court did when this Court ruled unanimously in Wells that it was not proper to do an inventory search when there was simply no guidance from the agency to the individual officers. This Court referred it back, and since then agencies have had no problem examining those scenarios and coming up with situations just like agencies have since Sokolow in the profile cases. What are the kinds of situations, based on its experience as a law enforcement agency, that makes it reasonable in the following circumstances, following types of situations, the following is likely? This Court has consistently given deference to administrative agencies, their expertise in the area, and we are not suggesting that be any different. What we are suggesting, Your Honor, is, when you weigh out the interest of law enforcement and safety and you weigh out individual rights, you can't give standardless, unlimited discretion to individual officers. The best you should do is to give that discretion to administrative agencies. Ruth Bader Ginsburg: Which might be different in every State, and suppose... are you saying that if Maryland had a manual and said, after 5:00 p.m., it's beginning to get dark, the officer at that time can order the passenger out, and then if they had that rule, then we would defer to it and your client would legitimately have been asked to get out because it was after 5:00? Byron L. Warnken: Justice Ginsburg, that is probably correct. This Court has recognized the 50 little laboratories, and we know that in inventory search cases, we know that in profile cases, basically that's what this Court has done now. It has said that even though you don't have anything individualized in that case, if you can draw us-- Ruth Bader Ginsburg: Which would mean that if that's what your answer is, that all they need is a manual that says after 5:00 this is okay, then the next client like yours loses, because in... with your client it wasn't a question of detention. When your client exited the car the contraband exited with him, right? Byron L. Warnken: --It... yes, Your Honor. Yes, Justice Ginsburg. If Your Honors were to draw the line, for example where Justice Souter was suggesting earlier, or raising as a possibility earlier, of simply exiting, and then if this Court later decided that in fact that was such as to be reasonable, then in fact that would be permissible. But of course, Your Honor, these standards that would be made by agencies, just like the profile cases today, would, of course, be subject to review as to whether they were unreasonable and extended too much or not sufficient guidance to individual officers. Officer safety is at issue, but it cannot take all Fourth Amendment rights away. William H. Rehnquist: Thank you, Mr. Warnken. Byron L. Warnken: Thank you, Your Honors. William H. Rehnquist: General Curran, you have a minute remaining. General Curran, can you tell me why we... I resent being put in the position of deciding this case on speculation, as lawyers sometimes... you look at the ceiling well, if we do this, this will happen. You're telling us that it will increase police safety if we adopt this automatic rule. None of the briefs... and there's a brief here by 20 States or so... make any attempt to compare the assaults on police in the States that have the rule you're urging us to adopt and the States that don't have that rule, and that's the crucial question. We know we're going to inconvenience citizens to some extent. We don't know whether we're going to increase police safety. Why... aren't those statistics available? Why doesn't somebody come and say, this is the proof of what we're saying? J. Joseph Curran, Jr.: May I answer, Chief Justice-- Antonin Scalia: Yes. I don't understand that. J. Joseph Curran, Jr.: --Justice Scalia, you are right, we don't have the specific numbers, but may I infer from information we do have. Since Mimms, with the authority upheld for the police across the Nation to order the driver out, and since some 25 jurisdictions have believed that Mimms also conveys to the passengers, we do have data that shows that the percentage of deaths in traffic incidents have been reduced from about 30 percent to somewhere around 13 percent, so there is an inference that Mimms and its progeny within the States has, in fact, worked. William H. Rehnquist: Thank you, General Curran. The case is submitted.

Earl Warren: Number 255, Millinery Center Building Corporation versus Commissioner of Internal Revenue. If you get to the side to see that Mr. Weiss. Now, Mr Weiss, you may proceed. Bernard Weiss: May it please the Court. This proceeding comes before this Court to settle a conflict in legal principles arising out of decisions rendered in two cases in this particular case in the Second Circuit and in the Sixth Circuit. Now, in the Sixth Circuit case, the name of the case was Cleveland Allerton Hotel Incorporated versus Commission of Internal Revenue, the Circuit Court of Appeals held that a lessee of real property, the owner of a valuable building on such lease land is entitled to deduct, as an ordinary expense of doing business, the amount of a payment over and above the determined value of the land on the date of the purchase in order to be relieved of the burdensome terms of the lease. In the Second Circuit under an identical facts, and I will come to the fact in a moment, held that the petitioner, lessee, is entitled to as a purchaser of a bundle of rights, which bundle of rights being a capital asset is not adoptable under Section 23 (a) of the U.S. Internal Revenue Code of 1939. And instead that the bundle of rights consist of are reversionary interest in land and a reversionary interest in building and that the -- that an allocation of the amount of the cost of the -- of the property may be allocated between the value attributable to the building and the reversionary interest -- reversionary value in the building and then to be spread over the remaining economic life of a building which both parties to this proceeding agree is 30 years. The facts in this case are these. In April 1924, this petitioner entered into a long time lease under the terms of which, he was required to construct and did in fact construct a 22-storey concrete and steel building on the corner of Seventh Avenue and 38th Street, New York City at a cost of $3 million under the terms of the lease, title to the improvement. Title to the building, improvement, conditions, furniture and fixtures was to remain in the tenant throughout the term of the lease. We had one peculiar provision in this lease. I'll -- I'll first go to the term of the lease. The term lease of the lease was the original -- the initial term of the lease is 21 years. The lessee had the right and had the option to renew the lease for an additional 21 years and, thereafter, from additional 21 years if he saw fit to do so. Under the terms of the lease, this petitioner was to pay for the year -- first 21 years of rental, a net ground rental of $100,000 plus the income tax thereon which both parties to this -- which both parties to that agreement agreed was equal to $18,840, this $18,840 being an additional amount of payment to cover the income tax on the $100,000. The lease -- the lease contained a provision to the effect that at the termination of the last term of the lease. The title to the building and improvements was to pass to the landlord at his option. And in the event that he accept the title for this property, he was to receive it free and clear of all incumbencies with -- and without paying therefore. And if he refused to accept title to the property, title to the building and improvements, this petitioner was required to raise this building and that is in his own cost. Speaker: I missed something. Did you say that the rental on the renewal, two options for renewal -- Bernard Weiss: Yes, two options -- Speaker: (Voice Overlap) -- Bernard Weiss: -- for renewal. I haven't given him the terms of the options of renewal. Speaker: That's what I thought. (Inaudible) Bernard Weiss: The terms of the option for renewal where these. That in the event that this petitioner were to renew the lease, the property -- the land had to be appraised as if vacant and unimproved and evaluation of 6% -- and 6% of -- of the evaluation of this land as if vacant and unimproved would determine the amount of the rental to be paid for the succeeding 21 years. But in no event was the rental to be less than $100,000, plus this additional sum of $18,840 representing the income tax thereon. In April of 1945, this petitioner renewed the lease and he renewed it at the -- at the so-called -- but I would like to refer to as the saving clause, the minimum clause, a $100,000 plus the $18,840. And the reason for that being that the landlord waived an appraisal of the land for the reason that 6% of the value of the land on the date the lease was renewed would have reduced a rental of less than $100,000. In May of 1945, this petitioner entered into a contract of purchase of the fee to the land. And at the same time, we -- the agreement provided that the taxpayer -- that the lessee was to be -- was to be -- I lost the train of my thought. I'll ask -- I just -- I'm sorry. It's just an aberration. Let me see where I left off. The -- Earl Warren: He has paid $2,100,000 was needed to -- was needed to pay $2,100,000 to -- Bernard Weiss: Well, now, he agreed to pay $2,100,000 -- Earl Warren: Yes. Bernard Weiss: -- for both the fee to the land and a cancellation of the lease and a release of the obligations of the lease. Earl Warren: Yes. Bernard Weiss: In June of 1945, title to the property, in fact, passed through this petitioner who at the same time received the release of the obligations of the lease and the cancellation thereof. The Tax Court of the United States found that the value of this land, vacant and unimproved, on the date of the purchase of this land, of the fee to the land was $660,000. If $660,000 was the value of the land, vacant and unimproved, under the terms of this lease, this taxpayer would have been required to pay a rental of less than $40,000 per year. Nevertheless, under the terms of this lease, he was required to pay $118,880 -- $119,840. Now, the reason for this -- for this petitioner renewing the lease under such an outrageous condition that existed at the time was this. The petitioner having constructed a building at a cost of $3 million had a remaining -- which at the time of the -- of the purchase the property had a remaining economic life of 30 years and a 60% value of the original cost. Now, if he failed to renew this lease, he would have lost his interest in the property and he desire to retain that interest most naturally. The contentions of the taxpayer throughout had been, throughout all the proceedings in the Tax Court, Circuit Court and here, is that the tax -- that this lessee entered into this transaction for the purpose of being relieved of the burdensome terms of a lease. And it is the contention of this petitioner that as a matter of law, any lease legally entered into which requires a -- a lessee to pay three times the value of that -- of a -- three times the rental value of a property for a period of 21 years from the time you have -- you renew the lease is a burdensome lease. And that any payment made to get out from under such a lease is an ordinary expense under Section 23 (a) of U.S. Internal Revenue Code of 1939 and shouldn't be allowed as a deduction. Earl Warren: How much depreciation had he taken in those first 21 years? Bernard Weiss: He had fully depreciated -- his original cost was fully depreciated. Earl Warren: The $3 million? Bernard Weiss: Oh, yes. The original cost had been depreciated and that is not involved in the case in view of the ruling of the Court and it will be recall that this petitioner made a request, made three separate requests. One of which was not acted on and both sides -- there's no quarrel with the finding of the Court that the taxpayer was entitled at least to depreciation on the value of the building at the date of the acquisition of the fee in 1945 from the -- from the landlord over the remaining life of the lease. That is not involved in this proceeding except insofar as the Commissioner would like this Court to consider that this relief that the petitioner -- that the lessee would receive by allowing him depreciation is sufficient depreciation and -- and that he should be satisfied. Unfortunately, the Commissioner of Internal Revenue has interpreted this way, the reversionary value with the building to mean, that this building shall be valued as if it were 21 years older and we'll take the value -- the -- then, we will take that value and reduce it by a discount to arrive at what amount of money would be paid today to arrive at some sort of a figure which represents the depreciated value of the building 21 years since. And then that figure would be allowed by way of depreciation over the next 21 years. That is the way they are interpreting these words and, of course, that would simply mean less. Under a calculation that they've arrived at in which they've told me in which it has nothing -- it doesn't appeal in this proceeding, they would have arrived at a value for this building of approximately $185,000, despite the fact that here is a man paying $2,100,000 for a land only worth $660,000. Now, the testimony in this case which is undisputed and uncontradicted shows that the same landlord sold an identical twin puzzle to another party on the other side of the street, the identical dimensions for $600,000. It is for this reason that we claim that the petitioner in making the payment, this excessive payment over and above the $660,000 or $1,440,000, was paying that amount of money to be rate of a burdensome lease. Why? The next 21 years, this taxpayer would have been -- this lessee would have been required to pay a rental of two and one half million dollars. And by making this payment, he has a valuable piece of land worth $660 and the balance is merely an amount paid to save himself these rental payments throughout the next 21 years. And that is what the Circuit Court of Appeals and the Sixth Circuit held that that was an ordinary -- that that item constitutes an ordinary expense. It's an amount paid to get rid of a -- the burdensome terms of a lease and that it is no different and the rule should be no different merely because a purchase of land took place at the very same time that the cancellation of the lease was being work out or paid off. Earl Warren: We'll recess now, Mr. Weiss.

Earl Warren: Number 512, Clifton E. Baird and Violet L. Baird, Petitioners, versus Commissioner of Internal Revenue. Mr. Ponder, you may proceed. Lester M. Ponder: Mr. Chief Justice, may it please the Court. I'd like to refer at this time to two statements that were made -- have been made by the counsel for the Government which are on my mind. One is that it has been a long established administrative practice to treat the accruals as the Government contends in this case. I'd like to point out that first on that point, the administrative ruling to which counsel refers was not issued until 1957 long after this question was deeply in litigation in the lower courts. Secondly, I'd like to point out that the Commissioner has never seen fit to embody this position in regulations either under the 1939 Code or more lately under the 1954 Code. And we submit that if the Commissioner felt strongly as to the correctness of this administrative position, he would have embodied it in a regulation carrying the weight of a regulation and not of a ruling, which, of course, it does not have the standing on regulation, secondly, on the point just made as to the accrual point of the later deduction. I believe it is safe to say that a search of all the cases decided by this Court involving the proper year of accrual of items, of income or deductions in the lower courts without exception and that includes two cases, I think the most recent cases of this Court on the accrual question which have not been referred to, those are the Dixie Pine Products and the Security Flour Mills cases which are cited, of course, in the brief in 1944. And in none of those cases, I submit, has this Court eluded to or ever referred to any later offset or credit as having any possible effect on the year of accrual but the test being as annunciated in the Spring City case and as reiterated in all the later cases that is the right to income which becomes fixed in the year which was determined to question. The offset to -- Earl Warren: What -- Lester M. Ponder: Excuse me. Earl Warren: -- what was the practice between 1931, as counsel referred to the ruling of the Department, and 1957. Did the 1957 regulation changed the practice or did it merely codify it in -- in the regulations? Lester M. Ponder: Let me say this, Your Honor, in the first place, it was never put in the regulations in 1957 and has -- Earl Warren: Well, whatever -- Lester M. Ponder: The ruling, a revenue ruling. Earl Warren: Ruling. Lester M. Ponder: As I understand it, Your Honor, there was no change in the treatment accorded by the Commissioner when the question arose as to how taxpayers treated it in that interim period, I cannot say. In other words, the 1931 ruling was -- what is known as a GCM, which is the General Counsel's Memorandum so-called at that time. Frequently, as you know, taxpayers do not see fit to follow inferior administrative rulings but preferring to litigate those rulings if they feel they are incorrect. Now, as -- answering your question, as far as I know, there was no change in this general view of the Commissioner during that period. But as I say, he failed to give this position the dignity and standing of a regulation even though from the year, I say, 1948 to the present, this question has been litigated time and time again but no changes -- but, as I say, no regulation was issued on the point. I called the Court's attention briefly to an error in printing on page 9 of the brief. I do not think it is material. But in the line on that page in a tabulation entitled Financing Charge Paid to Finance Company $420, that amount should be $1265.80 as it appears on page 18 of the record which is given as the reference there, that is there is no confusion if the record is checked but it's simply in the printing there was a transposition because that figure had appeared earlier in the tabulation. I simply call that to the Court's attention. Now, I will endeavor not to repeat the basic accrual points which have already been, I think, very amply covered by preceding counsel. I would like to point out to the Court, however, that it is the position of the petitioners in the Baird case that their rights to income where even more contingent during the taxable years than those of the automobile dealers. Why? Why do I say that? First place, automobile sales, of course, have been financed by finance companies organized especially for that purpose over a period of many years, 30 or 35 years or longer, whereas the Baird case involves mobile homes which are sometimes referred to as house trailers rather than automobiles as in the Hansen and Glover cases just argued. House trailers were of comparatively small use prior to World War II but with the wartime housing shortage, the need for itinerant workers and other such causes, the house trailer industry began to increase greatly about 1945. As a matter of fact, it's now estimated that about 3,500,000 persons live in about 1,200,000 house trailers at this time. And in 1948 -- excuse me, 1958 last year for every 100 houses started, 14 new house trailers were manufactured to show the growth, the growth of the industry. Now, what significance does that have on our case? We think it has this significance that the trailer dealers, like the automobile dealers before them, were unable to finance their sales and had to turn to outside financial institutions for this service. But the established automobile finance companies apparently had no interest in this business. Consequently, the few institutions which would agree to furnish financing were in a bargaining position which permitted them to incorporate very stringent terms governing the retail dealers such as the Baird's and their rights to the amounts credited. Now, why did they have this difference between the trailers and automobiles? Several facts quickly show it. One is that there was a very long credit period for trailers as compared to automobiles. It would run from three to seven years as compared to an average of perhaps two and one half years for automobiles. Secondly, trailers cost more than automobiles in the nature of the product. They will average from $5000 to $8000 in price compared to automobile prices during our period, and I quickly say this was several years ago before prices are as high as now when the automobiles would be between, say, $2500 and $4000 for the average car. The third factor that made the house trailer dealers in a very poor position to arrange financing was the transient and impermanent nature of the majority of trailer purchasers compared to automobile owners. Now, only two Circuit Courts of Appeal have had occasion to consider the identical question that is involved in the Baird case on these facts. They are the Blaine Johnson case in the Fourth Circuit and the Texas Trailer-coach case in the Fifth Circuit. I submit that the facts in all three cases are identical and I do not believe that the Government contends to the contrary. During this period, we have an additional complication in our case that is not present in the Hansen and Glover case, that is complication on the facts. Mr. Baird and Mrs.Baird, as partners, did business during this period with three separate finance companies. Well, of course, each one drove a separate bargain. They are all in the record. Most of those agreements were in writing. There were some oral bases which are in the record in two of the three agreements. But the basic agreement and the one to which I want to refer chiefly was with Minnehoma Financial Company of Tulsa, Oklahoma and that was entirely in writing and, of course, is in the record. I believe it's at page -- starting at page 27. Now, during this taxable period, the Baird's, as I say, assigned their contracts and I want to point this out to that contrary to a statement yesterday which I'm sure was simply a slip on the part of counsel for the respondent, in Minnehoma, there was no note but in the other two Midland and Michigan, the other two companies, did have notes. We do not think that is material. I simply call that to the Court's attention so the Court will understand that in the Minnehoma, there was no note. There was simply the conditional sales contract. Now, I will, for purposes of the gravity of time allotted me, refer solely to the details of the Minnehoma agreement for this reason. The Minnehoma agreement, of the three agreements involved in the Baird case, is the only one that is common to the three cases involving trailer dealers, that is Blaine Johnson in the Fourth Circuit, Texas Trailer-coach in the Fifth and the Baird case. Therefore, since it's as a common contract, and I'd like -- like to just simply stress that one contract. And, of course, as I have said that's at record 27 in toto and another reason for referring to that one is that it was entirely in writing. Now, under that contract, what were, what were the limitations on the Baird's that made their rights to these credited amounts so contingent that we contend they were not accruable in the years of the sales of the trailers? First, the trailer purchaser must complete a credit form supplied by Minnehoma. Minnehoma supplied the credit form. The dealer had to forward this in two copies of either at Dun & Bradstreet or a retail merchant's credit report to Minnehoma. And Minnehoma had to approve the purchaser's credit before there could be any sale. Secondly, each trailer contract had to be on a printed form provided by Minnehoma, in which the name, of course, Minnehoma is inserted therein at the appropriate places as will be shown in the record. Thirdly, the balance owed by the purchaser is payable only at the Minnehoma office in Tulsa and if, by any chance, it should be paid to the dealer, he has to immediately forward these under very stringent conditions on that. Next, Minnehoma designated the amount of the down payment. Fifthly, the dealer unconditionally guaranteed Minnehoma against any losses including loss of prospective profits. That's the wording of the agreement, “prospective profits”. This guarantee, therefore, covers much more than the 5% holdback. It covers insurance premiums for the full-term. If the -- if the purchaser would prepay, still Baird was liable only full-term insurance premium, same way with finance charges. They guaranteed full-term finance charges, prospective profits. So you can see that Baird's reserve was subject to being reduced by much more than the 5%, not only that involved but these other factors. And that, of course, is pointed out in detail at page 19 of the brief. Now, what does Baird get back? The contract says this, “An amount to be determined, to be determined by Minnehoma from time to time in its absolute discretion, equal to not more than 5%”. Not just 5%, equal to not more than 5%. But the total purchase price would be credited by Minnehoma. Payments, when do they be made? They are to be made only from time to time as determined by Minnehoma. Then in addition to this holdback reserve credit, Minnehoma may, but it doesn't have to, credit the partnership with a portion of the finance charge of matter solely within the discretion of Minnehoma. And then, of course, if that is done, that credit, of course, becomes subject to the same contingencies governing the hold -- the holdback, as I've already outlined. I call the Court's attention to a -- to another provision this contract, we think, makes Baird's rights extremely contingent. Minnehoma's determination as to the possibility of the contingent liability shall be filed and not subject to question by the dealer. And how could that be written any stronger, I submit? Thirdly or I should say further, Minnehoma could reassign any contract upon such terms as -- and conditions as Minnehoma should determine and even if they did that without Baird having anything to say about it, they didn't waive their rights against Baird, expressly in the contract and then such as her niece would succeed to all of Minnehoma's rights against Baird. Now, as I say, these identical facts were before the Fourth Circuit in the Johnson case and they were before the Fifth Circuit in the Texas Trailer-coach case. In Johnson, there were other contracts also which, as we say, just as we had other contracts, we think that fundamentally, they were of the same general nature but, of course, differed in their precise wording. In the Seventh Circuit opinion in this case, we feel that the Court made an error in failing to perceive the identical factual situation between the two cases because there is a reference in the opinion of that Court to a possible deviation between the facts where the Court states in the last paragraph of its opinion, “Ignoring some of the factual differences,” the Court said, “we decline to follow if -- all the same rather, “we decline to follow Johnson and Texas Trailer-coach”. I submit there are no factual differences and that that error caused the opinion of the Seventh Circuit to be contrary to these petitioners. The reason, as I say, that I say the facts are the same, it was stipulated in the tax court trial of the Baird case that the entire Blaine Johnson record was received in evidence in the Baird case. How could the facts be different on that stipulation? Secondly, in the -- in the Texas Trailer-coach case, the only finance company involved was Minnehoma. The contract was in evidence, the agreements were in evidence and, of course, they were identical with the agreements in the Baird case because Minnehoma had drawn up a set of agreements and contracts which it used uniformly with trailer dealers. And in any event, they are identical and our comparison shows that. Now, the basic accrual principles coming to those points, as I say I will not dwell at length because I think they have been covered. But I would like to point out to the Court that it has been held on several occasions that a strained construction in administrative efforts to accrue income should be avoided. And we submit that the position here of the respondent is an extremely strained effort to accrue income regardless of what else may be said. I also like to point out that in the Dixie Pine Products case and the Security Flour Mills case of this Court in 1944, Mr. Justice Black said that the right to income -- excuse me, when the right to income has become final and definite in amount, then the income is to be accrued. And I think that in some of the discussions on this point, those cases have been overlooked. And I call the Court's attention to those cases which, of course, cited in the brief. We feel that we have shown that substantial contingencies govern the petitioner's rights to the amounts credited. They were, of course, clearly unavailable to the petitioner's in any sense during the tax years involved whether they would ever be available was uncertain during the taxable years because of this wide control of the finance companies over the credited amounts. And as I have already pointed out, the respondent has never challenged the similarity in effect of the three finance companies that we have involved in this case. So, of course, as time won't permit, I won't go into the others except to say that they are substantially similar. Now, with respect to this one or two transactions hypothesis, of course, we say under the decided cases of that there simply was one transaction here. The -- that was so held expressly in those words in Johnson and expressly in Texas Trailer-coach, and our facts are identical. And we say that only that result can obtain here. We say that further in its brief, the respondent states on pages 40 and 41 that regardless of whether this Court holds a one or two transaction hypothesis, the tax result must be the same. So curiously enough, we find respondent arguing in this Court that there are two transactions and it's saying the brief that it makes no difference. Now, quickly as to the finance company being a party, we think in treat and in fact it was a party. From Texas Trailer-coach, we find this language. A trailer dealer has little hope of opinion financing unless he agrees to the establishment of a reserve account. Its existence means life or death to the trailer business. And again, from Blaine Johnson in the Fourth Circuit, those few financial institutions which would finance this paper were able to dictate to the trailer dealers the terms on which they would do so. In view of these facts, we feel that our position should be sustained. And I would like to say again that curiously here, the respondent also has departed from his historic position and the historic position of this Court as exemplified by the Clifford case, the horse case and many others in arguing what we feel is a hyper technical argument which glorifies form instead of the substance of the transaction which, of course, is well established to be the guiding tax principle. If I have any further time, Your Honor, I will reserve it. Earl Warren: Mr. Rothwacks. Meyer Rothwacks: May it please the Court. The question on whether or not the Commissioner's position in these cases glorifies form over substance was the subject was the subject of some comment in article in 43 Cornell Law Quarterly. There, the editorial comment looked to the decision of the Texas Trailer-coach case which involved the sale of trailers as it does in the Baird case. The note editor concludes and we think that this is a correct conclusion calling attention to Judge Wisdom's estimation in the Texas Trailer case that the Commissioner was fascinated by the form and overlooked the substance of the transaction as my Brother says, he said that it was submitted that this criticism applies equally well to his own analysis which stretch -- stress so heavily the unitary nature of the transaction. And that this stress of form over substance by the taxpayer in emphasizing the unitary nature of the transaction was demonstrated by a consideration of the situation in which a dealer disposes of some notes by subsequent independent sales while retaining others. In such a case, the editor says, it would seem to be clearly necessary to accrue the full value of the notes which are discounted as well as those which are retained. What it want to admit is this, as it seems the Court must, is it not a surrender to form to say that different tax consequences for discounted note should follow merely because the two sales have been simplified and integrated into a single transaction. Charles E. Whittaker: (Inaudible) would you state the citation -- Meyer Rothwacks: 43 Cornell Law Quarterly. Charles E. Whittaker: 43? Meyer Rothwacks: 43 Cornell Law Quarterly. Charles E. Whittaker: Thank -- thank you. Meyer Rothwacks: At -- Charles E. Whittaker: Thank you. Meyer Rothwacks: -- at 719 dealing with a decision in the Texas Trailer-coach case. Charles E. Whittaker: Thank you. Meyer Rothwacks: I shall not burden the Court in this rebuttal with a restatement of the Government's position. I'd like merely to point out in response to the Chief Justice's inquiry as to the Government's administrative position in these cases that it has been a perfectly consistent administrative policy ever since 1931, some nine years before the first litigated case in this area. I -- I merely adverted to the 1957 ruling because the 1957 ruling spells out, and it was very helpful indeed, spells out the nature of the transactions in these cases. The -- the GCM merely stated the policy and it stated it in this unequivocal fashion. It observed that in the event the purchaser fails to meet his obligation, that is a man who buys the car or buys the trailer, the dealer is given the benefit of the reserved credit through a corresponding reduction in his liability to the finance company. The ruling said that in as much as the taxpayer has adopted the accrual method of accounting, he must be consistent in the treatment of all of his items of income. Such treatment under the accrual method demands that each item of income shall be accrued when earned rather than when received. This is the basis upon which the theory of accrual is founded and the possibility of an item of earned income not being received due to some unforeseen circumstances is immaterial. It is true, the Commissioner said, that where an entry on the books of account is based on a remote contingency which may never happen such item could not reasonably be accrued for income tax purposes. The contingency must, however, be something more, something more than the mere possibility of the debtor not satisfying his indebtedness. The facts show -- the Commissioner said, the facts show that the reserved credit is not a contingent credit but is paid to the dealer either at the time the note is liquidated by the purchaser or in case the purchaser fails to meet his obligation, the dealer is given the benefit of the reserved credit through a corresponding reducion in his liability to the finance company. Now, in that connection, it is far clearer in the Baird case than in Glover and Hansen because of the contractual obligations running from the dealer to the finance company on the separate contract entered into between those two entities, that the reserve could be charged when there was a loss on repossession, that the reserved to be charged when there was a prepayment, that the reserved could be charged on account of any indebtedness whether or not related to defense, action and question between any indebtedness between the dealer and the finance company. Now, in that circumstance, in that circumstance, it becomes all the more evident in Baird than it was in Glover and Hansen, that the dealer will either get the amount in that dealer's reserved in cash or he will get it by something that from a tax point of view is the equivalent of cash and that is the discharge of his obligations. Thank you. Lester M. Ponder: If the Court please. Just two comments, I believe, here. One is again, on the two-transaction hypothesis, it is my belief that the Seventh Circuit Court of Appeals decision on the two transaction point was based primarily on taking certain testimony of Mr. Baird out of context and attributing to it a meaning which did not exist, that is to say in testimony on cross-examination, he was asked if when the trailer purchaser came to his place of business, the purchaser knew what finance company was going to handle the transaction. Well, of course, he said no. But the other evidence shows that before the sale was completed, the purchaser knew the identity of the finance company. As I say if, for no other reasons, than that in the contract itself, the finance company name was set forth, the payment place to be at that location and many other such points. But the Court apparently, as I say, I think in error, seized on that one statement out of context that when he walked in his place of business and picked out the trailer, of course, he didn't know at that time, he wanted a model, a certain model at a certain price, only later when they discussed terms and his credit was approved by the finance company. Of course, before the sale was completed, then, of course, the purchaser did know. So as I say, I think that was the crux of the erroneous holding on the two-transaction point if that is important in this case. Secondly, again referring quickly -- Potter Stewart: (Voice Overlap) the -- Lester M. Ponder: Yes. Potter Stewart: Excuse me, the -- the Seventh Circuit did reason to its conclusion upon the basis that this was two transactions and (Voice Overlap) -- Lester M. Ponder: That's correct, Your Honor. Potter Stewart: -- so that the Sixth Circuit in the Schaeffer case. Lester M. Ponder: That's correct, Your Honor. Potter Stewart: But it's the Government's position here, an alternative position, if you will, that even if this be assumed to be one transaction, still, for the reasons they developed in their brief, the Commissioner should prevail. Lester M. Ponder: That's correct, Your Honor. And I don't feel I should spend more time on the point because of their position in -- in that regard. Potter Stewart: I just want to be (Voice Overlap) -- Lester M. Ponder: Yes, that's my understanding. Potter Stewart: It didn't feel that that was necessarily dispositive whether or not this was one or two transactions. Lester M. Ponder: That's correct. I'm simply trying to explain why I think the Seventh Circuit did go off on a tangent if that should be important. That's my only point on that. Secondly, I want to point out again that this administrative ruling in 1957, again, does not have the standing, in our opinion, to which respondent attributes because it simply is a restatement of their argument before this Court and before all the Courts of Appeal and before the tax court. It's just nothing more than a restatement in a more elaborate form on certain points. But the point is it is not of the standing, of course, of a regulation. Now, we'd like to point out here, as I've already done, I'd like to say that there is much more here than the debtor not satisfying his indebtedness, as I pointed out. Baird was liable for loss of prospective profits, for example, which had nothing to do with the debtor not satisfying his indebtedness. It's -- it's just the opposite. If he has satisfied it early, that caused Baird to be liable under that provision. Then in conclusion, I would say, Your Honors, that as I understand respondent's argument, he is asking this Court to establish a new rule of accrual something that might be called the possible later offsetting tax benefit theory. This Court has never adopted such a view. And we submit that the established accrual principles governed this case and require decision for the petitioners. I thank you.

Warren E. Burger: We'll hear argument first this morning in 74-165 and the related cases, Blanchette and Others against Connecticut. General Insurance Corporation is the first of the group. So Mr. Solicitor General, you may proceed whenever you are ready. Robert H. Bork: Mr. Chief Justice, may it please the Court. This is a direct appeal by the United States other federal parties, United States Rail Association and the trustees of the property of the Penn Central Transportation Company. A three-judge District Court determined that the Regional Rail Reorganization Act of 1973 is constitutionally deficient in significant aspects. The United States support the constitutionality of that Act. There is also a cross appeal here by the trustee of the New Haven Railroad to have the act declared unconstitutional on grounds rejected by the District Court. The appellees here on our appeal comprise the sole shareholder and the major creditors of the Penn Central Transportation Company, a railroad that will be important in any reorganization effective under the Rail Act. Time for argument is divided equally between the supporters of the act and the opponents of the act. The supporters have divided our time as follows. Mr. Cutler who represent the Rail Association and I will divide an hour and 13 minutes, though we hope to reserve some if it for rebuttal. Mr. Cutler will deal with the issues raised by the cross appeal. I will deal with the issues raised by our appeal. And Congressman Adams has been seated five minutes to support the act on somewhat different grounds with those advanced by Mr. Cutler and myself. Mr. Horsky for the Penn Central Trustees, who supports our position in part and opposes it in part perhaps now supports it will use the remainder of our time, plus some of the other sides time. He is in effect a bridge between the two sides. This litigation is crucial to the success or failure of Congress's plan to reorganize and to make viable the real network in the northeast. And the case bears, I think, as you look at the briefs a circus appearance of enormous complexity. But I think, it is quite simple in its basic concepts. The core issue before us is whether the Rail Act will work in uncompensated taking of the shareholders and creditors' property in violation of the Fifth Amendment to the Constitution. The three-judge District Court vowed that it would. The three-judge Special Court created by the Rail Act itself has more recently held that it would not and that the statute was therefore constitutional. It will be useful to sketch, I think, the real crisis in the northeastern United States. The main features of the act that its Congress has response to that crisis and the holding of the District Court which emasculates Congress' effort. By 1973, seven major railroads in the northeast were attempting to reorganize under Section 77 of the Bankruptcy Act. Those proceedings were proven unsuccessful due to the seemingly insoluble financial difficulties of the roads. The imminence of financial collapse and the possible liquidation of this northeast rail network, threatened the immeasurable damage to the economy and to the national defense. Congress responded with the Rail Reorganization Act we have before us. The primary purpose of that act is to create a new, profitable, privately owned rail system in the northeast and most importantly to do that rapidly, much more rapidly than is the custom under reorganization under Section 77 of the Bankruptcy Act. Within 180 days of the statutes enactment, each Court having jurisdiction over a railroad and reorganization was required to order that the reorganization proceed under the new Rail Act. Unless it first, one, found that the railroad was recognizable on an income basis within a reasonable time and that the public interest would be better served by that form of reorganization. Or two, found that the Rail Act does not provide a process which will be fair and equitable to the estate of the railroad and reorganization in which case the reorganization is to be dismissed. Appeal from this 180-day decision by the reorganization courts lies to a Special Court created by the act and that Court is composed now of Judges Friendly, McGowan, and Thompson. Five of the reorganization courts found that the Act did not provide a fair inequitable process, two founded that it did. The appeals were taken and the Special Court has now found that the reorganization act does provide a fair and equitable process and that decision explicitly includes that the termination of the Act will not work an uncompensated taking. The Act also establishes United States Rail Association, which is a public nonprofit corporation and it is required to formulate a final system plan that will establish and maintain a financially self-sustaining rail system adequate to the needs of the northeast. The centerpiece of this final system plan is to be a new for profit corporation, a consolidated rail corporation, Conrail. The bulk of the rail properties will go to Conrail, although, some maybe sold under the final system plan to profitable railroads in the area, to Amtrak, and to state and local transportation authorities. This plan is to be laid before Congress within 450 days of the passage of the Rail Act, although, the rail association has now requested to Congress a 120-day extension of that deadline. The final system plan becomes effective, if it is not disapproved by either House within 60 session days. Within 90 days after that, the plan is to be certified to the Special Court. The Special Court will then order the transfer out of the rail properties from the bankrupt estates to Conrail and have the securities and obligations and benefits of Conrail transferred back to the bankrupt estates. Subsequently, it will determine the fairness and the equity of the consideration given in return to these states and that consideration, a package of securities and benefits given is not to exceed the constitutional minimum. Now that consideration given to the bankrupt estates, the rail estates, is to consist of stock and securities of Conrail and up to $500 million of the association's obligations, which are held by Conrail and which are federally guaranteed and other benefits under the act such as payments for labor termination and so forth. If this consideration exceeds the constitutional minimum, the Court must order the excess returned. It may reallocate the consideration among the transfer or rail estates and if necessary, it may enter a deficiency judgment in the estates' favor against Conrail or against profitable railroads that receive property from these -- the bankrupt estates. The entire judgment of the Special Court on the evaluation issue is then reviewable by this court. Now, although the constitutionality of this statutory scheme was being litigated in various reorganization courts. These cases were brought in District Courts, not reorganization courts by the Penn Central Shareholder and by the major creditors. They were consolidated by the judicial panel on multidistrict litigation in the three-judge District Court. Now, that Court from which we appeal determined as follow. It said first, that the question whether the final transfer of rail properties from the rail estates to Conrail would affect an unconstitutional taking was not yet right for adjudication. William O. Douglas: There is nothing here from that Special Court? Robert H. Bork: Nothing here, the Special Court opinion is available William O. Douglas: Yes. Robert H. Bork: And I believe the briefs now refer to it. But there is no appeal here from the Special Court. William O. Douglas: Well, it cannot be on here. Robert H. Bork: Under the statute, it is not considered an appeal. William O. Douglas: That's another question. Robert H. Bork: That could be another question Mr. Justice Douglas. I trust it will not become one in this case. Second, there is the problem of interim erosion which the three-judge District Court of the bankrupt estates -- three of the Courts that the interim erosion that is the losses incurred by these railroads in continuing service prior to the final transferred date might amount to a taking in the Fifth Amendment since they thought that taking may have occurred or may soon occur, at least there was a possibility and therefore, that issue of interim erosion is right for adjudication. The Court therefore enjoined the rail association from acting under Section 304 (f) of the Rail Act, to prohibit any reduction of service that is requested and that maybe determined by a Court to be necessary to prevent an unconstitutional taking of property. Third, the Court enjoined the enforcement of Section 20 (b), which requires the dismissal of the reorganization proceeding under certain circumstances that stage of the case has passed and I think that ruling has now essentially become irrelevant. Potter Stewart: Although, you the federal parties did appeal that, didn't they? Robert H. Bork: They did appeal in the Special Court has held that the Act was fair and equitable, so we are passed the stage at which a dismissal of a reorganization pursuant to 207 (b) is a possibility. Potter Stewart: Let say, what's -- why was the point of that provision of the statute making that providing for dismissal of the 77? Robert H. Bork: That is not entirely clear to me that particular point of dismissing the reorganization in the event that this Act did not provide a fair and equitable process. Potter Stewart: Its kind of -- kind of a non-secretor or something -- Robert H. Bork: Perhaps the Court -- Potter Stewart: What one wonders about is its purposes, is there any legislative history showing what the reasons wants to do it -- Robert H. Bork: There is Justice -- I do not have it. Perhaps, Mr. Cutler maybe able to answer the question of that, but in any event, I think 207 (b) is effectively behind this because no such dismissals occurred and under the ruling of Special Court would not as --. Finally, the Court without particularly stating any reasons enjoined the associations from certifying a final system plan for judicial review under the provisions of Section 209 (c). Now, this injunction against certifying a final system plan to the Special Court respectively prevents the consummation of the congressional plan or creating this new Conrail and that means in effect that the statute is at that stage understands still and cannot under going to affect. Now, there have been many contentions here and I think for most of them perhaps rely upon the briefs. The briefs have been perhaps some 10 to 12 inches thick. But I wish to say at the outset that after further analysis since we have submitted our briefs and after considering the Special Court opinion, we have modified the position taken in our briefs. We now think that this appeal turns almost entirely upon the Tucker Act question. That was the -- of person's whose property is taken to go into the Court of Claims to get compensation. Byron R. White: I take it then you think it -- absolutely essential with that issue be decided? Robert H. Bork: I do, Mr. Justice White. Potter Stewart: Would that means that you in effect concede constitutional invalidity of the statute and the absence of that remedy? Robert H. Bork: In effect, we say Mr. Justice Stewart, that we do not think there will be an unconstitutional role and I think the Special Court is quite persuasive about the unlikelihood of a interim or role amounting to the Constitution I think. We also don't -- but we also think that the Conrail is likely to be a financially viable for railroad and that there will be no unconstitutional taking at the final transfer. But we must conceive that we can give no absolute guarantee on either of those voice and there -- Potter Stewart: In the absence of the Tucker Act remedy in the event of such unconstitutional taking then -- Robert H. Bork: Yes and I would not put at Mr. Justice Stewart that the Act would then become unconstitutional at large. I think a better result would be to continue the injunctions at the 304 (f) and as to 303, the final transfer provisions. So, that Congress could then if there were no Tucker Act remedy available. Congress could then consider whether it wanted to provide the Tucker Act remedy or whether it wanted in some other way to deal with the statute in order to keep this reorganization plan which is really our only Government on -- Potter Stewart: You mean, what? Robert H. Bork: The timetable. I beg your pardon. Potter Stewart: I didn't hear what you just said. Robert H. Bork: Well, I was referring to the enormous complexity -- Potter Stewart: Oh, I did not catch your word. Robert H. Bork: And heroic effort. Potter Stewart: I beg your pardon. William O. Douglas: Is this change in position and traceable for the fact that this is a corporation as a federal instrumentally? Robert H. Bork: No. William O. Douglas: In your judgment? Robert H. Bork: Mr. Justice Douglas, it is not -- it is simply that -- oh, you mean the fact that the change of position is not even that. No, because we thought that there before we admitted the possibility, the conceptual possibility of a taking. We -- what we thought it factually so unlikely is not to be in the case given the financial situation. William O. Douglas: Well, do you agree that with the three-judge court that the question of whether the transfer of the properties as such was a taking that is not right? Robert H. Bork: The question -- Byron R. White: Or you are focusing wholly on the erosion -- Robert H. Bork: No, I am not. Byron R. White: Or in terms of the necessity to decide the Tucker Act question? Robert H. Bork: No, I am not Mr. Justice White. I think that we cannot tell know whether or not the final transfer will effect -- will in fact affect a taking. Byron R. White: And that is true even without -- even assuming no erosion? Robert H. Bork: That is true. Byron R. White: So, the three-judge court you are suggesting is wrong and that -- in the saying that wasn't right? Robert H. Bork: I want to make a distinction between this. The three-judge court is right to the extent it says, "We cannot tell now whether or not there will in fact, would be a taking at the final transfer." However, I think we can tell now -- Byron R. White: And you say that same is true with erosion, with respect to erosion? Robert H. Bork: We cannot tell for a fact that there will be erosion. However, we can tell that it is. We cannot guarantee there will not be a taking and I think it would be legally difficult to say that, creditors must gamble and go down to the wire with no possibility of compensation, if they loose, and discover at the final -- after the final transfer date that there had been a taking, and if no compensation was available. Byron R. White: In a sense, this is sort of an -- the absence of an issue that is justiceable at this time or right this issue isn't it? Because, you simply cannot ascertain as of today whether or not there will be an unconstitutional erosion of whether or not the Conrail securities will be adequate? Robert H. Bork: That is correct. That issue is not right. However, it is I think not premature to decide that that possibility exists. Byron R. White: Yes. Robert H. Bork: And that therefore, the Tucker Act issue is a criminal issue in this case. Byron R. White: Yes. William H. Rehnquist: Mr. Bork, what if the govern -- what if Congress pass a law saying that, five years from now, we are going to build such and such reclamation project and describe the lands that we are going to be taking and said that instead of paying these people for the lands and money, we're going to pay them in Conrail stock. Could they come in now rather than five years and get some sort of an adjudication as to the constitutionality of that plan? Robert H. Bork: Only if one assumes that the Conrail stock, if one gets reason to know that the Conrail stock would in fact be an adequate compensation from what they gave up. I would think they could not. William H. Rehnquist: But wouldn't a typical answer this court be that there will be time enough to decide that when the Government actually takes your property? Robert H. Bork: Well I think not Mr. Justice Rehnquist. If there was also an distinction that there was no Tucker Act remedy available, so that deciding it then will do no good because there is no way you be compensated. Byron R. White: You may end up never thinking about it. Robert H. Bork: That is correct, but here, it is quite likely that-- Byron R. White: But what's the -- what is the compulsion beside at them but when the property is taken under any, then it is just -- Robert H. Bork: Oh, well in this case. This Act provides that this property will be transferred from the rail estates to this Conrail to other profitable railroads to Amtrak, to state and local transportation authorities. And then, some years will passed while we litigate the issue of whether or what those rail estates got back was adequate compensation. Should it prove not to be adequate compensation? At that point, there is now way this -- there maybe no way these creditors can be made whole. Warren E. Burger: Well, are you suggesting Mr. Solicitor General, that if the worst happens. If the worst happens, that three or four or five years from now, there is no judicial remedy if it where then judicially determined that there had been a taking and that it was uncompensated or inadequately compensated? Robert H. Bork: If Section 303 of this Act, Mr. Chief Justice, does not turnout to provide adequate compensation and if it should turnout that they have no Tucker Act remedy available, there would have been an uncompensated taking in violation of the Fifth Amendment. Warren E. Burger: And could there be a judicial remedy for that when that point was reached? Robert H. Bork: No. There could not because the Section 303 specifically limits the Special Court in what it can do and it can add nothing to the benefits provided by the Act, the stock and securities of Conrail, and a deficiency judgment. Warren E. Burger: Do you think that would have something to do with the appeal ability provisions, the review ability of the Special Courts? Robert H. Bork: Well, the Act specifically provides that that evaluation decision is appealable to this Court. There is no problem about appealability of that. Potter Stewart: But again, we can't on appeal, we couldn't appropriate money. Robert H. Bork: That's quite true, Mr. Justice Stewart. Potter Stewart: My Brother Rehnquist question really should be a -- to be an analog, I should suppose a legislation passed by Congress that would definitely appropriate certain property and say that the payment for this property will be ex-shares of Conrail stock and that there will be no Tucker Act remedy, no other thing given for the property and that is the analog that you have -- Robert H. Bork: That's quite right. William H. Rehnquist: But if that were the -- supposing following up my Brother Stewart's question. Why couldn't the presumed victims or non-beneficiaries if you want to call it that up, the provision. If they can go into a three-judge District Court now and seek injunction of the enforced of that. Why can't they also wait until the properties actually taken and go into a three-judge District Court? Robert H. Bork: Because Mr. Stewart is in fact raising the analogy of a statute which said, "In the end of five years, we will flip a coin, if it is heads, you get paid off in full, if it is tails, you get nothing, if you get nothing, there is no Tucker Act remedy and you are just out of your property." William H. Rehnquist: Okay, and the question is whether -- Robert H. Bork: If you wait -- William H. Rehnquist: Whether you must wait under that statute and go in the -- until your property is taken and go in to a three-judge District Court and then join our constitutional or whether you can do it five years in advance. Robert H. Bork: Well, Mr. Justice Rehnquist, it would seem to me its trifle it adds with a jurisprudence to tell a man that there is a 50/50 chance his property will be taken under the statute and that if it is, he will have no remedy and he may not try to enjoin the statute in advance, but must go forward and take his 50/50 chance. William H. Rehnquist: Well, I can conceive of a statute which was totally it adds with our jurisprudence. But if it doesn't go into effect till five years from now. That does not mean you can come to Court now and enjoin its operation. Robert H. Bork: Well, the statute is in effect now and the mechanism leading toward this result is in full swing, and if these parties, I hate to be making there case, but if these parties has to wait until that date, they are without remedy, and I do not think that that --. William H. Rehnquist: If they had a three-judge District Court remedy now. Why don't they -- why won't they have it then? Robert H. Bork: Because the three-judge District Court remedy then, will do them no good. William H. Rehnquist: Why can't they enjoin the taking at that time? Robert H. Bork: Oh, I mean why won't we wait on separate -- Mr. Justice Rehnquist, we will be in no better position at that time to know anything about this case. William H. Rehnquist: But at least the taking will be much more immanent? Robert H. Bork: The taking will be immanent, but we will not know whether the compensation to be paid is adequate or not because this statute provides that the property will be taken before evaluation proceedings begin and it will be some years after, this is enormously complex evaluation proceedings or at least lengthy one. It will be some years after the taking occurs before anybody knows whether they are to be compensated. Byron R. White: Well, that's, that's -- its going to be years, whether is that right but it's not? Robert H. Bork: That's true, but at least, we will know with the Tucker Act that the compensation will be there. Byron R. White: So, you'll be happy while you're waiting? Robert H. Bork: They may not feel happy while they are waiting Mr. Justice White, but their constitutional rights will not have been infringed. We should do something some degree -- Byron R. White: Would be and won't be infringed either if they get paid enough for that designed in Tucker Act. Robert H. Bork: That is true, but can't be sure they will. Byron R. White: I'm sure they wont. I guess it is the question when -- we are just arguing as my Brother Powell said about winning something right the decision. Robert H. Bork: Yes, but I think we are, but I think that's -I think the right in this issue will not change in this case until it is too late. Byron R. White: It will change for you. Robert H. Bork: I've always thought that Tucker Act was right. We never argued that. I do not think the question of whether a taking will in fact occur can be known now and it isn't right. But the possibility that will occur is clearly present and therefore it seems to me the Tucker Act issue is clearly right. The -- if the Tucker Act has been limited so that there can be no compensation either for interim erosion or interim erosion. Then, we would agree that if the injunction under -- about Section 304 which prevents the rail association from denying abandonments -- when a taking point has occurred should either be made in effect or preferably the statute should be read to deny the rail association. The power to refuse abandonments at a point when the Courts hold an unconstitutional take is occurring. And if the Tucker Act has been limited, we agree that an injunction against certification of a final system plan to the Special Court should remain in effect. I think that's preferable to striking down the entire Rail Act on the theory of unconstitutionality because leaving those injunctions in effect, would give Congress a time to reconsider the Tucker Act issue and time to reconsider the possibility of making changes in the Rail Act to obviate these difficulties. Because this is an enormous effort by the Congress and I think that ought not be tossed aside wholesale without giving Congress time. Warren E. Burger: I suppose you would agree that the issue of constitutionality can't be resolved here with any of you to even the probability that Congress would remedy any defects in the future. Robert H. Bork: No, Mr. Justice -- Mr. Chief Justice, but I think these two injunctions or reading the statute in those ways would effectively protect the creditor interest against an unconstitutional taking. And also, give Congress the option to reconsider what it wishes to do. But, we agree in the taking as unlikely in the constitutional sense and having made those concessions and put myself on the wrong side counsel table for this period of time. I now would likely to address our case. We think the judgment of three-judge court ought to be reversed. Nonetheless, because we think it is perfectly plain that the Tucker Act remedy is available and was not repealed by the Rail Act. There is therefore, no basis for these injunctions requiring abandonments when erosion reaches the point of a taking or for injunction against certification of the final system plan. The Tucker Act provides impertinent part the Court of Claims shall have jurisdiction to render judgment upon any claim against the United States founded upon just Constitution. Now, that's a general branch of jurisdiction in the Court of Claims and it is available for any taking under the Fifth Amendment, unless it is withdrawn by Congress. The three-judge District Court, we think, misstated the issue as whether Congress intended to grant a Tucker Act remedy. I don't think Congress did deliberately intend to grant a Tucker Act remedy in the Rail Act. The Special Court correctly opposed the issue as whether Congress in the Rail Act intentionally barred the Tucker Act remedy. The rule is that the Tucker Act is available for a taking into the Constitution unless it is removed, not unless it is start off and granted. The United States cause the -- is a case for the taking of an easement over a chicken farm by a low flying aircraft. It is a case where Congress did not intend a taking and a case where Congress did not intend compensation. Those factors were irrelevant. The Tucker Act was available because a taking had occurred by lawful authorized action of the Government. It seems to be perfectly plain therefore, that these appellees have a Tucker Act remedy unless the Rail Act specifically withdraws it. There is no explicit limitation of the Tucker Act anywhere in this enormously detailed 39 page rendered statute. The Tucker Act is not even mentioned in the statute and that would seem surely be very oversight if repeal was intended. I think, we must therefore examine the act to see if there is a clearly implied repeal.And in doing so, we have employed two canons of construction. Now, appellee's counsels have had some fun with the use of these canons of construction as I would by their side of the case. But these are canons long known to the law and they binding up on Congress in drafting statute because that's how they know how the statute will be interpreted as they are indispensable to Courts in interpreting statutes. I sight just two. The first is that repeals by implication are not favored in our law. The second is that when there are two admissible constructions of a statute, that construction which will save the constitutionality in the statute is favored over that which condemns the Act. There's no doubt that the opponents of the Rail Act here are asking for a partial repeal of the Tucker Act by implication. They also urge reconstruction of the Rail Act that they say does result in its unconstitutionality. They have their own canon of construction and they are precisely the opposite of those that the law recognizes. Now the strength of this presumption against complied repeals, I think it's much greater in the Tucker Act area than perhaps it is elsewhere and that shown I think by two cases. I would like to mention. The first is Hurley against Kincaid and the second is Lynch against United States. Although, decisions of this Court retain their vitality as I think they do. Then, I think they are completely dispositive of the Tucker Act question here. The Special Court in Judge Friendly's opinion said that Hurley against Kincaid did not support our position as strongly as we had urged, but it went on the note that there was case called Lynch, which we had not sited which did support our position. We oblige as we accept the gift of Lynch but we continue to believe that Hurley against Kincaid has pertinence here as well. In that case, the point of Kincaid conceded to enjoin the construction of flood way that threatened his land. In Section 3 of the Flood Control Act under which the Government was proceeding stated that, no liability of any kind shall attach to rest upon the United States for any damage from replied floods. Section 4 of the Act provided for advance compensation for the taking of land by condemnation of necessary lands and easements. Now, the parties advance as here a wide variety of factual legal contentions. But the Supreme Court held simply that the injunction should not issue because the event that taking occurred, the complainant can recover just compensation under the Tucker Act in compensation of the law, an enactment law. Hurley against Kincaid now stands at a minimum where two prepositions that a statutory program may not be enjoined in anticipation of a taking where the Tucker Act is available. And this is a case I suppose that goes to the question of whether the rightness of a tucker issue is clear. A statutory program may not be enjoined in anticipation of a taking where a Tucker Act remedy is available. And secondly, that the repeal of the Tucker Act is not to be implied from the presence in the program statute of an alternative method of compensating those whose property is taken. These prepositions are highly relevant here. The -- those who seek to enjoin the operation of the Rail Act argued that the implied repeal of the Tucker Act is to be found in Section 303 of the Rail Act. Among other places, tried Section 303 provides modes of compensating the bankrupt estates or rail properties transferred under the final system plan. And they say that, the existence in the Rail Act of alternative modes of compensation implies the absence of any other form of compensation. I think that would be a thin argument for repeal of the Tucker Act at best. The Court has asked to find an imply appeal for the purpose of destroying the constitutionality of the very statute to which the repeal is attributed. So far as we know, no case has ever found an implied repeal in order to impute to the statute itself an intention to commit suicide. If there is any doubt on this issue, I think Hurley against Kincaid lays into rest. The Flood Control Act provided its own means of property acquisition and compensation for taking to find an implied repeal in Hurley against Kincaid would be much easier because all that would have happen would have been an injunction would have been issue and slow the progress of the work until a condemnation occur. So, that only inconvenience was involved in finding an implied repeal there. Here, to find an implied repeal is to find the Act unconstitutional in major aspects and bring the program to a complete all. Lynch against United States, the case found by Judge Friendly reinforces rather than replaces Kincaid in our argument. In that case, actions were brought for proceeds of Government insurance policies. The insured in each case has become totally disabled while the policies were enforced. Under the policies terms in such circumstances, compensation must be given to pay the premiums of the policies. The compensation was not given and the insurance died. United States demurred to this lawsuit on the ground that Section 7 of the Economy Act, Section 17 of the Economy Act of 1933 stated specifically, all laws granting or pertaining to yearly renewable term insurance are hereby repealed, a much more explicit and clear repealer than anything to found in this case. This Supreme Court held that as applied to contract rights, that repealer was a taking of property forbidden by the Fifth Amendment. But the Congress of course, did have the power to withdraw its consent to suit against United States. And the Government argued here that it was obvious that when Congress took away the right, it should be presumed to have contended to takeaway the remedy which it seems to be a rather plausible argument. Nevertheless, this Court refused to read the statute is taking away the remedy in the absence of a multi-explicit direction. It said, "There is no separate provision in Section 17 dealing with the remedy and it does not appear that Congress wish to deny the remedy, if the repeal of the contractual right was held void under the Fifth Amendment. Now Judge Friendly points out the exact application of this reasoning to our case by saying, "Translated into the terms of this case. There is no separate provision in the Rail Reorganization Act dealing with the Tucker Act remedy and it does not appear that Congress wished deny this remedy, if the Act should be held to involve a possible taking that would require the award of a just compensation under the Fifth Amendment. So Lynch demonstrates, I think the Court is not willing to find the repeal of the Tucker Act remedy unless Congress specifically states that what -- that's what wants a much stronger indication in the Economy Act than there is here. Now, these conclusions from Hurley and Lynch which I think are dispositive of this case are strengthened by examining the Rail Act, its text, its structure, its legislative history, and finally views now pressed upon us by the compress it upon you by some members of the House of Representatives. The tax to the Rail Act I submit yields only one implausible explanation. The Tucker Act is not mentioned and yet, there are 13 provisions in the Rail Act which deal with the relationship of other statutes to the Rail Act. Congress went through quite specifically repealing in part, modifying in part, and dealing with the relationships of other statutes. In 13 places and I refer you to Section 601, which deals with major statutes and specifically entitle a relationship to other statutes. And it seems quite peculiar to say that, Congress took meticulous care to spell out the repeal of advertising requirements having to do with the entry of Government contracts. But did not think it was worth mentioning that it was contemplating the uncompensated taking of property. That is not just improper statutory construction. I think it is bizarre statutory construction. If we look to the structure of the Act, we see the same thing. Section 304 (f) shows that very few abandonments are to be permitted. But eventhough there are steady losses because these lines must be preserved for inclusion in the final system plan. Byron R. White: Is that the same sort of an argument that we would use if you were asked why the three-judge court had any power at all in this case? Robert H. Bork: Well, I'm not quite sure about either the same kind of argument I would use. I think the three-judge -- his referring to the fact that -- Byron R. White: Well, that the Special Court apparently thought it had and perhaps it does. How to consider the same questions that we are talking about now. And perhaps Congress intended that to be the exclusive avenue for review point? Robert H. Bork: It made that question of Congress' intent there is unclear, but I think there are separate reasons for saying that the three-judge District Court did have jurisdiction. And therefore, that this Court has jurisdiction. I'll be willing to address myself to that -- I beg your pardon? Byron R. White: The issue isn't raised by anyone, case is it? Robert H. Bork: Not that I know. Byron R. White: How do you classify that? Robert H. Bork: In order to find a repeal of the Tucker Act, we have to be asked to belief that the Congress knowingly insisted upon continued operations knew that they might cause losses and for that reason repeal the Tucker Act because it did not want to compensate. The same thing is true of the final system, final transfer provisions in Section 303. We are asked to believe that Congress knowingly required to transfer and knew might conceivably fall short of just compensation and yet intended that that should occur not to compensate. Indeed, there is no reason here to impute any implied repeal of the Tucker Act to Congress except to impute the Congress a desire not to pay as it turned out that there was no constitutional taking and I do not think that kind of intent ever ought to be imputed to Congress, unless Congress makes that imputation unavoidable by specific language. Maybe that Congress never even thought about the Tucker Act. I think that's quite likely, but if it mandated a course of behavior that results in the taking that is enough to make the Tucker Act remedy available. I won't follow the legislative history because the legislative history shows no more than that Congress was not thinking about the Tucker Act and Congress thought that Section 303 would provide adequate compensation, but if they are wrong, we think the Tucker Act is available. Now, I want to spend a moment addressing myself because there is nothing left in this case it seems to me in Tucker Act point except, we are offered the views of a number of Congressmen as to what they intended when they ask the Tucker Act. And Congressman Brooke Adams will speak for them here. I have no doubt whatever sincerity of their views and I have no doubt whatever is to the accuracy of their statement of their intention. But I object to their consideration of statement of intention on the grounds that they didn't wait when worker radical reconstruction in the constitutional relationship between Congress and this Court. This Court discerns like it have been intended in the statute were debates from the records. It should not look to what individual Congress say they intended afterwards when those intentions were never expressed to the Senate, to the House that adopted the bill or to the President who signed in the law. We do not know what the results would have been if the Tucker Act issue have been explored in Congress or relayed before the President. But even if there were a brief here from a majority of both houses, my argument would be the same. The Constitution provides for a legislative process and perhaps, if the minority -- if these views and issues had been aired, perhaps the minority would have convinced the others on this issue. And it is simply wrong to take views expressed afterwards which never went though the legislative process and visit by the Constitution. If a present statement of prior legislative intent were given effect, I think we might have to have a different kind of trial when we went into legislative history. We might have to examine or take affidavits from Congressman as to what they thought about issues, in fact when they voted on the law. As to many statutes, that would be impossible. I suggest to that in all of it would be improper. We are becoming getting dangerously close at that stage to the method of statutory analysis which was rejected by this Court and by Chief Justice Marshall in Fletcher against Craig and he answer when broad case. Now, I make this argument solely out of concern for the law and the proper processes of interpreting statutes. If I am wrong, if my submission is rejected, I would be sorry for the law but I would quite glad for my position in this case because I think Congressman Adams' brief. If we are to consider his statement of what Congress intended supports the position I have been arguing. He said on page 17, The Tucker Act was not considered by the Congress in creating the Rail Act. It is a jurisdictional statute often used to settle private claims that was neither repealed nor engrafted onto the Act to create a possible deficiency judgment against the Government. That seems to me, if you consider this expose fact those statements of legislative intent to be precisely in line with our contention that when Congress doesn't consider the Tucker Act, but does something that affects a taking that Tucker Act remains unavailable remedy. Now, Congressman Adams and others expressed a fear that we are and they would giving the rail estates the key to the treasury. There's no basis for that concern. That Congress and not the Department of Justice controls the first and should this Court agree that the Tucker Act remedy remains available here. Congress may have wishes the following date repeal the Tucker Act that it applies to this case or make any other amendments to the Rail Act that it wishes. The final disposition of this entire matter is for Congress, whichever way this case goes, are we talking is to discern the legal situation as Congress has left it so far. Now, I would like to close at hypothetical, I think illustrates the strength of our position. Suppose our position were emerged in the Tucker Act issue because but suppose this litigation did not occur now. But we went down the road for five years and discover that they have been occurred. These creditors sue us in the Court of Claims and the Government comes in and demurs on the grounds that the Rail Act has impliedly repealed the Tucker Act. It is true we have taken your property but then we are terribly sorry, but there is nothing can be done about it because we can find in an implied repeal of the Tucker Act in the Rail Act. I submit to you that that argument wouldn't stand a chance in the Court of Claims or in this Court. The cases were not implied repeal under those circumstances would be seen to be artificial then unjust and fully unpersuasive. But the legal issues are precisely the same in that case as they are in this case and we submit that they should be decided the same way. Warren E. Burger: Thank you, Mr. Solicitor General. Mr. Cutler. Speaker: Mr. Chief Justice and may it please the Court. The New Haven Trustee, the cross appellant attacks the procedures of the Rail Act for the final transfers of properties pursuant to the final system plan and he argues that these procedures are unconstitutional under the Fifth Amendment. In our brief as appellee, we argue that the court below correctly rejected this attack as premature. But now that the Special Court has rejected the same attack on its merits and the statute purports to barred direct review of that decision, we agree with the Solicitor General and with Mr. Horsky who will argue the point in more detail. That it would be inappropriate exercise of these Court's discretion to reach and decide these issues on this appeal. As to the Tucker Act, it seems to us it is really an academic point anyway because if you rich the Tucker Act issues on erosion. Whatever you decide as to that will necessarily, we believe, decide the availability of the Tucker Act as to the final transfers. While it's quite true that the other issues that Mr. Justice White suggested could be raised at some later date in other three-judge court proceeding. Some of the damage would already have been done. The Congress and the Bankruptcy Courts are now preceding to carryout their responsibilities in resolving the eastern rail prices under the tight timetables of the Act. There would be a critical waste of time and resources it now seems to us and a possible danger of large claims against the United States for whatever erosion, the unconstitutional limits might have occurred in the interim. If the final transfer provisions of this Act are later, some later date, held unconstitutional by this Court. Now, the New Haven Trustee argues that these provisions are unconstitutional on numerous grounds of which I have time to take up only three. The first is that, the Act requires the transfers to occur before the adequacy of the consideration is judicially bad. While the resources provided by the Act to provide the consideration and their view maybe inadequate so that the constitutional minimum may never be received. The provision for a transfer first and the for judicial evaluation later is the critical genius of the Rail Act in our view because in that way, Congress broke the procedural logjam for devising and approving a railroad reorganization plan that has plague the ICC and the judiciary for decades. Some -- a procedure that took so much time, some 15 years in the Missouri Pacific case that even if the solution could be evolved, it would no longer be relevant to the problem to which it was addressed. But by this method of transfer first, Congress made it possible for the rail entity to start business within some two years after the passage of the Act for the railroad estates to be relieved of the so called "erosion burden" of providing rail service at that time and for the time consuming process of adjudicating evaluations and distributing proceeds, first to the rail estates, and then among the various creditor classes in each state could take its course after rather than before the new entity starts business. A transfer first followed by evaluation judicially later was of course the last ditch procedure finally adopted by Judge Anderson in the New Haven cases. And no one found constitutional fault in that procedure since inadequate judicial assurance of compensation was thought to be available from Penn Central. Here, we say this much more solid assurance in the Rail Act and the Tucker Act. If the Special Court cannot itself provide the constitutional minimum out of the over $2 billion of resources that are provided under this Act, inadequate remedy under the Tucker Act remains available for the reasons given by the Solicitor General and approved by Judge Friendly in his Special Court of opinion. Now the New Haven Trustee, unlike his co-plaintiff, Connecticut General, concedes that the Rail Act did not bar a suit under the Tucker Act. What he argues is that under the Youngstown case, the Steel Seizure case, a Tucker Act suit if he brought one or the rail estate brought one would not succeed on its merits because the statute requiring the transfers, the Rail Act in his view is unconstitutional. But there can't be any doubt that those required transfers first are precisely what Congress has authorized. And if the right to sue under the Tucker Act is left intact by the Rail Act as the New Haven Trustee concedes, there are just no basis for calling the Rail Act itself unconstitutional and the transfers that it requires unauthorized. Youngstown is very different as Judge Friendly points out at page 102 of his opinion because there, the President seizure of the steel plants had nothing authorized let alone commanded by the Congress. The New Haven Trustee second point is that the Rail Act is not a valid exercise of the bankruptcy power but it is a condemnation wolf masquerading in bankruptcy sheep's clothing. He urges that the so called "cram down power", previously upheld by this Court under Section 77, cannot constitutionally be invoked to cram down on all creditor classes as distinguished from only one or two. But as the Rock Allen case suggest and as the Special Court rule, Section 77 does not exhaust the limits of the bankruptcy power.And there doesn't seemed to be any constitutional reason why Congress cannot cram down still further, if it deems that this is the only way of assuring continued rail service by a viable private firm particularly whereas here in east, viability requires the consolidation into one new system of properties from several bankrupt railroads each with their own myriad classes of creditors. So, long as the constitutional minimum consideration is assured, rail creditors have no constitutional right merely by withholding their consent to a plan to insist on condemnation and public ownership instead. Third, the new Haven Trustee argues that Congress cannot constitutionally exercise its bankruptcy in commerce powers in combination. So, as to require rail estates to accept the securities of the reorganized firm as part of this fair and equitable constitutional minimum and, if any balance is required to accept Government guaranteed user obligations, which are provided in this Act up to at least $500 million, and perhaps more, and other benefits under the Rail Act, and if still needed a claim under the Tucker Act itself. He argues that if there is any possible need for Government compensation, then the entire transaction is a taking of property for public use and entitles the rail estates to payment entirely in cash. But as the Special Court held, the Constitution we say does not bar Congress from exercising its powers in combination, so as to minimize the drain in the federal treasury. Section 77, itself is an exercise of both the bankruptcy and the commerce powers. As the Special Court put it, Congress is not required to steer the ship of state into the cellar of nationalization for cash or the cribbed these of a rail shutdown. Congress can steer in between, if a viable reorganized entity with significant earning power can be created. There's no taking of property for public use to the extent that valuable securities of the new entity are given in exchange for the rail properties transfer. After fair value of those properties is judicially determined to be less than the fair value of the securities is judicially is determined to be less than the fair value of the properties transfer. And the transfer of the properties is still congressionally and judicially compelled, then there maybe a taking to the extent of the shortfall, but only to that extent. At this point of course, we do not know whether there will be a shortfall, But if one is judicially determined, Congress has provided, as I said, at least $500 million of Government guaranteed securities for direct transfer to the rail estates to preserve the power to provide more and it is going to review this final system plan before it gets to Court, and it is also providing other benefits under the Act, and it is left, we say the Tucker Act remedy available for any balance. I should take a moment on Mr. Justice Douglas's question about Conrail as a federal instrumentality. And we would say Mr. Justice Douglas that it is not, it is a private corporation and while it is true that so long as the majority of its debt has been advanced or guaranteed by the Government. That a majority of the directors maybe named by the President. Those directors will have the same duty as any other directors to all of the shareholders, namely these creditors in other States and the duty to make a profit. Byron R. White: Mr. Cutler, does the -- do the obligations of the association that are issued to Conrail that maybe -- and maybe issued to the railroads in exchange for their properties, do those obligations represent loans from the association of Conrail? Speaker: They do represent loans to the association Mr. Justice White, but the loans are within the discretion of use wherein the Congress when it approves the plan and they can be stock subordinated loans far behind the claims of these creditors. Byron R. White: But they would superior to any stock in if they serve it that Conrail issued to the railroad? Speaker: They would presumably have to be at least slightly superior to any stock that issued. But of course Conrail is not confined to issuing stock. It is of course able to issue debt securities which can be handed to these creditors secured by Williams on the very properties on which they now -- Byron R. White: Well, do they extend them as the associations of securities are issued, then that the stock that has been issued is less valuable? Speaker: Not necessarily sir, because the obligations of user federally guaranteed $500 million of them can be turned over directly to the rail estates of course. Byron R. White: Without or without being assure or guaranteed? Speaker: There would be debt obligation from Conrail but it could be a 100-year debt at 2% as far as the statute goes. Moreover, another $500 billion of those obligations could be turned over to Conrail for direct expenditure by Conrail to approve its properties in a way that would enhance the value of the entire estate and finally, a third $500 billion -- million could be used to enable Amtrak to buy part of the northeast corner, which Conrail would have had in its hands and Conrail would receive that cash. As in closing, I just want to say that the real issue here is whether Congress can combine these powers to reduce the drain on the federal treasury. That's what Congress has tried to do in order to make payment at least in part in securities of the reorganized entity. While the creditors of course, are trying to force nationalization in which case, they believe although, we would dispute it that they would be entitled not only to cash but to some higher value than either the growing concern value of these securities or liquidation value if that's more. And that's why you find the Government parties arguing as some think contrary to their interest that this statute is constitutional because the Tucker Act remedy is available. And why the creditors arguing, obviously contrary to their interest that it is unconstitutional because no Tucker Act remedy is available for them. Thank you very much. Warren E. Burger: Thank you, Mr. Cutler. Mr. Adams. Brockman Adams: Thank you Mr. Chief Justice, may I please the Court. The reason that I am here this morning is that the primary intent of this statute was contrary to some of the statements of Government counsel, not ever to be a taking. The properties are never taken from the individuals. But instead, we have tried logically to extend the powers of the reorganization statute is set forth and interpreted by this Court in the New Haven Inclusion cases. The whole history of this statute was for us to try to create a buyer where none existed. Make an offer to these reorganization courts, give all of the stock in exchange for the assets that are transferred. So, that the original creditors are crammed down, yes. But they receive full interest in this corporation, plus $2 billion worth of Government advantages. And when they are finished with this and the Court values at some later time. If there has been a mistake in the manner in which the process operated, then these parties can sue as Justice White was asking in his question, "Is there a right to sue for some failure, maybe we hold the party too long," then, they could. But the two primary issues are these. How long can hold these parties? That was what concerned the lower court in this case. We think they can be held during this limited period of time. And if they can be held during that period of time and you adjust what they received in terms of stock or you set a different date for transfer. Then, their erosion problems are taken care off in that fashion. The second problem however and the one we are concerned about with the so called "Tucker Act argument," which I think is a rehearing is whether or not this statute in its process provides for a deficiency judgment against the United States. And our problem very simply in Congress and it is stated in our brief in the appendix and it runs through all of the other briefs. This was discussed great length in Congress and the Congress wanted to go only so far in granting funds to reorganize this process, and they did that. Now, as far as the cost the case is concerned, Hurley versus Kincaid and the other Tucker Act cases, we did not try to repeal the Fifth Amendment or certainly repeal the Tucker Act jurisdictional statement. That issue will depend upon the facts after this process is over whether an individual party has been injured by a lawful act of the United States. But the key issue before the Court this morning is, "Is this process lawful?" Can we use the reorganization process? Can we under the logical extension of this Court's ruling in the Denver Rio Grand case and in the New Haven Inclusion cases go through this process with this people? We think that the Congress did this properly and we hope this Court will hold that the statute -- its process is constitutional, that the cram down of stock for assets is valid. Byron R. White: And you would say that they shouldn't reach the Tucker Act matter or should say that we should reach it and say, it is unavailable? Brockman Adams: I think you should that if the Tucker Act requires a deficiency judgment as part of this process to make it constitutional. Then, we have reached the Tucker Act and this Act does not provide that. If you decide however, that there maybe some place down the line and the lawful process a mistake, then you reach and say, the Tucker Act case will have to be decided, when and if some party can decide that they have created a case on the merits. Now, that decision is what we consider -- Byron R. White: So, you do anticipate a situation, where the Tucker Act would be available? Brockman Adams: Oh, yes. Let us say for example that after this is all over and this is the three-judge court's problem. That if a party comes in and says, "You held us beyond the constitutional limit on erosion and at that point, we are of the opinion that it went just too long, It was unreasonable." But that is a specific individual case at that point. Byron R. White: So, the Tucker Act you would think would be available message? Brockman Adams: And of course, we did not repeal the matter. I thank the Court. Warren E. Burger: Thank you, Mr. Adams. Mr. Horsky Charles A. Horsky: Mr. Chief Justice, may it please the Court. I appear as the Solicitor General has stated for the trustees of the property of the Penn Central Transportation Company, the debtor. We are here before the Court as appellants because we agree that the Act with a minor exception that all come to is valid and we disagree basically, with the appellees on that issue. We are closer I think today this morning to agreeing with the position of the Solicitor General and the Government parties that were a week ago. But there may still be some differences and in some respects, we agree with the appellees. Byron R. White: Who's make the -- Charles A. Horsky: Let me explain. Byron R. White: Who's make the move, Mr. Horsky? Charles A. Horsky: The Solicitor General. The reply brief filed a few days ago in which the Solicitor General took the position that the issues were available and before the Court has made vast difference in our position. First, let me say a few things in general. The trustees believe that the basic concept of this Act is a sound concept. As the Solicitor General has said, the rail crisis at the northeast railroads created a situation which was clearly beyond the power of the trustees or the reorganization courts or Section 77 to resolve. The compulsory restructuring of all of these bankrupt railroads in the northeast under the Act is certainly a potential solution to a very serious natural problem. There are good many imponderables in the Act it will have to be resolved in the months and then, the years that are coming down the road. And the remains as I think, everyone would concede they have possibility that the quite disparate goals that the Act requires. That is, that there would be a profitable Conrail created and that it would be adequate to serve the rail needs of the northeast are not both realizable. But the effort certainly is worthwhile and should be continued. Second and particularly important is the agreement we have now with the Solicitor General that issue before the Court as to the constitutionality of the Act is properly before the Court and should be resolved. Let me take the --it should be resolved, part of it first because I cannot overestimate, cannot overstate the importance of having a decision in these cases on the constitutional questions, unless and until this Court decides whether the process -- whether this key is constitutional. The plain fact is that the situation, the rail situation in the northeast is going to get worse. On the Penn Central alone, there are thousands of miles of track that are so badly in need of repair, the trains can move over them only at reduced speeds, 10 miles an hour. And there are many thousands of cars and many thousands of locomotives that are not usable because there is no money to repair them. The Act in Section 215 reports to provide a $150 million of temporary money for improvement while this planning process is going on. As a practical matter, that $150 million will continue to be unavailable until the constitutional doubts about the Act have been resolved. Moreover and particularly important from the point of view of my clients, the trustees, they themselves are unable so long as constitutional doubts exist. To know how they should use the limited cash resources that they have in connection with the operation and maintenance repair of this railroad. If the estate, if the Penn Central State has no reasonable chance of reasonable prospect of compensation for interim erosion. Common prudence on the part of the trustees would suggest that the cash they do have be used at the maximum extent possible to prevent the continuing approval of the administration claim such as taxes. The decision on the constitutional issue will really relive both the public and the trustees of the burden of the present situation. I agree fully with what Mr. Cutler has said about it, but I would like to emphasize it in space, it's terribly important. Third, we agree with the Solicitor General as to what the constitutional issue is, "Is the Tucker Act available?" Now I appreciate, but the fact that we all say that you want to decide the case, it doesn't mean that you will. You've got to persuaded that the issue is right for decision and that it is appropriate that you decide it now. I think it is and let me say a few words briefly on that. The areas the Solicitor General has indicated to you two quite discreet Fifth Amendment problems. One is whether, the compensation available under the Act where the rail properties which will be compelled, which the Penn Central will be compelled to convey to Conrail will be adequate. The second is whether, there will be because of the extent the length of time that the planning process takes an unconstitutional taking by way of interim erosion of the Penn Central state because it will continue to operate as it does now at huge, huge annual losses. On the first of these issues, the court below said the issue was premature. We've set out in our brief, pages 48 to 54, the reasons why we think the lower court was in error as to its reasons for believing premature and the Government parties have adopted our argument as theirs and their replied brief. But without going into the details of that argument, let me emphasize this point. Under the doctrines as I understand, cases like the Ashwander case with Poe and Ullman, this issue is right for decision. There is not any doubt but the -- there will be under this statute a conveyance of properties from Penn Central estate to Conrail. There was a suggestion, which hasn't been mentioned here, but perhaps would just confuse you. But there has -- was a suggestion that you could litigate this question before the Special Court, just before the transfer took place after the plan had been finally approved. The Special Court said in its opinion that that was not possible in the time that they have, which might be as little as 10 days. They certainly couldn't under to decide whether or not there was constitutional consideration provided in the plan for the properties that would be conveyed. The fact is that this conveyance is going to happen and that there is no other Court, no other procedure by which we can find out whether or not that the process is constitutional, whether the Tucker Act apply. Now the other point, which I think is even more important, it -- but perhaps sounds a little bit like blackmail, but it is important than the less. The Special Court has ruled as you will find if you read its opinion, that the mandatory conveyance features, what I am talking about are constitutional, not standing alone but only because there is a Tucker Act remedy. Consequently, if this Court and it indicated that if there wasn't a Tucker Act remedy, it would be forced to operate under the statute to remove the estates from the operation of the Act, because it would find that the process of the act was not fair and equitable. Consequently, if this Court does not provide the assurance -- let me go back. The Special Court also said, "It was holding its final decision in advance pending the decision of this Court as it was entirely proper Court to do." But if this Court therefore does not provide the assurance that the Tucker Act remedy is available. The Special Court has very strongly intimated that what it will do, will be to decide that the process of the Act is not fair and equitable. And that will therefore, discharge all the railroads including Penn Central from the operation of the Act and the act will abort. So, for practical reasons and I think for very good legal reasons, we strongly urge that you come to the question of the Tucker Act and decide it. Now, I do not think you have to get into as much trouble with respect to interim erosion problem. That's the second of the problems that are raised by the Fifth Amendment. The court below reached it on that basis by holding that there was such likelihood that that there would be a point reached or the continued compulsory operation of the estate at loss would be unconstitutional that they ought to decide whether it was appropriate to do that and whether there was Tucker Act remedy. Now, the conclusion of the court is to whether that s likely is subject to vat amount of writing in these briefs. There's controversy over, what constitutes erosion. There is controversy over, how you measure erosion. There is controversy over, what the various measurement shows as to what the erosion has been in the past and what it will be in the future. There is uncertainty to be sure as to how long the planning process will last. The timetable itself as the Solicitor General has indicated has been extended ones by four months by Senate joint Resolution 250, which is on the President's desk now for signature having pass both Houses. And I have no doubt it would be signed by President Ford, shortly. And there is the possibility under the Act that Congress may reject the plan provided by USRA. It has 60 days within which it can be veto either House can veto the plan. At that point, although there is a tight time schedule up to that point. At that point, there is no time schedule for USRA to submit the next one. It has to do it, but it can take it sweet time about it, the next month and the next month after that. So, that nobody can be sure how long Penn Central will be continuing to operate its rail properties. All of these mean that there is disagreement to a degree over the likelihood or the degree of likelihood that there will be a point of unconstitutionality. But everybody agrees that it will be that there is some possibility of it and in that event, only a Tucker Act will save the statute. And I further agree with what Mr. Cutler said. If you find that the Tucker Act is available on either the unconstitutional erosion or on the improper taking, you have answered the question. Because nobody has suggested that the Tucker Act is available for some of the takings under the statute, but not for all of them. Well, so much for the Tucker Act. I don't believe that I need to add anything to what the Solicitor General has said about the nature of the argument on that question. But I would like to make a couple of comments, which I think the Solicitor General did not make and which I think irrelevant. I perhaps, do not correctly read judge Aldisert's opinion below but I sense in this comment he said that if he found there were Court of Claims remedy, it would be, "Judicial legislation on a grand if not arrogant scale." I think, I sense in that a feeling that what he was afraid of was that the possibility of a Court of Claims judgment if there were jurisdiction in the Court of Claims would be huge. It might be hundreds of millions of dollars or even more than that and of that was one of the reasons why he thought that he could not appropriately say that the Court of Claims judgment was available. If that is true, if there is any relevance to the question of the availability of the Tucker Act as to the size of the potential judgment against United States, there are a couple of considerations which the Court should have in mind. The first is that, a decision now by the Court that a Court of Claims remedy would be available to remedy any inadequate compensation in the taking by the compulsory transfer is no sense as the Solicitor General has said an ex post facto argument. The Congress can deal with that in two ways. In the first place, it has to look at the plans that come from USRA. If it gets the first plan and the financial viability of Conrail looks pretty shaky or they are not sure that it is going to be adequately funded or adequately profitable. They can send USRA back to the drawing boards because they would say, "We do not want to take the chance that this one might cause a very large Court of Claims judgment." And they can continue to do that until they are satisfied that what the plan provides will either minimize or eliminate the possibility of a Tucker Act judgment of any substantial size. And secondly of course as the Solicitor General says, they can repeal or amend the statute. But I think it -- this is a fair comment. I believe that it is probably true that this statute with the combination of the power of the Congress to reject the plans it does not like, so it gets a plan it wants combined with the sort of combination, reorganization, condemnation features of the plan with the Tucker Act remedy at the end is probably the least expensive way for Congress to preserve an important national asset which is now no longer able to preserve itself. Or to put it boldly, I think Congress would prefer a Tucker Act remedy to the requirement that nationalize this railroads. Let me make one other comment which is important to us in terms of the Tucker Act in which the Solicitor General has not mentioned. In the court below and in this Court, the appellees as Mr. Cutler has pointed out, that even if you have a Tucker Act it really is not adequate, it is not enough. We disagree basically with the appellees on that point but we do have some concern that if the Court finds, that there is a Tucker Act remedy, that we can maintain a suit in the Court of Claims, that we have an adequate remedy on the Court of Claims and not a chancy one. We set out the whole argument at pages 63 to 67 of our brief, but let me illustrate the problems. In the court below in the argument before the three-judge court, I expressed some concern that the Government did not recognize that we had to have an adequate Court of Claims remedy. For example, that the Government did not recognize that the fact that the trustees were trying to accommodate to the public interest and we are trying to accommodate to the statute by keeping the railroad running rather than trying to stop it, would not be urged against them in the Court of Claims as a waiver of their right to have remedy for unconstitutional erosion if that occurred. In response, the counsel for the Government gave me that assurance and we have quoted the language of that assurance in our brief. In the briefs in this Court, both in the briefs of the Government parties and in the briefs of the United States Railway Association, there is a suggestion now that -- well, the trustees may not -- may forfeit any right to unconstitutional erosion because they are not diligent in applying for permission to stop. And they sight Section 304 (f) which permits interim erosion with the permission of the USRA. The theory apparently is that unless we apply to stop the whole system and USRA denies us that right. We may have waived our right to compensation. Just -- it seems to me so painted that Section 304 (f), which I will not burden the Court with the dissertation on does not contemplate that USRA would be permitted pending the preparation of a final system plan to authorize the abandonment of the termination of operations in the liquidation of the entire Penn Central system. Indeed, as the Special Court noted, USRA does not really have the power all by itself to do that anyway because any reasonable objection by a state, local or regional transit authority will inhibit USA's permission to make any abandonment's. And plainly it seems to me, no application by Penn Central Trustees to stop operations on the whole system would be entertained by USRA and it would be futile to make the application. If the Solicitor General and Mr. Cutler still share the view that we are subject to that obligation before we can protect our rights to interim erosion. I hope the Court will disabuse them of that position in their opinion. Now, let me turn to another point as I have indicated, the trustees do agree with the appellees here. That absent to Tucker Act remedy, this statute can not be sustained. I don't propose to argue that position in detail because it is adequately argued in our briefs and it is adequately taken care off in Judge Friendly's opinion in the Special Court. But I do have a few comments on the appropriate relief, if the Court determines that there is no Tucker Act remedy and that the statute therefore should not be sustained. I think under those circumstances -- Byron R. White: Is it conceivable that the Court could determine that there is no Tucker Act remedy and that nonetheless the statute -- Charles A. Horsky: Is constitution. I'm going to relay on the appellees to convince you that that is not the case. I am assuming -- I'd like to talk just for a moment as to the remedy in the event should determine that the statute is not constitutional because there is no Tucker Act remedy. Potter Stewart: It is also conceivable of course, that the Court could hold the Act as not constitutional despite a Tucker Act remedy. I mean, there are other attacks constitutionality's -- Charles A. Horsky: That's right. I have -- Potter Stewart: Come down and a -- the payment in securities rather than cash and all sorts of it, like that. Charles A. Horsky: I have one point like that myself that I would come to, but let me take on premise what I think the appropriate relief should be. I think the lower court in an essence structured it correctly as the Solicitor General said, the first paragraph of the order just enjoin USRA from certifying the final system plan of the Special Court. That doesn't stop the planning process. It permits it indeed to go on right to the conclusion, so that the Congress will have whenever it has to deal with the statute again a completed plan before it. What it does is to interpose the court order, the stop order at the last possible point before the inexorable process of the act would transfer the property from the Penn Central estate. Paragraph 2 of the order dealt with the Section 304 (f) problem and I think it appropriately said don't have any inhibition upon the power of the reorganization court to take whatever actions are necessary to protect the constitutional rights of the creditors. But let me come to the third one, on which I disagree with the Solicitor General. This is the paragraph of the order that you inquired by Justice Stewart, Section 207 (b) of the Act, which requires the reorganization court in the event that it finds that the process of the Act is not fair and equitable to dismiss the proceeding. It is possible that that Section will never come act operation, but it is also possible as I have indicated that if this Court finds that there is no Tucker Act remedy, the Special Court will affirm the decision of Judge Fullam, who found that the process was not fair and equitable, and the question will be does Judge Fullam have to dismiss the Section 77 proceeding. Now, it is a very curios little piece of the statute. We suggested in the court below that the only possible rational basis for it and it has no legislative history was as an interim device to add a really quite unpleasant consequence to the decision by the reorganization court that the statute -- Potter Stewart: What if really make all that difference there would be an equity receivership I guess that -- Charles A. Horsky: It would presumably be an equity receiver. We can live under equity receivership. But all of the problems, all of the ancient law that you have to go back to find out exactly how you operate under an equity receivership, would have to be brought to surface and explore and I frankly do not know the extent -- Byron R. White: The only thing that will be deprived of is a liquidation type reorganization plan? Charles A. Horsky: You'd be deprived of the entire -- Potter Stewart: You wouldnt be deprived of that. Charles A. Horsky: Apparently of Section 77, whatever it gives you. Byron R. White: In order to carry out liquidation? Charles A. Horsky: In order to carry out reorganization or liquidation -- a New Haven type reorganization or a sale in pieces or various other kinds. Byron R. White: Yes, but you do not reach this unless you find the railroad isn't reorganizable as a profitable railroad? Charles A. Horsky: Well, it is not reorganizable as a profitable. That's -- That has been decided by Judge Fullam in the so-called 120-day hearings and nobody disputes that. But reorganization on an income basis is not the only basis upon where you can reorganize railroad and all the statute does is to say, "Look Mr. Reorganization Court, if you find the process of this Act not fair and equitable, you got to rid of Section 77 proceedings." Now let me, it's not -- it isn't part of the statute, but USRA did not even appeal that part of the order. They do not care whether this operates or not. We do, we are operating under Section 77 and it would just be inconvenient and perhaps worse than that if we had to transfer it to an equity receivership, it might be alright but raises problems that we'd rather not face if we do not have to. Now, the basis upon which the lower court entered that part of the order held this Section unconstitutional or was it violated the Uniformity Clause of the Constitution. The appellees have a general attack on the statute on that basis that very -- a good many Sections, indeed probably the whole Act ought to be strong enough on the ground that it is not uniform because it applies only in a region. We don't agree with that. But on this particular one, this particular Section, I think it is valid one as two judges in the court below did. This is simply a state that these particular bankrupt railroads and this particular part of the United States must be denied the advantages of Section 77 under particular circumstances. If a railroad on the west coast, tomorrow files a Section 77 petition, that petition is not defeasible under some -- under the circumstances of this Act because of any circumstances like this. The Penn Central petition is defeasible under this Act. William H. Rehnquist: But Judge Friendly's basis for sustaining that by the Court of special appeals or the Special Court was that in effect Congress was including all presently bankrupt railroads in the system, and if -- and it seems to me that if you make that argument with respect to your point, Mr. Horsky, that Judge Friendly would rule against you? Charles A. Horsky: Well, I am not sure because it seems that you have here a situation where the problem is imminent as between debtors. You have debtor on the west coast whose Section 77 petition is not going to be dismissed because of this condition. You have Penn Central which where it is going to be dismissed or maybe dismissed because of this. The two railroads are treated differently. Now perhaps, you can treat debtors, debtor better on the west coast different than a debtor on the eats coast. But you can't do it under the Bankruptcy Act, under the uniformity I should think. This is certainly not the Commerce Clause. In any event, we hope that you will sustain the -- Potter Stewart: Do you agree that if the constitutionality of these pro -- the provisions of the Act now at issue are upheld in this litigation and in view of what the Special Court has done, then this point wouldn't arise. Charles A. Horsky: This point would be moved. Potter Stewart: That's correct, isn't it? Charles A. Horsky: Yes. The Special Court will then finally and definitively reverse Judge Fullam and hold that the process of the Act is fair and equitable, and no circumstances the -- about Section just doesn't come into our brief. Thank you very much. Warren E. Burger: Thank you, Mr. Horsky. Mr. Craco. Louis A. Craco: Mr. Chief Justice, may it please the Court. I regret the necessity of disturbing the congenial set of agreements and concessions with which previous counsel had approached this rostrum, and to take issue with virtually all counsel who have appeared before me. I represent the appellant and the appellees in Connecticut General, secured creditors of the Penn Central Transportation Corporation and we appear in support of the injunction issued below, and the declaratory relief of which it was course of relief declaring the Act in significant part to be unconstitutional. I hope in by taking immediate issue with the notion that the tasks of the creditors or for that matter, the stockholders represent my brother Mr. Berger or for the New Haven Trustee, here again, represent by Mr. Auerbach is to force a nationalization of the Penn Central Transportation Company or to impose a collision with either seller or this. It is our task, it seems to me, to suggest that this particular remedy fashioned by this particular Congress, for this particular set of problems represents a reach in excess of the constitutional grasp of the Congress and we do not mean to suggest that a proper solution to these problems is beyond the width or wisdom of the national legislature. The root position that we take and I take it that this now is conceded to be the issue is that if the Tucker Act be not available, the Rail Act is unconstitutional and that it furnishes no assurance that the bankruptcy estates will receive fair compensation, either for the rail properties ultimately conveyed or for the interim erosion sustained until such conveyance. We argue that the Tucker Act is not available on a fair reading of the statute and that the Rail Act in this respect was properly enjoined below. Let me take up initially the preposition raised by Mr. Justice Rehnquist as to whether all these troublesome and questions need to be reached now or whether sufficient to the days the eagle there up. We submit that these questions are right now Mr. Justice Rehnquist, for a number of reasons that I would like to touch on quickly and likely. First of all, as other counsel in particular the Solicitor General has observed, the Act is enforced now and there is nothing whatsoever contingent about the inexorable operations of the Act between now and the date of conveyance. Secondly, notwithstanding the provisions of Section 303 with regard to ultimate compensation, erosion in the interim will be sustained and that is occurring now. The court below found it likely that those -- that that interim erosion would arise to the level of unconstitutionality during that interim period and the protection that we require and the assurance that we require for compensation as to those matters it seems to us matures daily. William H. Rehnquist: Well, that I can see that might be a basis for attacking the abandonment's or the anti-abandonment provisions, but why would that afford a basis for attacking the ultimate compensation the fact that interim erosion occurs? Louis A. Craco: By itself, it might not. We take it together, however, with the contention made here that the ultimate conveyance and compensation mechanisms are sufficient onto themselves to compensate for the erosion which is being endured. And if they are not, then the impact of the interim erosion argues for consideration of adequacy of compensate or mechanism now. Furthermore however, under Section 209 of the Act and under Section 303 (b) (2) of the Act the last sentence, the Act specifically excludes future review of the compensatory mechanisms by injunctive procedures, so that the remedy that Mr. Justice Rehnquist suggested as possibly being available on some future date, is attempted to be precluded by those provisions of the Act. And most particularly the Special Court is given no discretion under the Act but to orders the conveyances upon the certification of the final system plan. If there are any doubts about the statutory intent from that, the Senate reported at page 33, it says it, one little word after the other that the Special Court is given no discretion to withhold those conveyances. The fifth point, I would make on the question of rightness Mr. Rehnquist is that, all of the objectionable features to which all allude in a moment of the Act are no mean knowable now and nothing implicit in the passage of time or what might transpire during the passage of time, can change the legal characteristics of those features of the Act. And finally, we would content that and this is close to the heart of our case that, the constitutional vice of the Act, is that it imposes upon the private sector, the creditors, the stockholders, the unsecured creditors, the entire risk of the success or failure of this operation during the interim. The entire risk of loses in the interim, the entire risk of in adequacy of compensation in the end, the entire risk of the difficulties of obtaining a final system plan that can work, the entire risk of conjec -- congressional rejection or in pass, and it is our preposition that when our property, for the property of the estate in which we have claims is requisition in the public interest for a continued or final operation for a public purpose. It is constitutionally impermissible to impose those risks upon us without just compensation and all those risks are discernable now, though, absence of assurance is discernable now and we think, the issue which that risks presents is right now. I've said that the Act precludes assurance of fair value and I would like to tell the Court that I've post to address two issues. First, touching lightly in the light of the Solicitor General's concession on why we believe the act is constitutionally vicious in the absence of a Tucker Act remedy and then touching somewhat or heavily I hope, on the question of whether the Tucker Act is there to rescue the Act. I say, I'll touch lightly on these questions recognizing the possibility that Mr. Justice Stewart raised that the Act could be conceivably considered by this Court. Sustainable in the absence of the Tucker Act because I think the Solicitor General's argument on the point as a quasi appellee for the moment was persuasive and perhaps, sufficient to the occasion. That in the absence of the Tucker Act the show is substantially over. But let me touch on four characteristics of the Act that it seems to me condemn it as a constitutional enactment. First, there are no provisions in the Act. I mean, literally none at all. That provide for a payment of the interim erosion sustained by the estates until such time as the conveyances occur. And we submit that that imposes upon the estates both the risk and indeed a very likely certainty of unconstitutional erosion on the estate and of the claims against the estate as their interest might appear. The second consideration and I think this is -- it's important to frame this in terms of the about intention, to frame this Act like unto the New Haven inclusion prospect. The Second consideration in that context is that, there are no provisions in the Act. Again, literally none, which create what the New Haven Inclusion case characterized as an intrinsic value for the Conrail stock. In the New Haven Inclusion case, Judge Anderson had after negotiations endorsed in $87.50 per share value for the stock in the Penn Central, nothing establishes such value here. We'll be gone though that assurance was there. We have in this situation substantial evidence in the record with regard to the liquidation values of the Penn Central estate and we have maximum obligation or authorities which fall measurably short of that amount. And so, we are left with consideration in the form of a package of securities as to which as I say, there is no intrinsic value supplied by the Act. The third feature and this I take it to be conceded as a constitutionally impermissible feature of the Act in the absence of the Tucker Act on page 39 of the Federal appellee brief is that, there is no traditional determination of the fairness and equitableness of the consideration prior to the irrevocable execution of the conveyances. As I say to the Solicitor General, has conceded that that constitutional entitled and exists. The Special Court has rejected the invitation of the Solicitor General to extract such an opportunity in the short time between certification of the final system plan and the maturing of its obligation to convey. And that's the Special Court's opinion on page 68. Not only does this absence of an opportunity to determine an advance, whether the consideration is going to be fair and equitable to the estates. Constitute in itself, constitutionally impermissible feature of the Act. But I think, it radically distinguishes this case from all the cram down Presidents. Most particularly the Rio Grand case and the visitation on the cram down provision which I happen to think is best laid out in Mr. Justice Douglas' dissent in the Sancho Paper case. The heart and soul of the cram down provision is that prior to the imposition of a plan of reorganization upon dissenting interest of shareholders. The Court upon its informed discretion with the aid of the Interstate Commerce Commission shall determine that the plan is fair and equitable. That is shall determine that consideration at a time when it has the power to do something about it. And the vice of this Act and the distinction from all prior considerations of cram down is that, there is no judicial intervention to ensure that result. And finally and favorably, there is no underwriting provision in this Act. The New Haven plan as you will all undoubtedly recall included a deep pocket in which the Penn Central had undertaken to make good any excess of value that might judicially be found in excess of the intrinsic value of the stock or the marketable value of the stock at the time that the stock was received. And at 399 U.S. particularly at pages 486 and following, the opinion of the Court, lays heavy emphasis on the importance of that underwriting provision. What that meant was it they're stood behind the commitment of the plan that was presented to you, and irrevocable contractual commitment, to make good on any consideration that might be required in excess of that provided by the immediate features of the plan. And it is our position that that underwriting provision is utterly absent, deliberately absent, from this Act. Section 303 (c) which is the compensatory provision of the Act provides the exhaustion of the constitutional minimum of one's rights in a deficiency judgment against Conrail, the point that I will come back to in my discussion with Tucker Act. But most particularly, the conference report which is set out in the legislative materials furnished to you by the Solicitor General. At page 56, it makes clear of an -- any further clarity were necessary from the statutory language that the provisions of the Act with respect to the terms and conditions of the securities issue. "Shall not include any form of federal guarantee of the value of the corporation stock." In other words, the underwriting provision which this Court found to be essential to the survival of the New Haven plan is explicitly precluded by the conference report and fairly excluded by the statutory scheme here. So, those positions taken separately and most particularly those positions taken in the aggregate, lead us to the conclusion that this Act is valid over the Fifth Amendment. I speak now, not of the questions of uniformity. I'm not going to address myself to the questions of due process. It seems to me that those have been adequately briefed over or will be dealt by my brother. But the point of the fundamental on fairness of the Act in acquiring private property or a public purpose without, and a short compensation upon the hypothetical allegation that attracts the experience of the New Haven. It's simply wrong as a matter of law and wrong as a matter of history. Now that underwriting, which the statute does not in terms provide and the constitutional deficiency which the Act does suffers is sought to be repaired here by the introduction into the mix of the Tucker Act. The reason why the Solicitor General and the Trustee of the Penn Central, both acknowledge to you quite candidly I think, that the Act is unconstitutional in the absence of the Tucker Act is because they recognized the necessity for that character of underwriting which the New Haven found essential, and which the Act does not appear to provide. Potter Stewart: That was a found essential on the context of other not it was fair and equitable plan wasn't it? Louis A. Craco: That's right, sir. Potter Stewart: And whether or not it was constitutional. Is there a difference in the test? Louis A. Craco: No -- Potter Stewart: One higher and one lower or are they equivalent? Louis A. Craco: I think to these purposes of they are the same. The position that you took in that case, dealt with the fairness and equitableness of the plan in the 77 since because it was in entirely voluntary arrangement. We say that the same standards at minimum applied to a situation, where there is no voluntary character to the arrangement but where it's entirely in an exact of statute. Nobody has negotiated the terms of Section 303 (c), they are there. But I think the constitutional obligation of fairness is at least as owners in this case, as the fairness and equitable I suppose it was found there. As your opinion indicated in that Court, at page 488, it would be unfair to require the conveyance of the New Haven assets for what might turn out to be a fraction and their worth. And that on fairness, we think it's the heart of the political ethic of the Fifth Amendment and is applicable here. When we say, when we talk about the availability of the Tucker Act, it seems to me we're in parallel of a certain ambiguity and I want to try before recess to indicate, what we think that ambiguity might be and the nature of the analysis that, I will hopefully address after lunch. There are two aspects to the availability on the Tucker Act. The first is, its legal availability as a substitute for assurances lacking under the Act. A true constitutional panacea as the Solicitor General would set. And the second question arising under the rule of the availability of the Tucker Act is whether as a matter of law of remedy, it is available as an adequate remedy of law sufficient to have required the court below to stay its hand from injunctive relief. And that raises some different considerations from the issue of pure or legal availability. It will be my contention when we return and I'd say that we're about to leave, that the availability of the Tucker Act is a femoral on both considerations. That the remedial structures of Section 303 of the Act, do not impliedly repeal the Tucker Act. They simply displaced the Tucker Act in regard to the circumstances. Warren E. Burger: And that amounts to a repealer or does it not in your terms? No, sir. I think what it does -- Louis A. Craco: Preemption sort of the -- We can get into a semantic this course here but I think that there's a difference between repealer which is not likely to be implied, which is not to be implied and to strike down in Act on a one handn and a preclusive effect of an exhaustive and complete remedial Section which while not repeal in a Tucker Act. It simply exhaust the remedies of the Tucker Act would not -- will otherwise be available for. We think as I say, the Section 303 is so complete on its terms and so utterly consistent with the purpose and policy of the Act that it be complete on its term that the Tucker Act is not fairly understood to be available here as a matter of law. Potter Stewart: That's true in the flooding case I think. Louis A. Craco: I don't think it was true in the same sense and it seems to us that in that case, there were radical distinctions which I oppose to address, both the flooding case, the Lynch case and Hurley -- Warren E. Burger: But if this Court says it holds that the Tucker Act is not repealed and controls what is that do to your position in this respect? Louis A. Craco: Then, you have to reach the second question as to whether or not the punitive existence of a Tucker Act remedy here provides a remedy which is sufficiently certain and clear as to have required abstention from the injunction below. Warren E. Burger: You mean, when I pursue that after lunch. Louis A. Craco: I will. Thank you. Warren E. Burger: Mr. Craco, you may continue. You have -- now, I don't know exactly how much time. Louis A. Craco: I think I have about 10 minutes in modest encroaching rights on my brother. Warren E. Burger: Very well. Louis A. Craco: Mr. Chief Justice, may it please the Court. In dealing with the Tucker Act, let me go directly to the cases in which our adversaries find solace, are Hurley and Lynch. I'll touch on them briefly because I think in the distinction between those two cases which I think is a cardinal distinction, lies a material inside into the character of this case. First of all, let me say that I would like to rely on the area addition and the analysis of Judge Friendly in the Special Courts opinion beginning at about page 94 and footnote 101 on the Hurley case. Plainly, that is the case in which Congress evidenced an indisposition to be beset by damages for consequential liability for consequential damages, arising from floods incident to a flood control program. It said nothing of the question of what remedy it would or would not afford for taking if in fact the taking occurred. And the Court goes no further than to say, that upon the discovery of an actual taking of the -- by the way in this position of the Court to entertain of the Congress -- to entertain claims for consequential flood damage is not meant to cut off recourse to the Courts under the Tucker Act for clear and present taking. In common with the Lynch case and this is the key, it seems to made distinction between those cases and this. In common with the Lynch case, Hurley had no provision in the Act with respect to remedial characteristics of the statutory scheme. The Solicitor General quoted to your language which I think is at the heart of the matter in -- from Lynch, its at 292 U.S.586 and their, the Court in identifying why the abrogation constitutional or not of contractually rights did not infer an abrogation of the remedies, said this, "There is no separate provision in Section 17 referring to the Economy Act, dealing with the remedy." Now, those cases -- Potter Stewart: That was the insurance case? Louis A. Craco: That's the insurance case. Now both of those cases, it seems to me, proceed in the absence of a remedial provision. This case proceeds in the presence of an exhausted remedial provision and that is the distinction that I want to emphasize. It brings me to the first of the two twin arguments that I indicated that I would make that as a matter of law, the Tucker Act is not available here because there are remedial mechanisms provided for in Section 303 (c) of the Act which are on their phase and by any fair construction in the interplay of Sections, preclusive of recourse to any other remedy. The remedies provided by Section 303 (c) are supposed to provide the estates with everything that they are entitled to get. The statutory languages that they are to provide for the recovery of the constitutional minimum, which I take it to be stingy, rather it for that which just compensation required. They command further and this is of importance, regurgitation by the estates of any excess over of the minimum constitutional value. Their exclusivity is hedged about by two other provisions of the Act, Section 209 of the Act which prevents any injunctive recourse by any other Court and Section 303 (b) (2), which provides that no other Court may enjoin the conveyances. So, that this Court that is the Special Court, is invested with the entire scope of remediation under the Act. And that remediation is made by the terms of the Act, coextensive with the constitutional entitlement of the estates. In other words, it is not contemplated by the remedial provisions of the Act that they'll be anything left over to which in a State might be entitled that it could go any place else to recover and the catch all the bag, at the end of the remediation provision, a place where you get everything that you're entitled to if you don't get it from the stock, if you don't get it from the user bonds, is a deficiency judgment against Conrail, and no where else. As I indicated to you this morning, the language of the statute which turns you face towards Conrail for the full remediation of your rights is buttress by the language of the conference committee report which indicated in as many words, that there was to be no federal guarantee of the value of the stock and precludes by inference that which the statute precludes in terms. This arises from no elaborate cannon of construction. This arises from a fair reading of the statutory terms and the interplay of the statutory structure itself. And we suggest that the recourse to the cannons of construction advanced to you by the Solicitor General today is designed to avoid the plain meaning of the provisions of the Act and to -- rather than to elucidate an obscure meaning. Warren E. Burger: On such an important question Mr. Craco, it would have been very simple for Congress to have made that clear in one sentence that Tucker Act is out of the picture, would it not? Louis A. Craco: I think it would have and obviously this issue would not be here if they had done so. Justice Frankfurter indicated that statutory interpretations tend to come to this Court with some patent on both sides to the question. But we think that they did not for one clear reason. They didn't think of the issue in those terms. They were trying to construct a reorganization statute and it is not the common learning of reorganization cases that you look to the Tucker Act for your ultimate recourse. Warren E. Burger: You're suggesting indirectly that if there were some hypothetical way to take a poll of all the 435 members of the House and all the members of the Senate that majority of them never gave this subject in any thought one way or the other? Louis A. Craco: I think that's very likely so in and for two reasons. If you looked at what they did do, they were talking the language or reorganization. And they were talking it in the context of warnings from the secretary of transportation that if they started talking about takings, they might very well run into an interpretation in this Court or some other that they had in fact affected in a domain statute. So, I think they saw assiduously discipline themselves to the language of reorganization and so carefully tried to track the experience of the New Haven, that they avoided any of the redirect that might have implied in any way, that a right might us accrue under the Tucker Act from which they were precluding a remedy. I think that's the only fair construction of the purpose and policy of the Act taken at large, part from the provisions of the Act themselves. If you look at Section 101, Sub 6 of the Act, it's the last of the purpose on provisions of the Act and it's very clear. What they said about to do and let's be heard clear about this because it governs both arguments I have. What they said about to do, was to try to find out whether they could effect a rescue of the Northeast Rail system by a modest investment of federal funds at the least cost to the taxpayer, with the language that they use. And it seems to us that what they did in fact was ratio the amount of funds that were to be available. That's instinct in the legislative -- Thurgood Marshall: Well, assuming that they didn't intend to do anything with the Tucker Act, the Tucker Act is still there? Louis A. Craco: The Tucker Act is still there unless they precluded its application by another remedial statute which they did in fact enact and it's our position that they did that in this case. Thurgood Marshall: Well, I thought you're argument was that the remedies provided here were different from the remedies to Tucker Act. Louis A. Craco: That's right, different and exhausted. Thurgood Marshall: So, how could they be precluded the Tucker Act, if they are different? Louis A. Craco: It's different, it's exclusive, and it's exhausted. Thurgood Marshall: But what do you have that says it's exclusive? Louis A. Craco: The inference from the language of Section 303 (c) that says that if the provisions of the Act do not provide the constitutional minimum to the estates, then, the Court shall enter a deficiency judgment against Conrail. Now, the constitutional minimum is presumably the content of the cause of action you haven't under the Tucker Act. Thurgood Marshall: And if there's any other provision in Congress, it wouldn't apply. Louis A. Craco: I'm sorry sir. Thurgood Marshall: Any other provision of Congress as action wouldn't apply, is that your position? Louis A. Craco: I think it's? I think they intended and did turn you away from other provisions of Congress that would provide a remedy in the absence of the remedial legislation that they enacted here and told the estates to have their complete constitutional -- Thurgood Marshall: So you say that they? Louis A. Craco: On Conrail. Thurgood Marshall: What they did but to say that the Tucker Act does not apply. Louis A. Craco: In effect, yes. Thurgood Marshall: How can you say that without the Congress is just -- without mention it, they would appeal it? Louis A. Craco: Because as I said before -- Thurgood Marshall: All limited. Louis A. Craco: I don't think that they were talking language of condemnation at all. And they were talking language of reorganization and in so talking, did not mention the Tucker Act. The things that they did mention by the way, the other repealers that they have, are all directly related to the implementation of the final system plan. They have nothing to do with the remedial features of the Act at all. But I think it's important to understand the question of adequacy as well as availability and if I may turn -- Warren E. Burger: On that score, what would -- what's your view? What would happen if Conrail could not pay the deficiency judgment? Louis A. Craco: That's -- that gets me to adequacy right away. The simple answer to that Your Honor is that, the practical consideration underlying this entire discussion of the availability of the Tucker Act has a surreal quality about it because you get to the deficiency judgment under the Tucker Act. Only if your deficiency judgment against Conrail has been exhausted and returned unsatisfied. The hypothesis, which necessarily assumed that the security packages that you've been afforded prior to that time, have been exhausted and are substantially without value. The notion by the Tucker Act remedy arises at all for a sliver of value on top of a package of given values be lies the fact that it arises as it deficiency at all, only when Conrail can't respond to it's own judgment. And if that juncture I suggest to you you're into a situation, where the Conrail situation has collapsed. This remedy -- Warren E. Burger: That's what some people who are concern about it, is it not? Louis A. Craco: Yes, it is. Warren E. Burger: Then why I'm curious, as to why you characterized others a sliver, sliver of value? Louis A. Craco: Because at that point, the stock will be without value of Conrail can't respond to a judgment for no more than the asset value of its operating assets. The bonds which are secured by its assets will not be a substantial value and if that point the deficiency which will ensue will be greater than the -- than any hypothetical difference between the existing value and what the Special Court awards. The point is, that much more are likely in any real world than a Tucker Act remedy in the Court of Claims is at Conrail Section 77 and going to the question of whether the Tucker Act remedy can ever be adequate. It assumes an acquiescence of protracted acquiescence by the Congress in the ongoing process of this Act, at a time when they've indicated that they want their investment to be limited and that protracted acquiescence I suggest to you, they have advanced no disposition to entertain. We think that the Act on the Tucker Act is not a plain remedy. It's not a certain remedy. It doesn't even get reached until after all the processes of the Rail Act are exhausted and until Conrail has collapsed. And those we say, in addition to the reasons why under the structure of the Act, the remedies are unavailable at all. Make the putative remedy in adequate as a matter of the law of remedies. And on those grounds perhaps surprisingly, we suggest that it is unavailable and argued at the court below quite properly rejected its availability, thank you. Warren E. Burger: Very well. Thank you, Mr. Craco. Mr. Berger. David Berger: Mr. Chief Justice, may it please the Court. I represent the Penn Central Company which is the sole stockholder of the railroad and reorganization here. We agree with Mr. Craco's analysis of the Act and we also agree that under the statutory scheme, the entire risk here is being imposed upon the claimants in the reorganization proceeding. Now, Mr. Cutler has stated that Congress can stir the ship of state in between seller and corruptors But the stockholders and the creditors in this reorganization proceeding should not we submit, take the risk of being torpedoed during that extremely, precarious voyage. And these points up the uniquely precarious position of the Penn Central Company as a sole stockholder it represents 160,000 shareholders, a significant portion of whom in Judge Fullam's words do not readily fit the image of sophisticate investors. Moreover, Penn Central Company has a massive unsecured plan conceding $41 Million. And as such under the absolute priority rule, Penn Central Company is at the bottom of totem poll. I would suggest that enter an erosion may hurt some of the claimants. But interim and continuing erosion must hurt my client Penn Central Company. In short, Penn Central Company is hurt the first and its hurt the worst. Now, no one in this litigation is contended that Penn Central Company had or has no equity. The trustees figures reveal at the put value at the day of reorganization was some $16, 066 Million of the equity. And as of the date when the Act took effect, this had dropped the $684 Million. Byron R. White: What was the first date, the date of merger? David Berger: No, the date of the petition for reorganization, Your Honor, 6/21/1970. Potter Stewart: Oh, yes. David Berger: And on the date when the Acts of the facts, it then already drop the $684 Million and using the Solicitor General's figures coming from his brief, he says that, the current liquidation value of the estate of apparently exceeds the valid claims against it by a minimum amount of $1.3 Billion what she contends is adequate to cushion this secured creditors. The secured creditors don't agree but it's certainly is not adequate to secure to constitute a cushion with respect to the unsecured creditors or the stockholders. Now dealing with the past erosion, the briefs and their many, many, many pages on this point, I think this comment is warranted, may it please the Court. The facts are undisputed. Only the interpretation is different. We think that Government's interpretation mistakenly minimizes the past erosion. We would prefer and we think it's correct to rely upon the trustees figures. After all, the trustees or officers of the Court, they certainly have no motive to misinterpret the figures and moreover, looking at the history of the reorganization for the past four years, the trustees have supported in the public interest to continue rail operations of Penn Central even at this huge loses. And indeed, they have steadfastly resisted claimant's attempts to terminate the reorganization proceedings under Section 77 (j) William H. Rehnquist: Is that in the position of your client in the reorganization court Mr. Berger that the operations are ought to be terminated? David Berger: We have since petition in the Court terminates the rail operation, yes Your Honor. Now, their figure show that the accumulation of post bankruptcy priority claims at the minimum amounts to $745 Million to which they had a very conservative figure of $40 Million for the physical decline in the value of the assets or making a total of $785 Million. Now, we submit by the purposes of this case. It is not necessary at this time for the Court to quantify past erosion of the penny. The secured creditors say that this past erosion exceeds $785 Million and we agree. The undisputed facts stipulated in this record, may it please the Court, is that $851 Million was lost in the Penn Central rail operations from the date of reorganization to the date of the enactment of this Act. Now, we submit the clear witness and not in this record to work defining of the court below and the reorganization court that the point of constitutionally impermissible erosion has either been reached or will soon be reached. And thus, the case in this juncture, in this posture, presents a question very like that presented in Chicago and Rock island, 294 US 648-677, sited with approval by Mr. Justice Stewart in the New Haven Inclusion cases. That it presents a question addressed not to the power of the Court but to its discretion. A matter I submit peculiarly within the discretion of the lower court and a matter in the words of Rock Island ordered by this Court not subject to the interference of an appellate court unless discretion will be improvidently exercised, it certainly no evidence of that. Now I would say that, erosion in the order of $785 Million to 800 Million in the language of Government Attorney Dausch obviously has either in the stockholder's account and on check this continued erosion will not be into the stockholder's attempt or will devour it. Clearly, this record justifies what the reorganization court said and it said that "The creditors and the stockholders of the Penn Cent have exhibited commendable patience and restraint in supporting the continued operation of the railroad during reorganization and it cost of nearly $1 Billion." My duty representing the stockholders I submit, is to try to prevent the wound arising from this massive erosion from having fatal consequences, to prevent the Government from conducting this railroad experiment at Penn Central Company's expense with the result of physically killing Penn Cent. Now, a word about future erosion and I think that's in misnomer, its -- we used that phrase in the briefs. Right now, it's happening as we argued the case. This erosion is continuing right now. The enforcement of Section 304 (f) inexorably will cause continued erosion, as a trustee characterize it today, huge loses during the planning period from January 2, 1974 until the consummation of a final system plan if that should ever happened. Now, how long will this be? Well, we now know that it can't be for a period less than two years because of the 120-day extension.Realistically, I think we're talking about three to five years. And I would point it out, that there is no limit to the number of final plans Congress may reject. Indeed, there's no assurance that Congress will ever approve a final plan. It seems to me, that unless there is clear explicit protection against these huge ongoing loses which the lower court as demanded reorganization court estimates would run from between $200 Million per year for one year, $400 Million for two year and if we take in 1976 as part of the planning process, $600 Billion that unless we -- there is clear express -- explicit protection against those huge ongoing loses, resulting from the continued, mandated, Penn Central rail operations, as mandated by 304 (f) that the Act must be declared unconstitutional. Now in looking at the Act, I would say that the suggestion in the Government brief that there is some protects and against this interim erosion is just unsupportable. As a Special Court has held Section 303, just doesn't provide any compensation whatsoever for interim loss. And I find no support for the contention that there is any kind of protection or provision for compensation for interim the losses. References made in the brief to Section 213, but I would point out that this grant provision of the statute provides for a total of $85 Million for all railroads, not merely Penn Central. The Department of Transportation and as shown by the letter of Mr. Barnum attached of the trustees brief say, in Annex A. It dependently takes the position that these fines cannot be used to stem further erosion. In order to get grants, the railroads must agree to maintain the service at present levels. So, no abandonment or discontinuance are all possible to come under Section 213, so that's clearly of no withheld. And that brings us then to Section 215. If we looked at that, we find that Section 215 provides only for loans not for grants and these loans are restricted in their use for acquisition, maintenance, rehabilitation of rail properties in the final system plan. No one knows, no one can know. It's totally unknowable now or in the near future what rail properties will be in this final system plan. Total authorization under 215 for the loans is $150 Million for all railroads. And I think the use of binocular, the clincher is that the law explicitly provides that any loan under Section 215 is and will be a charge against the estate, so that any compensation that might be given to the estate for the ultimate taking will have to be reduced by amount of a loan. I submit a summary that Penn Central Company interest are already been terribly ruined about a billion dollars up to the first three-year and being eroded at the rate of about $200 million a year. It seems to me, that inconsumable to put the burden of further interim losses on the estate during the two, three, four, five-year period until the final system plan will have been consummated the words of Judge Anderson paraphrasing Camden the New Haven case. The public has had it's buy from June 21, 1970 to December 31, 1973, a huge buy, $851 million of rail losses. I submit that the public is not entitled to another huge buy of four to $600 million. This would bring the total close to a billion any half. It seems to me again paraphrasing Judge Anderson, Penn Central's duty to the public has been more than amply fulfill. If this huge losses from mandated coerced rail operations must be continued, that can only be done to at the public expenses mandated by Fifth Amendment. We associate ourselves with Mr. Craco and with the argument which my brother Mr. Auerbach will make and we say that not to defy the constitutional question is really to decide it and to decide it wrongly. In conclusion, I would address myself to this question. Would not a definitive the size of whole name by this Court that the Tucker Act remedy exists to be a sufficient answer to my fears about interim and continuing erosion, I think not. This Court as Mr. Justice Stewart suggested cannot provide a real response to a money judgment of the Court of Claims. We can see that whether Congress undertook by this Act to provide that the Tucker Act remained as a remedy is a matter clearly within the province of this Court. It would therefore be appropriate for the Court to determine that the claimants have an effect and subjected to an eminent demand taking for which there's must be just compensation under the Fifth Amendment, but with difference this Court cannot provide the money. If the estimates of continuing entire erosion or anywhere near correct and we submit they are, in three years this with a loan amount to $600 million with the existence of a Tucker Act remedy, afford that kind of assurance which the Fifth Amendment mandates of just compensation. William H. Rehnquist: Well, on you're theory Mr. Berger, then an individual against to whom there was an inversed condemnation ought to have a right to enjoin that rather than simply suing in the Court of Claims, because you can't be sure that Congress will appropriate the money? David Berger: I think that this becomes a matter of agreement, Justice Rehnquist. We're talking about the $10,000.00 piece of property that's being flooded or some chickens like the Cosby case where planes flew to low. There's no reason to believe that Congress won't appropriate the money. But now I think, but realistically speaking and I don't want to repeat what Mr. Craco has urged on the Court. It seems to me, in the light of a legislative history here that we're going to have some difficulty. In fact, I would quote the language of Mr. Adams. Speaking of movements I think that is been mass movement of some kind. Here's what he says in his brief, if this Court should decide at this time, that a mechanism of the deficiency judgment against the United States under the Tucker Act is necessary to make this Act to constitutional, the Act must fall since the legislative history of the language of the Act that clear that no deficiency judgment against the US is authorized by the Act. Now facts this case, therefore in some other case, where you don't have this kind of situation, where you don't have this kind of legislative history, where you don't have this kind of potential very large claim arising from admittedly huge losses, there would perhaps being no problem about an appropriation by the Congress but I submit in this instance there is a very serious fact. And therefore, the only real practical way to remedy this is to send it back to Congress, and give Congress an opportunity to correct the constitutional defect. Warren E. Burger: Mr. Burger is there ever ? David Berger: Excuse me, Mr. Chief Justice. Warren E. Burger: Is there ever any assurance that a judgment in the Court of Claims will be divided for by the Congress when let say an Indian tribe gets a $50 or $100 million judgment or someone else gets a $50 million judgment? David Berger: I wish all my clients were Indians but I seem that they are very well. But they're not, all is stock all is not an Indians here, that's number one. Secondly, the largest is that our research indicates largest judgment the Court of Claims that's been from which an appropriation that made us $40 million. We're talking about lastly larger sums here and my fear is as express by Mr. Craco that the total statutory scheme excludes any greater federal, fiscal intervention than that provided for in the law. Warren E. Burger: Well, your answer to my question I think it is that there is no assurance? David Berger: There is -- Warren E. Burger: Congress will provide the money to pay any judgment in the Court of Claims. David Berger: Except, except a realistic one, sir. History shows that were a judgment is of that nature that Your Honor indicated, Congress does normally appropriate -- Lewis F. Powell, Jr.: Mr. Burger I was simply going to ask you if you would take off what you a guide realistically as the possible alternatives here. I think, we all assumed there is no single course of action that appeals to everyone but it seems to be a consensus that an income reorganization in the normal census not visible. I take it you would not really be eager for a liquidation under the hammer. You suggest going back to Congress but there's no assurance that Congress will come forth with what you might regard is more generous proposal. What are the alternative, realistically? David Berger: Realistically, may I please Your Honor, Mr. Justice Powell. Stated by the Government Counsel in the Court of law that Penn Central and I quote "Is an irreplaceable national asset but that doesn't give the Government the right to treated as though it belongs to the Government or the National Government as such right now." And I would suggest, if this location that would occur, if the rail operation would be terminated is so great, that the Congress should have an opportunity to decide what he wishes to do. Now, if Congress says that it just doesn't care and look back this location occurs, then, there are number of practical alternatives including dismembering of that the railroads selling all parts to the different railroads making transactions with regions if not, with the United States but wherever regional authority, which will include the 17 States through which the railroad runs. And also but we and finally, dismembering those parts which cannot practically be continued to be operated as well. Thank you. Warren E. Burger: Mr. Auerbach Joseph Auerbach: Mr. Chief Justice and may it please the Court. It is fallen into my lap among my brother to discuss with the Court questions of the significant of the New Haven Inclusion cases as they bear upon the issues here and the cause of appeal which the Haven Trustee took in this matter, with respect to the affect of the ultimate conveyances required by the Act which the Law of Court considered premature before addressing myself to those two points, however, I would like to mention briefly as a matter which is a reason during this course of the day, as to which I think the Court would want to be advised. First, the question was asked whether the opinion of the Special Court was appealable and could come before this Court. As we stated in our replied brief here at page 48, "We intend to file with the Court as soon as possible and that will be very shortly, a petition for writ of certiorari under the Ulrich pact." We hope to raise some of the questions. We think the Special Court did deal with certain matters in the unconstitutional way. Now obviously, the decision of the Court here and the issues now before it might move out entirely. But the fact is we do intend to file and raise those issues with this Court notwithstanding the last sentence of Section 207 (b). Another question was asked this morning replies comment. The question was, whether dismissal of the reorganization is a possibility. The New Haven Trustee filed a petition and motion under Section 77 (g), which is the prescribed method under the rail reorganization statute. For dismissal of the reorganization and for the part of the Penn Central Trustee's as receivers on October 9, 1973 something over a year ago. That motion and petition were not heard until May 1974. They were reheard again by Judge Fullam in September of this year but before and he has not yet active but it can't act now because the Special Court has enjoined a dismissal. Another ground for a petition of certiorari. The third point which I would like to refer of this nature is a question with respect to Section 207 (b) by one of the justices this morning to which the Solicitor General replied, I think Section 207 (b) is effectively behind us. The fact is, The New Haven Trustee now has pending in the Third Circuit, appeals from both the 120-day findings and the 180-day findings headed by Judge Fullam which have the triggering Sections for the action by the Special Court. In which, we argued that an Article three courts such as Special Court is, could not enter the kind of opinions which we call it advisory opinions in the absence of any record as to what the final system plan would be or knowing -- and now what the consideration of the other issues which they dealt with would ever be that's the Third Circuit Court, and Judge Hastie said as the Chief Judge in that Court had notified the parties they would reserve the decision. Again, pending decision of this Court because if this Court, in fact, the reverse is the lower court in it's holding that was premature to consider the outcome of constitutionality that would moot those issues as well or couldn't those issues as well. So, we do have three separate things pending which depend on how the Court acts here. Going now to do the questions which I wish could address myself principally namely, the significance of The New Haven Inclusion cases and why the Court should take -- should grant our request on the cross of appeal. I think it's clear from the legislative history. I can refer for example to the Congressional record of the house from November 8, 1973, where states in the debate in Mr. Adams, "This is a constitutional reorganization proceeding in out of condemnation." And he speaks in that same Section, "The statutory reorganization use in this bill follows that adopted by the Supreme Court in The New Haven Inclusion cases." Now, we think Congress even in attempting to carry out what has been described in his day as a heroic measure was wrong. They did not understand the New Haven Inclusion cases. It is a decision of this Court. It is in case in which my file has a long history. We think the Congress, if he had understood The New Haven Inclusion cases, could not have been acted the statute, could not have provided what it did, and we would not be face with the constitutional issues that we are now faced because the attempt could not be more clear whether it be in 104-member motion that was filed in the Court last week to make oral argument here as in my guy curiae that Congress did not intend to see this property. Now in fact they may have, whether they intended or not. But if that's the case, we rely on Youngstown as the basis of the decision here that you can't say that Tucker Act applies. There is anomaly here that Judge Friendly was amused by. We have the Government saying, it's a good cause of action against the United States. You have the credit to say, "There isn't a cause of action against the United States?" And it comes down, I think to the question asked a few moments ago by Mr. Rehnquist. We think and it's a fact that we maybe wrong but we think we're talking about billions and the very idea that the Indian case which was some $40 million to be a President for relying the fact that Congress is our obligations. Many, many years down the road and we maybe speaking of a dozen years down the road is something which is creditors. We think the Court should not oppose upon us and which, we could not consent to as being the best interest to those people whom we represent as by judiciaries. Because of this melding of these issues, I would like with Court's indulgence to review in some length, the history of The New Haven Inclusion case both before reach this Court and in this Court. The New Haven reorganization proceedings commence in 1961. Mr. Smith, the appellant cause appellant here is the sole remaining custody of that reorganization. In 1967, barely six years which in reorganization terms pretty rapid. We were before this Court on the question whether and this is the title of the case of The Penn Central merger cases. Whether in the Penn Central merger cases, certain New Haven bond holders were entitled to insist that their consideration be determined before the merger could be carried out. And with Mr. Justice Brennan as I recall that argument, return to counsel for Penn Central and he said, "His Penn Central willing to pay whatever is finally judicially determined." I may at this point, point out the ICC had already made the determination which the creditors were objecting too. And when Mr. Justice Brennan asks that question, counsel with the Penn Central said, "Yes,we will pay whatever the Court determines finally." Thus in colloquial terms, we haven't open-end transaction and the Court refused to grant the request of the New Haven bond holders that the merger be held up, but should the merger can go ahead. Now, there's the first mistake Congress made. Congress thought because the Court in the New -- Penn Central merger cases as the foundation for the New Haven Inclusion cases permitted the conveyances to be made required to be made as a matter of fact. But before the consideration was finally determined that they could do the same under the statute and the statute clearly does that. We don't even know the plan is when conveyance is, until the very moment when the conveyances are made but the New Haven Inclusion cases don't say that nor the Penn Central merger cases. What they say is that, where the consideration must be paid and the parties agreed to be bound to pay whatever the Court determines, it may proceed that's not the case under the statute. The next phase, it came before the Court and the phase I mentioned was 1967. The Penn Central merger was carried out on February 1, 1968 and the next phase come before the Court was the consideration in the New Haven Case. And that's the opinion called "the New Haven Inclusion cases" and in that case Mr. Justice Stewart grabbed the opinion. Just eight days after the Penn Central had itself filed for reorganization. Now, this opinion -- Potter Stewart: I can promise you, I didn't write the opinion that they -- Joseph Auerbach: Well, I regret to hear that Mr. Justice because I thought it was mass full opinion. But the opinion eight days after the Penn Central when it reorganization, made note of the fact of the reorganization and then had to deal with the consideration question in the light of the issues created by the reorganization. And what it happen was the case as it came to the Court base upon the ICC findings at the early had been objected to by the bank holders and with the approval of Judge Anderson had a shock turn in its form of consideration. Judge Anderson said, "I won't disagree that the stock indeed maybe worth $87.50 a share but I cannot agree that constitutionally the creditors are obliged." Now to assume that it will be worth $87.50 a share at infront of indefinite period. Therefore, I would require an underwriting for 10 years that stock must at some point reach $87.50 so, the shareholders can get out of that would be the New Haven shares shareholders that holding that stock and get out and to caught in the New Haven Inclusion cases is it that's no good enough. It's not good enough, it's just doesn't give the assurance that creditors have in order to be paid properly or to know there going to be paid properly for their property. And the Court remanded the case with that specific question to be determined which was the fashion a payment which in the words of the opinion would produce the proposal liquidation value of the properties which had been conveyed. Now, the next phase of that case and despite on it's an academic thing because we don't have any further decisions. But the next phase after that decision which occurred in June 29, 1970. The phase was Judge Anderson comply add of orders which he thought would tell the Interstate Commerce Commission how do you expect them to proceed on the remand. That was appeal by the Penn Central Trustee's. The Court appeals for the Second Circuit reversed Judge Anderson indicated that the entire amount had to be taken off in connection with the Penn Central Merger because it's bearing upon that and I'll go back to the commission. Mr. Smith comply with back to the commission that would have been in the spring of 1971 and at this time, we still have never had a hearing before the commission which ended in order to say, "We can't do this and we know what's going to happen to the Penn Central." Now, this brings us therefore right up to what's happening with this new statute. The New Haven bondholders have now waited 13 years since they were enjoined by Judge Anderson from foreclosing on their liens. They've waited more than six years since the property was required to be conveyed by the commission and approved by this Court. They waited more than four years since the Court determine the final consideration, that's not an issue. The value of the property in that New Haven Inclusion cases determination has never been questioned. That's, that's the value of the property, a $175 million but they waited one of four years to be paid for. If the Rail Act is constitutional, this is what they must cope with. They will not know until 1976 or let me interject for a moment. The New Haven Trustee has a lien on the property which he conveyed to Penn Central. We have a legal lien, in addition, and our enjoined from foreclosing it. In addition, Judge Fullam granted what he called an "indeterminate lien," indeterminate as to amount so the question would be remained open whether the New Haven Trustees is entitled the more it's just a bond which he holds on the eventual payment. And we conceived that to be an aid of the remand from this Court. But if the Rail Act is constitutional as I say, they won't know the 1976 whether the property which they handle lien on is going to be required to be conveyed to Conrail and if it's required to be conveyed Conrail it gets conveyed free of The New Haven Trustee's lien. And he must then just look to the Penn Central Estate without a lien for the payment from the very properties which this Court said in 1970, the bondholders entitle to have the proposal liquidation value for. William O. Douglas: So, the Act, the lien doesn't follow up proceeds? Joseph Auerbach: No, Mr. Justice Douglas, it does not follow it. William O. Douglas: I mean, the new Act? Joseph Auerbach: The new Act, no. The consideration which Conrail pays as fix by USRA goes into the general pot of the debtor for -- whose property was and it was taken. Byron R. White: But the various types for that pot will be still had some requisites on some priority basis? Joseph Auerbach: Well, Mr. Justice White, the problems -- Byron R. White: The reorganization proceeding isn't going to be dismissed? Joseph Auerbach: I wish I could ask that easily. The problems are not the reason. The reason is the concept of the statute is to bring together five railroads and pieces of five and if -- and to illustrate the piece of Railroad A which went in, namely Penn Central is combined with the piece of the Central as New Jersey which is subject to it too, and each of those pieces were subject to a lien. And now, you come to the old problems of the sovereigns evaluations. We just don't know where it will stand in our liens doesn't follow except an equitable sentence. Byron R. White: But the Special Court when ask to decide to the value of very pieces that the various estates convey? Joseph Auerbach: Yes. Yes, they would. They would. Byron R. White: And to know that the -- so, that there's going to be some securities directed in the direction of the Penn Central Estate bound to which the you have a prior claimants? Joseph Auerbach: Well, I don't know if you have a prior claim. They're bound to be securities -- Byron R. White: Well, I know but you're going to be -- you all are just made in your own security a creditors. Joseph Auerbach: We all remained as secured creditors of Penn Central whose security has been conveyed out free of lien. And that's what happens on the conveyance thing -- Byron R. White: He retained your position in the estate, I suppose? Joseph Auerbach: Yes, but, we know now what our value is to Penn Central. We don't know our value is to the Conrail system for the reason the carriers. Byron R. White: We don't know now -- Joseph Auerbach: I beg your pardon sir? Byron R. White: We don't known now. Joseph Auerbach: No, and we won't know. You see that the conveyance secures presumably something after two years but the evaluation may not occur for now to ten. And that is why I would point out to you that when we talk about time, we have 30 years. I think we have to assume in New Haven that 20 years had been total will be the time for -- Byron R. White: Let's assume is that absolutely certain, no question whatsoever that sooner or later there would be enough money or value in the Penn Central Estate to pay you off at least but nobody else. Joseph Auerbach: Yes, Mr. Justice. Byron R. White: Would you been -- Would you have some claim that wasn't being satisfied? Joseph Auerbach: No, of course not. Of course not, if the Penn Central Trustee's came to us today and check -- Byron R. White: I know but you have -- what I mean is that you weren't -- your claim doesn't displaced you still have as much as the prior claim as a proceeds. Joseph Auerbach: Well, -- Byron R. White: You had to the properties. Joseph Auerbach: Before I answer that directly.Let me illustrate by -- Byron R. White: The Rail Act may not say so, but that's going to -- that's the Lee Ads bankruptcy law. Joseph Auerbach: Well, yes Your Honor but the question with the bankruptcy law applies is one which I can illustrate for you under this, this very case and what I would call this on, I know the Solicitor General use that word this morning but I think I'm entitle to use it too. In this very case we have this situation, the New Haven properties which are owned by Penn Central essentially the Boston to New York or a large part of the Boston to New York portion of the northeast card, the balance of being to New York to Washington portion. The Statute, the Rail Act in no less than three places talks about creating or convene to Amtrak properties in that northeast card. The statute provides in Section 211 (a) that USRA may make loans to Amtrak which would buy the properties from Conrail. Now, the very properties which we would of convey, have been required to convey feebly into Conrail would be sold for cash by Conrail to Amtrak under the statute. Now, the question I have and I try to ask you a question Mr. Justice is, can we impose a lien on that cash? I would be very much surprise with under the bankruptcy law, we could. Byron R. White: How come it was given -- how come it was given the New Haven Estate to gain profit. You're going to have appropriate claims in it and assuming that there is enough money in there. You may at least use or at least to a -- I suppose that there's a need to have claims the bankruptcy to that for state plan, are you not suppose to illustrates this but -- in you? Joseph Auerbach: Oh, indeed they are and we -- oh, indeed they are Your Honor. They are ahead of all the secured creditors. The United States as creditors ahead of us. All the taxing authorities, the payments have not been made on rentals. This sums up with -- well over half billion now in this administration claims. I can't really answer your question except hypothetically, if there is enough fair for us then there is enough the for us. But whether there will be, I can't answer. Byron R. White: But the -- but the -- your relative decisions that this is going to be distributed by the rail? Joseph Auerbach: Well, the Rail Act is not protected. I have to say that to you. I can't answer how Judge Fullam in a contest among creditors for what we think would be a very sharply reduced part, what he will be able to do. Byron R. White: They want actually the Bankruptcy Act may not actually a more than -- Joseph Auerbach: Well, Bankruptcy Act right now would protect us, if Section 77 would be in carried out. For example, we have a Section 77 (g) this motion that's been pending. If in fact and it seems to me, that the findings have been made by the Special Court established this, and if in fact, we pass the stage where there can be reorganization of Penn Central then there is a constitutional right to have the 77 (g) motions granted, and if is that constitutional right and it goes into liquidation, the equity receivers must keep those properties intact and liquidate -- whether they do it on mass or separately. They would have to protect this -- them of the Bankruptcy Act. Byron R. White: Special Court decides on this? Joseph Auerbach: About to be sure and the Special Court decide against his only on the concept Mr. Justice White, that the Tucker Act applied didn't decide against this otherwise. Now as it happens, we think constitutionally, the Court must consider the statute but without the Tucker Act if this is a constitutional statute and I would argue that the detail of our brief, we think it's unconstitutional. You don't even reach the Tucker Act as we see it till you pass the point of constitutionality and Judge Friendly, I think did. We think he was incorrect in that respect. If I may in the few minutes I have left, I'd like to turn the reasons why particularly of you, of some of the question asked by justices this morning. It's not premature now, to rule on the question raised with respect to constitutionality of the ultimate conveyance not just the interim erosion and very briefly, the Court now knows the Rail Act compels a conveyance of that property free of lien. The properties would be included without notice or opportunity for hearing on the part of the owners or the judges who supervised the trustee's in the Section 77 proceedings. The Congress of the Section 208 has an absolute right of determination of what will go into that final system plan by rejecting plans that have put to it. Fourth, the Special Court is required without notice or opportunity for hearing to order the conveyances that are provided in the final plan. Fifth, the trustee's are required are ordered by the statute to convey those properties free of lien without any choice. Sixth, the Rail Act for did specifically, and I think that was mentioned in response to the -- to a question from Justice Rehnquist, that did specifically, that any enjoining of those conveyances. Seventh, the amounts provided under the statute and now, wholly known to the Court. You know what it is Congress says could be paid and no more. Eight, the review of Congress as to any Court ordered revision under Section 206 (i) of the Act gives it the right to reject all capital structures that a Special Court or reorganization court would be necessary the premises. Warren E. Burger: Thank you, Mr. Auerbach. Mr. Solicitor General and your brother -- Robert H. Bork: Mr. Chief Justice, I have nothing further, unless there are some questions. Warren E. Burger: I observed that there are none thank you, gentlemen. The case is submitted.

Warren E. Burger: We will hear arguments next in Sumitomo Shoji against Avagliano. Mr. Chayes, I think you may proceed whenever you are ready. Abram Chayes: Mr. Chief Justice, and may it please the Court, this case concerns the international obligations of the United States under the Treaty of Friendship, Commerce, and Navigation with Japan and similar treaties with many other countries, an obligation to permit a foreign investor to manage and control its investment in this country by engaging executives and other specialists of its choice. Sumitomo Shoji America is a company organized and existing under the laws of the State of New York. It is a wholly owned subsidiary of Sumitomo Japan, a general trading company or Sogo Shoji, with more than 100 offices around the world. Plaintiffs below are women who are or were employed as secretaries by Sumitomo. They brought suit under Title VII of the Civil Rights Act, alleging two principal causes of action. First, in Paragraph 12 of the complaint, they allege that Sumitomo discriminated against them by restricting them to clerical positions on the ground that they were women, and second, in Paragraph 13, that Sumitomo had discriminated against them by restricting them to clerical positions on the ground of their nationality. Sumitomo answered denying the claims of discrimination and asserting that its employment practices challenged in the complaint were authorized by the Friendship, Commerce and Navigation Treaty, and on this basis Sumitomo moved to dismiss the complaint for failure to state a claim on which relief could be granted. The district court denied this motion, holding that Sumitomo as a New York company was not entitled to the benefit of the Treaty. That question was certified for interlocutory appeal under Section 1292(b) of the judicial code. On the issue certified, the Second Circuit reversed the district court. It held, as did the Fifth Circuit in a substantially identical case, Spiess versus C. Itoh, Incorporated, that a wholly owned U.S. subsidiary of a Japanese investor could indeed invoke the protection of the Treaty, but contrary to the Fifth Circuit, the Second Circuit went on to hold that on the merits the Treaty did not preclude examination under Title VII of Sumitomo's employment practices with respect to senior personnel. On this ground, it affirmed the district court's denial of the motion to dismiss, and we took our petition for certiorari from that decision. Now, I want to go directly to the Treaty issues that I think are at the heart of this case. Indeed in my view, the deeper question of this case is whether the United States will faithfully carry out Treaty obligations undertaken with two dozen foreign countries, obligations that it placed in the Treaty and placed in the Treaty for its own purposes. There are two issues under the Treaty, two components to the Treaty question. The first is who may invoke the employment right under the Treaty, and the second is what is the scope of that right. As to the first, who may invoke the right, I think that need not detain us long. Both courts of appeals decided that a wholly owned subsidiary of a foreign investor was entitled to the benefit of the employment right. And why? Because neither court of appeals could perceive any sound reason or basis in policy for distinguishing in terms of the employment right between foreign investment carried out through a branch and foreign investment carried out through a locally organized subsidiary. Speaker: I suppose, Professor Chayes, you would carry that down to a subsidiary of a subsidiary. Abram Chayes: Well, I think that is true. That is our... our position is that the foreign investor has a right to manage and control his investment in the United States by engaging executive personnel of his choice, and if his investment is... takes the form of a subsidiary of a subsidiary, the answer is the same. Speaker: What about a subsidiary, if you want to call it that, owned 40 percent by a foreign parent, or 55 percent? Abram Chayes: Fifty-five percent wouldn't bother me. The regulations-- Speaker: How wouldn't it bother you? Abram Chayes: --Well, the regulations under the Immigration and Naturalization Act provide and have provided always that a 51-percent controlled subsidiary has the nationality of the state of its owner. If you go below that, below 51 percent, then you are not talking about a controlled subsidiary, and it is the right to control and manage the investment that is at stake. If you look at Article VII of the Treaty, Article VII says that the foreign investor has the right to invest in this country in any lawful juridical form. Speaker: I take it the brief filed by the United States is also filed on behalf of the State Department. Abram Chayes: Well, it is hard to say-- Speaker: At least the legal advisor's name is on the brief. Abram Chayes: --Yes. I was going to say, it is hard to say in whose behalf the brief on the part of the United States was filed, because-- Speaker: Or whom it supports. Abram Chayes: --Yes, or whom it supports. 0 [Generallaughter.] It seems to be that the brief discloses a compromise between various points of view in the government, and that is what I would like to say on this branch of the case. The essential point is, there should not be distinction as between branch investment and subsidiary investment. Nobody has been able to adduce a reason why one should distinguish between investment carried out through branches or investment carried out through subsidiaries. On the contrary, the major objective of these treaties, post-World War Two treaties, was to accommodate investment through locally incorporated subsidiaries. That was a new element in 1952, although already quite popular. By now, it is the predominant form of overseas investment. In the United States, 85 percent of our direct investment abroad takes the form of locally incorporated subsidiaries. That is why the State Department said, the same State Department, Justice White-- Speaker: Yes, but you wouldn't suggest that the State Department supports your position. Abram Chayes: --Well, I am going to suggest that in a moment-- 0 [Generallaughter.] --but I want to say that as late as July, 1979, the State Department said that an interpretation of the Treaty that would exclude locally incorporated subsidiaries would gut the Treaty of much of its value for the United States. Now, that is colorful language for the State Department. Speaker: Well, it doesn't say that now. Abram Chayes: Well, now I think what the State Department says now is a little bit different. It says this. It says, we don't want to call the locally incorporated subsidiary a company of Japan for the purposes of Article VIII. It says, we don't want for the purposes of Article VIII to pierce the corporate veil. Speaker: What are the differences functionally between the two types of structures, the subsidiary and the branch? Abram Chayes: Well, of course, the subsidiary is a corporation. It has limited liability. It is taxed as a separate entity, and so on. The branch is a part of the foreign enterprise, and it does not have limited liability. It is a presence in this jurisdiction of a foreign enterprise, and so on. Speaker: For the purposes we are here today, what do you think are the critical differences? Abram Chayes: I think there are no differences for the purposes we are here today. Speaker: Functionally, they are the same. Abram Chayes: Functionally, none, and-- Speaker: There may be... conceivably there might be some tax consequences of being one or the other? Abram Chayes: --Well, yes, but not for the purposes of employment, Your Honor. If you look at Article VII-C, it says, first, the foreign investor may establish branches. That is VII-1-A. VII-1-B says it may establish locally incorporated subsidiaries, and then VII-1-C says, it may manage and control its enterprises without distinguishing at all between them. Now, I want to say... I want to return to Justice White's question, because I do think it is important to see that although the State Department doesn't want to call us the company of Japan for the purposes of Article VIII, it is perfectly willing that we should have the benefits of Article VIII protection derivatively, so to speak, through the right of our parent. If you look at Page 6 of the brief of the United States in its summary of argument, it says that in so many words. Accordingly, it says, as a wholly Japanese owned trading company, Sumitomo may continue to obtain the services of Japanese nationals to the extent they qualify for treaty trade or visas under the standards described above even if the court concludes that Sumitomo is not a company of Japan that may invoke the special employment privileges of the Treaty, and you will find similar expressions scattered throughout the State Department's brief, wherever one side or the other won the particular negotiating battle. Speaker: How would you distinguish that statement from a functional analysis? Abram Chayes: I would not at all, sir. I would say that that... we are perfectly prepared that this Court should decide that we are a company of Japan for the purposes of Article VIII, or that we get the right derivatively from the right of the parent. We have no vested interest in which rationale the Court uses to reach that result, and as we suggested in our brief, the courts below apparently look both ways on the question of rationale, and they do so for the very reason you say, Your Honor, because functionally there is no difference. Functionally, the right of the foreign investor to manage and control has got to be the same and was designed to be the same in this Treaty, whether his investment took the form of a branch or of a subsidiary. Now, I would like, therefore, Your Honor, and-- Speaker: May I just interrupt with one question? What function does the definition in Article XXII perform in your view? Abram Chayes: --Well, that, as you see from the briefs, is the subject of a lot of scholastic exegesis. I think that it performs a function that has not been very fully called to our attention, and that is this. think Article XXII was really designed to say what companies of... what kinds of enterprises or entities in the foreign country did we have to recognize, and conversely, what kinds of entities in our country did the Japanese have to recognize, and all this talk about a single simple case is not a test about the nationality of the company. It is really a test about what kind of entity in the foreign milieu we have to recognize as a company, and the reason why this article was drafted in these terms was that previously, previously in the U.S. Treaties of Friendship, Commerce and Navigation with Germany, for example, or with Japan, the Treaties in the 19 teens and the twenties, a whole series of requirements were established before a company could claim recognition by the other party. It had not be not only organized within the territory of one party, but have its seat there, and so on, if you look at the German Treaty or the Japanese Treaty. And so they said, now let's sweep all that aside. Let's have a simple test that tells me when I have to recognize a Japanese enterprise, and tells the Japanese when they have to recognize my enterprise, and that is when it is incorporated in the other party's... it is organized under the other party's laws. It has little or nothing to do, I think, Mr. Justice Stevens, with what we have to do about companies organized under our own laws. But even if you take that view, then it seems to me, as I said before, it may be that the State Department has some concerns about calling a company organized under the United States, a VIII, because that may have a carry-over, a carry-over effect in other parts of the Treaty, but in fact, the State Department says, you can get there by a different route. All you have to say is, it is the parent that is-- Speaker: They just say that for the purpose of identifying the Treaty traders, don't they? Abram Chayes: --Excuse me, sir? Speaker: Don't they just say that for the purpose of identifying-- Abram Chayes: No. Speaker: --individuals who would be treaty traders? Abram Chayes: No, sir. I think they say, again, if you want to look at another example, the government's brief at Page, I think, 21, "Because Sumitomo's parent corporation"... I am reading now down at the bottom... "apparently is a company of Japan-- " Speaker: Where are you reading? Abram Chayes: --Down at the bottom of the government's brief at Page 21, sir. Speaker: Twenty-one. Okay. Abram Chayes: Yes. And it says, "apparently a company of Japan". I don't think there is anybody who denies that Sumitomo Japan is a company of Japan. "The parent might well have discretion protected by the Treaty to select Japanese nationals for certain top level managerial positions in Sumitomo through the exercise of the parent's right under Article XIII-1 to engage executive personnel. " In other words, that is-- Speaker: Well, what about non-top level management? Abram Chayes: --We don't claim that we don't... that we have the right to engage anything other than executive personnel and the other categories mentioned in Article VIII of the Treaty, and if I could-- Speaker: Well, that executive personnel isn't top level, is it? Abram Chayes: --Well, if I could, Mr. Justice, to go the-- Speaker: Well, maybe you are going to tell me what the Treaty means, then. Abram Chayes: --That's right. I want to talk about what the scope of the treaty right is, because I honestly think there isn't much substance to the argument that whatever the Treaty right is, this company doesn't get the benefit of it. And in talking about the scope of the Treaty right, I want to make two points. First, Sumitomo is not claiming a general immunity from Title VII. We are speaking only of a narrow group of top executives and specialists necessary to manage and control the investment, and second, I think it is essential to keep in mind that these employment rights were put in the Treaty not by the Japanese, not by the Germans, not by the Danish, not by the Israelis, but by the United States. We were the draftsmen of this Treaty, and what we wanted out of Article VIII of this Treaty is also stated in the government's brief. It appears in Footnote 14 at Page 24-25, and what we wanted was, it says, the purpose of Article VIII was to override these restrictions, host country restrictions on employment of aliens, and I am quoting now, "so that American businessmen operating abroad would be able to select U.S. nationals for essential positions. " and that is the right that Sumitomo is seeking. Now, to define the scope of that right, as I say, I think the government in sort of general terms accepts that statement of what the right is, but then they say, oh, well, on this record we can't say that all these people that occupy challenged positions are really executive personnel, are really specialists of the kind mentioned in the treaty, so we have got to send the whole thing back for a case by case examination of what these executive positions amount to and what these specialist positions amount to. Your Honors, we believe that that question can be settled as a matter of law on this record by this Court, and it can be settled if we expand our horizon a little bit and take into account additional legal materials that are not referred to by the government, and essentially the legal materials involved are the Immigration and Naturalization Act of 1952 and the regulations thereunder. Now-- Speaker: May I interrupt once more-- Abram Chayes: --Surely. Speaker: --because I want to get these levels of employees firmly in mind, if I may. The derivative right that they agree you may have, they are not... they are somewhat... on Page 21-- Abram Chayes: Yes. Speaker: --is top level management through another provision of the Treaty that would authorize management and control of the subsidiary, which is... would you agree that is not coextensive with the concept of people of their choice, attorneys, agents, and other specialists of their choice? Abram Chayes: Well, it is executive personnel, attorneys, agents, and other specialists of their choice. Speaker: Right. Abram Chayes: Well, Mr. Justice Stevens, let me say that if we had nothing but the Treaty to go on, that would be a fair or a possible reading, but we do have more than the Treaty to go on, and that is what I am trying to bring into the picture right now. Speaker: But what I am really asking, you don't construe their brief as conceding that those two concepts are coextensive. Abram Chayes: I do not, and I am saying that on the face... we don't have to confine ourselves to the face of the Treaty, because we've got the Immigration and Naturalization Act, which was passed at the same time, contemporaneously. Section 101(a)(15)(e) of the Immigration and Naturalization Act was the part of the Immigration and Naturalization Act designed to carry out these provisions of the Treaty, and if you look at that section of the Act and the regulations promulgated thereunder, they evidence contemporaneous and continuous Congressional understanding of what the scope of that right was, and administrative understanding of what the scope of the right was. Speaker: The scope of which right, the top management right or the executive of their choice right? Abram Chayes: The entire treaty right. Speaker: But they are two different. That is what I am trying to-- Abram Chayes: Well, all right. I think it is the right that we are claiming. That is what we are claiming. We are claiming-- Speaker: --The executives of their choice language. Abram Chayes: --We are claiming executives of their choice, and we are saying the scope of that right is defined. We don't have to sort of look at the ceiling and say, is it top, or low, or what. The scope of that right is defined by the contemporaneous Congressional expression of the INA and the contemporaneous and continuous administrative expression of the regulations. Speaker: It is still a question of Treaty construction, though. Abram Chayes: Well, Treaty construction, yes, but I think it is fair to say that we can use the contemporaneous statute by which the Congress attempted to carry out U.S. Treaty obligations, and the regulations thereunder, as defining the Treaty right, as defining what the Treaty means, and if you look at those, you will see that the Act says that to get a Treaty trader visa, an E-1 visa, you must be an alien entitled to enter pursuant to a Treaty of Friendship, Commerce and Navigation, and a national of the state under which the Treaty... under whose Treaty you claim. So that that means our right of free choice is limited at the outset to nationals of our own country, that is, Japanese nationals in the case of Japanese Investments in the United States, U.S. nationals in the case of U.S. investment abroad. That is exactly what we wanted, the right to put U.S. nationals in our management positions abroad. Then, if you look at the regulations, you see that there are further criteria defining the scope of this Treaty right. The regulations, which appear in our brief, I think, at Page 6, talk about executive and supervisory positions on the one hand, and specialist positions on the other, where the qualifications are essential to carrying on the investment's activities, the activities of the enterprise. Yes, sir? Speaker: In your brief, you note that the regulation comes from a 1981 codification. Was the regulation as contemporaneous as the statute? Abram Chayes: I think there were regulations promulgated at the time of the statute. Yes, Your Honor. They have been clarified, as appears in the footnote of our brief at that point. I think it is in the reply brief, perhaps, at Footnote... well, I think it may be 9 or 10 of the reply brief... Footnote 11 of the reply brief. No, I'm sorry. It was Footnote 9, but it appears at Page 11. And it shows you the historic evolution of those regulations. I think they amount to a continuous... a continuous administrative interpretation that is of much more interest here than the sort of back and forth badminton game that the letterwriters in the State Department played with each other. Here is the way the United States construed this Treaty when they had to administer it. Now, if you go further beyond the regulations you will see that there are interpretative notes, and as you look at the government's brief, the interpretative directions are provided in the government's brief at Appendix B-A, I think, and at Page 3-a of the government's brief, you will see what it says about executives, and it says they do have to be top executives in order to qualify for a visa, with important supervisory functions, and you will see what it says about specialists at Page 6-a in the government's brief. Speaker: To what extent does the knowledge, the command of the Japanese language and a knowledge of Japanese customs and traditions in business enter into this? Abram Chayes: Well, it is more than that, even, Your Honor. These general trading companies are a very special kind of organization. These employees have been recruited after college, and they stay in this company for their lives, for the most part. They are like a civil service, or even a foreign service. They serve in the Japanese office for a while. Then they are sent overseas to the American office. Then they come back to Japan, and go out again to the office in Germany perhaps. These are part of... these people are part of this company. That's their lives, is to be part of this company. Now, I want to say just one word about why we still shouldn't go back and find out whether these regulations and laws have been accurately applied. The answer to that is this. To go back and decide whether these positions were truly executive positions, and whether the person truly had these qualifications, would be in fact to review the consular officer's decision, and that is something this Court has never permitted. Speaker: Well, if the government thought we were going to agree with you up to this point, they might agree. Abram Chayes: I'm sorry, sir? Speaker: If the government thought we were going to agree with you up to this point, they might agree-- Abram Chayes: They might agree to-- Speaker: --that the consular decision should not be reviewed. Abram Chayes: --Should not be reviewed. Speaker: Yes. Abram Chayes: Well, I think they would. I think they would, Mr. Justice White. Speaker: Well, we may ask them. Abram Chayes: And I think people who have had responsibility in the Justice Department understand-- Speaker: Well, we may ask them. Abram Chayes: --Thank you, sir. 0 [Generallaughter.] I think they understand how important it is to preserve this immunity from review of the consular officer's visa decision. Speaker: What is your authority for saying that the consular officer's judgment is final in a suit in a federal court involving some Treaty provision? Abram Chayes: There is no Supreme Court case which states that the... which decides the point exactly. There are legion of Supreme Court cases that say that these issues are committed to executive and legislative discretion, to the political branch-- Speaker: Well, that is true so far as letting a person into the country, but the question here isn't whether they should have been let into the country or not, but whether they qualify under the Treaty so as to afford a defense to a Title VII action. Abram Chayes: --Our argument, Mr. Justice Rehnquist, is that it has been determined by the consular officer that they do qualify under the Treaty. Now you say, well, why shouldn't we review that determination just like we review all sorts of administrative determinations, and the answer is that consular determinations on visa issues have always been held immune to review. Why? Speaker: But that is a question of whether the man's visa is all right. We are not asking that here. Abram Chayes: Well, our position, Mr. Justice Rehnquist, is that our right extends to people whom we have been able to convince, the consular officer under the State Department regulations and the INA to issue an E-1 visa. That is why it is a matter of law, and that the determination ought not to be reviewed, not because it wouldn't be a nice thing to have a review of this administrative determination, but because for other reasons having to do with the integrity of the administration of the immigration laws, this Court has continuously refused to subject those determinations to review. Speaker: Mr. Chayes, may I ask you another question that troubles me about the way in which the case comes to us? As I understand it, the 1292(b) appeal was just on the issue of what kind of a company is the subsidiary. It seems to me not only do we have a possible difference between top executives and people of their own choice. We might also have a difference between that category and the jobs that the plaintiffs are seeking-- Abram Chayes: Well, it is that, sir, that-- Speaker: --and it is perfectly clear that everything can be resolved beyond the first issue. Abram Chayes: --Mr. Justice Stevens, that is our position. Our position is that the Treaty, which might be ambiguous on its face, is defined in the Immigration and Naturalization Act that was passed to implement it, and in the regulations thereunder, and all those issues are determined as a matter of law. Now, the only possible argument, as I suggested, is that we ought to review the consular officer's determination. It ought to be entitled to some kind of judicial review. And my answer to that is that this Court has been very careful, I would say, has never permitted the review of consular officer's determinations because the administration of the Immigration and Naturalization Act and the immigration laws of the United States has been held to be a paramount political-- Speaker: Yes, but as Mr. Justice Rehnquist points out, it is quite one thing... it is one thing to say that these people may come in and work here, give them permission to come, and quite another thing to say that that necessarily means that no woman in New York can be eligible for any of these jobs, which is in fact what they are claiming. Abram Chayes: --Well, our reply to that is quite different. We say that we are entitled to executives of our choice... I am sorry, I will have to answer your question... as long as we have somebody we want to put there and we can get an E-1 visa for him. If we take him out of there and don't substitute another person with an E-1 visa, our belief is that that position is then subject to the Title VII laws. That is, the only right that we have is to get visas for people entitled to enter under the Treaty. That is what the laws says, entitled to enter under the Treaty. They must be entitled to enter under the Treaty, and there is no way they can be entitled if they don't fall within this category, and once we do, that choice is foreclosed, but if we don't, Title VII applies just as it always does. I am sorry to have gone over-- Speaker: Mr. Chayes, one of the complaining women below was a Japanese national, was she not? Abram Chayes: --Yes, she was, Your Honor. We... There are two answers to that. Speaker: So Title VII applies to her. Abram Chayes: Well, there are two answers to that question, Your Honor. In the first place, we conceded, and it appears in our reply brief, that as to that person, the Japanese national, who was a plaintiff, female Japanese national, she might have a claim that withstands a motion to dismiss, but on the other hand... and so that concession stands in the record, and, I think, meets your question, but on the other hand, if you are talking about executive personnel of their choice, and you are talking about how a Japanese company manages its top executives worldwide, it does seem to me that this Court might wish to hesitate before it imposed our notions, to which I subscribe wholeheartedly, of non-discrimination, on decisions taken by Japanese companies in Japan to send people to the United States, but that is by the side. The main answer to your question, Justice O'Connor, is that we have conceded that as to her, a claim that is proof against 12(d)(6) has been stated. Again, pardon me for carrying beyond the allotted time. Warren E. Burger: Well, our questions brought that on, counsel. We take responsibility. Mr. Steel. Lewis M. Steel: Mr. Chief Justice, and may it please the Court, I would like to pick up this argument by calling to Your Honor's attention precisely who the plaintiffs are and what the class is that they seek to represent. They are clerical employees. They do not seek to be president of Sumitomo America. They seek to move up in an orderly fashion through training programs and through their own qualifications at this point in time to the lower level management positions, and I would point out that we have record evidence in the form of the EEOC reports that show that fully 40 percent of the work force today is apparently reserved for the people who are categorized as Treaty traders, so that when counsel for Sumitomo talks about high level executives, in reality, he is talking about every single person in that company with the exception of a few white males, except clericals, so that we have a real live issue on that score which in no way has been answered by the pleadings, and must be answered by a trial on the merits. I would like to say that we are presenting here two propositions. First, we claim that Sumitomo Shoji America is a domestic corporation, and therefore it has no rights under Article VIII of the Treaty. That is, the of their choice provision. Second, we claim that even if Article VIII were to apply to an American subsidiary, then the of their choice language would not exempt Sumitomo from American civil rights laws, and would not grant it a license to discriminate. Speaker: Mr. Steel, what would you suggest are the differences functionally between a branch and a subsidiary? Lewis M. Steel: Well, I see many differences. One, you obviously have tax differences which may be significant. Secondly-- Speaker: How would they relate to the Article III aspect of the Treaty? Lewis M. Steel: --I am not sure I-- Speaker: It doesn't affect their function, does it? Lewis M. Steel: --No, that doesn't-- Speaker: That doesn't have anything to do with the reason why the Japanese parent creates... establishes the branch or the-- Lewis M. Steel: --Well, it may well have a reason, Your Honor. Speaker: --subsidiary, does it? Lewis M. Steel: It may well have an important reason. There may well be some advantages which have not been developed in this record at this point between functioning as a domestic subsidiary and functioning as a branch. One of them could be in the field of tax Secondly, you could have bankruptcy questions. Thirdly, you could have questions as to immunity from jurisdiction of suit. It seems to me there are many possibilities why a patient in Japan might well choose the protection of using a corporate form here, a domestic corporate form rather than appearing in this country as a branch, and I think that some of those have been developed in my brief, some of those have been developed and alluded to, I think, in both the government brief and also in the amicus AJC et al. brief, and I think those well could be significant, but I don't think we have that burden of trying to resolve that question because, contrary to counsel for Sumitomo's statement that the Treaty is ambiguous, it is not ambiguous at all. Section 22-3 has a precise definition and precisely states that companies such as Sumitomo will be treated as American corporations, not corporations of Japan, and Article VIII within the article refers to situations involving both nationals and companies of Japan in the very first sentence, which discusses the VIII refers to a situation where a subsidiary corporation would gain certain rights, and that is the situation where accountants and other experts are needed by the subsidiary. So, you start out here in your analysis by looking at this case from its plain language, and it seems to me that once you do that, the burden is really on Sumitomo to overcome a very clear situation, because I do understand there are cases from this Court indicating that you can look behind plain language, but certainly plain language is very important. Certainly, it is the heavy starting point for analysis. Speaker: Do you agree that the United States or the State Department had a different view than it now expresses in years gone by, even in the face of this plain language? Lewis M. Steel: Well, the United States apparently has had three views, and it has-- Speaker: As to this plain language. Lewis M. Steel: --Yes, Your Honor, but it started out with a view that by a attorney advisor, Diane Wood... I don't have the page reference, but it is referred to in the brief... saying that Sumitomo was subject to jurisdiction. That is when EEOC first asked the State Department for its opinion. That opinion letter was then withdrawn by Mr. Marks, who promulgated the Marks letter, and then the Marks letter was withdrawn when the Atwood letter came into being, but there is a very, very big difference between the Atwood letter and the Marks letter. Marks was clearly shooting from the hip. Atwood, on the other hand, clearly stated that before his letter was promulgated, the State Department had carefully reviewed the documents in question and the negotiating history. Speaker: The court of appeals described both of the letters as cursory, didn't it? Lewis M. Steel: They both certainly were short, Your Honor, but when you-- 0 [Generallaughter.] That is cursory. I would have liked from Mr. Atwood more detail. I agree with that. But you see, when you look at the Atwood letter, you know, as we know now, that certain documents were available to Atwood that apparently Marks didn't consider. For example, there is a very, very long communication which we discuss in our brief relating to the concept of subsidiaries being put into Article VI(4). Now, you have a back and forth in the correspondence between Japan and the United States about Article VI(4), and the State Department concludes that Article VI the way it was originally written would not protect subsidiaries from certain problems, namely, expropriation. In order to ensure that subsidiaries had that protection, VI(4) was put in, which put into that section the concept of protecting a controlled corporation. So, when Mr. Atwood was evaluating the Treaty, he was able to look at the negotiating documents, which made clear that it wasn't accidental as to which sections referred to controlled corporations and which sections didn't. Speaker: Unless the administrator has put some of the reasoning into his communication, we haven't customarily gone into that degree of psychoanalysis, have we, of saying that he must have had all this available, and presumably he relied on it even though there is no evidence in the communication? Lewis M. Steel: Well, he did say that he had it available. He did say he relied on it, and it has been released. We can certainly assume that if he is a truthful man, he evaluated the documents that he released to the parties, including this very significant document. Speaker: Yes, but so far as the supporting reasoning, to the extent that under cases like the Swift, Skidmore analysis of the weight that is given to administrative construction, neither of these letters would appear to have a great deal of supporting reasoning contained in them. Lewis M. Steel: I would have liked more reasoning in the Atwood letter. That is true, Your Honor, and I do understand that it may be entitled to less weight than it would be entitled if it were not so cursory. I do agree with that. But if you look at the timing of the Atwood letter, and understand what Atwood had before him, which is the documents we all have before us now, it seems to me that the letter is entitled to weight, and we do know that after the Atwood letter, the position of the State Department in conformity with the Atwood letter was communicated to the government of Denmark, and that letter is also in the record. I would like to turn to a major argument of counsel for Sumitomo. Even though I believe that Sumitomo, given the plain language of the Treaty, has the burden of persuasion, counsel attempts to put that burden on us, and says, we have not shown any reason whatsoever for the distinction between branches and subsidiaries. I would suggest that if Your Honors look at the section in our brief concerning legislative history, which is the section involving what the State Department representatives said to Senator Hickenlooper and his committee when this Treaty and the series of treaties in 1952 were presented to that body, that... those questions and answers and those statements are very significant, because they tell us what we all know from understanding our history, and that was, back in 1950, and throughout, that entire period, the United States Senate was very, very concerned about the rights of Americans and American entities, and the mood of the Senate was that it would object to treaties which infringed upon American sovereignty at home. Very clearly, the State Department representatives, who not only had the burden of convincing foreign governments to sign treaties, but also had the burden of convincing the Senate to ratify those treaties, was trying to do everything that it could possibly do to let the Senate know that it was not taking away from either the federal government or state governments their traditional powers to regulate corporations. And if we have to speculate as to why people would make that type of distinction between branches and corporations, we have the dialogues in those two hearings which tell us very, very clearly that Senator Hickenlooper was extremely concerned lest this Treaty would take away the traditional rights of the state governments to regulate corporations, and each and every time that question was asked of State Department representatives over a period of two years, the State Department representative made clear that this Treaty and its companion Treaties would take nothing away from the states to regulate... to regulate in this area. Now, that is very, very significant, because in 1953, as we have pointed out in our brief, there were states that had antidiscrimination laws. Those laws were in effect, and it is clear that it was not the purpose of Congress or of the Senate in ratifying these treaties to in any way infringe upon the States of New York, where Sumitomo is incorporated, to enforce its law, or other states. Speaker: Do the states have any reciprocal problems with other states of the United States that Americans have with overseas operations? I am addressing now the reciprocity aspect that has been mentioned of Article VIII. Lewis M. Steel: Well, let me say this. Obviously, the State of New York is not in the same situation as the United States in terms of the fact that it doesn't have a foreign policy to consider, but very, very clearly it did have an antidiscrimination statute on its books which meant a lot to it. The Attorney General has filed an amicus brief in this Court. And more importantly, Senator Hickenlooper and his committee was very concerned that these treaties would not erode the powers of the states to regulate domestic corporations, and that is precisely what Sumitomo America is, and I suggest if we have to look for an answer as to why the Treaty was structured in this way, we may well look to those Congressional hearings. Speaker: Well, I understood your colleague on the other side to say that even if you treat subsidiaries different from divisions, he still doesn't lose this case. Lewis M. Steel: Well, I would like to turn my attention to-- Speaker: You are going to... He spent a lot of time on that. Lewis M. Steel: --Yes, I would like to turn my attention to that, and I would like also in turning my attention to that to refer to the Senate hearings which is set forth on Page 23, I believe, of our brief, in which when the Senate was considering this, the State Department representatives said that the Treaty rights were to be, and I quote, "upon as favorable terms", and let me stop and underline that, "upon as favorable terms as the nationals of the country, the right of the owner to manage his own affairs and employ personnel of his own choice. " Now, Sumitomo maintains that Article VIII sets up a non-contingent right, that it is an absolute right, and yet the State Department representative very clearly told the Senate committee in question that the right was to be upon as favorable terms as the nationals of the country. That is a contingent right. That is not right which is non-contingent, because it must be the same right as is available to nationals at home. It is very clear that the employer... that the employment rights in this Treaty are national rights, are national treatment rights, and not rights that go above the concept of national treatment. I would like therefore to suggest that at the point in time that this Treaty was passed, it was perfectly appropriate for Congress to pass Title VII and not have that statute be in conflict with this particular Treaty. More than that, it is very clear that the parties could have contemplated the passage of Title VII, because of the U.N. charter provisions which are in our brief and concepts of equality which were developing at that point in time. Secondly, I point out that Title VII has specific exemptions. Congress well understood, and I have a section in my brief about that, that it could exempt certain areas from Title VII protection, and in fact did so, and did so in two areas relating to foreign policy, and those sections are also set forth in my brief. I would like to make a comment about the government. I believe that its brief in which it wonders whether or not Article VIII constitutes a legislative type validation for the top jobs, I suggest that that is entirely an unnecessary approach to take, precisely because the business necessity concept under Title VII would give Sumitomo all the protection that it needs there, and you must remember when you are talking about top jobs, business necessity becomes a very potent weapon. It is rather difficult for a plaintiff to overcome business necessity at the top levels where the employer says, I need in this-- Speaker: You don't agree with the United States then that these companies can achieve the same result-- Lewis M. Steel: --Absolutely not. Speaker: --derivatively through the Treaty trader. Lewis M. Steel: Right, and I don't believe the government says that. It wonders as to whether or not in the future it may take that position, but I think the Treaty trader exception... excuse me, the business necessity approach carefully and would completely take care of that problem. I would also like to point out with regard to the Immigration and Naturalization argument that has been made by Sumitomo the following. It strikes me that the INA and its supporting regulations do not meet the issues here for at least three reasons. One, those regulations and that statute involve individual rights, the individual who wants to come into the country. They do not involve corporate rights. They do not involve the right of a corporation, but instead the right of the individual who applies to come in as a Treaty trader. Speaker: Could I ask you, the issue we were just talking about, the Treaty trader, is that issue even here? What issue do you think is before us? Lewis M. Steel: Well, I am not sure which one you are talking-- Speaker: I am talking... what do you think the issue is before us now? Lewis M. Steel: --Well, I think the main issue that is certainly before this Court is whether or not Sumitomo is exempt from Title VII strictures-- Speaker: Yes. Lewis M. Steel: --and I think that there are a series of arguments that have been made by-- Speaker: Just by virtue of the face of the Treaty. Is that it? Lewis M. Steel: --Well, that's right, and counsel for Sumitomo tries to extend that and say by virtue of INA, and by virtue of those regulations under-- Speaker: Must we get to that latter part? Lewis M. Steel: --Well, this case has now been going on since 1977. This is a civil rights case. We would like to get going with it. We would be most appreciative to have the guidance of this Court so that we can get going with it, and-- Speaker: Even if you lost it? Lewis M. Steel: --I would rather lose it now than lose it five years from now, and frankly, I don't think we are going to lose it. I am hopeful we won't. Speaker: Mr. Steel, just as a matter of curiosity, do any of your people still have employment with Sumitomo? Lewis M. Steel: Yes, they do, Your Honor. Speaker: Many? Lewis M. Steel: One person at present is an employee. Another person has filed an EEOC charge in the recent months. Speaker: You are now into your colleague's time, Mr. Steel. Lewis M. Steel: Okay, I had two more points under the INA, but let me just say them briefly. One is, you have to-- Speaker: At his expense. Lewis M. Steel: --Okay. Thank you very much, Your Honor. Warren E. Burger: Mr. Wallace. Lawrence G. Wallace: Mr. Chief Justice, and may it please the Court, in the view of the United States, the dispositive issue before this Court at the present stage of the case is whether the special employment privilege of Article VIII is conferred on a subsidiary incorporated in the host country, such as the Petitioner. The answer given by the Treaty's text is that that privilege is not conferred on such a subsidiary, and the contracting parties to the Treaty are in agreement that the textual answer is the correct one, that the Treaty means what it says in this regard. Now, the Court has noted that the views of the contracting parties to a treaty are entitled to great weight, and I think that principle applies particularly when we are talking about the interpretation of a provision that is obviously meant to impose reciprocal obligations because it is only by a decision agreeing with the views of the contracting parties that the actual application of the reciprocal obligation can be assured, and otherwise, there is some question introduced that will cause questions to be resolved in our international relations of whether reciprocity can be preserved if the views of the contracting parties are determined not to be the correct views. Speaker: Now, the view of the Japanese government is consistent with the view you have taken. Is that correct? Lawrence G. Wallace: That is correct. One thing that we have set forth with great clarity is that both governments, and the Japanese government has consistently taken this position, agree on the meaning of Article VIII of the Treaty with respect to subsidiaries incorporated in the host country, and this view comports completely with the plain text of the Treaty. It is only by going behind that text for other reasons that the court below or the Fifth Circuit reached a contrary result. The definition that appears, and the text of the pertinent provisions is set forth in Petitioner's brief. The definition that appears in Article XXII, which is set forth on Page 5 of that brief, is one of four subsections of that article, all of which are definitional in nature, and none of which would have any function in the Treaty unless they were to illuminate the usage of terms in other provisions of the Treaty. There is no other meaning to Article XXII of the Treaty. Speaker: In your view, should we stop there, Mr. Wallace, or should we go on and resolve the question raised about the difficulty of interpreting who is covered by the Treaty trader? Lawrence G. Wallace: Well, I don't really think there is a difficulty. Perhaps I should turn to that immediately. I was just going to further elucidate about Article VIII itself, gives an example of the usage of these terms in a way, in the second sentence of Article VIII, it is obviously designed to draw a distinction between the subsidiary incorporated in the host country which would not be allowed to have accountants and others practicing for it who could not qualify under local law, whereas the parent in the foreign country would be allowed to send in such a person. And right there, in Article VIII itself, the distinction is drawn for a very plausible reason, and there is no reason to think that the first sentence of Article VIII means anything different, and let me try to clarify what has been said about our discussion of Treaty trader visas, because I think considerable confusion has been introduced by the Petitioner's contention that the securing of a Treaty trader visa in any way illuminates the rights of the employing company. All we meant on Page 6 of our brief, in the sentence that was quoted, if one hypothesizes that as we contend, Title VII applies to the subsidiary and to its hiring decisions, nonetheless, the Treaty, through Article I and through Article VII, gives the subsidiary rights with respect to its operations here, and it can consider Japanese nationals in filling its positions, and it can do that consistently with Title VII either on a non-discriminatory basis by deciding that the Japanese national is the better qualified person for a particular position, or by showing as a matter of business necessity that others need not be considered for that position. Speaker: Would that be quite independently of the Treaty? Lawrence G. Wallace: It is independent of the Treaty. It is a right under Title VII, but what is needed from the Treaty is the way to get that person into the country to be employed, and that is what is conferred by Article I of the Treaty and by the Immigration and Naturalization law that allows these people to come in under Treaty trader visas. Speaker: But the right to defend the Title VII action in you view, doesn't it depend on the Treaty, and the Treaty doesn't give them anything added? Lawrence G. Wallace: No, the Treaty only... through Article VII the Treaty gives them the very valuable right of standing on an equal footing with other companies incorporated in the United States. They are entitled to national treatment. The heart of the Treaty, as it has been defined. But this has no implications for whether Title VII applies or not. All we are pointing out in this first part of the discussion is that they can bring in a Japanese national, but in doing so they might or might not be violating someone else's rights under Title VII. That is a separate question, and when a consular official issues a visa, all that official is determining is whether the individual applying to him qualifies for the visa. He makes no determination about the company's rights. The consular official sees to it that the individual who has applied to him for the visa has been offered a job in the United States that qualifies as one of the jobs for which he is entitled to the issuance of a visa. It may be that the company in offering him that job has violated someone else's Title VII rights. That is a separate question that is not even addressed, and need not be addressed by the consular official, because it has nothing to do with his right to the visa. Even if it were later determined that Title VII were violated by that appointment, Title VII remedies do not bump an incumbent employee out of the job. So, it would have nothing to do with his right to enter the United States to take the job, and we were talking about something quite separate on Page 21 when we talked about the possibility that the parent company may claim a right to assign certain persons to the subsidiary. It is premature in this case to know whether that question is presented at all. On the face of things, all of these people are employees of the subsidiary, and there has been no proof made that any of them were assigned to the subsidiary by the parent company, nor do we know yet the circumstances under which that assignment was made, whether it really could be argued to have been made in exercise of the parent company's treaty right to manage and control the subsidiary, or whether it might have been, for example, just part of a training program for the parent company's personnel, to give them some experience here and there, so that they will be better employees in the parent company in future years, which would raise a different question of whether there is a right under the Treaty to assign persons for that kind of reason. The record simply is not developed enough to address, in our view, any question other than the Article VIII question on which the contracting parties agree and the language of the Treaty is clear, and in response to this, all the Petitioners have been able to do is try to introduce some possible ambiguities or inconsistencies in the negotiating history or the subsequent interpretation of the Treaty, and that cannot be enough to overturn the meaning of the plain language agreed to by the contracting parties. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Earl Warren: Number 9, Swift & Company Incorporated, et al., Appellants versus Don J. Wickham, Commissioner of Agriculture and Markets of New York. Mr. Condon. William J. Condon: Mr. Chief Justice, may it please the Court. This action comes here from the dismissal by a three-judge statutory court in the the Second Circuit, Common District of New York of a challenge by appellants to the constitutionality of a statue of the State of New York. The appellants Swift and Armour packed frozen stuffed turkeys in their plants in Wisconsin and Minnesota. These are packed under the jurisdiction of the United States Department of Agriculture, under the Poultry Products Inspection Act and they're shipped in interstate commerce from those plants to the various states of the union. State of New York has a statute as part of the Agriculture Markets Law regulating net weights and the labeling thereof, which provides as applied and agreed in the Court below as proper, requires that a product such as stuffed turkey be labeled to show the net weight of the turkey and the net weight of the total product. Appellants labeled their turkeys with just the net weight of the product. These labels are subject to the prior approval of the Secretary of Agriculture of the United States under the Poultry Products Inspection Act. Each has an approved label showing just a single weight. In the early part of 1963, each appellant separately filed an application with the Department of Agriculture, requesting approval for a label, which would show separately the weight of the turkey, the weight of the stuffing and the total weight. These labels were rejected by the poultry division, I say rejected, actually the application came back commented on only, there is testimony of the trial indicate that this is the form in which a rejection takes at the Department of Agriculture level. And following the rejection of those labels, this lawsuit was commenced. Appellants challenged the constitutionality of the New York Statute on several grounds. The first ground is that of violation of the Supremacy Clause of the Constitution alleging both preemption and conflict for the Federal Statue. A violation of the Commerce Clause and interferences with the guarantees of the Fourteenth Amendment Due Process and Equal Protection. Now three-judge court was convened. Testimony was heard and at the conclusion thereof an opinion was written dismissing the complaint, it was unanimous opinion by the three judges. At the outset I think it's necessary to discuss the question here of jurisdiction of this Court, the District Court expressed the view in its opinion that it seriously questioned whether this was properly a matter for three judges. Of course it follows from that, but there would be some question whether it was properly a matter for direct appeal to this Court. The Court of the view that if the problem involved only that of supremacy, that prior to this Court's decision in Kesler in any event, the District Court would have held without any problem that it was not a three judge matter. That Section 2281 of Title 28 of three-judge statute would not apply to those circumstances and of course the Court noted however that in the Kesler situation, Mr. Justice Frankfurter writing for the Court indicated that where the conflict between the state and federal statute is immediately apparent without any serious necessity for the Court to construe statutes in order to get to the constitutional problem, that in that circumstance, Section 2281 ought to apply, the Court -- Judge Friendly speaking for the Court below noted however that in the Kesler situation it was necessary for Mr. Justice Frankfurter after making this statement to do a considerable amount of statutory construction both of the Federal Act and the State Act involved and he therefore concluded that the question before him, that is the three-judge court was whether or not this Court had been required to do more statutory construction than had been required in Kesler and then the Court rather neatly side stepped the problem by reference to the lack of sensitivity of its witness paper in suggesting that we appeal to both the Court of Appeals and the Supreme Court in the event that his determination or suggestion might be wrong at least no serious damage would have been done for the litigates. This we did. Now looking first at Kesler, I believe that there isn't any more certainly and I believe less statutory construction necessary here than was necessary in Kesler. In that case you may recall that it was necessary for the Court to determine not only the meaning and policy of the Utah Financial Responsibility Act, but also a considerable amount of effort and attention was paid to the policy of the Federal Bankruptcy Act and indeed as I recall it, the dissenting justices didn't agree on the construction of either one exactly with that of the majority. So that there were serious questions of construction of the statute. Here there is no problem with respect to the construction of the New York Act at all. There hasn't been any question about it. We didn't challenge the interpretation of the New York Act. There hasn't been any indication in the case or in the Court's opinion that, that was problem. The Court simply indicates that this is the way that Act is applied and it's a perfectly reasonable construction of it. There wasn't any problem involved with respect to the Poultry Products Inspection Act to be sure it had to be looked at, it had to be studied, but no serious problems was presented by way of statutory interpretation. There is some and I do disagree to a large extent with some of the things that the Court did, but overall in the opinion of Mr. Justice Frankfurter took some 20 pages to dispose of the problems of construing the two statues in Kesler, it seems to me that in this case we haven't got anything worse than that. We don't have more. However my -- Speaker: [Inaudible] William J. Condon: I think that's right. I don't believe however that this should have been properly a Kesler case in the first place. I think that the determination of this Court in the first Avocado opinion which was purely a jurisdictional question -- Potter Stewart: Justice Whitaker's opinion. William J. Condon: That was Mr. Justice Whitaker's opinion, yes sir. In that case it came here on the pleadings and there was a division in the Court and this very problem of what's the effect of a challenge to the constitution on supremacy ground was before the Court, but both majority and dissenting justices approached the problem on the basis that the determination of this issue rests upon the pleadings. It rests on the issues that are raised in the pleadings, not on the determination of the three-judge court after it has heard the evidence and decided whether or not the issues raised were properly proved. This is the problem here, from the standpoint of the determination originally made by the district judge to whom the motion was addressed, the three-judge court and Judge Friendly notes in his opinion that Judge Coket at that time couldn't know that the other constitutional issues after proof would prove to be insubstantial. But in the Jacobson case both Mr. Justice Whitaker and Mr. Justice Frankfurter realized that or at least seemed to recognize that the problem of jurisdiction is determined upon the pleadings. This is what is presented to the Court and if the district court may enjoin the conduct complained of or enjoin the statute or declare unconstitutional, then that three judge court is necessary and a proper court. Speaker: [Inaudible] William J. Condon: We do and that has been held in abeyance at the Court of Appeal pending the determination of the jurisdictional question in this Court. If I may turn to the merits of the controversy, the appellants' claim here that with respect to the problem involved in this case, the Poultry Products Inspection Act, has preempted occupied the field. Now, there have been of course a line of preemption problems and cases before this Court almost throughout its entire history. We could quote the language of the various formulas that have been relied upon, but basically it seems that in every instance where the problem before the Court is one of Federal preemption. What the Court is concerned with is the determination basically of the Federal Policy and whether or not the coexistence of state action in the areas involved would frustrate that Federal Policy or not. What's the Federal Policy we're dealing with here? First of all I think we ought to point this out, that the problem involved in this case is one of labeling. The only thing that's involved is what is to go on a label. There has been consideration, there has been discussion at various levels and there were some in Judge Friendly's opinion that the issue is one of a definition of net weight. The appellants disagree with this. I don't think this is the issue at all. There never was any problem about what net weight means. Net weight isn't defined they say in the Poultry Products Inspection Act, oddly enough it's not defined in the Agriculture and Markets Law in the State of New York either, which whole purpose is net weight, that's what it's regulating, it doesn't define it either. This is not by way of criticism; it's just the fact that net weight isn't a problem to anybody who is concerned with weights. We have gross, tare and net, the people know what they mean. What's involved here is what net weight is to appear on the label. How are we going to label the product and what is involved simply from the standpoint of this Federal supremacy question is whether or not Congress in the Poultry Products Inspection Act has preempted the field of what is to appear on a label of a poultry product which is subject to this Act. William J. Brennan, Jr.: [Inaudible] William J. Condon: Well, I think that the Court had to reach before it could get to that one. I think the Court had to dispose of the question of preemption because it seems to me that if the Poultry Products Inspection Act has preempted the area of the labels on these products, then it doesn't make any difference whether there is a conflict or not. The conflict problem only arises when you say yes the two may exist side by side, but not if there is a conflict. William J. Brennan, Jr.: [Inaudible] William J. Condon: Well, as I read the opinion Your Honor I believe that he had first decided that the Poultry Products Inspection Act does not preempt this field. Then he moved into the issue of conflict and I think then the burden of his holding was this -- the record isn't right for determination on conflict. For this reason there had been a failure to exhaust administrative remedies as he saw it. William J. Brennan, Jr.: [Inaudible] William J. Condon: Well, I think that the Court did reach it, if Your Honor please. I believe the Court did reach it, but I think that the three of them they reached the question of preemption and found that it didn't exist. It said Congress hasn't occupied the field and then moved on to --. William J. Brennan, Jr.: [Inaudible] any express statement by the Congress, is that what do you mean when you say preemption? William J. Condon: No sir. William J. Brennan, Jr.: How are you distinguishing conflict from preemption, I don't --. William J. Condon: The way I distinguish is this, that are cases, we know cases for example the Campbell against Hussey situation, the Tobacco Inspection cases, tobacco labeling, where they -- the holding is that when Congress has acted then there is no room for state action, you find this in the Interstate Commerce cases too. The issue I think was argued here yesterday in connection with the National Labor Relations Act as well that can the two coexist even though they touch different things, even if they don't conflict with one another? Is it the policy that Congress wants to -- wants its agency to do it all. On the other hand, even though the two may coexist, take for example the Savage and Jones and McDermott and Wisconsin situation, where in Savage and Jones, the Court held that there maybe state regulation of labeling even though the Food and Drugs Act had something to do with labeling at that time, but then the McDermott situation came along and said yes there maybe state action, but not if it conflicts with the action of Congress with the federal action and this is where I am separating, this is how I developed the dichotomy. It's both under the supremacy clause, it is to be sure we are talking about supremacy, but in the one case if there is preemption since what I tried to answer to Mr. Justice Harlan, that if there is preemption, it doesn't make any difference whether there is conflict or not. Our original label because it bore the Federal approval would be adequate to go anywhere and the states would not be able to do anything about it, with respect to the text and the content of the label. We are careful to keep it as narrow as I can with that in regard to this because there is no claim that the states can't regulate false weights, improper weights, if they don't get enough in the package. I don't think there is any question about the fact that the state retains the power to do this, but no false or improper weights involved in this lawsuit. The only thing that's involved in here is the manner in which it's labeled. Now, we claim that there is Federal preemption. We claim that Congress has intended that the Poultry Products Inspection Act occupy the field with respect to the text, the form and content of labels on poultry products under the Act and we find that policy not because they used the words, the magic words to say so and not because they used uniform as was the case in -- William J. Brennan, Jr.: Well, I gather that if Congress had said so explicitly we have no problem. William J. Condon: There wouldn't be a problem, that's correct. William J. Brennan, Jr.: But Congress I gather has not in this sense said anything, isn't that right? William J. Condon: That's right. William J. Brennan, Jr.: Now, then how are going to spell out that nevertheless that's what Congress -- William J. Condon: I think we have to define it from what Congress has done. This is what -- this is the problem that comes to the Court. In this kind of a situation you look at what Congress has done and you try to determine whether or not any other holding would be consistent with the Congressional policy, whether they can consistently do what they try to do. In this statute, the policy of the Act, I think with respect to this aspect can be defined from a look at what the Congress has done. The definition section, for example, where they define immediate containers and it's clear that this Act applies to immediate containers and an immediate container is defined to include a consumer package and that's what we're talking about in this case. We're talking about a turkey that's wrapped up in a package that's going to the consumer and Congress defines that in here, has some reason for this. It provides for prior approval of labels by the Secretary of Agriculture and specifically for the prior approval of labels, which are going on consumer packages. Now, Congress has said this, the regulations say this, they make it plain, that before we may use a label on any poultry product subject to this Act, we must first submit it and incidentally the regulations are very plain, we are not allowed to print it until after it's been approved. The Secretary of Agriculture must approve the label and this label must be on the product before we can ship it out of the plant. As a matter of fact the Act, see what the Court and what Congress has done in the statute, that at the heart of it there are all kinds of regulatory provisions but the heart of the statute is contained in Section 6, 7, and 8. Section 6 provides for the inspection of the product, Section 7 provides for the sanitary facilities and the practices, Section 8 for labeling. Congress takes up the three of them with no differentiation, no distinction, there is no categorization or weight attached to one or the other. Now the argument is made that it's clear from the declaration to policy on the legislative findings of Congress Sections 3 and 2 in the inverse order, so all Congress was concerned with was on unwholesome poultry and the desire not to have unwholesome poultry moving in interstate commerce. Well, this maybe so, this is what Congress has said, this is their policy, it's what they are trying to do, is control the interstate shipment of poultry, so that they won't have unwholesome poultry moving in interstate commerce. Now then, that's what they intend to by this statute and then they sat down and wrote the statute and they wrote in Section 6, in order to effectuate these policies we are going to have anti and postmortem inspection of the products of the plant, they wrote in Section 7 what they are going to do with respect to sanitary facilities and they wrote in Section 8 what they require with respect to labels. Now it is a legislative certainly not a judicial determination whether or not the means which Congress has adopted in the statute are the best or the most appropriate means of effectuating the purposes announced. But the fact is however that this is what Congress has done in order to effectuate the purposes described in the beginning of the statute. Now I know that the Solicitor General has filed a brief as amicus curiae and has taken the position that this statute does not preempt the field and in his brief the Solicitor General on the page 19, quotes with rather substantial ellipsis from the – one of the house reports, when he says that net weight labels was merely intended to “Ellipsis”, round out, the Acts' principle purposes. On the page 33 of the appellant's brief, the same quote appears only without quite so much of an ellipsis. At the very bottom of the page, moving over on to the second page. If the purpose is to establish a system of compulsory inspection poultry and poultry products in interstate commerce, moving down the last sentence, such inspection would be rounded out by requirements as to the maintains of sanitary facilities and the practices, and as to correct an informative labeling in products. Now I presume that the Solicitor General doesn't intend us to conclude from this that the maintenance of sanitary facilities and practices is as incidental to the wholesomeness and therefore the furtherance of the congressional polices as is that net weight labeling. The fact of the matter is that Congress has chosen to regulate all three areas in order to establish -- develop its purpose. It's not then for the Court to say whether this was appropriate or not. Before I leave this question of preemption, I'd like to refer again to an argument raised by the Solicitor General. Because Solicitor General in his brief makes reference to the exemption from the Food, Drug, and Cosmetic Act which that Act contains for products subject to the Meat Inspection Act and the substantially identical language which appears in the Poultry Products Inspection Act in 19A. The argument runs that under the Food, Drug and Cosmetic Act this Court has always held that the state is free to regulate with respect to labels. It follows and any such case under the Meat -- under the Food, Drug, and Cosmetic Act which involved federal inspected meat, the Cockman case and he moves from there to indicate that if the Food, Drug, and Cosmetic Act applies to poultry, since the exempt to meat, since the exemptions are same under the poultry, then likewise it would apply to poultry after the interstate shipment has concluded and that being so, then obviously the states may do what they want after the interstate shipment is over. And I call the attention of Court the argument for several reasons. The first is that I think the statement originally that this Court has consistently held that the Federal Food, Drug, and Cosmetic Act did not prevent state action is a grutalative statement. That the cases cited in support of that proposition are all cases involving the Food and Drugs Act of 1906. So far as I know this question hasn't been presented to this Court with respect to the Food, Drug, and Cosmetic Act of 1938. Now this has not suggested necessarily the Court would reach a different result, but it is to suggest that it need not necessarily reach the same result because the labeling provisions and requirements under the Food, Drug, and Cosmetic Act of 1938 are substantially more detailed and more stringent and in many areas perhaps preemptive. Certainly I think this must be true with respective prescription drugs and things of that sort, but in any event the cases don't support the principle. This is the basis for this argument. The second leg of the argument I believe is the Cockman case and as I say that was a prosecution with criminal case, the prosecution for removing labels from federally inspected meat after the shipment in interstate commerce was over. With respect to that case, I can only say this. In the Court of Appeals opinion the question of the exemption from the Food, Drug, and Cosmetic Act was never raised. The Court of Appeals doesn't discuss it and in the petition for certiorari which was filed with this Court, the petitioner doesn't raise it either. Now the case certainly is something less than authority for the proposition that the Food, Drug, and Cosmetic Act applies immediately to meat products when their interstate movement is through. And finally its the language of the exemption as written into the statute, Section 19(a) is that secretary's authority should be exclusive in poultry and poultry products should be exempt from the provisions of Federal Food, Drug, and Cosmetic Act as amended to the extent of the application or the extension thereto, of the provisions of this Act. Well then it begs the question, and question is how far does this Act extend and if this Act as I contend does extend in the case of consumer packages which are regulated in the statue, which are prescribed as to their labeling in the statute and the regulations and for which the labels must be approved by the sectary before they can be put on the product and if as I contend this Act carries to the consumer with respect to that label, then it begs the question to say that, this exemption is the same as for meat, because it is as far as the exemption is concerned, but certainly that doesn't define the extension of this Act, to determine where the exemption begins and ends. The other half of the supremacy argument, the one which gave everybody so much trouble and certainly did the Court below and that's the question of the conflict with the Federal Statute. I don't think there is much very much doubt that factually we have a conflict as of the moment we have a product with a label which is approved by the Department of Agriculture, which we sell everywhere in the United States except the State of New York. That product cannot come into New York with that label on it. Potter Stewart: It can come into New York with that label on it, if the New York label is added, isn't that correct? William J. Condon: Well, as a practical matter I mean -- Potter Stewart: New York would not require the deletion of the Federal label would it? William J. Condon: Oh, no it has -- it requires more, but I think as the Solicitor General points out and as I've tried to, as a practical matter the only place this product can be labeled to satisfy New York is in the plant in Minnesota. Potter Stewart: Is in the plant, yes. William J. Condon: You can't do it anywhere else, that's the only place where we've got the information and the weight. So the question really comes what do we have to put on the product in Minnesota? Now New York says we have to put on that product in Minnesota two weights, weight of the turkey, the weight of the product. Department of Agriculture has turned down our application for a label, which would satisfy New York requirements. And this raises the question now of -- two questions really, the Court below indicated first of all that we could use a supplemental label. And this way everybody would be happy, but there are one or two things wrong with that, first of all I think that the Court below unduly restricted the definition of label in the statute. As the label as you know and this Poultry Products Inspection Act is defined to include both the definition of label and the definition of labeling from the Food Drug and Cosmetic Act. They were lifted banally and made into one definition and that's any written, printed or graphic material on the product, on the label or accompanying such product. Now this Court has already defined what accompanying such product means as those words were used in the Food Drug and Cosmetic Act. In the Cardell case, you may recall Cardell against the United States, a criminal prosecution for misbranding a product when introduced into interstate commerce, 301 Food Drug and Cosmetic Act, and this Court held that, that product was misbranded when the misrepresentation, the false misleading material followed the product in interstate commerce by as much as 18 months. So that there isn't any way really that we can have additional information to go with the turkey even if it were physically possible to do it and practical. There isn't anyway we could do it without it being part of the label and therefore subject to the prior approval of the Secretary of Agriculture. Byron R. White: [Inaudible] would have agreed with you if this had been a final administrative action, wouldn't it? William J. Condon: I don't know, I don't know if they would or not because the Court below disposed of all of these things and finally said, but we've got here a civilian federal official. Byron R. White: If at the end of the administrative process, the federal authorities did not let you put this information on the turkey, on this turkey at all, are you -- and New York wouldn't let you in without it. Isn't that a conflict or not? William J. Condon: I'm sorry, I didn't -- Byron R. White: Would the court below admitted that, that was a conflict or not? William J. Condon: Well, I'm not sure that it would because the court below did spend a good deal of time on this possibility of a supplemental label. It also apparently defined the, what I call the preempted area. You see they recognize a certain amount of preemption by saying that what you put on in this supplemental label can go there as wrong as it's not on that part of the federal label, which would imply federal approval. Byron R. White: Yes, but what if at the end of the administrative process this is -- that the administrative officials have finally determined that this information just wasn't going to go on that turkey, whether it was on the same label or a different label? William J. Condon: I think if it meant plain enough, surely the Court below would have recognized the conflict. Yes I agree with that. William J. Brennan, Jr.: Well what does this mean at page 20 of your brief Mr. Condon? As testified by Mr. Hebert, Deputy Director of the Poultry Division of the United States Department of Agriculture, dual weights which New York demands would not be allowed out of the appellants plants in Wisconsin and Minnesota. William J. Condon: First of all I think there is a portion missing of a sentence in the printing there. It should have read products bearing dual weights would not be allowed. William J. Brennan, Jr.: What are the words product bearing? William J. Condon: Product bearing dual weights, which New York demands. William J. Brennan, Jr.: Product bearing. William J. Condon: Did that help? William J. Brennan, Jr.: I still -- that doesn't help too much. William J. Condon: Well, what happened, the -- William J. Brennan, Jr.: The sense I get out of this is that somebody testified in effect that you would not be allowed to ship turkeys from Wisconsin and Minnesota, if you had any label which complied which New York requirement. That -- William J. Condon: That's right. William J. Brennan, Jr.: That's not how it would be a violation of federal requirement. William J. Condon: That's right, that's what he testified, if you put this on, we won't let it out of your plant. William J. Brennan, Jr.: But I don't -- what was the reason Judge Friendly thought they had to exhaust some administered remedy, what was that all about? William J. Condon: Well, Judge Friendly was concerned about the fact that -- William J. Brennan, Jr.: This fellow is too far down the line, is that it? William J. Condon: Yes, I think that's it. William J. Brennan, Jr.: But you have to go to whom, the Secretary himself? William J. Condon: Well, the Act provides this that you must -- the Act, the regulations say you must get approval from the Secretary. Then it says if you don't accept, if you do not accept the determination of the Secretary, then you may have a hearing, administrative hearing, and then if you are aggrieved or adversely affected after that you may go to the Court of Appeals. Now -- Byron R. White: Meanwhile you are out of business. William J. Condon: Meanwhile you are out of business William J. Brennan, Jr.: But did Judge Friendly -- well I'm understanding had this in mind, that it might be that if you got high enough up within the department someone would authorize you to comply with -- would allow you to comply with the New York regulation without being in violation of the federal regulation. William J. Condon: That was his position, yes. William J. Brennan, Jr.: And we don't know if that's so or not, do you, other than this kind of testimony that wouldn't be so. William J. Condon: Well, I can only -- I refer to that testimony and then I refer further to page 36, I believe in the record and is one of these exhibits to the complaint. It was an amendment to the regulation, which was in the federal register on January 16, 1963, this was prior to the beginning of this lawsuit, and in the middle of the second column there is explanatory material with respect to the amendment and in that explanatory material, the Deputy Administrator, this Bureau, the marketing services points out that this amendment clarifies the original intent of the regulation, but I think it more recently understood that the net weight required to appear on the immediate container of any poultry product is the net weight of the poultry product and includes in addition to the weight of the poultry, the weight of any ingredient that is combined with the poultry and the product and excludes the weights when are dry packaging materials and so on. Byron R. White: That doesn't go on to say that net weights will not be allowed in addition to Judge Friendly's point. William J. Condon: Yes. Byron R. White: It does not go on and say that net weight in addition are barred? William J. Condon: No, it does not, but it does rather say affirmatively that when we say net weight in our regulation, we mean the net weight of the poultry product and not exclusive of these other ingredients. Byron R. White: There is something in there that says that both weights won't be permitted? William J. Condon: No, not specifically in so many words. Byron R. White: The only thing in the regulation, but there is something in the letter you received, then in the testimony in court that it wouldn't be permitted? William J. Condon: That's right, that's right. Our position on this of course is that Congress has been rather careful in the choice of words in this thing. Now, the Solicitor General says the record isn't right because we had an administrative procedure, we had remedies, but first of all remedies suggest that you've been wrong. I'm not challenging what the Secretary of Agriculture has done. We have no challenge to that. Now I am not -- first of all, I personally haven't been able to find any authority for the proposition that we must exhaust our administrative remedies in order to rely upon an administrative determination. Now, surely while the Solicitor General suggests that this subordinate Federal Official hasn't really undone anything, this same subordinate Federal Official has approved every label that's moving in interstate commerce and poultry products today. The law says if you don't get approval from the Secretary, you can't ship and your product is illegal. Surely, we don't understand the Solicitor General to say that isn't an approval label. There must be. So that what this man has done, the delegate of the Secretary must have some legal significance. Now we have in the odd words that Congress used, we have accepted the determination of the Secretary. Our argument of course we laid it out in the brief was that Congress must have intended that the Secretary himself wasn't going to approve these labels in the first instance and yet it provides for a hearing, an appeal from the Secretary's determination. So that this was the determination of the secretary. The rejection of our label was the determination of the Secretary of Agriculture. Byron R. White: But you would make the same argument without the determination wouldn't you, that you would just make the argument that the states law has nothing to do with it at all, and whether there been a determination or not, New York did not exclude your turkeys by requiring any kind of weights on the turkey. William J. Condon: I make that argument with respect to the preemption. Byron R. White: Yes. William J. Condon: But these of course have to be alternative arguments. I don't pretend that there is a must response to this Court, by this Court to a preemption argument. These are very difficult questions. But I say if you do find that there is not a preemption then there is this conflict. William J. Brennan, Jr.: Well, when you get to the conflict, kind of what troubles me is, why, if there is no conflict certainly, if administratively the Secretary of Agriculture would have say go ahead you can comply without violating our regulations with a New York requirement, it would mean I gather that then your processing, you'd have to setup another step in the process, but that's another problem. William J. Condon: That's another problem, that's commerce. William J. Brennan, Jr.: Yeah, but I don't see why -- there is no conflict certainly if the Secretary says go ahead and comply with the New York requirement, is it? William J. Condon: Well, that's very true, but Mr. Justice Brennan. He said there is a conflict because he did say -- William J. Brennan, Jr.: I can understand your argument on the so called preemption side, but I don't see on the conflict side that whether you can create a conflict if you can get out of business. As Mr. Justice White observes, of course we've got somebody in here who has testified that they wouldn't let you do it. William J. Condon: Well, that's true. Again though in candor I must say he is another subordinate federal official. He may not be quite as subordinate as the Head of the Poultry Product Section, but he is only a step further up. The Deputy Administrator has indicated that this is the way they interpret it and our experience has indicated, and based upon our experience we didn't see any point in going up the administrative ladder to get further indications that we were going to get any same result that we got here. Earl Warren: We will recess now. [Inaudible] William J. Condon: No Your Honor. Thank you Mr. Chief Justice may it please the Court. At the recess we were talking very briefly about the problem of getting a product out of the plant, if it didn't bare a label which was approved by the Department. A word in that regard might be an order. I'm sure the is Court is aware of the way the Poultry Products Inspection Act is enforced or applied by the Department of Agriculture. Substantially the same system has been in effect under the Meat Inspection Act for the last -- close to 60 years even though this statute is relatively new. There are full time inspectors on the plant at all times. No product can move out unless it is approved by the inspectors and no product in package form may leave the plant unless it bears an approved label and it was on this basis I think that Mr. Howell was able to say in response to the question of the trial, we wouldn't let the product out of the plant. Byron R. White: How long would it [Inaudible] William J. Condon: Mr. Justice -- Byron R. White: [Inaudible] William J. Condon: Mr. Justice White, I'm sorry to say I have no information on which I base an answer to that. My information not only from the Swift & Company, but from the Department of Agriculture is there has never been such a hearing. Byron R. White: [Inaudible] William J. Condon: Well, we've been involved in hearing from the Department of Agriculture to be sure. Byron R. White: [Inaudible] William J. Condon: This I don't have any information with which I can answer your question. I don't know. Hugo L. Black: But you can try. William J. Condon: For number of reasons Mr. Justice White, first of all, by reason of the regulation in the explanatory material which I read prior to the recess, we didn't expect the label to be approved. Quite frankly we expected that this interpretation which was written in that federal register release would govern, but my client, the company didn't want to start an action until it had at least made this effort. Having made the effort and having got the response they expected to get, not they applied for, but they expected to get this response, then it was felt it would be useless to go further because the response that we got from the Secretary's delegate was precise to the same as what was forecast by this regulatory release. Hugo L. Black: Well is that generally a good reason for not going up if you have a chance to go up in the case? Can you say well we knew when we got up there, we knew it required valid, but we know when it gets up there you decide against it, so we didn't waste time on it? William J. Condon: Well a legal advice was sought by the client and the legal advice was no we don't think there will be any difference, we don't anticipate there will be any difference. Hugo L. Black: I do not think there will be any difference, but was the legal advice that we have no right to go, there is no regulation which authorizes to go to anybody. William J. Condon: Oh, no sir it's clear under the statute we did have a right. Hugo L. Black: To go where? William J. Condon: To go to hearing at the Secretary's level, the statute says that -- Hugo L. Black: But you thought the Secretary would decide against you and therefore you didn't do it? William J. Condon: Yes sir, that was the fact and I think I should -- Hugo L. Black: But you've got a good excuse legalistically. William J. Condon: Well I don't know, as I need an excuse, that -- probably the problem is a matter of emphasis. Byron R. White: Well, put it this way, what do you think New York would have said if the Secretary, had said we want only one weight on the bird and no other one, that's what the regulation means and if it takes the regulation, here is the regulation, what do you think New York would have said? Do you think they would have said, you stay out here until you get a court order? William J. Condon: I think New York would have said precisely that. Byron R. White: Well I know, but you don't really know, do you think the New York officials would have said then, awfully sorry but we won't stand for what the Secretary is saying. I mean if your choice is just for to litigate in the Department of Agriculture or in court, why shouldn't you go to the Department of Agriculture? Might not have taken as long as -- how long this has been in court? William J. Condon: 1963, the Fall of 1963. Tom C. Clark: [Inaudible] William J. Condon: No, did they? I'm sorry, the question, did they? No there really wasn't any proceeding Mr. Justice Clark. We merely filed an application for label approval. Tom C. Clark: Would you anticipate that they would come in if it was at the secretariat level? William J. Condon: Well, after reading Judge Friendly's opinion, I would now anticipate that they might. At that time if you asked me the same question my answer would be no, this is a matter between company subject to regulation and the regulatory agency, I would not expect that the state of New York was -- William J. Brennan, Jr.: [Inaudible] if the client was satisfied with the answer got at the level of first bureaucrat, any reason to go beyond the bureaucrat. William J. Condon: Well I would say this in all candor Mr. Justice Brennan, the answer that the client got was a satisfactory answer to the client. The overriding clamor in the food industry today is for uniformity of labeling. This is the one thing that our people talk about, complain about more than any thing else. William J. Brennan, Jr.: So if you had gotten further, all you would have wanted was affirmation of the advice that you got at the first level. William J. Condon: The only purpose of it would have been to -- perhaps like a better record and this didn't seem to make a great deal of sense. Speaker: [Inaudible] in New York requirements was to get an opposite result. William J. Condon: No Your Honor. Speaker: Which you asked for wasn't it? I mean, that's perfect and proper. William J. Condon: It is proper, but it isn't true. It would have been a proper thing to do I think, but it isn't true because at the time, at the time we made this application there still was ample time to take advantage of the holiday season, it's a holiday product at its principle distribution, big thrust and there would still be time to stuff a lot of turkeys for New York and get them into the New York market and the commercial people raised a clamor for us to take just one more step before we did anything further. Having done that then other people said no, that's enough, we've gone far enough now. If we are going to determine this thing we might justice as well figure that we're out of the New York market until the matter has been clarified judicially. Speaker: Are you complacent as to which way this case goes on the merits or in other words if you are told you have to comply with New York regulations as well as federal regulations, does that satisfy you? William J. Condon: No sir, we're not complacent because while a statement, a simple statement of the facts in this case will indicate that we're litigating about the label on a stuffed turkey. The fact of the matter is we're litigating about the labels on all kinds of combination products which contain meat or poultry, both of which we deal in, both appellants deal in, and other food ingredients, and we make hundreds of such products. Now the statute that we're talking about, the New York Statute applies by its terms not only to stuffed turkey, it applies to any combination product which is other than a ready- to-eat meal, which contains meat, poultry or sea food and other edible ingredients. Now this is pork and beans, corn beef hash, frozen dinners, all of these things, they are all covered by this, and we make all of these things. And if these labeling requirements are going to be extended to all of these products, John Madden, the Director of Weights and Measures of State of New York in his testimony, he said, no, we don't apply this law to meat products, and we don't apply it to sea food products, and we don't apply to other poultry products, we don't apply it to soups, we don't apply it to turkey dinners, TV dinners, and things of that sort, because in his idea was it was impossible to do so and enforce it, they couldn't check the weights on these things. But he said, we are anxious to see how this case comes out because we'll have to be guided by the law as it's told to us. Hugo L. Black: Would you mind stating what's the practical effect, what's the practical reason to give New York for having this requirement about the stuffed turkey? William J. Condon: I'm sorry, I'm not sure that I understand your question sir. Hugo L. Black: What does the label require? What is the label? William J. Condon: The label? Hugo L. Black: Yeah. William J. Condon: And what does it required under the New York Law? Hugo L. Black: Yes. William J. Condon: The New York Law requires that a stuffed turkey in this case, show the net weight of the turkey and the net weight of the total product. Hugo L. Black: Now what's the reason for that? What -- there is some reason for it actually speaking. William J. Condon: Well the reason has -- it has been -- Hugo L. Black: What do they do? William J. Condon: The reason as it has been expressed is that the consumer has a right to know how much turkey he is getting. Hugo L. Black: Well, to that extent you would agree with them, wouldn't you? William J. Condon: Surely, I don't have any quarrel with the fact that the consumer might be better informed if we gave more information. The same however would be true if we told how much mash potato there was in the TV dinner or how much peas. Hugo L. Black: Well, it might not be necessary in some field as others. William J. Condon: I think though that -- Hugo L. Black: In fact, it might be that a nice fat looking round turkey, if you had to stuff it out [Inaudible] it might look different to the customer. William J. Condon: Well this -- Hugo L. Black: I'm just trying to find what it should have. William J. Condon: I don't think -- actually, I don't think this is so from what our people say and what Mr. Howell testified that you see a turkey doesn't stretch, we don't take the ribcage out of these things, all we do is fill what's there. Hugo L. Black: But it would look a little bigger, wouldn't it? William J. Condon: No, generally speaking it won't look any bigger. The ends of him will be rounded out, it will make a prettier package perhaps because the ends are kind of rounded out, but other than that the body of the turkey doesn't stretch or expand, it stays the same. Byron R. White: [Inaudible] William J. Condon: Quite true, it's possible as it was indicated in this -- Byron R. White: Got heavy stuffing where the housewife pays more, she may not care how it looks but she might be quite interested in how much meat she is getting for it instead of stuffing. William J. Condon: hat's absolutely, that's absolutely right. Of course people say we stand and run for office every single day with that electric and we are not interested and no manufacturer who is in the business is interested in selling one turkey to somebody. We want to sell that person over and over again. These things are to an extent self regulating. Now we are not talking, clear we are not talking here about any fraud, we are not talking about any misrepresentations. We are talking about two different ideas from two different regulatory agencies as to which information best serves the consumer's interest and both of these agencies are interested in the consumer's interest. Now as far as the appellants are concerned, if the Department of Agriculture would take the view that all stuffed turkeys ought to show both the weight of the turkey and the weight of the product, we would have no problem with this, because then again we would be back to uniformity. We could use the same label wherever we were going to ship that turkey and we wouldn't have to police the shipment of it. We wouldn't have to worry about whether a turkey with one label was going into a place where that label was not acceptable. These are the things which -- William J. Brennan, Jr.: May I ask you Mr. Condon, without a further administrative determination in the Department of Agriculture, which as I understand Judge Friendly's position might result in your being relieved by the resolution in the department of the question of any requirement to comply with the New York labeling. Under the present state of this record how can we resolve the conflict point of your argument? I can understand that on the preemption point of your argument, we can say preemption wise you're relieved of any obligation to comply with the New York regulation, but when we get to the conflict side of it, on the present state of this record how can we determine that? William J. Condon: Well I think you can do it one of two different ways. You can either hold that you don't have to appeal from an administrative -- a proper administrative determination that you are not aggrieved by -- William J. Brennan, Jr.: In other words, what that Deputy Director or whatever, that settles the question that on the federal side, the federal determination is you don't have to comply, is that it? William J. Condon: That's right. William J. Brennan, Jr.: Without -- William J. Condon: That's right. William J. Brennan, Jr.: What's the other one? William J. Condon: The other one would be to read that as being the action of the Secretary, which is what the statute says. The statute says we must have a label approved by the Secretary. It further says, that if you don't accept the Secretary's determination, the only determination we have is one, so that if you don't accept the secretary's determination, then you may have an administrative appeal. Now this is an appeal from the secretary to the secretary. It is however the action of the secretary. However much people may refer to a subordinate federal official in the language of the statute, it's the Secretary of Agriculture. Byron R. White: Meanwhile, if you have to appeal you are not -- your turkeys are still in the plant. William J. Condon: That's correct. Byron R. White: You can't get them into commerce. William J. Condon: I can get them into commerce, but not into New York. Byron R. White: Not into New York and [Inaudible] William J. Condon: In a sense, in a sense that's true. Abe Fortas: Mr. Condon. William J. Condon: Yes sir. Abe Fortas: Your clients sells, does it not, a number of products, which are regulated as to labeling and packaging by the Federal Government in one way and by various other states in their different ways. For example, oleomargarine. William J. Condon: Yes sir. Abe Fortas: Now, is it your position that in each one of those situations, and I'm talking about a situation where there are federal labeling requirements as to weight etcetera, that the federal regulation should be held to preclude state regulation? William J. Condon: No sir, our position or our contention is confined to the situation where as here and in the Meat Inspection Act, we are dealing with labels, the text form and content of which must have the prior approval of the regulatory agency before we can use them. Now, in the case of oleomargarine and other food products which are regulated by the Food, Drug and Cosmetic Act of the Food and Drug Administration, under that Act, there is no prior approval, requirements of those statutes are set out and as long as you meet them, that's all that matters. Abe Fortas: Will you please tell me why a prior approval makes a difference with respect to the constitutional issue, that is to say if federal power should in case of specific labeling requirements preempt the field to the -- so as to preclude state regulation, why does it matter whether there is a requirement of prior approval or not? William J. Condon: I think that the burden of my argument Mr. Justice Fortas is this, that where Congress has spoken with specificity about labeling requirements and then has charged the agency with the prior approval of labels in connection with that specificity of requirement, that the additional requisite of prior approval indicates to a far greater degree the intent of Congress that, that control of labels shall be exclusive of all other control. In other words, it's another facet to give weight to the claim of federal preemption. Abe Fortas: Well there is, there are -- William J. Condon: In the case of, excuse me, in the case of products under the Food, Drug, and Cosmetic Act for example, there is no easy answer that would cover all products. In some cases, you will have preemption, in other case you will not. I anticipate these, I'm not citing specifics at the moment. Abe Fortas: And there are also some statutes are there not in which Congress has expressly provided for preemption? William J. Condon: Yes, there are sir. Speaker: Excuse me, the government's amicus brief as I understand it is opposed to your position, in other words they suggest affirmance on various grounds, including among others that there is no preemption here and that New York can consistently with the federal regulation do what they have done. William J. Condon: That is correct. Speaker: Now we had to take it that the Solicitor General is speaking to the views of the Department of Agriculture and thus the agency. The brief is captioned as brief of the United States and sometimes the United States disagrees or the Solicitor General disagrees with the Department of Agriculture, but how should we take this? William J. Condon: Well I'm not sure that I'm the proper person to ask that. Speaker: Yeah why [Inaudible] William J. Condon: You've asked it and my answer is that I do not believe that the Solicitor General's brief reflects the views of the Department of Agriculture. Speaker: You do not believe it does? William J. Condon: That's correct. Speaker: Well what if it did, I actually think that would be a very great weight against your position. William J. Condon: I think it would weigh heavily, it surely would. I don't think that the -- Speaker: And are we entitled to know whether this does represent the views of the Department of Agriculture? William J. Condon: I would certainly think you are. Earl Warren: [Inaudible] legislative history of this labeling act would indicate that the Congress intended to preempt the field? William J. Condon: Nothing as specific as I'd like to have it Mr. Chief Justice. There are references, not great references to labeling. The legislative history was largely concerned with the problems of wholesomeness and the -- I think the -- there were one or two references in our brief but the references that are in the Institute of Poultry Industries, amicus brief are as good as you can get. Earl Warren: Excuse me, we'll write that down. William J. Condon: I'm suggesting merely that the references in the amicus brief are probably the -- as wholesomeness as you can find on the question of labeling in the legislative history of this statute and if we all agree that, that isn't dispositive of the issue it would be helpful, I would be delighted if there were a lot more. But this is not the problem that was accorded a great deal of attention in the legislative history. Abe Fortas: Excuse me sir, but as I understand your answer to my questions, you are inferring from the fact that Congress acquired prior approval, a congressional intent to preempt the field. William J. Condon: I'm inferring from that, plus the other things which I mentioned yesterday. Earl Warren: Perhaps the Department of Agricultural or the Solicitor General will indicate to us whether or not they are in agreement, the two departments of the government, do you think that would be appropriate? William J. Condon: I think as I indicated to Mr. Justice Harlan, I think the Court is entitled to know that. Earl Warren: Perhaps Solicitor General will do that for us. Byron R. White: [Inaudible] what do think the position of the Solicitor General is vis-a-vis the Department of Agriculture in its legal opinions? William J. Condon: What do I think it is? Byron R. White: Yes. William J. Condon: Well -- Byron R. White: In short let me put it this way, why isn't the views, why aren't the views of the Solicitor General automatically and necessarily the views of the Department of Agriculture? William J. Condon: I don't think I can answer that one. Byron R. White: But you've already answer it one way by saying that they aren't. William J. Condon: I don't believe that they are and that's correct. I don't believe that the views expressed -- Byron R. White: For example you're talking about the solicitor for the Department of Agriculture or the Secretary or the head of the Weights and Measures Department or what? William J. Condon: I only -- Byron R. White: Who represents the legal view of the Department of Agriculture? William J. Condon: Basically, I think officially it has to be Secretary. Byron R. White: In this Court? William J. Condon: Oh not in this, no sir. The position of the United States is that presented to you by the Solicitor General. Byron R. White: Well then how can you say that position of the Department of Agriculture isn't that view? William J. Condon: Well I was careful not to say that until somebody asked me if I thought this represent of the view and I don't. Byron R. White: Well I gather Mr. Condon we've had other instance in this where the Solicitor General got up and told us he believes one thing and the general counsel of some federal agency takes a different position, it wouldn't be the first time that's happened. William J. Condon: There have been cases and reports of course indicating representatives of both. Tom C. Clark: We have had the [Inaudible] not to accept it? William J. Condon: United States versus United States.[Attempt to Laughter] Byron R. White: Is there any -- do you have -- what's the basis for saying this doesn't reflect the views of the Department of Agriculture, what's your basis to that? William J. Condon: Conversations that I've had with. Byron R. White: With the Solicitor or with the Secretary? William J. Condon: General Counsel, representatives General Counsel's office and an Assistant Secretary. Speaker: [Inaudible] Earl Warren: Solicitor General Hirshowitz. Samuel A. Hirshowitz: Mr. Chief Justice may it please the Court. We went to -- Earl Warren: May I ask you before you get into your argument, do you happen know anything about this discussion we've had here whether the Department of Agriculture agrees to the position of the Solicitor General? Samuel A. Hirshowitz: No sir. Earl Warren: You do not know, right. Samuel A. Hirshowitz: We are interested in getting a decision on the merits by this Court, but nevertheless in view of the expression of opinion and the opinion of the District Court about the jurisdictional point, we thought it necessary to brief the point in this Court. Under Section 1253 of the code, this case can be heard by -- on a direct appeal only when a three-judge court is required to hear the case. Under the doctrine of preemption, this raises no direct constitutional question and there would be no requirement for a three-judge court. On the question of conflict, in this case it becomes apparent, both statutes are identical in language, both say net weight and in an order to attack the application or the practices of New York State, it was necessary for the appellants to have the court construe the interpretation by the Commissioner of Agriculture of the State of New York under a regulation issued by him pursuant to that Section 193 of the Agriculture Markets Law. So you have two ways being moved. First you have the statute, which has the identical language that the federal statute has, net weight, then you have a regulation issued by the Commissioner of Agriculture of the State of New York, which defines the net weight. Then you have an interpretation by the Commissioner of Agriculture following that regulation which actually is the point in controversy here that brings the case into Court. And as we read the Kesler case, this was not a case for a three-judge court. The particular phraseology in the Kesler case was, if an immediate controversy is not the unconstitutionality of a states statute, but merely the construction of a state law or the federal law, the three-judge requirement does not become operative. And here as I said the situation falls directly within the language which I have quoted from the Kesler case. Now in addition to the attack on the statute under the Supremacy Clause, there were claims raised in the complaint under the Fourteenth Amendment and the Commerce Clause, and we made a motion to dismiss on the ground those claims were insubstantial. The court as you see from the opinion held that the claims were unsubstantial and we say therefore that the fact that a three-judge court was actually convened and heard the case and ruled that the claims were unsubstantial, did not authorize the direct appeal to this Court because the cases have held that a single judge compares on the substantiality of the federal constitutional claims raised in the complaint, because otherwise any insubstantial claim could be made and entitle the pleader to a three judge court. Potter Stewart: [Inaudible] square with the first Avocado case. Samuel A. Hirshowitz: Yeah, well I was just going to say the only language which disturbed us on that point is language in the first Florida Lime case -- Potter Stewart: Florida Lime Growers against Avocado. Samuel A. Hirshowitz: -- which seems to say that the sufficiency of the complaint or the issue is not to be determined by the eventual resolution, but with the case which preceded that the Woolen's case which we cited in our brief and which this Court said that the fact that a three-judge court was assembled and after a hearing rendered a final decree, did not authorize direct appeal to this Court. The way we rationalized the trial or attempt to rationalize the Florida Lime case is that the -- in the -- in our case we made a motion to dismiss on the ground that the claims were insubstantial and that the fact the Judge Krocker, the District Judge assembled a three-judge and they ruled that the claims were insubstantial, did not authorize a direct appeal to this Court. Now as I said, we are just as interested in the determination of this matter on the merits. We're just as interested as the appellants in having the packers sell their products in New York State and make them available to the consumers, but only on the conditions which would protect the public in New York State against deception and entitle them to information, which the state in it's consumer protection program has determined that the consumers in New York State are entitled to. Now these stuffed turkeys or stuffed poultry in general are advertised at say $0.50 a pound. There is no segregation as between the bread which goes into the stuffing and turkey itself. The housewife goes into the market and she is entitled to know how much turkey she is buying because that's the standard that she would use in the dinner that she is preparing. I can't see any reasonable objection that the packers or anyone else could offer to giving the consumers of New York State that information. Potter Stewart: I didn't understand General Hirshowitz that the appellant was making any claim that the New York regulation is unreasonable per se. Samuel A. Hirshowitz: Well during the course of a -- Potter Stewart: But maybe I misunderstood. Samuel A. Hirshowitz: Well, during the course of the hearing before the three-judge court efforts were made to show that it would be impracticable to comply with New York law, but the proof as found by the three-judge court does not substantiate it. It would take exactly a fraction of a minute to calculate and put this extra weight on the poultry which would indicate to the consumer what the net weight of the poultry is, in addition to the information that maybe required by the Federal Department of Agriculture. Hugo L. Black: Were there any attack [Inaudible] against the New York statute on the grounds that was [Inaudible] protect the industry, domestic poultry industry in New York? Samuel A. Hirshowitz: No, Your Honor, but some of the facts I intend to bring out would indicate that the ruling by the lower federal official and Department of Agriculture has at least subject to a great deal of scrutiny. Hugo L. Black: A great deal of scrutiny for what reason? Samuel A. Hirshowitz: Well, I intend to bring that out because as you will see from the facts developed in the record, it would be difficult to believe that the great doctrine of preemption, which is cited by the appellants would deprive people of New York of their right to have this information, additional to which -- Potter Stewart: Now, General Hirshowitz what if, instead of the facts we have in this case, what if we had a final determination by the Department of Agriculture affirmed by a court that the Federal Statute prohibited the label which New York says it requires? Now you wouldn't have any question about what the result would be in that case, would you? Samuel A. Hirshowitz: No sir, but as we cite -- Potter Stewart: Well, certainly the Federal Government would have a right to deprive the people of New York of what the commissioner says they're entitled to, wouldn't it? Samuel A. Hirshowitz: That would be after judicial process and we would naturally have a remedy in Congress to address ourselves to Congress if that were the case, but I just want to point out to you that all the steps that were taken by the two packers, Armour and Swift were without notice to New York and more than that, the individual who presumably caused the disapproval of the labels submitted -- the applications for label approval submitted by Armour and Swift, he knew about the interest of New York State. He knew about the interpretation by the New York State Official, yet he says in his testimony that officially the Department did not know about it. So no notice was given to New York and Judge Friendly comments on this in his opinion. Now in the -- William J. Brennan, Jr.: Now, who would have this knowledge General -- who would do you say had this knowledge? Samuel A. Hirshowitz: Mr. Howell, the -- William J. Brennan, Jr.: Oh, the witness I mentioned earlier. Samuel A. Hirshowitz: Yes, the Department of Agriculture official. William J. Brennan, Jr.: What you say is that the record shows that he knew of New York's position of some proceedings involving other practice? Samuel A. Hirshowitz: No, no, the interpretation arose as a result of a criminal charge against Swift & Company brought not by the State of New York or by the Commissioner or at their behest, but a prosecution by the City of New York instigated by the Commissioner of Markets who marshaled the evidence and prosecuted by the District Attorney of King's County. After that prosecution, the packers -- the industry tried to get a bill enacted, which would do exactly what they hope to do by this litigation, exclude the right of the states who asked for this additional information. William J. Brennan, Jr.: To get that bill enacted where, in New York -- Samuel A. Hirshowitz: It would be New York State legislature. The bill was passed by the then legislature in 1963 legislature, but was vetoed by the governor as, generally speaking as harmful to the interests of the consumers. It was after that, that they decided on this course which counsel has candidly set out of going through the motions of asking for this label approval, but this witness who appeared in the three-judge hearing Mr. Howell was also in court when the prosecution against Swift & Company was in the lower criminal court of New York City. In addition to which he said that he had knowledge of the interpretation which was subsequently made after a public hearing by the Commissioner of Agriculture of the State of New York, held a public hearing at which he listened to the views of the industry and the views of consumer organization and then he reached this interpretation that he would require the additional information in any form. Now we submit that there is no substantial basis to the appellant's claim of preemption. There is absent here in the Federal Act, any expression of intention of Congress to exclude the state from requiring that this information be made available to its consumer. The rule expressed in the cases that -- is that the express intention must be so positive that the two cannot stand together or be reconciled. The recent cases on which this Court has upheld state action like the Florida Avocado case and Euron case contained the statement of these principles. The appellants rely on Campbell against Hussey case. In that case this Court found the expressed intention of Congress as supporting the argument of preemption and this differentiates the Florida Avocado case from the Campbell case. This Court said in the Florida case that in Campbell Congress have declared uniform standards and inspection to be imperative for the protection of producers and the public interest. In passing the Federal Tobacco Inspection Act, reference was also made there to repeated references in the legislative history to necessity for uniform standards. This Court went on to say in the Avocado case that even though the Act involved there either as its purpose a policy of establishing minimum standards of Avocado's, that language without law did not reveal a congressional design that federal marketing orders should displace all state regulation. In our case, the explicit and stated policy of Congress was to guard as my friend has said against unwholesomeness in the interstate shipment of poultry. In the entire stated purpose of the Act, there is no mention of any concern or interest in the establishment of weight standards for poultry. Section 3, for instance of the Act, which is the declaration of policy says in part to prevent the movement in interstate or foreign commerce or in a designated major consuming area of poultry products which are unwholesome, adulterated or otherwise unfit for human food. No reference at all to any requirement for weight standard. 78 witnesses testified before the various congressional committees as to the necessity of the Federal Act, stressing poultry communicable diseases, some infecting poultry workers. The only reference to weight in the entire Act is in Section 8 which specifies that the container upon its label should state, "The net weight or other appropriate measure of its contents." There is no discussion at all in the committee reports about weight, except a single reference in the committee report in discussing Section 8 and merely making the statement that it contained a reference to quantity. It is claimed at the time net weight in Section 8 of the Act is indeed and beyond plausible dispute, a peripheral aspect of the Act, to which they dissenting opinion in the Florida Avocado case referred. Appellants refer to Section 8(a) of the Act banning false or misleading matter on the label. Nothing in that section of the Act excludes the state requirements of an additional truthful statement of the weight of the poultry as well as the total net weight required by the Federal Department. On the contrary, the District Court found that the additional statement would make the impression conveyed by the total weight less misleading. Relevant also is language in Section 18(b) of the Act that in carrying out the provisions of this Act, the secretary may cooperate with state agencies. In sum, it appears that there is absent here any intention to interfere with the particular state requirement, stemming from the state's regulation of weight measures, which as the opinion of the District court shows, goes back in New York to colonial times. The official inspection mark on the poultry package required by Section 8 is simply inspected for wholesomeness. I find no provision in the Act itself, requiring label approval by the Secretary. The requirement for label approval is in the regulations and there is a section in the Act, which authorizes the Secretary to make regulation. Appellants, however, seek to buttress their claim by reference to these regulations. The regulations don't change anything, the Act does not define net weight or other measure or its contents and neither does the regulations. Assuming the validity of the prior label approval appearing in the regulations, any reference thereto to labeling is to ensure the appearance of the package -- on the package of the information required by the Act, which is detailed in Section 8 and the absence of false or misleading information banned by the Act. The regulations do not strengthen any claim of preemption or furnish any support for any ruling that the statutory words in Section 8, "Net weight or other measure of its contents," exclude the furnishing of the additional information as to the weight of the poultry. The assertion by the appellants of long standing departmental interpretation of the Act's language as to net weight is not accurate. It must be remembered that this Act was only enacted, the Federal Act was only enacted in 1957. It appears in the record that quantity shipments of stuffed poultry by the appellants date from 1960. The present controversy with the appellants arose two years later in 1962 and not criminal court proceeding to a trial court. William J. Brennan, Jr.: Does your New York regulation precede the federal regulation which you said was 1950 something? Samuel A. Hirshowitz: The New York regulation precedes it, but the interpretation by the Secretary which is under challenge follow the criminal conviction. William J. Brennan, Jr.: Yes, no, but New York had a regulation before the Federal Government entered this, is that it? Samuel A. Hirshowitz: They had a regulation, yes, which was -- there is testimony in the record. There is a county sealer in New York State in each county. The Department of Agriculture has general supervision. The county sealers and the City of New York, the Department of Markets and Flowers, the statute, the Department of Markets, the Commissioner of the Department of Markets that is sitting in New York, he read the statutes as Section 193, net weight of the poultry as meaning the net weight of the poultry exclusive of the stuffing and he brought this -- or he instigated this prosecution. Thereafter the hearings were held as I said by the Commissioner of Agriculture of the state as to whether he should formally adopt this interpretation and this was -- I believe in the early part of 1963 or the latter part of 1962. William J. Brennan, Jr.: In connection with the Federal Act, did New York appear to represent to the Congress that it already had a regulation? Samuel A. Hirshowitz: No sir, because there would be no objection by New York state to the passage to the Act. Consumer organizations in New York state as well as elsewhere would be fully in accord with the Act. New York State I would imagine as having a such a substantial part of the population frankly, would be a heavy consumer of poultry and would probably, although the figures show that in the years to which I referred 1960 or 1963, I think the packers sold about one million pounds a year in New York State of stuffed poultry on New York State and possibly some of the other big states that might be a market for that. William J. Brennan, Jr.: Well, did New York appear to support the federal legislative? Samuel A. Hirshowitz: I do not know Your Honor. The poultry inspection division, this is the division which subsequently disapproved the label submitted by Armour and Swift, the poultry inspection division in the same period approved a label calling for the three weights, not two weights, three weights -- a statement of three weights submitted by the Connecticut fund for stuffed Cornish hens and the meat inspection unit of the Department of Agriculture at the same time, 1963, approved a label calling for Cornish hens which is also a combination. And approving a label for Cornish hens, stuffed Cornish hens, the poultry unit said, “There would be no objection to showing the weights of the stuffing in the bird if they were shown separate from the net weight statement.” So therefore, as I submit, the departmental history would appear to contradict the assertion in the brief of the appellants of a long standing policy of departmental interpretation of the term net weight. Still more demonstrative of lack of any assistance in the regulations or in the departmental practice to the contention of preemption is the recognition by this very department, that additional state requirements are not displaced by the Federal Act and Regulations. At the foot of each printed form of application, for label approval, appears the following sentence: Any approval of or comment concerning this labeling material or the weighting thereof, as contained in this notice must be understood to represent the attitude of this service only and does not excuse, failure to comply with other applicable federal or state laws or city or municipal regulation. Speaker: Where does that appear? Samuel A. Hirshowitz: It appears on page 161. It was run into the record at the 161 and the Swift application to which my friend referred is on page 272. The state requirement for additional information on a separate label as the appellant's have admitted, acting under the Food and Drug Act was upheld in Savage against Jones and the subsequent case, the Corn Products Refining case. In the Savage case, the opinion referred to the object of the Food and Drugs Act to prevent adulteration and misbranding. After discussing the Federal Acts language against false or misleading material the Court said it is one thing to make a false or misleading statement regarding the article or its ingredients and it maybe quite another to give no information as to what the ingredients are. In the present case, the state as has been stated by the appellants would be satisfied as in the Savage case, by a supplementary label or even by a tag attached to the bird merely stating additionally the weight of the bird. This would remove any possibility that this additional information was part of the Federal Inspection Mark or had secured federal approval. Furthermore, this would not require tampering with or removing the federally approved label, which was the basis for decision in the McDermott case referred to by the appellants. After the McDermott case, this Court decided the Corn Products case to which I -- which I've just mentioned and the Court there specifically upheld the right to require additional information on a state label under that Act. Incidentally the appellants in the Amicus Association questioned the validity of the commissioner's position that on authorizing this statement that a supplementary label or tag would comply with his interpretation of Section 193 of the New York State Agriculture Markets Law and they get into a discussion as to the validity of the interpretation under New York State Law, of the position of the Commissioner of Agriculture. Judge Friendly in the three-judge opinion referred to it. We originally in our answer invited him to seek a resolution to that question by going to the State Court first, but they declined the invitation. At any rate, Judge Friendly held that the interpretation by the State Commissioner of Agriculture was a reasonable interpretation. Appellants have referred during the course of this argument to the Cardell case, a case decided under the misbranding provisions of the Food and Drugs Act. Their statements and their brief that it's dispositive of the preemption point is in effect extravagant. Court -- the case simply held that the false statements in advertising accompanying the product was subject to prosecution under that section and the majority held that both were integral parts of the offering despite the time separation to which my friend referred. Nothing in that case does anything to undercut the Savage and the Corn Products cases decided under that Act. While it is not necessary for a decision here at this time. We should point out that there is no showing that the Appellants could not regulate their manufacturing process, so that the tag or label could in fact be added in New York. Several alternative suggestions present themselves. The weight of the poultry could be put on by an indelible stamp or the amount of stuffing regulated that was done by the shipper of stuffed Cornish hens who had an actual -- who monitored the amount of stuffing that went into the bird. The principal reliance, in effect, by the appellants has been to this rejection of the label approval submitted first by Swift in the middle of 1963 and immediately disapproved by the department federal official and subsequently in the latter part of August as they were contemplating this lawsuit they had Armour & Company also submit an application for label approval and cause it to be disapproved. And so let me make clear that the application submitted in each of these instances by Armour and by Swift were for approval of a label -- federal label containing the information requested by New York State. No application was ever submitted by the appellants to the Federal Department of Agriculture for approval of a supplementary label or a tag conforming with New York's requirements and there is no occasion to -- at this time to predict what the Department of Agriculture would do, formerly if such an application had been made. So that the argument that the disapproval by the lower echelon federal official establishes a conflict falls or fails because no application was actually ever submitted to the federal official complying with New York's requirements. Moreover, the application submitted by Swift & Company had contained a provision calling for information as to three ways and New York has explained only requires one additional point of information, the weight of the poultry without the stuffing. Byron R. White: Mr. Attorney General what if there had been an application filed for a label with the overall weight on it, plus the information that New York requires and it is turned down, what would New York -- Samuel A. Hirshowitz: The first answer, it wasn't done, therefore they can't advantage of the disapproval. But the second thing is, if it were done I'm just about to say that they were under a duty to do two things. In first place knowing of the interest of New York State and the fact that Department of Agriculture officially did not know about the New York State's interpretation and New York's interest, they were under duty to disclose that, a) to the New York -- to the Department of Agriculture, Federal Department of Agriculture officials; b) they were under a duty to advice New York State of the situation; and c) we claim they were under a duty to take the necessary steps to file a protest and secure a hearing at which New York State or other interested parties including consumers could well have been represented. Byron R. White: Well, Mr. Attorney General, assume that the hearing had been held and there had been a determination by the Secretary of Agriculture, that the only information to be permitted on the label was the overall weight of the bird, without the information New York required, would that be end of the matter as far as New York is concerned, except for an appeal to Congress? Samuel A. Hirshowitz: No, the section provides for the possibility of judicial review and -- Byron R. White: Well, do you require Swift to seek to -- Samuel A. Hirshowitz: If New York, yes, in view of the fact they did not disclose to New York State. Byron R. White: But they couldn't -- if they won before the -- if they -- if the Secretary said that you can't have this information on it you would require them to appeal at the Court of Appeal. Samuel A. Hirshowitz: If they had advised New York State of the situation and New York State had appeared and been represented, I think New York State would have had right to have a judicial review of the decision of the department and the case would come to Court through the administrative process instead of coming hereon an injunction suit, which challenges allegedly the constitutionality of the statute. But they did more than that and I think there was a lack of good faith, evident in these packers in not advising New York State and not advising officially the Department of Agriculture, the Federal Department of Agriculture of the interest of New York State. And their motive for it was they were just going through with the motions to prepare for this litigation. And in the record appears admissions by the witnesses produced by these packers that they never made any tests in their packing plans to determine whether the additional information would present any manufacturing problem at all. Nor did the department of agriculture direct any test to be made to see whether it was practicable to do that. When the application was denied the department, Federal Department of Agriculture, poultry inspection unit, used reasons which were established in the record in this Court by the testimony of the witnesses produced by the packers to be without any rational substance at all. One reason was it would lead to confusion. Second it said it might cause contamination. All these reasons were explained as having no substance because as I have already said, it appeared that it would take less than a half a minute to add this additional information and secure the net weight of the poultry and actually 30 or 40 minutes. This turkey or poultry is in the manufacturing process at a room temperature about 40 degrees. So the fraction of a minute would have no deleterious affect at all. The case here is somewhat unusual because of the fact that they were no adverse parties there. You had an administrator -- an application for approval to administrator by a person or a party who wanted the administrator to make the -- to disapprove the application and as counsel has said they were happy with the decision of the administrator. In such a situation, there is no true basis for a challenge to the constitutionality of the action of the state on the basis of this disapproval by the minor federal official. As I've said, while this business was going on, at the very time this business was going on, the federal unit was in the impossible position of having to approve two weight statements for Cornish and stuffed poultry, where the experience was favorable. The record shows the experience was favorable, that there had been no consumer complaints or confusion or otherwise. Nevertheless, when they were disapproving the application for label approval submitted by a Swift & Company and not to be inconsistent, they abruptly withdrew the approval of the label of the Cornish hen, the stuffed Cornish hens. Furthermore the witness and the lower echelon official of the poultry inspection unit had conversations with the meat inspection unit, with the consequence, that in December 1963 at the commencement of this action that unit also caused the approval of the label for the Cornish hens to be withdrawn, indicating the special interest of this particular employee of the Department of Agriculture, which I said a little while ago should withstand scrutiny. It is our argument that if the appellants desire to obtain a resolution of the assumed conflict, it was necessary for them to pursue the departmental review provisions of the Act. That the issue tended by them as to the alleged conflict was not right for judicial intervention and we have relied on our brief on the per curiam opinion, in Arkansas Power and Light Company and the opinion of this Court in Myers against Bethlehem, particularly the Arkansas case which we think is appropriate in this instance. The District Court in its opinion phrased it this way: “When the inconsistency hinges on a factual determination, a citizen desiring freedom from state regulation does not discharge his burden by obtaining a letter from a subordinate federal official at least when Congress has laid out a fact finding procedure as to which the state could be given notice and an opportunity to be heard. At such a hearing, it is quite unlikely, said Judge Friendly, "that anyone would reasonably find that a separate statement of the weight of the unstuffed bird would be false or misleading." We note that the Solicitor General not only agrees with our position as respects preemption and the other constitutional claims advanced by the appellants, but also agrees with the District Court's view just expressed and adds such additional arguments which are not contained in our brief as the public interest and a full development of the facts in which we fully join. The responsive appellants is indeed a confession and avoidance, a confession that they wanted and welcomed a disapproval by the subordinate federal official, and an attempt to show that New York was not entitled to notice. When this law -- echelon official arbitrarily disposed of the matter and this is relied upon to ask for equitable relief against a state statute we submit the issue is in fact not ripe for such action until there is a complete factual record. Since appellants will not in fact advise parties to the disapproval, the factual record could not be made without New York and any other public interest properly given an opportunity to present such facts. And as I said furthermore since as the District Court found that no application had been made for approval of the label material in accordance with New York requirements, the question of conflict does not really arise in this case. Appellants also relied upon the Commerce Clause and the District Court as I said held that the claim was insubstantial. Appellants concede the right of the states to protect its people from fraud and deception especially in the field of weights and measures. The case of Savage against Jones to which I referred previously, the Plumley case, all of the cases cited by us in our brief reject the Commerce Clause argument advanced by the appellants. In the Euron case, this Court said that the Commerce Clause did not cut the states off from legislating under it's police power even though the legislation might indirectly affect commerce. The fact that out of state processes may be required to alter their processes in not unduly burdensome manner, as found by the District Court, there is no objection under the Commerce Clause to state regulation, especially as we have noted in the field of protection of the public in the area of weights and measures. In the Florida Avocado case, this Court said that a state may impose upon imported food stuffs a higher standard demanded for its consumers. The contention by the appellants in the Amicus Association that other states may impose other requirements, supports no Commerce Clause argument. The District Court found that there was nothing in the record to show that the appellants could not prepare for sale in New York, stuffed poultry in sufficient numbers to satisfy New York's requirement. As we have pointed out the Federal Act contains no mandate for uniformity in this area. Moreover, the possibility of contrary requirements banning the additional information in other states is as remote as laws banning compliance with requirements against discrimination referred to in the Colorado discrimination case. We can't anticipate that any state would ban the particular information required by New York State. In any event, there is no proof of present conflict in the record. Finally in this connection, we have pointed out there is likewise no proof that New York's requirement could not be complied within New York itself at the point of sale by simply marking the poultry with an indelible mark, setting out the poultry's weight or by using the amount of stuffing. The Commerce Clause would not apply as held in the Armour against North Dakota case cited in our brief upon the principle that the Commerce Clause does not extend to interstate commerce after it comes to rest within the borders of New York state. Finally, the claims under the Fourteenth Amendment, the District Court said were baseless. Upon the record it was obvious that the state was legislating in a reasonable manner, in a traditional area involving the exercise of its police power. The record showed that the proportions of stuffing in the bird could not be ascertained by the consumer in the absence of the information required by the New York interpretation. The substantial variations of the stuffing in the stuffed turkey processed by the appellants and the consequent need for state action was fully established in the record. Furthermore there is no basis for any claim of discrimination, the requirement and the Commissioner's interpretation is binding upon both domestic and out of state processes of stuffed poultry equally. The failure to exclude TV dinners or a host of other ready-to-eat food products such as the pork and beans referred to by my adversary is on a rational basis. They are sold as units. Poultry, stuffed poultry and other poultry is sold by the pound, and of course the principle is, an accompanying principle that the state need not cover the whole area, they found the need for this particular type of regulation. In the brief of the Amicus Association, they take a contrary position. They say that if the Court approves the interpretation of New York law by the Commissioner, a horrible result would attach. There would be chaos in the industry, because all these combination products would automatically become subject to the interpretation of the Commissioner. Of course that's not true. The regulation specifically excludes those types of combination products. Speaker: [Inaudible] Samuel A. Hirshowitz: Well they say they haven't -- there is -- and I believe that's accurate although there are rumors that some stuffed poultry is being sold in New York upstate. Speaker: Mr. Justice Harlan: [Inaudible] Samuel A. Hirshowitz: No, they did not obtain any stay, I don't think they applied for a stay, I'm note sure about that and they have voluntarily refused to avail themselves of the opportunity to take this process through to the Department of Agriculture by submitting additional labels complying with New York law and giving New York notice so that we could get the administrative process and Judge Friendly and speaking for the three-judge court held on that point there that the case was not right. I couldn't pass on the question of any possible conflict. I have a note here that the -- given to me by my associate that the Solicitor General himself is willing to state to the Court that the solicitor's brief in support of the respondent is with the approval of the Federal Department of Agriculture. Earl Warren: Mr. Condon, you took your final five minutes questioning, and if you would like to sum up [Inaudible] time, you may. William J. Condon: Thank you Your Honor. Mr. Chief Justice, may it please the Court. There were one or two things that were opened by the Attorney General in his argument that may require at least mention. One, the matter of the knowledge of the Department of Agriculture of the situation with respect to New York, as the Attorney General pointed out. Mr. Howell who is Deputy Director of the poultry division testified on the subpoena by Swift & Company in the criminal prosecution in New York City in November of 1962. He testified again at the trail of this action in 1964. Now I'm sure that we all know that no federal official in the department of this kind is going to come to New York in response to a subpoena without the knowledge, official knowledge of his department, that the subpoena isn't served and worked quite the same way on a federal official as it might someone else on the street. The department did know and did know the problem and the approval was given to Mr. Howell to respond and testify on their behalf. Somehow or other it appears that because the department didn't get in touch with New York, that the Department and particularly Mr. Howell was being partial, perhaps partial in the Swift & Company or Armour and Company, I'm not sure which, but I think perhaps it ought to be mentioned that New York also was aware of the conflict and perhaps New York might have had some burden. There are after all 49 other states and perhaps New York might have had some question or some burden or responsibility of being in touch with the federal people. There is no indication that this was done either. Now, the point was made again finally that these other combination products to which the Poultry Institute brief refers are not covered by the New York law and this simply isn't true. As long as they are not ready to eat, and that means cooked, handed to you so that you can eat them now, if they are combinations of meat, poultry or sea food, they are covered by the statute. This confusion existed on the record and it was clarified in the cross examination and again the redirect examination of Mr. Madden at his testimony in the trial he was the defendant's principal witness here. One other point: there was reference made to the material that appears on the bottom of the application form. This material was read and it says that this represents the attitude of this service only and does not excuse the compliance. Now the question is, I suppose what does that mean? The only answer to that, I don't know what it means but in view of what's happened in this lawsuit, we have a pretty good idea of what it does not mean. It does not mean that the service having rejected your application is going to close its eyes if you try to put out a product with a label that doesn't comply with what they've done. Now, it might very well mean that the product can't be sold if it's adulterated and it might very well mean a number of other things, but it cannot mean that the service is turning its back on the mandate of Congress and not going to do what Congress has told them to do and that this doesn't mean what the congressional act obviously seems to say that it does. Abe Fortas: Mr. Condon, can I ask you this question? As I understand it the New York Statute and the Federal Statute are for present purposes about the same, that is to say the both require statement of net weight, is that correct? William J. Condon: Well, they both require a statement of net weight, I think the substantial difference is, the Federal Act calls for the net weight of the product, poultry product. It defines poultry product to be, poultry plus anything else is packed with it, food. The New York law requires net weight, but it defines net weight as being the net weight of the meat, poultry or sea food. Abe Fortas: Are you saying that the Federal Statute makes mandatory the ruling that was made in this case, that the administrative official Mr. Howell or whatever his name was, had no discretion. William J. Condon: Well, I think that's at least a permissible interpretation. This is one of the claims that was made in the letter that Dr. Lee wrote in commenting upon our application as a matter of fact. Abe Fortas: Well, take it my way for a minute so I can get your theory. Now suppose that the two statutes provided only generally, that there must be on the label a statement of net weight. Now absent any sort of interpretation either of the jurisdictions concerned, would it be your position that the federal statute supersedes the New York statute just on that state of facts? William J. Condon: Yes, yes sir. Abe Fortas: It would be? William J. Condon: Yes sir. Abe Fortas: In other words, it's your position that in any area where the Federal Statute provides for labeling and provides for the statement of net weight on the label, and any state statute which provides for a statement of net weight on the label, is constitutionally invalid. William J. Condon: As applied certainly to that product, yes sir. William J. Brennan, Jr.: [Inaudible] primarily because, in this instance, in this statute required prior approval of the label. William J. Condon: I understood, Mr. Justice Fortas to be asking upon that basis, the prior approval. Abe Fortas: No, I'm glad to have you clarify your views. My question did not include that. William J. Condon: It did not, I'm sorry sir, without that, and again now you are back to essentially the Food, Drug and Cosmetic Act situation. Then I would say no, there is no necessary preemption and there is no necessary conflict. No sir. It would depend on the facts in a given situation, whether or not it would be or not. Byron R. White: This is your preemption end of your argument? William J. Condon: That's correct. William J. Brennan, Jr.: May I ask one last question Mr. Condon? I notice in the Solicitor General's brief, a statement that dozens of witnesses testified in support of this federal legislation. Do you happen to know whether anyone appeared from New York? William J. Condon: I do not, as far as I know, they did not, but I can't say that they for sure. Thank you.

Warren E. Burger: We'll hear arguments next in United States against Wilson and Bryan. Mr. Norton, you may proceed whenever you're ready. Gerald P. Norton: Mr. Chief Justice, may it please the Court. This case is here on writ of certiorari to the United States Court of Appeals for the Second Circuit to review the judgment of that Court, reversing the convictions of respondents Wilson and Bryan for criminal contempt of Court in the United States District Court for the Southern District of New York. Each was provisionally sentenced to serve six months in prison. The question presented is whether a trial witness who refuses to obey a court order to testify may be held in criminal contempt pursuant to the summary procedures of Rule 42 (a) of the Federal Rules of Criminal Procedure rather than the notice and hearing requirements of Rule 42 (b). Our primary submission is that the District Courts have the authority and the discretion to use summary contempt proceedings in those circumstances. We also contend that in any event, in the particular facts of this case, summary contempt procedures were properly used. The respondents Wilson and Bryan both refused to obey the orders of the District Court that they testify at the trial of one Robert Anderson on charges involving two bank robberies: one of them, the Nanuet Bank and, the other, the Empire Bank. Prior to the trial, Bryan had been indicted for robbery and assault with dangerous weapon concerning the Nanuet robbery. Wilson had been similarly indicted concerning the Empire robbery. Bryan had plead guilty to the assault charge and Wilson to the robbery charges against him and in both cases, the other charges were dismissed. Now shortly before the Anderson trial was to begin, Bryan had been sentenced by Judge Cooper pursuant to 18 U.S. Code 4208 (b) which provides for a study of the defendants and re-sentencing after a period of three months but which requires initially that the maximum sentence be imposed, in this case, 25 years. Before the trial began, Judge Lasker, who was assigned the Anderson case, had been told that it would probably take about two-and-a half days. In the course of the trial, eventually, Bryan was called as a government witness to testify concerning the Nanuet robbery and Wilson was called to testify concerning the Empire robbery. At this time, both were incarcerated, Bryan on his sentence on the assault conviction, Wilson awaiting sentence on his robbery conviction. There is a common pattern of events concerning both contempts. First, all proceedings occurred in open court with the jury absent. Each one was asked questions by the prosecutor concerning Anderson and the respective robberies beginning with did they know Anderson. They refused to answer any questions. The District Court granted them immunity pursuant to 18 U.S. Code 6003 and explained the consequences of that grant of immunity. He said that he would hold them in contempt if they refused to answer. Each again, refused. The district judge directed them to answer and said he would hold them in contempt if they refused. They again refused and he held them in contempt. Now, the court had already received arguments for-- from the attorneys for Wilson and Bryan as to their grounds for refusing to testify. At this time, the court heard additional argument concerning the sentencing of both Wilson and Bryan, what alternatives the court could consider and what their motivations and the reasoning might have been. Wilson's attorney specifically acknowledged that his motivation was to save a friend. The Court then gave Wilson and Bryan each the opportunity to be heard, and each declined to speak. Judge Lasker then sentenced each of them to six months at this time, as he put it, but he made it clear that this was a provisional sentence subject to revision and that he would consider an application for reduction. He made it consecutive to the sentences they were or would be serving for their other convictions in order to give the sentence reality and said, otherwise, there would be no point to it. And, he specifically noted in sentencing Bryan, who was the first of the two to be sentenced, that a purpose of the sentence was to persuade Bryan to change his mind and to testify, and he said he would reduce the sentence to nothing if he did. Later the same day, both sides rested the case against Anderson. There are certain facts, before I go into the consequences of their refusals that are peculiar to each of the respondents and I'll note them briefly, although we don't believe that they are material to the central question presented. Though he had notice of the government's intention to call Bryan as a witness, Bryan's original attorney had been unable to attend the Anderson trial. He did submit a document setting forth some arguments as to why he thought Bryan should not be required to testify. At the court's request, Wilson's attorney who was in court prepared to address a similar problem concerning Wilson agreed to represent Bryan. Now, in the course of the proceedings against Bryan, it had been argued that one reason they declined to testify was a fear that it might affect their sentencing. In Bryan's case, his eventual re-sentencing by Judge Cooper. Now, this is a baseless fear in this case because, in pleading guilty and in discussing the case with the probation officer in connection with the pre-sentence investigation, they had already been required to make and did make admissions concerning their involvement, although, in the course of that, Wilson declined to identify his accomplice. In any event, in order to avoid any basis for such a claim of possible effect on sentencing in Wilson' case, Judge Lasker decided that he would try to sentence him then, before he testified. The court heard the probation officer report on what he would have included in his pre-sentence investigation report which included an admission of Wilson's involvement in the robbery, and also heard a presentation by Wilson's attorney as to Wilson's background, his family problems, and the substance of a report by a doctor in which the doctor referred to Wilson as having an adolescent loyalty to defendant Anderson. Now, in making this effort to sentence to Wilson the judge stressed that he thought that a delay in Anderson's trial and others scheduled to follow it was undesirable and he noted particularly the fact that Anderson was in jail. Finally, however, Judge Lasker concluded that he would be -- he'd rather defer the sentencing of Wilson who was after all facing a potential sentence of 20 years on a very serious charge and, at a later time, he sentenced him to treatment under the Youth Corrections Act. Neither Wilson nor Bryan took advantage of the opportunity to reconsider their refusal and to testify, although it was admittedly a limited opportunity of several hours that day before the Government rested its case. As a direct result of their disobedience of the court orders that they testify, the administration of justice was seriously obstructed in this case. Acknowledging that the government's case against Anderson concerning the Nanuet robbery had been substantially weakened by Bryan's refusal to testify, Judge Lasker granted Anderson's motion for judgment of acquittal at the end of the government's case. That case was irrevocably lost. As to the Nanu -- as to the Empire robbery, Judge Lasker noted that while Wilson's testimony was not as perhaps essential in the sense that it was prima facie case sufficient to send the case to the jury, it was not cumulative either. So, the case went to the jury. The jury disagreed and, as a result of the hung jury, there had to be a second trial with consequent cost and judicial and other resources. At that second trial, as it turned out, Anderson was convicted concerning the Empire robbery, but one can safely assume that if Wilson had testified at the first trial, we might never have had a second trial. On appeals by Wilson and Bryan, the Court of Appeals reversed. It held, first, that neither one of them had any legal basis for refusing to testify once they had been granted immunity. The Court noted in passing that if they had been simply concerned about the effect of their testimony on sentencing there were other and better remedies to deal with that problem, such as sealing the transcript or asking that they'd be sentenced by a different judge. Their remedy of refusing to obey the court's order to testify, the Court of Appeals said was wholly improper approach to that problem. The ground for the reversal of the convictions was that the Court of Appeals concluded that the use of summary procedure of Rule 42 (a) is improper in a case of an orderly refusal of a witness to comply with the court order that they testify even if the witness is represented by counsel and even if the witness has an opportunity to be heard. The court felt hat this result was compelled by its decision in an earlier case, the Marra case, in which it had said that if it were looking at the question on a clean slate, it would uphold the use of summary procedure in those circumstances, but it felt disabled to do so by what it thought was the teaching of this Court's decision in Harris against the United States, to which I'll return shortly. As we note in our brief at page 23, other Courts of Appeals have sustained convictions pursuant to Rule 42 (a) in similar circumstances and have disagreed, in effect, with the Second Circuit's analysis in this case. Now, criminal contempt comprehends a spectrum of offenses in varied types and degrees of seriousness. It's therefore important to focus precisely on the question here. This case presents no claim of abuse of the summary contempt to power by a judge embroiled in a heated controversy with a witness or a party or an attorney, nor is there any claim of a right to a jury trial with the sentence in this case, the maximum sentence here being six months, nor do we have here a staged recreation in the presence of the court of a contempt that was actually or originally committed elsewhere. The question here is simply whether a so-called respectful refusal of a witness to obey a court's order to testify or to give evidence at trial can be punished summarily as a criminal contempt. Well -- Harry A. Blackmun: Mr. Norton, was there any formal objection to use of a summary procedure? Gerald P. Norton: There was not, Mr. Justice Blackmun. Before the Court had granted immunity to the witnesses, there was a passing comment by Wilson's attorney to the fact that she wanted more time to consider or research the privilege questions which they were then discussing, but that issue evaporated from the case once the Court granted the witnesses' immunity and there was no objection raised to the summary procedure as to either witness. Now, the question this Court has not previously directly resolved the question in this case, although it did in dictum in the Yates case, approved the procedure that was followed by Judge Lasker here. Now, 18 U.S. Code 401 authorizes federal courts to punish by imprisonment various contempts, one of which is disobedience of its lawful orders. It's not disputed here that the refusals of Wilson and Bryan to obey Judge Lasker's order that they testify constitutes criminal contempt punishable under 401. Incidentally, I should note that although the District Court docket entries recite conviction under 18-402, it's clear that the Court intended and the parties here have understood that it was a conviction under 18-401 and Section 402 is, by its terms, plainly inapplicable. Now, that a refusal to testify may be punishable under these circumstances, under -- as criminal contempt is more than clear from this Court's decision in Harris and other cases. It's also clear that disobedience of a Court order to testify is a serious type of contempt. This Court said in the Shillitani case that the power of a Court to compel a witness to testify is essential to the administration of justice. In Calandra it noted that every citizen owes his government the basic obligation to testify when so ordered. Now, the reason that the public has a right to every man's evidence, as the Court said in the Nixon case, is that the integrity of the judicial system depends upon full disclosure so that innocent persons do not suffer, nor the guilty escape. It's important to note in this regard that the principle we contend for here is inherently neutral in operation. It does not necessarily favor the prosecution, although in this case it might. The same question would arise if a defense witness refused to testify when ordered to do so by the Court. In such circumstances, the consequence of recalcitrant might not be limited to the extended incarceration of a defendant but rather, it could result in the conviction of an innocent person. Now, the central issue here is whether the summary procedures of Rule 42 (a) of the Federal Rules of Criminal Procedure were properly used in this case. The case is squarely within the terms of Rule 42 (a), in that, Judge Lasker saw and heard the contemptuous conduct and it occurred in the actual presence of the Court. Moreover, summary disposition of -- in this case is consistent with the purpose of Rule 42 in distinguishing between those contempts which should be subject to the notice and hearing requirements of Rule 42 (b) and those covered by 42 (a) where summary disposition is appropriate. The use of the summary contempt power is justified in part by the fact that contemptuous conduct often disrupts ongoing proceedings. There is therefore a need for a swift adjudication of whether the conduct is justified and lawful and whether it should be punished so as to end the disruption. The need for dispatch is perhaps or is especially great with the recalcitrant witness, the trial witness in a criminal case, particularly a jury trial, whether it's a prosecution witness or a defense witness. A defendant has a right to a speedy trial. The Court's prosecutors have obligations to proceed promptly. The defendant may well be incarcerated so that any delay in the trial for a cite excursion on the contempt proceedings or, as in this case, for a retrial because of a hung jury puts a penalty on the defendant. If the defendant is ultimately acquitted, there is no way to recoup that lost liberty. Also, where a jury trial is involved, a suspension of the proceedings to comply with the notice and hearing requirements of 42 (b) creates additional difficulties and expense. Now, where the contempt consists of the refusal in the Court's presence to obey in order to give evidence at trial, there is no real need for a formal hearing required by 42 (b). The primary purpose of which is to gain facts and to resolve factual disputes. The essential facts are known to the judge. In many such cases, as here, the reasons for the contempt will also be known by the circumstances leading up to the original refusal to give evidence and the order to testify. If there are relevant facts which are not known to the judge or other matters that might bear on whether the defendant should -- or the witness should be held in contempt or the question of sentencing, they can be brought to the Court's attention afterwards. As the Court noted in Groppi, and again in Taylor against Hayes, Courts commonly modify contempt judgments on the basis of subsequent presentations or developments. In this case, Wilson and Bryan had more than Rule 42 (a) would entitle them to. They had opportunities to explain their position before they were ordered to testify and before and after they were held in contempt. They had counsel to advice and assist them and they had the substance of a hearing. Moreover, since conviction, neither one has made any effort to make any presentation to the District Court of any matter that might have warned them whether they should be held in contempt or whether the provisional six-month sentence was appropriate. They have not sought any kind of reconsideration or additional hearing or tendered any matters of any kind beyond offering speculations as to what might have happened had there been a fuller hearing than they in fact had. Indeed, in cases that are indisputably subject to the summary contempt power, there is likely to be a greater basis for speculating that, a hearing might have been useful in such cases. There has been no prior opportunity as here, to make some explanation of why you're doing what you're doing and in many of those cases, the conduct where the witness or defendant throws a chair or some power is abusive to the Court, there is a greater reason for thinking that there is some background causative factor that deserves some further exploration, yet summary contempt is properly upheld. And if the mere speculative possibility of some kind of extenuating circumstances were to be accepted as sufficient reason to -- not to use summary contempt, there might never be a case where a Court could safely exercise a power that all concede it has. Now, the summary imposition of the contempt in this case is consistent with the propositions that the Court should, in the contempt area, use the least power adequate to the needs of the occasion and should resort to criminal contempt only if civil contempt would not be efficacious. As Judge Lasker knew, civil contempt in this case could be effective only for a brief period. There were only a matter of hours remaining in the trial. One could reasonably assume that Wilson and Bryan would be willing to spend those hours to save a friend. Warren E. Burger: Were they then incarcerated or -- Gerald P. Norton: Well, they were and that's my next observation that first, in any trial, there's not likely to be a long period of potential coercive confinement, but in this case, in addition, they were both incarcerated already so that any additional incarceration pursuant or of confinement of civil contempt would have been superfluous, which Judge -- Warren E. Burger: There was then just a confinement in a different place. Gerald P. Norton: That's true. As Judge Lasker recognized in making the contempt sentences run consecutive to their sentences on their convictions, this he could not do with civil contempt. Now, in a case where civil contempt might be appropriate because there's a sufficiently long period of confinement, a grand jury witness would be a good example and the witness is already incarcerated, you might have a different situation because in some such cases, at least if it was a prisoner serving an adult sentence imposed by the same Court, it might be possible for the District Court to suspend the execution of that ongoing sentence for the period of the confinement on civil contempt. This is a novel approach, recently sustained by the D.C. Circuit in the Liddy case and by the Seventh Circuit in Anglin case. However, this was not an option that was a feasible one in this case because there were only a couple of hours left in the last day of the trial. On the other hand, the deferral of contempt proceedings required by 42 (b) is not entirely satisfactory here either. That approach tends to forgo the opportunity to coerce compliance during the period when it might be meaningful. It's almost totally punitive. Now, Judge Lasker recognized here that summary imposition of criminal contempt had a possibility of coercing these people to change their minds and testify. They had to face the likelihood, not only that if they had not been in jail they would have to serve some time, but if they didn't purge their contempt they would have to serve whatever full sentence was imposed. Let me turn now to the question whether the District Court's approach in this case was foreclosed by this Court's decision in Harris. The question presented in Harris was whether a grand jury witness who disobeyed a court order to testify was properly held in criminal contempt pursuant to the summary procedures of 42 (a) where the original refusal occurred in the grand jury room, out of the presence of the Court, and it was recreated in the presence of the Court. Now, also unlike this case, the witness had unsuccessfully requested an adjournment opportunity to present witnesses. In a 5-4 decision reversing its earlier decision in the Brown case, this Court held that, although the refusal constituted criminal contempt, it should have been proceeded against under the notice and hearing requirements of Rule 42 (b) since the real contempt was not in the presence of the Court. In dicta relied upon by respondents in the Court of Appeals, the majority indicated that Rule 42 (a) was reserved for exceptional cases involving misbehavior of various sorts. Even so, the Court indicated that it was not holding 42 (a) inapplicable to a case like this because it's expressly assumed that 42 (a) may at times apply to testimonial episodes. And we've addressed in our brief the historical argument as to whether summary contempt power can ever be applied to disobedience of Court orders as distinguished from misbehavior, and I will not address that further here. Note simply that a witness' refusal to obey a Court order to testify or to give evidence is likely to create, as here, a far greater obstruction of Court proceedings than many of the mis -- types of misbehavior for which summary contempt power is unquestioned. Now, the contempt in Harris involved a grand jury witness and here we have witnesses at a trial. There's far a greater need for speedy action at a trial because a grand jury can last 18 months and more and civil contempt may be summarily imposed. William H. Rehnquist: Mr. Norton, don't you think the Court that decided Harris would probably decide this case against you? Gerald P. Norton: I would not think so. It's not necessarily compelled by Harris. We don't have here the problem of kind of staging the contempt in the presence of the Court in order to come within the terms of Rule 42 (a). Potter Stewart: On the other hand, the Court that decided Brown, a fortiori would decide this case in your favor? Gerald P. Norton: No question. Warren E. Burger: Well, the difference in Harris was that you don't have 12 jurors and witnesses and the whole mechanism of a Court standing by waiting. As you point out, a grand jury -- Gerald P. Norton: Well, that's one, that's -- Warren E. Burger: -- a grand jury could take the matter up to 30 days or 60 days later. Gerald P. Norton: That's right. Warren E. Burger: But a petite jury would be difficult to hold -- petite jury trial would be difficult to hold in time. Gerald P. Norton: That's right, and most trials it'd only take a few days. The statistics for 1974 in the Administrative Office of the U.S. Court show that 84% of all cases take 3 days or less and even 73% of criminal jury trials take 3 days or less and, indeed, more than 50% of all trials take 1 day or less so that summary -- that interruption or delay of proceedings to comply with Rule 42 (b) would have no coercive possibilities. In short, we don't that Harris compelled the reversal of the convictions in this case and that, if it is regarded as barring those convictions, it should be limited or overruled if necessary. I'd like to reserve the balance of my time. Warren E. Burger: Very well. Ms. Ginsberg. Sheila Ginsberg: Mr. Chief Justice, may it please the Court. In this case, without valid justification therefore, the Government asks this Court to approve a criminal conviction in six months sentence without -- imposed without an opportunity to defend against that imposition. There are a few facts surrounding the contempt in this case that I would like to emphasize. First, that the contempt or -- forgive me, the refusal to testify at all times was orderly and respectful. The witness was called to testify before the same judge, this is respondent Wilson, was called to testify before the same judge who was to eventually sentence him on the underlying bank robbery charge. Warren E. Burger: Well, on the question of it's being respectful or disrespectful or otherwise, what difference does that make in terms of holding up a trial of a jury case where you have 12 or possibly 14 jurors with alternates standing by and witnesses standing by, approaching the end? Sheila Ginsberg: Well, Your Honor, I believe the distinction is that the purpose of summary power is not just to move the trial along, but to preserve the authority and the dignity of the Court. Warren E. Burger: And how do you distinguish the two? Do you think the two are not linked together? Sheila Ginsberg: Well, there may be some link but, I might add, that that precipitous summary action may well do more to infringe upon the authority and dignity of the Court than the short adjournment of perhaps 24 hours so that a hearing can be held to allow the accused, condemned, or an opportunity to defend. I mean, in answer to what I perceive to be Your Honor's concerns during the assistance argument, trials are frequently adjourned for short periods of time without the calamity befalling the system that the Government now suggests. Adjournments are granted in criminal trials for much less consequential reasons the point is that, in fact, adjudications of criminal contempt are not exempt from procedural due process and in this case, there was no reason, no valid reason for not affording respondent Wilson the opportunity to defend against the charge. Now, when the respondent refused to testify, he did so on the grounds that even the grant of immunity would not protect him from use of his testimony against him at the time of sentence. I would like to point out at this juncture that there were other dama -- there were other -- there was other liability within the context of his testimony because had he testified, he would've been subject to cross-examination by defense counsel and it wasn't -- he was just not subject to liability as to the facts of this crime but there were other areas perhaps, and I don't suggest that they definitely exist here but there's a possibility that he would be subjected to greater liability by the cross-examination of defense counsel. Warren E. Burger: What kind of liability are you referring to, I'm not quite clear? Sheila Ginsberg: Well, on cross-examination, for example, if defense counsel were to ask Mr. Wilson to impeach his credibility about the commission of other crimes. Warren E. Burger: Well, how would that injure him? He could only impeach him with convictions that were a record as a matter of public record, isn't that so? Sheila Ginsberg: Well, that is so, but whether or not they were known to the probation department is -- without Mr. Wilson's testimony is another -- now, the question that I have to hasten to add that I don't suggest that there were those other crimes committed here, but there is that possibility. Harry A. Blackmun: Mrs. Ginsberg, I asked government counsel as to whether there was an objection made to the summary procedure here, was there -- do you feel there was sufficient objection made? Sheila Ginsberg: Yes, Your Honor. I feel there was, and the Second Circuit specifically held that there was. Counsel not only objected to, or requested rather, a continuance to enable time to research the legal issue. She specifically, and I believe it's at page 5 of the appendix, specifically objected to the hasty determination of this issue which subjected respondent Wilson to heavy criminal penalties. Harry A. Blackmun: Let me ask you another question, now that I have you interrupted. Are you here -- are you bottoming your position in the case on due process on a constitutional ground or on the supervisory power of this Court? Sheila Ginsberg: Well, Your Honor, I argue of course that that -- there is a due process right to a hearing and I would also rely on the supervisory powers of the Court to preclude from the ambit of Rule 42 (a), an orderly respectful refusal to testify. Harry A. Blackmun: Now, this is a federal case -- Yes. Harry A. Blackmun: -- and the next one might be a state case and our supervisory power might not exist in a state case. So, hence, I was wondering whether you were reaching for constitutional grounds. Sheila Ginsberg: Well, as I said, I've -- Byron R. White: Don't you think Harris is just a construction of a rule? Sheila Ginsberg: Well -- Byron R. White: That's all you need, isn't it? Sheila Ginsberg: Yes, that's all that I need. Yes, sir.[Attempt to Laughter] Harry A. Blackmun: But it isn't at all what the next case needs coming up from a state's side? Sheila Ginsberg: No, that's true. That is true. Harry A. Blackmun: I'm just looking ahead to our further agony.[Attempt to Laughter] Sheila Ginsberg: In any case, Judge Lasker, recognizing the viability of the respondent's claims, attempted to sentence him before requiring his testimony. However, after hearing the probation officer and defense counsel, the judge concluded that he did not have sufficient information, information particularly of a psychiatric nature, to adequately sentence the respondent on the bank robbery. He then determined that respondent's Fifth Amendment rights did not extend to protect him from use of his testimony on -- at the time of sentence for the bank robbery and he ordered respondents to testify. When he refused, he immediately held them in contempt and sentenced him to six months in prison. We contend clearly that this was error. The adjudication of criminal contempt is not exempt from due process considerations of notice and a hearing. In Harris, this Court specifically held that Rule 42 (b) and the notice and hearing provision therein provided the general or the normal procedure for dealing with contempts in the federal regime. Harris went on to say that this would give the accused condemner an opportunity to present the legal defenses to the charge of contempt and, also, to present facts in mitigation of the charge or the penalty. Now, in this case, had counsel been given that opportunity, there was much that she could've done by way of defense for Wilson. In the first instance, as I just noted, there was some indication in the record of psychiatric problems. Now, the Government tries to dismiss this as of little consequence, but the fact remains that Judge Lasker was convinced that there was some need for psychiatric treatment and he specifically indicated his intent to incorporate that psychiatric treatment within the sentence for the bank robbery. Clearly, psychiatric problems are relevant to determining Wilson's responsibility for refusing to testify and if not that far, they certainly arose until mitigation of the sentence. Moreover, there was a new -- William H. Rehnquist: Ms. Ginsberg, did this contempt require mens rea? Sheila Ginsberg: I believe it does, Your Honor. William H. Rehnquist: Do you have authority for that proposition? Sheila Ginsberg: I believe there is a per curium on decision of this Court. The name of the case however, escapes me. I can submit it at a later date. Potter Stewart: Well, there is a per curium involving a contempt in a federal court and maybe the case you're thinking about, long polysyllabic name, in which the -- there was a lot of very gross conspicuous misconduct by one of the defendants in the case. Then it was suggested that he may -- might have been insane, might not have been competent and this Court remanded to canvas that issue which would suggest that it does -- that the contempt does require mens rea because for only the objective conduct, then I suppose an insane person could've been equally guilty of contempt but if it requires a -- but if only a competent person could be found in contempt which was the implicit holding in that case, then I would suppose it would -- the answer would be it requires mens rea. Warren E. Burger: Aren't these all matters that the Court could take into account at a subsequent point? Sheila Ginsberg: No, Your Honor. I don't think that they are. I don't think that a -- Warren E. Burger: Aren't you aware that a vast majority of contempt citations, penalties are reduced after their original imposition? Sheila Ginsberg: Well, that may well be, Your Honor, but I think that, as a general principle of law and as it applies in this case, a Rule 35 motion is insufficient to compensate for the deficiencies of this procedure. Firstly, a Rule 35 motion does not go to the imposition of the criminal conviction and secondly, I think that what that procedure countenance is, is the imposition of a final sentence based on inadequate information. It places the respondent in a position of coming into Court and convincing the judge that his initial decision was incorrect. Warren E. Burger: Well, I could understand your position about his possible mental condition if he had engaged in disruptive conduct as in the case that Mr. Justice Stewart referred to. Here, he was casting his refusal on strictly legal grounds, was he not and there was no disruption of the courtroom? Sheila Ginsberg: Oh! There clearly was no disruption of the courtroom, but the -- Warren E. Burger: No misconduct of any kind. Sheila Ginsberg: None. No misbehavior. Warren E. Burger: Except the refusal in itself. Sheila Ginsberg: But, clearly, there are levels of or brands of incompetence which go the witness' inability to comprehend the obligation to testify. It would seem -- and, in fact, the per curium that I was thinking of, if my memory serves me correctly, deals with a refusal to testify or a testimony before a grand jury at any case. It would seem to me that there are certain varieties of incompetence that would certainly go to that. There were other facts here which clearly counsel could've presented at a hearing had she been given the opportunity. First of all, there was a confusion as to the extent of Wilson's Fifth Amendment privilege, how far it would protect him. Judge Lasker and the prosecutor were both labeling under -- laboring under the misconception that his Fifth Amendment privilege did not extend to the sentence. Judge Lasker believed that there was no way to protect Wilson from the sentencing -- from having a sentencing judge use his testimony and, in fact, he didn't have the right to protect the sentencing judge from doing that. The Second Circuit, in fact, in its opinion set forth the procedure whereby Wilson could've been protected and had counsel been given the opportunity she requested of a continuance, it's entirely possible that she would've come up with this procedure and thereby obviated the whole need for the hearing. Potter Stewart: Could that procedure -- is that a statutory procedure or one worked out on the Second Circuit? Sheila Ginsberg: I believe it was worked out in the Second Circuit, but not just on this appeal. They rely, in their opinion, on United States against Goldberg which was the case the prosecutor handed up to the judge during this hearing, but everything was done with such haste and with all due respect to Judge Lasker, in such a cursory fashion that it was never thought -- the procedure was never thought through and nobody ever realized or at least articulated at the hearing that that Wilson could be protected by testifying, having the record sealed and then having his sentence transferred to another judge. Potter Stewart: And that protection is not against self-incrimination, but against reprisals in the penitentiary and so on, isn't it? Sheila Ginsberg: No, Your Honor. It's a Fifth Amendment protection. Potter Stewart: Well, I'm talking about the protection procedure that's been worked out? Sheila Ginsberg: Well, no. It's to ensure protection or to ensure that the sentencing judge does not use a substance of the testimony to increase the underlying sentence in this case for the bank robbery. Warren E. Burger: To be sure you're going to get a neutral judgment in the sentencing -- Sheila Ginsberg: Exactly. Warren E. Burger: -- isn't that your -- the theory of it? Sheila Ginsberg: Exactly so. Potter Stewart: And the sealed testimony also serves the same function, does it? Sheila Ginsberg: Yes. Potter Stewart: The sealing of the testimony? Sheila Ginsberg: Exactly. I would like to quickly get to the Government's justification for the summary proceedings. They claim that, despite -- well, despite the language of Harris which makes it very clear that summary proceedings under Rule 42 (a) are only to be used in exceptional circumstances and Harris defined those exceptional circumstances as acts of -- in Court acts of misbehavior which threatened the judge or obstruct the proceeding or the courtroom, disrupt the courtroom. The Government argues that the justification in this case was to compel testimony. Now, first of all, I must point out that due the record is so -- if it is clear about anything, it is clear about the fact that Judge Lasker did not intend to coerce Mr. Wilson's testimony by sentencing him for criminal contempt. The judge -- Warren E. Burger: Well, he was punishing him for his contumacious refusal to answer, wasn't he? Sheila Ginsberg: That's correct, but it was not intended to coerce the testimony, this punishment. The judge stayed the sentence pending appeal and he told, specifically told Mr. Wilson that there was no need for him to concern himself about the sentence at this time. Warren E. Burger: Well, isn't part of it the deterrence of that kind of conduct with respect to other witnesses in other cases? Sheila Ginsberg: Well, if in fact that is one of the purposes, it doesn't seem as though that purpose would be thwarted by notice of 24 hours and a short hearing. I'd also like to say that the use of criminal contempt to coerce testimony is violative of the whole concept of criminal contempt. Criminal contempt, as Your Honor points out, is to punish not to coerce. It's a civil contempt sanction. Warren E. Burger: There, your taking issue with Rule 42 (a), are you? Sheila Ginsberg: No, sir. No, I'm not. I'm just saying that criminal contempt should not -- was not intended as -- to have as its primary purpose coercion, but punishment. Warren E. Burger: Thank you. Mr. Martin. John S. Martin, Jr.: Mr. Chief Justice and may it please the Court. I think that the is suposed in this case is one that is fundamental to our system of justice. That is, what rights, procedural rights do we give a citizen of this country before we sentence him to serve six months in jail? I think that the issue is muddied somewhat by the procedural context in which this case arises. And I think it drives to some of the questions that Justice Blackmun raised as to whether this is a due process requirement or rather a requirement of Rule 42. It seems to me that the petition -- the respondents here were afforded a hearing, that was not a Rule 42 (a) hearing, but at the same time they were not given a 42 (b) hearing. And I would suggest, very respectfully that in determining whether or not summary contempt -- the summary contempt power may be used in the case of a witness who respectfully refuses to testify. We have to look at the summary contempt power as that is contemplated in ex parte Terry. Summary contempt power authorizes the district judge or the trial judge to impose a sentence of imprisonment without affording the respondent the right to counsel or the right to say anything in his own defense. And it seems to me that the consistent teaching of this Court is that that type of deviation from what we normally consider the due process rights of a criminal defendant can only justified by the most extraordinary need to protect the dignity of the Court. And it seems to me that in this case that great need to protect the dignity of the Court is not present to justify a departure from the more traditional procedures which due process encompasses. It seems to me, we have a case where these two men, for different reasons perhaps and in different circumstances, refused to testify. I think one of the compelling facts concerning the client I represent, Mr. Bryan, in this procedure, is that he was forced to go forward in the absence of his own counsel. Counsel was simply assigned to him on that morning. That may not seem like a terribly significant fact, but it seems to me, my experience in representing assigned counsel -- representing assigned defendant is that the -- it takes some time for a lawyer assigned by the Court to develop a rapport with his client. The rapport that comes naturally if a man has sought you out to be his counsel does not exist when you are suddenly thrust upon the defendant and it seems to me that fact here takes away the ability of the counsel to on the spur of the moment really meaningfully advice the client of his rights. And it seems to me, the issue here is whether or not these respondents should have had the right to counsel before being sentenced to the maximum sentence possible in these circumstances, a sentence of more than six months could not have been imposed. Warren E. Burger: Well, one of the consequences of this conduct was quite serious, was it not, in terms of the results of one of the trials? John S. Martin, Jr.: It certainly was, Mr. Chief Justice, and I'm suggesting is not that the punishment was not proper and, indeed, I think an argument could be made by the Government at some future time that in a situation like this, it might be appropriate to impanel a jury so that a more severe sentence could be imposed, but that has to do with the punishment fitting the crime. What I'm suggesting, Mr. Chief Justice, is that before that much of a penalty, the maximum penalty available is imposed that we have to afford a respondent in a contempt proceeding certain minimal due process guarantees. A meaningful right to counsel and I suggest that the appointment of counsel that day was not a meaningful right to counsel as far as my client was concerned. I don't think this Court, if I had not shown up this morning, would have assigned another lawyer to appear and argue this afternoon. I think you would say that the lawyer has to have a right to prepare to meaningfully represent his client. Warren E. Burger: More likely, the alternative is that we would have had your case submitted on briefs. John S. Martin, Jr.: Also a possibility, obviously, Your Honor. But, I do think that in the situation here, that is a for less severe effect on my client in putting him in jail for six months. Harry A. Blackmun: How much notice would've been sufficient do you think in this case, 24 hours? John S. Martin, Jr.: I would think that, certainly a 24-hour period might have been reasonable. I think that you have here a situation, also, I disagree with the Government that this procedure is the most effective way as they suggest, is the most effective way to get the -- a testimony that you want. It seems to me, once the sentence is imposed -- well, that's where I've got to serve and I deal with it. A witness who is confronted with a situation where he is told that, “I am sentencing you, I'm ordering the marshal to take you into custody and hold you in civil contempt. I'm going to set this matter down for a hearing I have to determine if you should be held in criminal contempt and a sentence to be imposed will be fixed at that time.” And a witness in that situation is more likely to come back the following day and say, “I've thought about it and I will testify” than one who has had the final sentence imposed on him. So that, I don't think that the remedy that the government suggest is the most effective way to bring about the testimony that they seek to compel here, but it seems to me that the consistent teaching of this Court has been that summary contempt power is reserved for the very extreme case, and it is our submission here that this is not that extreme a case. The -- there was no disrespect -- manifest for the Court that it called for the Court to vindicate its authority right then without waiting for a moment so that people would know that the Court's authority exists. This is not the situation such as existed in Terry where there was a violent outburst in the courtroom and the Court there said, “Fine.” There, the dignity of the Court is affronted and it must be able to control the procedures in its own courtroom, and that was I think the rationale set forth in Cooke versus United States lays out those distinctions quite clearly. Potter Stewart: The difficulty is Mr. Martin for me at least, one difficulty, that we're dealing here really with the specific language of the Federal Rules of Criminal Procedure, are we not, unless, you're suggesting that there's something constitutionally deficient about the language of 42 (a)? John S. Martin, Jr.: I am. I am suggesting, Mr. Justice Stewart, that it is constitutionally deficient. It is a violation of due process to use summary contempt power in the situation before the Court. Potter Stewart: I see. You -- John S. Martin, Jr.: What I'm suggesting is merely -- Potter Stewart: Does this mean that you do concede that the language of 42 (a) would permit summary contempt power in these circumstances of this case? John S. Martin, Jr.: I do, and this is really what I was addressing myself to at the outset. The fact that, really, you have -- the procedure used here was not 42 (a), but it was not 42 (b). It was something in the middle and I think it was something in the middle because the district judge recognized that there were certain minimal due process rights that should attach before you send a man to jail for six months. Warren E. Burger: Well, the judge was well-aware, was he not? The trial was virtually coming to a close very shortly? John S. Martin, Jr.: I think that that is true. This was clearly going to be a very short trial and he was aware of that but as Ms. Ginsberg pointed out, there's nothing in the Court's action. Indeed, the Court's action totally contradicts the fact that he was seeking, by his order, to compel testimony right then and there because he stayed the effectiveness. He said, “Listen, I will consider this again after the Appellate Courts have passed on it.” So there's no element here of using this criminal contempt power to force right then and there the witness to change his mind about the testimony. Warren E. Burger: Well, your submission requires you, I take it, to either say that 42 (a) is constitutionally flawed or else this is not a 42 (a) case? John S. Martin, Jr.: Well, I think it requires the Court to say that 42 (a) is constitutionally flawed in the circumstances of this case. I think Terry indicates that, obviously, there are situations where you can impose contempt without giving the respondent any right to reply. But I think what the Court has consistently held, from the time Terry was decided to date is that to justify that radical departure from due process, you need very strong and compelling reasons showing that the demoralization of the Court's authority would occur. And, I think what I'm really submitting is that our system is just -- of justice is not so fragile that it would collapse. If the -- Warren E. Burger: Well, I go back to the -- John S. Martin, Jr.: People like -- Warren E. Burger: I go back to the consequences on the other trial. They were rather -- John S. Martin, Jr.: I think it is true that it disrupts the trial. It has consequences, but those consequences followed even though criminal contempt was imposed here. Warren E. Burger: I'm speaking also of the suggestion of the Solicitor General that there was a serious miscarriage of justice by the directed acquittal. It was directed really -- John S. Martin, Jr.: That's right. They dismissed the three counts involving the bank robbery in which my client was involved, and I don't mean to denigrate the seriousness of that and, as I said before, I might, if I were back in the Solicitor General's Office, be prepared to argue that you can impanel a jury and impose a substantial sentence more than was imposed here. All I'm suggesting, Mr. Chief Justice, is that when you impose a sentence as much as six months on an individual that you have to afford him some basic due process rights, a right to some notice and an opportunity to present, as the Court said in Cooke, evidence in either exculpation or mitigation. Warren E. Burger: What was the sentence imposed on the one defendant who was found guilty in the -- was it a new trial, separate? John S. Martin, Jr.: In the Anderson? Warren E. Burger: Yeah. John S. Martin, Jr.: Ultimate sentence, I must say, I just don't know, Mr. Chief Justice. Warren E. Burger: To the bank robbery so it can be assumed -- John S. Martin, Jr.: Oh! It's a serious -- Warren E. Burger: It can be assumed that it's a very substantial sentence. John S. Martin, Jr.: My client was sentenced to 10 years for the bank robbery. It's a substantial crime and, as I say, I don't denigrate the seriousness of what was done here. I'm just simply suggesting that, given the substantial sentence, six months is a substantial sentence. I mean, I have seen men cry where they've been sentenced to three months in jail. Warren E. Burger: For conduct that leads to the acquittal of a man guilty, apparently, of a 10-year offense? John S. Martin, Jr.: No, sir. I'm not saying it is out of order with the magnitude of the disruption, but all I'm saying is that before you impose a sentence of that magnitude you should give certain minimal due process rights to allow the respondent to have an opportunity to present to the Court any factors in mitigation or in exculpation. Having -- give -- have that right, I'm not saying it would've been inappropriate to sentence him to six months. Warren E. Burger: Your alternative argument was that it should -- they should give him, or perhaps it was your colleague's argument, give him time to think it over until the next day and he might change his mind. John S. Martin, Jr.: Well, I think that that -- Warren E. Burger: But, does that mean that every time a court is confronted with a recalcitrant witness you stop all the proceedings and give him 24 hours to think it over and see if he's going to answer questions? John S. Martin, Jr.: Well, I think in most instances, that probably is not going to be necessary. I was -- Mr. Norton's statistics certainly are not in conformity with my experience in the Southern District of New York where I practice primarily. It seems to me that in most cases, you're going to be able to proceed with other witnesses or other aspects of the trial, but adjournments of 24 hours are not unusual. If we have a wit -- a juror with the flu, we adjourn cases for 24 hours. So that, I don't -- certainly, it's a disruption, but six months -- Byron R. White: Well, what did he need a lawyer for? John S. Martin, Jr.: What did he need a lawyer for? I think he needed a lawyer, one, to advice him of the serious nature of the charges, to determine, to present to the Court, particularly in mitigation here, Mr. Justice White, factors concerning -- defending himself but also factors that is to, perhaps even, to introduce evidence to show that the refusal to testify was not one that was simply based on a too great a loyalty to a friend, but a real belief that the constitutional grant of immunity was not co-extensive with the privilege. It seems to me, if a man refuses to answer because he really believes that the District Court's rule is in error, that that is a relevant factor to be considered in imposing sentence. It seems to me, a man who just feels that the Court is wrong as to his constitutional rights and he wants to protect them doesn't deserve the maximum sentence possible. Potter Stewart: Your point is that the constitutional privilege against compulsory self-incrimination has got subtleties and nuisances that a person can't decide upon by himself but needs a lawyer to help him decide, is that it? John S. Martin, Jr.: That's correct, and also that whether not to go forward and testify is a decision in those circumstances where -- this is a point I was trying to make before that the witness has to have some faith in the lawyer. And I think that's one of the things that bothers me here is that my client was asked to make all these decisions and go forward with a brand new lawyer assigned to him that morning. Thank you. Warren E. Burger: Thank you. You have about five minutes left if you have anything further. Gerald P. Norton: Thank you. The suggestion that there was no intention here to give Mr. Bryan and Mr. Wilson an opportunity to purge their contempt I think is rebutted by the statement of Judge Lasker at page 32 (a) -- 32 of the appendix where he specifically referred to imposing a sentence for a period of time subject to elimination or reduction of it to nothing should Mr. Bryan cared to testify and answer the questions. That was plainly his intention, everyone understood it. They chose not to do so. As for the possibility -- Potter Stewart: Where were you reading from and what is your point? Gerald P. Norton: Page 32. Potter Stewart: Yes, of the appendix. Gerald P. Norton: Of the appendix, the middle of it, the middle of the page. Potter Stewart: Beginning, “My suggestion is that I impose a sentence…”? Gerald P. Norton: Yes. And other points he said he was making this provisional sentence in both cases subject to reduction or reconsideration. Now, the suggestion that Mr. Wilson's refusal was based on some legal issue as to the effectiveness of the immunity to protect him, I think, is also rebutted by the fact that when counsel said to consider the motivation for what Mr. Wilson has done, Judge Lasker said “to save a friend,” counsel “yes.” It is very clear what was happening here. This was not someone standing on some legal principle to preserve the issue for appeal. This was someone who simply didn't want to talk to save a friend. That's all there was to it. Thurgood Marshall: It wasn't really on what immunity he was getting, was it? Gerald P. Norton: It was. Judge Lasker explained that, explained that the consequences of the immunity were the -- what he said could not be used against him and that he had to answer question put to him. Thurgood Marshall: And did he say that it couldn't be used by the sentencing judge? Gerald P. Norton: I don't believe he specifically said that, but -- Thurgood Marshall: Well, no, but there was something that was left out that this man didn't understand, am I right? Gerald P. Norton: In this case, Your Honor, both Wilson and Bryan -- Thurgood Marshall: Are you? Gerald P. Norton: -- had admitted their complicity in the offense. There's never been any suggestion what would've happened -- Thurgood Marshall: I'm not talking about -- Gerald P. Norton: Here if they testified. It could've been used as -- Thurgood Marshall: I'm talking about the grant of immunity. Could he possibly understand it without getting advice or thinking it over? Gerald P. Norton: Mr. Wilson -- Thurgood Marshall: It wasn't in there? Gerald P. Norton: Mr. Wilson had his attorney present. Thurgood Marshall: Afforded an attorney. Gerald P. Norton: Mr. Bryan was represented by Mr. Wilson's attorney. Thurgood Marshall: Yes. Wait a minute. He had a -- he had somebody else's lawyer. Gerald P. Norton: Well-- Thurgood Marshall: Yeah. That's what he had. Gerald P. Norton: That's right. Thurgood Marshall: He had somebody else's lawyer. Gerald P. Norton: Someone else who's client had the identical problem and was prepared to address it that day. Thurgood Marshall: And witnessed the fact that they're so identical that one of them said that that lawyer couldn't represent him in this Court. That's how identical they are. Until this day, they're not identical. Gerald P. Norton: Well, I can't speak to the (Voice Overlap) -- Thurgood Marshall: Well, it's what the record shows in this Court. Gerald P. Norton: Well, they have different factual situations and they prefer to make different arguments. Thurgood Marshall: That's right. So they're not identical. Gerald P. Norton: Well, they were identical in as far as the question of whether they could be held in contempt when they refused to obey a Court order, they were in the identical situation. Thurgood Marshall: I am not -- were they in identical situation as to the immunity? Did the fact that one and his lawyer understood immunity mean that the other one understood the full parameters of the immunity? Gerald P. Norton: If Mr. Bryan's refusal to testify was based on some misapprehension as to the scope of the immunity, then that is a fact that could've been presented to Judge Lasker at any time in the 20 months or so since these convictions (Voice Overlap) -- Thurgood Marshall: Well, I will assume that anybody convicted for murder can bring habeas corpus 50 years later. Gerald P. Norton: Well, contempt -- Thurgood Marshall: But that doesn't make the original conviction legal? Gerald P. Norton: Contempt is an unusual creature in that regard and as -- Thurgood Marshall: It is. Gerald P. Norton: -- the Chief Justice indicated, criminal contempts are frequently revised after further presentations. On the question of notice, counsel seemed to assume that one day would be sufficient. Now, whether that's so or not is an open question. Some Courts of Appeals have said that five-day's notice is required where notice is necessary. A five-day interruption of the trial would be something very different indeed, in that it would be longer than the trial itself took. The question of whether a sentence under 42 (a) is -- has any coercive effect I think it's clear that summary exercise of the contempt power is inherently coercive. That is why the Courts permitted to exercise it. It is to invest immediately some conduct which obstructs or casts in a bad light the administration of justice. If the only purpose were punishment, 42 (b) would be sufficient. It is the need to deal immediately that justifies the summary dispositions. And finally, on the mens rea question, I note simply that, first, 401 does not require that the action be willful as 402 does and that, in this case, the defendant had entered his guilty plea with no suggestion that he was not competent to stand trial. The difficulties in sentencing a youthful offender on a 20-year maximum burglary count are very different indeed from determining whether he has legitimately refused to answer a question. Thank you. Warren E. Burger: Thank you. The case is submitted. Mr. Martin, you appeared by appointment of the Court and on behalf of the Court, I want to thank you for your assistance to us and of course, your assistance to your client.

Warren E. Burger: We’ll hear arguments next in 6909 in Maness against Wainwright. Mr. Brummer, I think you may proceed. Bennett H. Brummer: Thank you, Mr. Chief Justice and may it please the Court, I would like to take this opportunity to introduce Albert G. Caruana, Esquire, co-counsel for Petitioner and a member of the Bar of this Court. We are before the Court this afternoon on certiorari to review the first decision by the United States Court of Appeals for the Fifth Circuit to interpret and apply this Court’s decision in Chambers v. Mississippi. We urge this Court to reverse the Court below. In this case, the repeated application of Florida’s Voucher Rule devastated the Petitioner’s ability to demonstrate his innocence. The Voucher Rule clearly serves no legitimate State interest. Thus, the Voucher Rule’s impact on the Petitioner’s rights to fair trial, confrontation and compulsory process deprive the Petitioner of due process of law. This case arose out of the death of the Petitioner’s daughter as a result of the battered child syndrome. The issue was, who was responsible? The State charged the Petitioner. At trial, the defense attempted to prove, one, that the Petitioner was innocent; and, two, that the Petitioner’s wife, Linda, was probably responsible for the child’s death -- Linda, who had been the only other suspect. Warren E. Burger: Mr. Brummer, at trial did you ever really take that position, that the mother was guilty of the battery? That’s one of the arguments your opponent makes, and I didn’t find you really squarely raise that in the trial. Bennett H. Brummer: Your Honor, we were not counsel for the Petitioner at the trial; but I think that it was clear on the record of this case that Linda was adverse to this Petitioner at the time she was called to the stand by the defense, if that’s the direction of Your Honor’s question. Warren E. Burger: Well, I suppose the question is, did the defendant or his counsel ever specifically advise the trial judge that it was his theory that the wife was guilty of killing the child? Bennett H. Brummer: Absolutely, Your Honor. I believe the record is very clear in this regard, and there are a number of places in the record where this is so. First of all, it’s clear on the record that Linda had been the only other suspect. She had given a statement to the police, which tended to incriminate the Petitioner. She was listed as a State’s witness on the State’s witness list. She had been subpoenaed to the trial by the State and brought to the trial by the State from Texas. In his Motion to Suppress, the Petitioner said that he had confessed in order to protect his wife. In opening statement, the defense said it would show who probably killed the child, and it was not the Petitioner, and that Linda Maness would be the defense’s chief witness. Of course, after Linda took the stand and she testified consistently with the State’s theory of the case, any question as to her adversity clearly was cleared up. There is an immediate denial by Linda that she was guilty. In that there were only two suspects here, if she is not guilty, the Petitioner is. Warren E. Burger: You didn’t expect her to say, yes, she was guilty, did you? Bennett H. Brummer: We did not expect her to say that she was guilty, but we felt that we were entitled to a fair opportunity to present our defense for consideration of the jury. The testimony that she came out with -- that she had been out of the house at the time that the baby was injured, and the baby had been alone with the Petitioner at that time -- was refuted by her letters, by her statements to various witnesses who were present to testify. We wanted from her own mouth to explain before the jury how she made these statements, so the jury could weigh her credibility when she testified that she was not guilty. We also sought -- Warren E. Burger: But did you make an effort, in sidebar conference or whatever Florida procedure provides in a case like that, to show that regardless of the general rule that the trial judge in this case, after what you had shown, should make an exception to the Voucher Rule? Bennett H. Brummer: Your Honor, the Voucher Rule was applied to keep out numerous items of evidence. Each time, the Petitioner vigorously attempted by every means at his disposal to get this evidence admitted. With regard to the letters, in particular, Counsel said, “This is of utmost importance that we get these letters into the record. If I don’t know how to do it, please tell me.” The Court would not tell him. He then asked for a recess so that he could research the law in order to find out how to get those letters in. But it was clear that no matter how he turned around, the Court had the answer, and the answer was the Voucher Rule. That was the only answer that the Court had for the Petitioner’s attempt to present his side of the story. Warren E. Burger: There seems to be some suggestion that perhaps some of the evidence you wanted to introduce was excludable on some other State ground. Bennett H. Brummer: I believe, Your Honor, that the record is eminently clear the only objection made to this evidence was the Voucher Rule. Warren E. Burger: And the only ruling of the Court that there ever was. Bennett H. Brummer: Was on the Voucher Rule. Additionally, the Fifth Circuit found that evidence was excluded by the Voucher Rule. This appears at the appendix on Page 227. Warren E. Burger: Were those letters ever introduced on Federal Habeas? Bennett H. Brummer: The letters were not, but the Petition reflected sworn averment by the Petitioner as to the content of those letters. Warren E. Burger: Why weren’t they, do you know? Bennett H. Brummer: It seemed to me, and I was counsel at that time and co-counsel at that time, that it was more effective to characterize those letters than to introduce a number of papers and that, if Respondent had any question, he could deny or he could file a Motion to Produce; if the Court had a question, the Court could have requested the filing of those letters. But neither the Respondent nor the Court came forward with any request for those letters. As a matter of fact, Respondent completely ignored those allegations. Warren E. Burger: That would carry water if you were talking about a party to an action who had some standing for credibility; but on this record, how can you suggest that his characterization of those letters would be better than the original documents? Bennett H. Brummer: Your Honor, it was not his characterization of those letters. Those letters were in the possession of counsel. They were characterized by trial counsel at the time of the trial; they were in possession of counsel at the time that the Petition for Habeas Corpus was filed; and we read those letters and characterized them ourselves. It was not the Petitioner’s characterization. Additionally, there was no response from the Respondent questioning our characterization of those letters. Byron R. White: Was there ever an offer of proof of those letters? Bennett H. Brummer: There was never any request for an offer of proof, Your Honor. Warren E. Burger: Well, I know; but most people will make an offer of proof, just to protect their offer. But the letters are not in the record; that’s my real question. Bennett H. Brummer: No, they are not, Your Honor. Warren E. Burger: I find it more difficult to understand why counsel, having them in his possession, did not produce them and offer them or at least, as Justice White suggests, make an offer of proof as to what they contained. Bennett H. Brummer: Your Honor, I would not say that we did not make an offer of proof at any time. We did not make an offer of proof in the Federal District Court, because the issue was never raised. The question of the availability of the letters never came to the fore until the Fifth Circuit mentioned the unavailability of the letters in its affirmance of the lower court. At that time, we did file a Motion to Supplement the record with the letters. That motion was denied. Warren E. Burger: But yet it’s your burden to convince the Court on a Petition for Federal Habeas that some wrong has been done here, isn’t it? You can’t turn around and say, “Well, gee, if we had only known, we would have supplied the necessary evidence.” Bennett H. Brummer: Your Honor, I submit that the Federal District Court accepted our averments. Those averments regarding those letters are reflected in the Federal District Court’s Order of Dismissal. Secondarily, the letters were but one part of the fabric of this case, which is based on the inability of the Petitioner to cross-examine Linda Maness and introduce various items of evidence, including -- Warren E. Burger: Well, were they ever marked as exhibits? Bennett H. Brummer: No, they were not, Your Honor. At the time of the trial, the trial judge asked to view the letters. The prosecutor protested the letters are not marked into evidence. The trial judge responded, “I know it”, and she proceeded, in violation of normal procedure, to review those letters and to reject them on the basis of the Voucher Rule. But the letters are just one part of the evidence which was excluded. Warren E. Burger: I understand, I understand. Do you have a proceeding in Florida whereby an item to be offered in evidence is first marked for identification and then offered in evidence? Bennett H. Brummer: That’s correct, Your Honor. Warren E. Burger: And had these letters been marked for identification, but not admitted in evidence, or had they not even been marked for identification? Bennett H. Brummer: I believe the record reflects that they were not marked even for identification. The Federal District judge found that we had, in fact, exhausted our State remedies and denied the Petition on the merits. On appeal, the Fifth Circuit made certain findings of fact and conclusions of law, which we believe to be erroneous. The first and foremost is that the Petitioner’s trial did not violate the fundamental fairness standard discussed by this Court in Chambers. The Court made some contradictory findings, and we believe that they are or should be the focus of this Court’s review of the Fifth Circuit’s decision. The Fifth Circuit said that the Voucher Rule undoubtedly worked to the Petitioner’s detriment and that some evidence which suggested his innocence had been excluded. Moreover, the integrity of the fact-finding process had been impaired due to the Petitioner’s inability to cross-examine Linda Maness. It should be pointed out that he actually attempted to have Linda Maness admit that she knew that Garry Maness, the Petitioner, did not do it. He was interrupted in mid-question by an objection based on the Voucher Rule, which was sustained by the trial court. We feel that the defendant had that right, and this was a crucial exercise of that right. Regardless of the record, and regardless of its own findings, the Fifth Circuit concluded that the extent to which the Voucher Rule interfered with the right to present a defense was not sufficient to constitute a denial of fundamental fairness. We believe there are two bases on which this decision is incorrect. First, we believe that the record does reflect a violation of the fundamental fairness guarantee. Second, we believe that the record reflects a violation of the Sixth Amendment guarantees incorporated in the Due Process Clause. This lower threshold standard, which the Fifth Circuit said did not form a part of this Court’s decision in Chambers, was completely ignored by the Fifth Circuit otherwise in its disposition of this case. We submit that the damage done to the Petitioner’s case in this case was a greater depravation than that reflected in Chambers v. Mississippi. More evidence favorable to the Petitioner was excluded in Maness than in Chambers. In Chambers, the third party’s confession was admitted into evidence and was before the jury for the jury’s consideration. Chambers was restricted only in his ability to cross-examine the third- party confessor as to his repudiation of that confession. Warren E. Burger: Of course, here, you don’t have a confession at all, do you? Bennett H. Brummer: I submit, Your Honor, that we do. Under circumstances where there are only two suspects and Linda Maness says that the Petitioner did not do it, I submit that this is as close to a direct confession as you can get. Her statements included references to the fact that not only that the Petitioner did not do it, but that Linda was not at the store at the time that she had testified -- Warren E. Burger: We’ll resume there at 10:00 o’clock tomorrow morning. Bennett H. Brummer: Thank you, Your Honor.

Warren E. Burger: We will hear arguments first this morning in Pennsylvania Bureau of Correction against the United States Marshals Service. Mr. Zimmerman, you may proceed whenever you are ready Mr. Attorney General. Leroy S. Zimmerman: Mr. Chief Justice, and may it please the Court: The question presented by this appeal is whether a district court has the authority to direct the United States Marshals Service to share responsibility with state officials for the production of state inmates to appear in Federal District Court at a trial of a civil action. This question arose in the course of a civil rights action brought by a state prisoner against Philadelphia County officials for events allegedly occurring while he was in the custody of county prison officials. The magistrate ordered the state custodians to produce the plaintiff and two witnesses. Plaintiff was incarcerated 220 miles from the federal courthouse. One witness 218 miles away and another witness 143 miles away. Recognizing the burden that is placed on the state custodians, the magistrate ordered that state custodians transport the inmates to the Philadelphia House of Detention, there to transfer custody to the United States Marshals, who would transport the prisoners from the House of Detention to the Federal Courthouse and maintain custody of them while they were inside the courthouse. Well, the magistrate's order transferring custody from state to federal officers and the apportion of transportation responsibilities were based in part on his knowledge that the U.S. Marshal regularly transported federal prisoners between the Philadelphia House of Detention and the Federal Courthouse. This arrangement permitted state custodians to avoid the deployment of guards from their primary responsibility, that of maintaining prison security, to transferring prisoners. The U.S. Marshals Service intervened to oppose the orders, arguing that no authority exists to support such orders. In rejecting the Marshals' contentions, the magistrate recognized that the explosion of federal civil rights litigation by state prisoners has strained available resources. Consequently, in fashioning a procedure, the magistrate stressed that his order placed considerable burden on state officials, but the Marshal really would have very little burden, if any at all. The Court of Appeals in a split decision did not dispute the magistrate's factual and pragmatic conclusions, rather, Judge Gibbons, writing for the Court, concluded that no statutory authority, including the All Writs Act, supported the magistrate's order, apportioning the transportation responsibility between state officials and the United States Marshals. The Court held that the Marshal is obligated to maintain custody over the prisoners while they are in the courthouse. In fact, the Court of Appeals held that if security concerns justify it, the Marshal could be ordered to take custody of state prisoners outside the courthouse. Now, it is our position-- William H. Rehnquist: General Zimmerman, as I understand it, the state does not contest that part of the magistrate's order which required transportation from a correctional facility to Philadelphia. Leroy S. Zimmerman: --That is correct, Justice Rehnquist. William H. Rehnquist: And, the government doesn't challenge that part of the Court of Appeals' decision which required the furnishing of security within the Federal Courthouse? Leroy S. Zimmerman: That is correct, Justice Rehnquist. William H. Rehnquist: So, what we are talking about is transportation from the State Correctional Center in Philadelphia to the Federal Courthouse in Philadelphia. Leroy S. Zimmerman: Yes. It is our position that the All Writs Act-- Thurgood Marshall: Do you have a Federal House of Detention in Philadelphia? Leroy S. Zimmerman: --I beg your pardon? Thurgood Marshall: Do you have a Federal House of... Do you have any place where federal prisoners are kept in Philadelphia? Leroy S. Zimmerman: No. The House of Detention in Philadelphia, operated by the County of Philadelphia, is a designated repository by the Federal Marshals to house federal prisoners. Thurgood Marshall: So, what this ruling says is that they can pick up their own prisoners and transfer them, but they don't have to pick up these from the exact same place? Leroy S. Zimmerman: This ruling... The magistrate, in fashioning this ruling, Justice Marshall, said that because they regularly... in considering this, because the Marshals regularly went back and forth, that it was not a burden on them to transport state prisoners to Federal Court in civil rights actions. Byron R. White: General, I don't suppose your submission would be limited to that fortuitous circumstance. Leroy S. Zimmerman: No, Justice White. Byron R. White: You would think any time in the 1983 action the Federal Marshals should be required to bring the plaintiff, if he is a prisoner, and witnesses from the prison, furnish any of that transportation. Leroy S. Zimmerman: Justice White, so long as it is not an inordinate burden on the Federal Marshals. I think that that is something... I think the source of the powers in the All Writs Act, but I think that beyond that then there is a matter of discretion, assuming that point of law where the magistrate can take into account the respective burdens-- Byron R. White: If it is a question of authority, why, if they have authority or if they are obligated to do this under the law, it wouldn't make any difference what the burden is, would it? Leroy S. Zimmerman: --No. It is our position that the All Writs Act-- Lewis F. Powell, Jr.: Mr. Attorney General, refresh my recollection. How far was the transportation in terms of miles? Leroy S. Zimmerman: --Five miles from the House of Detention in Philadelphia to the Federal Courthouse. Lewis F. Powell, Jr.: And, you mentioned burden. I realize that you can make all sorts of suppositious cases, but suppose it were 50 miles. Would the rule still be the same? Leroy S. Zimmerman: Well, Justice Powell, I don't think that the question of burden is in this particular case. There is no record in this case to determine whether it were not nor is there a challenge to the magistrate's exercise of discretion by the Marshals. The sole source, the focus of the question in this case is whether or not the All Writs Act provides the authority, the power in the court, to fashion such a writ as it did in this case. Lewis F. Powell, Jr.: And, that would apply to the 50 miles? Leroy S. Zimmerman: Yes, sir. It is our position that-- Sandra Day O'Connor: General Zimmerman, suppose that you are somehow correct that the All Writs Act could encompass such a power on the part of the Federal Court to order this transportation, what requirements would you then think a judge or magistrate would have to find in order to justify such an order? Is it enough that the magistrate or judge determine that there should be cost shifting from the state to the federal government? Is that alone enough to justify an order like this under the All Writs Act if you are correct? Leroy S. Zimmerman: --Justice O'Connor, I don't think that this is a question solely of money. It is our position that this is a question of allocation of manpower and getting prisoners from a place where they are incarcerated to a place where their rights would be vindicated. Obviously, money is involved, but it is a question of manpower and the allocation of manpower from maintaining the operation of prisons in a secure fashion. That is part of the question of this burden. It does involve money. Sandra Day O'Connor: What requirements do you think would have to be met under the All Writs Act if your position about it is valid-- Leroy S. Zimmerman: Well, I believe-- Sandra Day O'Connor: --to justify such an order? I think the language of the Act incorporates words such as necessary and appropriate. What would make it necessary and appropriate? What is there in this case other than a cost shifting in effect? Leroy S. Zimmerman: --In this particular case... It is not our argument that it is necessary, but I do believe that the Act... Of course, the Act says, "appropriate in aid of the respective jurisdiction of the Court. " And, I suggest that in this case, as well as being agreeable to the usage and the principle of law... In this case, the All Writs Act was designed to give the courts that flexibility and I believe that when there is a determination made and there is a burden, anything that lessens that burden, that burden to produce a prisoner, and obviously there has to be-- Sandra Day O'Connor: It is a burden on both the federal and state agencies to have to do this. There is always a burden and there is always a cost. What is to guide a court or magistrate in making such a determination? Leroy S. Zimmerman: --As we argue, if the All Writs Act is the source of the Court's power, and I believe that it is here, then, of course, there will be a question in each of the cases, a matter of discretion of the magistrate to exercise discretion, whether or not he has acted correctly in looking at the burden of producing a witness. In civil rights cases, it is necessary frequently for the Court to make a determination on whether or not to produce the prisoner or witness in the court. Now, in examining and making that decision, there are burdens that are going to be placed if the Court decides the prisoner should be there or the witnesses ought to be there to better vindicate the rights, to have a more clearly and informed court. Sandra Day O'Connor: In this case, does the state take the position that it would not have obeyed an ad testificandum order to have the prisoner transported? Leroy S. Zimmerman: No, it does not take that position, Justice O'Connor. The All Writs Act is designed to give the court the flexibility you say is necessary to free the courts from the constraints of historic practice where new solutions are essential to solve new problems. And, this Court has reaffirmed that flexibility, the All Writs Act, recognizing it as a judicial arsenal from which the courts can develop new tools as the need arises. Now, the Act is worded broadly. As I said a moment again, a new writ only satisfy two requirements, that it be necessary or appropriate in aid of the court's jurisdiction, and agreeable to the usages and the principles of law. Now, that first requirement, we feel that there is no question that the underlying civil rights action was within the District Court's jurisdiction and I submit the magistrate's orders were appropriate in aide of that Court's jurisdiction. The explosion of civil rights litigation, especially by prisoners, has increased the requirement for the production of prisoners in court and the corresponding burden on the custodians who must produce those prisoners. Harry A. Blackmun: General, if this action were in state court, and it could have been there, could it not? Leroy S. Zimmerman: Yes, Justice. Harry A. Blackmun: Then we would have no problem at all. Leroy S. Zimmerman: Well, the state court-- Harry A. Blackmun: I take it the U.S. Marshals would not be involved. Leroy S. Zimmerman: --That is correct. Harry A. Blackmun: So, the expense would be that of the Commonwealth. Leroy S. Zimmerman: It would be. Specifically, in civil rights cases, the court must often decide whether to require... As I indicated, whether to require the production of these prisoner witnesses in court. In making that decision, the Court must weigh the relevance or the importance of probable testimony against the burden of producing the prisoner witnesses. Byron R. White: General, pursuing Justice Blackmun's question another step, if this had been in the state court and the plaintiff was not an indigent... He was in prison, but he wanted witnesses from the state prison, wouldn't you make him pay the witness fees and wouldn't you make him pay the transportation? Leroy S. Zimmerman: No, Justice White, he would not be required... If the witnesses were in prison, he would not be required to pay those. Byron R. White: Even though the plaintiff is not an indigent? Leroy S. Zimmerman: Well, if he is an indigent-- Byron R. White: Well, I said-- Leroy S. Zimmerman: --he would not be required to pay. If he were not indigent, yes, Justice White, he would be required to pay the cost. Byron R. White: --And, in this case then, if this person were not an indigent, wouldn't he have to pay? Leroy S. Zimmerman: In the case of a state prisoner here in this case? He would eventually, depending on the outcome of litigation, that may be taxed against him, yes. Thurgood Marshall: Okay. Mr. Attorney General, while this state prisoner is in Philadelphia, who pays for his expenses there, the federal government? Leroy S. Zimmerman: The arrangement is entered into between the Marshals Service and the Philadelphia County House of Detention. Thurgood Marshall: I am talking about in a case like this, this prisoner here. Who would pay for his living expenses in Philadelphia? Leroy S. Zimmerman: The arrangement there is between Philadelphia and the U.S. Marshals in this case. Ordinarily, state prisoners would not be transported from the place of incarceration in Philadelphia to the House of Detention. They would go directly to the Federal Courthouse. Thurgood Marshall: Well, suppose the case lasted more than one day. Who would pay the expenses? Leroy S. Zimmerman: A state prisoner would be returned to the place in Philadelphia called Greaterford which is the State Penitentiary there. They would not go back to the House of Detention ordinarily, not as state prisoners. Thurgood Marshall: Then the state would pay his expenses? Leroy S. Zimmerman: That is correct. Thurgood Marshall: Now, in this case, who would pay his expenses? Leroy S. Zimmerman: In this particular case, the expenses would be worked out in accordance with a voluntary agreement between the Marshals Service and the County of Philadelphia. Thurgood Marshall: I am trying to find out what is that voluntary agreement. Leroy S. Zimmerman: Well, I don't know the correct terms... I don't know the exact terms of that agreement in this particular case, Justice Marshall. Thurgood Marshall: Well, you talk about the additional... There are no additional expenses in this case. Is it admitted that this bus goes every day? Leroy S. Zimmerman: There is no record in this case, but the magistrate found in making his order that the bus... The Marshals traveled regularly to and from the House of Detention to the Federal Courthouse. Thurgood Marshall: And, is there any showing that this precedent would cause additional expense? Leroy S. Zimmerman: There is no showing of any kind because there is no record. And, in this case, we are not arguing burden. I don't think burden is involved here. It is strictly a power, a power question of the Court and the authority of the magistrate under the All Writs Act. John Paul Stevens: May I ask, during the day at the Federal Courthouse he is in federal custody, as I understand it, and nobody disputes that. Leroy S. Zimmerman: Yes, Justice Stevens. John Paul Stevens: Who buys his lunch if he has to spend the day there? Leroy S. Zimmerman: Well, I am not certain about who buys his lunch in the Federal Courthouse, but from my experience as Attorney General as a prosecutor I believe that his lunch would be provided by the United States Marshals because he is in their custody inside the courthouse in this case. William H. Rehnquist: General Zimmerman, when you say you are not arguing burden, and yet I take it that the magistrate would not have been free to say that the state has paid enough of these costs so I am going to pick someone out of the courtroom here and have him required to pay the expenses from the Detention Center in Philadelphia to the Federal Courthouse. If he can't just pick someone from random, why can he pick the federal government? Leroy S. Zimmerman: I believe that in this particular case anything that will lessen that burden of proceeding-- William H. Rehnquist: But, you conceded, I take it, that you can't call upon bystanders to lessen the burden. Leroy S. Zimmerman: --I don't take the position in this case that Section 1651, the All Writs Act, is unlimited. There are limitations. The limitations are that certainly the Court cannot order somebody to do something that is not in the course of their duties. William H. Rehnquist: All the All Writs Act gives you is a remedy if there is something you are entitled to under some other standard. Why are you entitled to it? Leroy S. Zimmerman: I believe the Court was entitled to do what it did here in order to get these witnesses from where they are incarcerated to a federal court to vindicate their rights. That is a very important aspect of this. William H. Rehnquist: But, it is conceded, isn't it, that the magistrate also had power to bring... to order the state to bring the people from the Correction Center in Western Pennsylvania to the Federal Courthouse. Leroy S. Zimmerman: That is correct and that is what he did in this case. And, most of the burden in this particular case was on the state custodian. There was very little-- William H. Rehnquist: My question wasn't from the Correctional Center to the Philadelphia. I said from the Correctional Center all the way to the Federal Courthouse. The Marshal had the authority, didn't he, to require the state to do all of that. Leroy S. Zimmerman: --The magistrate. William H. Rehnquist: I am sorry, the magistrate, yes. Leroy S. Zimmerman: The magistrate had the authority and, in fact, did in this case say bring the prisoners from wherever they are incarcerated throughout the Commonwealth of Pennsylvania in the various institutions to Philadelphia. Now, in order to lessen-- William H. Rehnquist: But now my question is do you or do you not admit that he would have had the authority to go further and say not just bring them to Philadelphia, but bring them to the Federal Courthouse in Philadelphia? Leroy S. Zimmerman: --Yes, he would have, but I argue in this case he considered the burden and an attempt to lessen the burden on the state custodian somewhat. In this case minimally I concede, but we are not focusing on that in this case. I believe that the principle in this case is whether or not the magistrate... the problem in this case is whether the magistrate had the authority to do what he did and I believe the All Writs Act, of course, gives him that authority because of the need, to vary writs, to vary orders. The question of burden in producing persons makes... That has to be examined and wherever it makes it more likely that the Court will be able to hear and to consider all of the evidence relevant to the merits of a claim, clearly that aids the Court in an informed exercise of its jurisdiction. Now, the Marshals argue that these orders are neither appropriate or necessary because there already exists the general habeas corpus statute which they say places the full burden on the custodian to produce the prisoners in the Federal Courthouse. This argument, we believe, ignores the point that some cases may call for modification of traditional procedure. And, where modification is determined to be necessary or appropriate in aid of the Court's jurisdiction, the power to modify is found not in the habeas corpus statute, but in the All Writs Act. Thus, the habeas corpus statute is really not the end for purposes of analysis as the Marshals argue, but really the beginning. Similar considerations, I submit, support the conclusion that the order under review is as required by the All Writs Act agreeable to the usages and principles of law. Certainly, transfer of custody violates no positive congressional command nor does it violate any common law rule, rather the order modifies traditional procedure to respond to modern developments in our ever-expanding jurisprudence. The essential principal underlying the writ of habeas corpus ad testificandum is affording the Court an orderly and an efficient means of procedure for securing the testimony of prisoner witnesses. This principle hardly is subverted by a modification of the writ directing the transfer of a prisoner from the custodian to a substitute custodian. Byron R. White: Was a writ issued in this case? Leroy S. Zimmerman: An order was issued in this case, Justice White, by the magistrate, by Magistrate Hall. Byron R. White: Mr. Attorney General-- --Why wasn't there just a writ of habeas corpus? Leroy S. Zimmerman: The magistrate did not label the writ. The magistrate relied on the habeas corpus statute in this case. It is our position, and we argued this in the Circuit Court, and the Circuit Court held against us, that the authority and the power to do what was done here was in the All Writs Act; that it was necessary to go to that Act to find the variation and the flexibility that the Court has said was in that Act to do what was done, a transfer of custody. The traditional habeas corpus act is concerned with getting inside the prison walls of the custodian and getting the prisoner to the gate. There is no question about that, the habeas corpus writ generally. But, from that point, getting the prisoners from the gate of the jail to the courthouse, today there are many-- Byron R. White: What if a writ of habeas corpus had just been served on the custodian? What would the writ have said? Bring him, wouldn't it? Leroy S. Zimmerman: --Yes, sir. Byron R. White: Bring him to the courthouse. Leroy S. Zimmerman: Yes, it would have. Byron R. White: Well, suppose that is all that would have been served on the custodian? What would have happened? Leroy S. Zimmerman: Then the custodian would have been required to bring him to the courthouse. But, my point is-- Byron R. White: So, there is this provision for getting witnesses to the courthouse, but the magistrate didn't use that, he used an order. Leroy S. Zimmerman: --In the calculus of the magistrate, and without a record I suggest it is impossible to be precise, but in the calculus of the magistrate's order, in examining that order, you will see that he took into account the principles and the concerns that I say are in the All Writs Act to be used by the Court. In any case, whatever statutes exist to govern and devine the role of the Marshal are not inconsistent with the role of the Marshal, are not inconsistent with the duties that are imposed by the order here. Marshals are assigned regularly to go to Court. Thurgood Marshall: Mr. Attorney General assuming that the week before this occurred the prisoner had been transferred to California. Who would produce him? Leroy S. Zimmerman: Assuming that the All Writs Act provides the authorities, I urge that it does, then it would have been up to the magistrate to determine. We are not asking in this case that there be-- Thurgood Marshall: Who would you suggest in conformity with your theory would be responsible for transporting him back to Philadelphia? Leroy S. Zimmerman: --I believe that if the magistrate directed and knew that the Marshal was going to Chicago once a week regularly, it would not have been improper for the magistrate to have fashioned an order to say, Marshal, bring the prisoner from California to Chicago and the state will be required to-- Thurgood Marshall: Let's make one little minor change, Hawaii. Leroy S. Zimmerman: --Well, I think-- Thurgood Marshall: I don't know of any Marshal that goes from Philadelphia to Hawaii regularly. Leroy S. Zimmerman: --I don't think that the question-- Thurgood Marshall: You don't really mean just because he goes there. It is a very simple question. Would California, Philadelphia, or the federal government pay for the transportation of this hypothetical prisoner? Leroy S. Zimmerman: --I think that either one could be ordered to pay completely. It would be preferable to have a sharing of transportation responsibilities. Decisions in other courts of appeals demonstrate that this procedure apportioning these responsibilities for transportation has been employed... have been employed in many districts throughout this country. Finally, I urge the Court in this case to preserve the reservoir of judicial power that is found in the All Writs Act, which was built by the Congress to provide the courts with the necessary flexibility to craft new orders and new writs that are responsive to the varied and practical challenges arising out of an ever-expanding jurisprudence. Thank you. Warren E. Burger: Mr. Levy? Mark Irving Levy: Thank you, Mr. Chief Justice, and may it please the Court: The state's argument here is, in essence, that the magistrate's order is reasonable. The trial courts have broad authority to impose reasonable obligations on the United States Marshals Service and that our objection to the order are, as in the words of the state's reply brief, merely dry formalism. All of that is far from correct. The United States Marshals Service is an arm of the Executive Branch of the federal government. Marshals are appointed by the President, is part of the Department of Justice, and under the supervision of the Attorney General, and is funded through Department of Justice appropriations. In fact, this Court in its opinion in the Naggle case reported in 135 U.S., specifically recognized that the Marshals Service is within the Executive Branch. Thus, contrary to the premise of the state's argument, the Marshals Service is not the hand-maiden or the administrative staff of the courts subject to whatever duties judges, in their discretion, may devise. Now, of course, the Marshals Service and the courts have developed a sound and cooperative working relation that well serves the effective administration of justice. The Marshal is by law subject to the control of federal judges in many respects. In addition, the Marshal often exercises his discretion as an executive official and agrees to do things that legally could not be required. Thus, disputes of the kind involved in this case are fortunately very rare. But, that cooperative arrangement does not negate the principle that there must be a source of statutory authorization before a court can require the Marshal, as part of the Executive Branch of the federal government, to take a particular action and expend its funds in a particular way. The Marshal has myriad responsibilities and only limited resources with which to carry them out. Among its principal responsibilities are the security of the courthouse, custody over and transportation of federal prisoners needed in federal court, execution of arrest warrants, and seizure of forfeited property, and implementation of the Witness Protection Program. To perform these duties, there are fewer than 1,000 Deputy Marshals nationwide, while there are 500 active federal district judges and 250 full-time magistrates in 500 federal court facilities around the country. The allocation among those various duties of the finite resources appropriated to the Marshal is at the heart of the Executive Branch's function. In the aggregate, orders of the type entered by the magistrate here will impose a substantial burden on the Marshals Service and interfere with its discharge of its statutorily assigned responsibilities. In addition, a trial court in any given case, is in no position to assess these considerations and decide how the Marshals' resources are to be deployed overall. John Paul Stevens: Mr. Levy, can I interrupt with a question that goes to the question of power rather than whether it is a good idea or not? Mark Irving Levy: Sure. John Paul Stevens: Supposing you had an emergency situation, a fire at the County Detention Center or an escape or a riot or something like that, and the state was short of personnel and couldn't get a witness to the courthouse and they let the district judge know and the district judge said, well, we want to go ahead with the trial and it is the only way we can get the witness here. It is absolutely necessary in order to have the trial go forward is to send a Marshal out and pick him up. Would you make the same argument that he has no power to do that? Mark Irving Levy: Well, first, in those circumstances it is exceedingly likely that the Marshal would agree to go out and do that. John Paul Stevens: Let's assume the question is one of power. In that situation, would the judge have the power to order the Marshal to-- Mark Irving Levy: The answer is he might, but that is a much different situation from what we have here. In that situation the Marshal would not be required in the first instance to bear the transportation or production burden, rather the court would have entered the ad testificandum writ to the custodian and when the custodian was unable or in this instance unwilling to comply, the court, in effect, would enter a second order, a compliance order, enforcement or sanction order. John Paul Stevens: --What would be the source of the federal judge's authority to enter such an order? Mark Irving Levy: Well, for example, if the state custodian simply refused to comply with an order that was within his capability-- John Paul Stevens: Well, take my hypothetical. It is just an emergency and the judge thinks the only way he could really get the witness there is to order the Marshal to go out and get him. Mark Irving Levy: --Well, the question would be whether... as part of enforcing an order that directive to the Marshal would be appropriate. There are questions whether it would, but that is a much different sort of issue than is presented here, where the Marshal is required in the first instance to produce that-- John Paul Stevens: Well, assume you get a state of facts which you would agree for purposes of my question that it is either necessary or appropriate to go get him. Would there be power to order the Marshal to go get him? Mark Irving Levy: --I am doubtful that there would be. I am not taking a categorical position on it. John Paul Stevens: Isn't that, in jurisdictional terms, the same issue that we have here? Mark Irving Levy: Well, not necessarily. As I say the jurisdictional question in this case is whether the magistrate has the authority, the judicial power to require the Marshal in the first instance to step into the state's shoes and become the principle respondent for producing the body of the prisoner. That is not the situation-- John Paul Stevens: He just delivers him from the intermediate point to the courthouse. Mark Irving Levy: --But, the Marshal would not be acting in lieu of or as the surrogate custodian in that case. The Marshal would be acting as a law enforcement official enforcing a federal court order that the state was unable to comply with. That enforcement responsibility of the Marshal simply presents a different question than the one in this case. Thurgood Marshall: Mr. Levy, getting it closer to this case, a judge tells the Marshal, I have a witness who is in the House of Detention in Philadelphia that I need for trial this afternoon. I have discovered that you have a bus that is going to bring in federal prisoners and other people from the exact same place and that you have half a dozen seats vacant on there, would you mind putting him in one of those seats and bring him to the courthouse. What is wrong with that? Mark Irving Levy: Nothing may be wrong with it and the Marshal in most instances, I assume, would be agreeable to complying in his discretion. The question is whether or not-- Thurgood Marshall: And, that is the difference between this case? Mark Irving Levy: --Yes. In this case, the Marshal was required, not asked or invited. Thurgood Marshall: So, the whole question is he was ordered and not asked? Mark Irving Levy: Well, the question here is one of judicial-- Thurgood Marshall: Is that the difference? Mark Irving Levy: --The question here is one of judicial power. Thurgood Marshall: Is that the difference? Mark Irving Levy: Yes, but that has nothing-- Thurgood Marshall: That is what you are complaining about? Mark Irving Levy: --We are complaining about-- Thurgood Marshall: If he had asked it would have been all right. Mark Irving Levy: --If you are asking if the Marshal chose to do it because it was not inconsistent or a burden on his other responsibilities. In this case, as the Attorney General of Pennsylvania stated, there is no record and the magistrate did not make any specific findings about either the burden on the state in this case. All he said generally was that there was a burden on the state in general or the burden on the Marshal in this case. In contrast to the hypothetical, Justice Marshall, I am advised, just as an illustration, that the Marshal typically brings between six and twelve prisoners from the Philadelphia Detention Center to the Federal Courthouse on an average day. In this case, the prisoner originally sought writs for nine state prisoners. The magistrate initially cut him back to five. Those numbers are a substantial portion of the prisoners that the federal government has need to bring in for its own purposes. It might well require additional vehicles. Thurgood Marshall: In the city the size of Philadelphia. Mark Irving Levy: I'm sorry? Thurgood Marshall: In the city the size of Philadelphia. Mark Irving Levy: That is correct. It might require additional vehicles, it might require extra guards. There are any number of ways in which this could impose a very serious burden on the Marshal and that would interfere with the Marshal's execution of its other obligations. Now, Congress could certainly decide as a policy matter that the United States Marshals Service should transport these prisoners and Congress could make available the necessary funds to do so, but we don't have that here. John Paul Stevens: Let me get one other thing straight in my mind. The government concedes, as I understand it, that after the prisoners and witnesses are delivered to the Federal Courthouse... I guess they are taken to a lockup downstairs or something... that the Marshal then can be ordered to continue to hold custody of them in the elevators and throughout the building, not merely in the courtroom. Mark Irving Levy: Incidents with courthouse security responsibility, that is correct. John Paul Stevens: Supposing you had a situation as you do in Chicago where there is a Federal Detention Center about a block from the Federal Courthouse. Could they be ordered to take custody at the Federal Detention Center and haul them back and forth across Jackson Parkway? Mark Irving Levy: Again, it is a matter of judicial power to require the Marshal to do that. We think not. John Paul Stevens: But, you would say the extent of judicial power is the exterior walls of the building which houses the Federal Courthouse? Mark Irving Levy: The Court of Appeals looked over a somewhat broader exception where the security needed required the custody be transferred outside the courthouse. It is unclear exactly what that means, but they left that open. But, the rationale is not that the Marshal has any independent responsibility for the prisoner-witnesses, but rather he has responsibility for the security of the courthouse. So, when they are in the courthouse, whether it is in the lockup or the elevator or the courtroom, the Marshal would be responsible for custody. When they are outside the courthouse, even in a federal jail or detention center, that would not be within the scope of 569(a), the courthouse security provision for the Marshal. John Paul Stevens: But, if the Marshal has the responsibility for the courthouse, where does the judge get the power to tell the Marshal what do it in the courthouse? Mark Irving Levy: Well, the Marshal would have the discretion how to implement the courthouse security. John Paul Stevens: The judge can order the Marshal though to be responsible for security in the elevator. That is not a matter for the Marshal to decide for himself. Mark Irving Levy: Whether he is to be responsible for security, we would agree, could be imposed by the judge. Now, whether it requires-- John Paul Stevens: What is the source of the judge's power to do that? Mark Irving Levy: --That would be under 569(a) of 28 U.S. Code. John Paul Stevens: Which says what about judge's power? Mark Irving Levy: It says that the Marshal may, in the discretion of the court, be required to attend any session of court. John Paul Stevens: Any session of court. Mark Irving Levy: And, if the Marshal has agreed and not raised any-- John Paul Stevens: Any session of court includes riding up and down an elevator. Mark Irving Levy: --The Marshal hasn't challenged that construction of the statute. John Paul Stevens: But, do you think it is correct? Mark Irving Levy: I think it is certainly within the Marshal's-- John Paul Stevens: No, no. Within the court's power to order him in the elevator. Mark Irving Levy: --We think it is certainly a permissible reading for the Marshal to make of its own statute, that this confers power on the court to do that. That is correct. John Paul Stevens: In other words, the judge should defer to the expertise of the Marshal in construing that statute. Mark Irving Levy: Well, as on any statutory construction, the reading of the agency whose statute it is is entitled to substantial deference. It would be controlling, of course, but it would be relevant and significant. Now, absent legislative authorization, our submission is that a court cannot require the Marshal to transport state prisoners regardless of its view of the reasonableness of that order. The question then is whether there is any lawful authority for the transportation order issued in this case. There plainly is no such explicit authority, so the question is one of implied authority. Now, our analysis starts from the proposition, which is essentially undisputed, that under settled principles, it is the obligation of the custodian to produce its prisoners in court pursuant to a writ of habeas corpus ad testificandum. Indeed, if the prisoners in this case were in federal rather than state custody, it would be the responsibility of the Marshal to transport them to court. The result we seek here asks that state to do no more with respect to its own prisoners. The custodian's obligation to produce-- William H. Rehnquist: Of course, that isn't necessarily a compelling argument, because what may be permissible as the distribution of burden within the federal system may not be permissible when you go outside the federal system and ask the state to produce some-- Mark Irving Levy: --Our point here though is that the custodian has the obligation and we agree that obligation would apply to us if these were federal prisoners, just as it applies to the state where they are state prisoners. Now, the custodian's obligation to produce its prisoners existed at common law and is carried forward by the express terms of the federal habeas corpus statute. In fact, the whole theory of the ad testificandum writ requires that the custodian be the respondent and bring its prisoners to court since it is the custodian that has the control over the prisoner. It is the fact that custody that fixes the custodian mandatory and non-delegable legal duty. This obligation reflects two important considerations. First, the custodian, like everyone else, has a public duty to make available evidence in its possession, here, the prisoner himself, even if that imposes a burden or is inconvenient. And, second, the custodial state has a penal interest in the continued confinement of the prisoner, since it is that confinement that gives rise to the special problems and added expense of obtaining the prisoner in court. It is not unfair or unreasonable for the law to impose the production obligation on the custodian. Since time immemorial until the recent state of litigation, the entire system has operated on the questioned rule that the production obligation rests on the custodian. William H. Rehnquist: --Mr. Levy, what if someone commenced a lawsuit in the Federal Court in the Eastern District of Philadelphia and said we are proceeding IFP and made the necessary affidavits and then decides that he wants to subpoena some witnesses. Now, do the witness that an IFP plaintiff subpoenas get witness fees and mileage the way the other witnesses do? Mark Irving Levy: That is something of an unanswered question. William H. Rehnquist: Why should they have to come if they don't get the statutory witness and mileage fees if there is no exception for IFP plaintiff? Mark Irving Levy: Well, I think that in the end is probably the right argument. William H. Rehnquist: So, the in forma pauperis plaintiff can't compel witnesses outside of prisons to come without paying mileage and witness fees. Mark Irving Levy: As I said, it is unresolved, but I don't disagree with that proposition. And, it would be perfectly appropriate for the magistrate, in exercising his discretion, whether to issue the ad testificandum writ to take into account the very same considerations. There is no absolute right for a prisoner or any other plaintiff to have an ad testificandum writ and the magistrate could well say that unless you make some contribution, even if you are IFP, to the expenses involved here, I won't issue the writ. Certainly, if he weren't IFP, we will take the position that the Marshal does that the magistrate should exercise the discretion to require the non-indigent plaintiff to pay for the expenses involved. William H. Rehnquist: Even though it is a custodial situation and not just the payment of witness fees and mileage? Mark Irving Levy: That would be correct. The magistrate would certainly have discretion to impose that obligation on a non-indigent litigant. And, indeed, we cite one case in our brief, United States versus $64,000.00 in Currency, where that is exactly what the trial court did. Thurgood Marshall: Mr. Levy, was there any effort or is there any effort now to work this out amicably between the state, the federal government, the judges, and the Marshals? Mark Irving Levy: I think there was an effort, but unfortunately it was unsuccessful. Thurgood Marshall: I don't see why we have this tension between the magistrate and a Marshal. They are both working for the same boss. Mark Irving Levy: Yes, they are, and almost in all instances they work in a cooperative way. Thurgood Marshall: Were any efforts made to work this out? Mark Irving Levy: I believe efforts were made and they were simply unsuccessful. And, part of the reason for that is that the order in this case departs, as the magistrate conceded, from the historical practice in the Eastern District of Pennsylvania. For a long time, the Marshal was not involved in this. The state was responsible for transporting its prisoners. In return-- Thurgood Marshall: Did they sit down? Mark Irving Levy: --I believe that they did try to work it out. Thurgood Marshall: You believe, but you don't know? Mark Irving Levy: I was not party to the discussions. I am not certain of that. But, if they did try, they were unable to work out the differences. Thurgood Marshall: It seems to be it would have been much easier than bothering us with it. Mark Irving Levy: But, the issue in this case is not whether the parties can work it out. Clearly the Marshal would have authority to entered into a cooperative agreement where it thought it was proper in the exercise of its executive discretion. The issue here is whether the Marshal for good and sufficient reasons chooses not to enter into such a cooperative agreement, whether the magistrate can require under his judicial authority to require the Marshal to do so nonetheless. And, although it was neither relied on by the magistrate nor raised by the state in the courts below. The state now places principal reliance on the All Writs Act, 28 U.S.C. 1651. The state contends, in effect, that Section 1651 is a preformed and virtually unbounded grant of authority to judges to devise any and all writs that they consider to be desirable. We disagree with that exceedingly expansive view of the statute, especially as applied to the federal Executive Branch. The All Writs Act is not a codification of standardless discretion for judges to do good. Instead, it establishes two requirements. First, the writ must be necessary or appropriate for the court's exercise of its jurisdiction; and, second, it must be agreeable to the usages and principles of law. The order in this case satisfies neither of those elements. The order is not necessary or appropriate since there is a well-established means available to obtain the prisoners. Sandra Day O'Connor: However, Mr. Levy, in the circumstances proposed, for example, by Justice Stevens, conceivably it is arguable under some extreme circumstances that might be necessary and appropriate. Mark Irving Levy: Under some extreme circumstances, it might be necessary and appropriate in the literal sense. And, certainly if the Court disagrees with our submission here, it should limit any discretion the trial court has for those exceptional circumstances. But, even there I still think there would be a substantial question whether the magistrate, as an arm of the Executive Branch, could require that the Marshals transport state prisoners. Considerations of separation of power and sovereign immunity apply here as they do in any other case and we don't think the All Writs Act circumvents those traditional considerations. Now, in addition to being necessary or appropriate, the writ also has to be agreeable to the usages and principles of law. The order in this case doesn't satisfy that requirement either. Quite the contrary. The order sought by the state is inconsistent with and in contravention of the custodian's time-honored obligation-- Byron R. White: Mr. Levy, is it consistent... Would it be consistent with your argument to say that the Marshal could agree to have done what he was ordered to do? Mark Irving Levy: --The Marshal, as a matter of executive discretion, could agree and the regulations-- Byron R. White: Where would he have the authority to do that? Mark Irving Levy: --Well, there would be two sources. First, generally executive officials have broad discretion to do many things that they are authorized and not required to do. Byron R. White: My question is where would they get the authority to do it? Mark Irving Levy: It would be an inherent exercise of executive authority to-- Byron R. White: Do you mean the Marshals can just issue a writ on the Treasury of the United States without authority to do so? Mark Irving Levy: --No, but our position would be that the Attorney General, who supervises the Marshals, has the inherent authority to direct the Marshals in the exercise of their normal duties and that where there is-- Byron R. White: Whether or not there is any express authority for it. Mark Irving Levy: --There are many instances where there is inherent authority or authority that is implied from the statute, if you will, that is not express authority. That has never been thought to be a bar to the executive exercise in his discretion to take a particular act. Byron R. White: So, you really are just relying on the separation argument to a great extent. If, without express authority, the Attorney General could spend this money if he wanted to, you are really just saying, well, that may be so, but a judge can't order him to do it over his objection? Mark Irving Levy: There is a considerable difference between authorizing the executive to do something-- Byron R. White: Well, there may be, but that is just about where you stand, isn't it? Mark Irving Levy: --That is an important part of our argument. I would also say, Justice White, that there is a statute that provides that the Marshal is to be allowed the expense of transporting prisoners. Now, that doesn't itself constitute a substantive authorization to transport prisoners, but it does mean that where the transportation is authorized, then it will be covered by the United States Treasury. John Paul Stevens: May I ask as a follow-up on Justice White's question that if instead of volunteering to do the transportation initially you had a situation in which the state had done the transportation, as was true in the Seventh Circuit case, and then came in and asked for reimbursement from the Marshal. The Seventh Circuit held that they could be ordered to reimburse them. You, of course, disagree with that case, but would you agree that the Marshal could voluntarily reimburse the state for the cost of transportation? Mark Irving Levy: Where it did not itself carry out the transportation? John Paul Stevens: The state just sent a bill and said we produced all these prisoners and it cost us this much money. Mark Irving Levy: Well, in the circumstances of the Seventh Circuit case where there was an outstanding order to the Marshal to transport them, the Marshal simply ignored that order. John Paul Stevens: Assume it just went to the state and they said, well, we will decide who bears the expense later and after the case is over the state just calls up the Marshals and said it cost us $400 to transport these prisoners, would you mind paying it. Would the Marshal have the authority in its inherent power in your view to pay that bill? Mark Irving Levy: I am not certain of the answer. I would be doubtful. John Paul Stevens: Why is it different as a matter of power whether you pay it in advance or later? Mark Irving Levy: But-- John Paul Stevens: It is the same power. Mark Irving Levy: --But, the Marshals' power-- John Paul Stevens: It is the same burden on the-- Mark Irving Levy: --The Marshals' power would be to engage in activities that are within the control of the Attorney General. Where it has engaged in activities, I don't know that the Attorney General would have the authority to give away money of the Treasury. I simply am not certain of that. It is not the issue presented here. John Paul Stevens: --Well, it relates. We are dealing with inherent power here, as I understand it. Mark Irving Levy: But, the issue in this case is the power of the court, not the power of the Attorney General or the Executive Branch to do something on its own. John Paul Stevens: Your view is the Marshal has greater discretion than the judge? Mark Irving Levy: It is a common situation. For example, the United States Attorney has discretion to prosecute or not taking into consideration any number of factors. It would never be thought though that simply from that a court could require the U.S. Attorney to exercise that authority in a particular way and at the direction of the court. William H. Rehnquist: But, there must be more limits than I get the impression you say there are. Supposing they are building a new building for the Department of Justice and the Attorney General says we are behind schedule on the building, you ten marshals go down and start digging that trench. Is that a permissible exercise of discretion? Mark Irving Levy: I doubt that that would be, but here, the duties are those of a kind the Marshal normally exercises and I think it is within the Attorney General's control to indicate how the Marshals should be deployed. That is really the core of the Executive Branch's function here. Now, let me say that, first, the Attorney General has promulgated regulations that say the Marshal can enter into intergovernmental or cooperative agreements. So, the Attorney General has recognized the authority to do that. And, second, the Marshal, in fact, does provide assistance to states in many areas. For example, apprehending fugitives from state custody even though no federal offense had been committed. The Marshals will assist the states in the Marshals' discretion for free or in transporting state prisoners between states for state proceedings. The Marshal will often help the states do that without charge. William H. Rehnquist: Why is the Marshal willing to do this latter thing, transport prisoners between states for state proceedings, but not to do what the magistrate in this case said he should do? Mark Irving Levy: Once again, the Marshal would be free in this case, but in those other instances, he decides that the transportation of a particular prisoner in a particular set of circumstances does not detract from the exercise of his other duties. He may, for example, have a plane... this is one of the hypotheticals the Court suggested... and he knows that there is empty space and no additional guards would be needed. So, he exercises his discretion to assist the state. The order in this case doesn't depend in any way on that determination. And, the authority of a court, the power of a court to order the Marshal to do simply wouldn't be workable if it depended on that kind of precises deployment of the Marshals' resources. The court is in no position to assess those kinds of considerations or make the judgments that are entrusted to the Marshal as an executive official. William H. Rehnquist: But, a district judge or a magistrate could under 28 U.S.C. 569. It can order the Marshals to attend a session of the court. Mark Irving Levy: That is correct. William H. Rehnquist: And, it could order the Marshal to execute any lawful writs, process of papers, issued out of the court. Mark Irving Levy: Anything that is properly addressed. William H. Rehnquist: Yes. Mark Irving Levy: Let me discuss the statute there which is what the magistrate specifically relied on, 28 U.S.C. 569(b), which provides that the Marshal shall execute all lawful writs, process and orders of federal courts. That provision, which has been in the Code since 1789, sets for the Marshals traditional obligation to execute court orders. It establishes the Marshal as the designated official for executing judicial process and makes clear that the Marshal, even though a part of the Executive Branch, has a mandatory duty to do so. We concede all of that. But, Section 569(b) is not an independent, affirmative source of judicial authority to address orders to the Marshal. Rather, it simply requires that the Marshal execute those orders that under some other source of lawful authority are properly directed to it. To give a specific illustration, the case at hand, the fact that a trial court is empowered to issue an ad testificandum writ to someone, that is the custodian, does not mean that it can issue the writ to the Marshal. A contrary conclusion would mean that the Marshal can be required to perform any order whose substantive terms are not prohibited. Under this theory, any court... any order that a court can enter at all could be directed against the Marshal in the first instance, but simply by the fact that it is addressed to him the Marshal would be bound to carry it out. William H. Rehnquist: But now here the Marshal could have issued the subpoena ad testificandum and directed the Marshal to deliver to the custodian of the state prison, could he not? Mark Irving Levy: I am afraid I didn't understand the question, Justice. William H. Rehnquist: The magistrate could have issued a writ of habeas corpus ad testificandum to produce these witnesses from the Western State Penitentiary and directed the Marshal to serve that writ on the custodian. Mark Irving Levy: To serve the writ, yes. William H. Rehnquist: Yes. Mark Irving Levy: That is right. But, that is far different. That is the sort of execution that the Marshal is authorized by other provisions of law to make. There is no other provision of law that authorizes or requires him at the direction of the court to bring state prisoners into Federal Court in order to relieve the state custodian of its legal obligations. Byron R. White: The writs were issued in this case, weren't they? Mark Irving Levy: They were orders. I don't believe they were styled as writs, but there were orders issued here jointly to the state and to the Marshals, that is correct. Byron R. White: Well, who served them on the state? Mark Irving Levy: I am not certain of the answer to that. It may have been that they were simply served by mail or that the Marshal may have served them. The state has never challenged that they were properly served. Byron R. White: So, the Marshal to serve them would have to go to these penitentiaries. Mark Irving Levy: It may be that there is an official for service in Philadelphia. I simply don't know what arrangements there are for service on the State of Pennsylvania. John Paul Stevens: Mr. Levy, as I understand it, since about 1976 or 1977 the circuits that have addressed this problem have all gone the other way from the Third Circuit. And, has the Marshals Service or the Attorney General ever asked Congress to take a look at this problem in the intervening period? Mark Irving Levy: It has not. We proposed that in our brief and our position in this case, but the court stay its hand to allow the legislative process to go forward. We said that we would propose legislation. The Court granted certiorari in this case and it is very difficult to get legislation proposed or considered when the very issue is pending in a case before the Court. So, no legislation has been sought so far. I can only assume that after this Court has rendered its decision, the losing side will then seek appropriate legislation in Congress and that is where we think the issue ought to be resolved, as we told the Court before. It is a matter for Congress to decide in the end as a policy question, how the Marshals' resources should be spent, whether the Marshal, to transport state prisoners, in addition to or instead of its currently prescribed duties. But, absent legislative authorization of that kind, there is simply no legal authority for the trial court to require the Marshal as an arm of the Executive Branch, to transport state prisoners to Federal Court. Byron R. White: But, there would be authority, inherent authority, you say, for the Marshals Service to undertake that obligation within its discretion. If it wanted to, it could do so. Mark Irving Levy: We think if the Marshal wanted to, it could do so, that is correct. And, that is nothing more than the typical instance of executive discretion to take acts within its generally authorized area of responsibility. The real problem in this case is that orders of the type entered by the magistrate here will impair Marshals' ability to carry out the existing functions that are assigned to it. Thank you. Warren E. Burger: Do you have anything further, General? Leroy S. Zimmerman: A very, very brief rebuttal, one point. The government has argued finite resources. Certainly there are finite resources on both sides, the state and the Marshals Service in this particular case, and there will always be burden to be considered here. But, it is our position that the magistrate should have the discretion to consider the burden in order to try in more cases to have more prisoners, more witnesses in the court in these civil rights cases in order to make a more enlightened determination. And, frequently, in the calculus that is used by the court to determine whether to issue the writ, that is a factor. I respectfully ask this Court to reverse the decision of the Court of Appeals and to affirm the order of the magistrate in this case. Thank you. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Earl Warren: – petitioners versus Louisiana. Mr. Rachlin. Carl Rachlin: Mr. Chief Justice, and may it please the Court. After trial, petitioners were convicted by a judge sitting without a jury of violating La. Rev. Stat. 14-103.1, which states in substance that whoever with intend to provoke a breach of the peace or under circumstances such that a breach of the peace maybe occasioned thereby and subdivision (1) provides in substance crowds or congregates with others in or upon in a variety of different places both inside and outside public and private, including a public building and who fails to move on when ordered to do so by a police officer or any authorized person shall be guilty thereof. The oral opinion of the court is filed on -- is referred to on pages 139 and 140 of the transcript herein. Under normal Louisiana procedure, petitioners had applied for writs of mandamus certiorari in prohibition which writs were denied without opinion as referred to in the record below. Speaker: What were the sentences in this case Mr. Rachlin? Carl Rachlin: The sentence is Brown received a $150 or 90 days. The other four petitioners received, I think it was $35 and 15 days. Hugo L. Black: Did you say $150 or 90 or $150 and 90? Carl Rachlin: Or -- and -- I thought it was $150 or 90. Hugo L. Black: That's what I thought you have said. Carl Rachlin: This Court granted certiorari on May 3, 1965 and they brought all appropriate proceedings in the court below. The various constitutional and federal questions were raised which I hope to refer to during the course of my presentation. On Saturday, March 7, 1964, shortly before noon, the Parish sheriff in Clinton, Louisiana, Mr. Doughty saw the petitioners, all Negroes, go past his place of office of business. The sheriff testified that he had been expecting them all morning. He further testified that he had heard that they, as members of the Congress of Racial Equality, were going to integrate the public library in Clinton, Louisiana. As soon as he saw them on the street go past his place of private business and enter the library which is just a short distance from his place of business, he called the jail and directed his deputies to proceed to the library, and he himself shortly thereafter within a matter of moments went himself. The sheriff had testified below that up until that moment, he had never observed any Negroes enter the -- this library which is part of a three Parish system involving three buildings and two bookmobiles. Speaker: Two what? Carl Rachlin: Two bookmobiles, mobile library systems which I will refer to in a moment. The three branches, the Clint -- the one and which we are concerned with here was the administrative office of the three Parish library system known as the Audubon Library. And there was a -- in addition to the administrative office, there was a library there as well as in two other communities and two bookmobiles, a red one for White persons and a blue one for Negro persons and the blue bookmobile as the testimony in the record has been -- has indicated serves and has registered all the Negroes in the parishes, the three parishes with which we are concerned. The testimony also indicated that if a White person had come to the blue -- blue bookmobile, that is the one for Negroes, such a person was refer either to the red bookmobile, that is for Whites or to one of the branches. The Negroes weren't, according to the testimony, were never known up to this moment to have used any of the branch libraries. In any event, Brown and the other petitioners herein entered the library and when met and I quote from the record by just giving the testimony of the librarian, “between the tables by Mrs. Reeves, the librarian” and this was in what was term by the administrative official of the library as the adult reading room which has sometimes been in the record below, been called the lobby. Potter Stewart: Mrs. Reeves was alone in the room when he's (Voice Overlap) Carl Rachlin: At the moment she was alone, sir, yes. Potter Stewart: And these there were five of these people who entered the room. Carl Rachlin: Five persons entered the library, all Negro. She was -- her testimony was that she was alone. However, at one point, the sheriff indicated that he wasn't certain -- he may have -- may or may not have seen another person enter but then the testimony was vague and that the hard testimony was precise, there was no one else in the library at that time. Potter Stewart: Was she behind the desk of some kind or --? Carl Rachlin: She was -- no she wasn't. She was moving around the library and as I indicated, apparently, she met them between the reading room -- reading table of some eight by four and her desk in that room. In any event, Brown asked her for a book. Mrs. Reeves testified that she went to the index system and was not able to find the book and indicated that she would have the book sent to Brown after she ascertained that he had been a registered member of the library. Speaker: What was the book? Carl Rachlin: The book was a book by a well known Negro writer; Arna Bontemps entitled “The Story of the Negro.” There is a little conflict of testimony as to what took place thereafter. Abe Fortas: Mr. Rachlin, excuse me, doesn't the State say that there was no such book in existence? Carl Rachlin: Yes, Your Honor. The State indic -- the librarian indicated that that there was some confusion about the name but I think if you permit me, sir, the record shows that the library actually obtained the book from one of the state institution either Louisiana State University or Tulane and in fact as the record -- as it was admitted into evidence in the record, the book was mailed to Mr. Brown with a card saying that he could either return it by a mail or he could return it to the blue bookmobile. That is part of the record of this (Voice Overlap) Byron R. White: But this -- this was a book by another name, by another author. Carl Rachlin: They're very close but not identical, sir. There's no question. It was not the same -- Byron R. White: But wasn't the -- wasn't the author that was given the library. Carl Rachlin: Well, I -- it is hard to explain that. I think the only answer is that the stenographer below did not correctly get the name of the author. The author's name, if -- if you look at the -- there is a -- a certain overlapping of the names between the name that -- wrote down and the name of the book in fact and I think that was more --do more. Byron R. White: Does the -- didn't the communication sending it out say that this is not the book you asked for but -- Carl Rachlin: It's very close to -- Byron R. White: -- by another author but it's perhaps what you want. Carl Rachlin: But -- I think the examination shows certain and probably was in fact the same book that was merely a stenographic error in the court below. But I -- that is of no significance because there's no question that we don't and we don't question whether the book was or was not there. We think that is highly irrelevant to the proceeding and we're not disputing that Mrs. Reeves -- I don't -- we don't claim for a moment that Mrs. Reeves attempted to in some way prevaricate the truth. Tom C. Clark: Was the title the same? Carl Rachlin: The title is very similar and I think it was a similar subject matter. William J. Brennan, Jr.: [Inaudible] Carl Rachlin: Well one was the -- the story of a Negro by Arna Bontemps, I can give you the correct title of the -- I have that here. After she met them between the tables, they asked her for a book and what -- the -- the way it reads in the record on page 97, question, what is the name of the book that one of the accused asked for? Answer, I copied it from the paper he handed me, Wendall Arna, the Story of the Negro: Bontems. Now the reason I suggest without actually knowing so they did not participate in the trial is that Arna Bontemps is a well known Negro author and I think the whole thing was just a stenographic confusion with the name that was not at that time known to the -- the -- to the – to the actual stenographer. William J. Brennan, Jr.: Now where does it appeal when the book (Voice Overlap) Carl Rachlin: Now the actual book -- Byron R. White: 112? Carl Rachlin: I -- just for a moment, sir. Yes, on 112 when -- on cross-examination of the administrative head of the library, Mrs. Perkins, the question was, I asked her in form of a statement. I'll show you what purports to be a postcard of the United States postal service addressed -- I'll skip a few words to Henry Brown, Jackson, Louisiana which reads “Memo to Henry Brown from the Audubon Regional Library, bookmobile number two. We are mailing to you on the separate cover the copy of Arna Bontemps: The Story of the Negro. And then, neither the Audubon nor the state library could verify such a title by Wendall. You -- you may return the book either by mail or to the book -- the blue bookmobile whichever way is most convenient.” I suggest though, I don't think it's significant that this was just a confusion over the correct name of the author. In any event as I've indicated and as the record shows, the choice of return was not in person to the library but either to the blue -- blue bookmobile, the Negro bookmobile or to the -- through the mails. In any event, at this point, Mrs. Reeves wasn't certain whether Brown asked to see the United States constitution. She asked Brown and the others to leave and they indicated that they would not. They indicated that she testified quite clearly that all during this time, they maintained absolute quiet. There was no unusual conduct or any disorderly conduct -- conduct of any kind. No boisterous talk. No noise talks because these all comes from the testimony of Mrs. Reeves by the way as well as the other witnesses who testified in behalf of the state. She called her superior and he -- Potter Stewart: Before -- I want to get one thing clear. She asked them to leave before calling her superior. Carl Rachlin: She asked them to leave. Potter Stewart: Well is it correct or not that she did not ask them to leave until after she had taken the order herself trying to find the book there, failed to find it, and then told them that she would send the book and let him know. Carl Rachlin: That is correct. She did not ask him to leave prior to -- Potter Stewart: So there was no -- maybe I'm -- am I fairly stating the factual conclusion when I say there was no refusal of service by her to these people. Carl Rachlin: There was no refusal to take the order, certainly that was true. Yes, sir. Potter Stewart: Or of any other requested service? Carl Rachlin: Well, there was some question as to whether they have – they had asked to see the United States constitution because the sheriff later testified that when he, at the time he asked them to leave, Brown and one of the others who was not identified by the sheriff said they wanted service and the sheriff refers specifically to the fact that there was a request discussion about the United States Constitution and as a matter of fact, the librarian herself when she -- that is the administrative head of the library, when she testified after Mrs. Reeves, she also testified there was discussion about the United States Constitution. So that when I answered your question, it was not meant to be a base of it but merely that there was further discussion unquestionably and -- but there wasn't -- sir, I can't honestly say that she refused to permit them to see the United States Constitution. She did however agree to take the order. And that order, as I -- as the record shows was in fact filled by mail. Potter Stewart: Yes. Of hand can you tell us where in the record this testimony about the constitution appearance? Carl Rachlin: Yes. Please bear with me for a moment. I had it in my notes. Potter Stewart: Don't take the time, we will find it on our own. Carl Rachlin: Well in any event, Mrs. -- Mrs. -- Mrs. Perkins, the administrative head of the library, indicated that there were couple of tables in this room variously referred to as the adult reading room, but I think Mr. Kilbourne at the trial as the lobby and the record on 101 indicates that they were both talking about the same room when he was questioning Mrs. Perkins. And that, from time to time the public did sit in the reading room and -- and do whatever people customarily do in libraries. As Mrs. Perkins came out, there was this talk about the Constitution. I think that is referred to, Your Honor, on page 104, I think is where -- let me see -- well that's where -- I'm sorry, that is not -- that is not accurate. Potter Stewart: [Inaudible] testimony begins apparently in page 116. I'm looking at (Voice Overlap) Carl Rachlin: Well Mrs. -- well Mrs. Perkins also referred to the Constitution -- oh yes -- yes, on 108, Your Honor, near at the top of the page, question, of course a question by Mr. Bell here, isn't a fact that the defendant, Mr. Brown -- Henry Brown asked you for a book on the Constitution of the United States? He didn't answer. He did not ask me for a book on the Constitution of the United States. Question - Didn't you previously testify about the Constitution? He said to me, what about the Constitution which your reply was that we owned it -- that we owned the copy that we owned several copies. In any event, Mrs. Perkins then shortly thereafter asked them to leave. And again, in -- in -- Speaker: Well this episode about the Constitution or whatever it was, was this before or after they were asked to leave. Carl Rachlin: This was -- this was after they were asked to leave by Mrs. Reeves. Mrs. Perkins came out after they refused to leave when Mrs. Reeves -- after Mrs. Reeves' conversation. In any event, Mrs. Perkins asked them to leave and again, as I say, there was this little conversation about the Constitution. They did not leave, but again, there was no question they were orderly and not noisy. At this moment, I refer back to what took place at the very opening of my presentation when the sheriff now comes in. He had meanwhile assembled his deputies but this was only a matter of minutes at most, perhaps 10 minutes the whole incident took and the sheriff comes in. The deputies came in separately. No one had -- by the way, the record is very clear as to the sheriff had testified that -- that on record 107, that no one had asked the sheriff to come to the library certainly not at this moment. Mrs. Perkins said, in her testimony that she was planning to ask the sheriff, but the sheriff proceeded on his own motion and arrived in about -- about 10 minutes after -- so after the incident had started. Sheriff indicated -- asked to -- apparently ask Mrs. Perkins whether she'd asked them to leave. She indicated she had asked them to leave and they had not. He then asked them to leave. At this point, Brown said, it was a public library and they wished a service. And they -- this is on records 116 through 118 and they also said, according to the sheriff's testimony that they wanted to check out books and wanted, according to sheriff's testimony, at some point to integrate the library. At record 120, the sheriff said as follows - I arrested them because the occupants of the building had asked them to leave and so had I. It was a public building and they refused to leave. On next -- the next question, probably succeeding question -- Speaker: Is it a fair – is it a fair assumption that the record shows that there really -- they are demonstrating at the library. Carl Rachlin: Your Honor, I would not wish to draw that conclusion because they apparently wanted to use the library -- use the library. Speaker: Why? Carl Rachlin: Demonstration I suppose in a sense of I sat on a library where I was not. Speaker: What do you mean they got to the -- they asked you the book they wanted after Mrs. Reeves has said, they couldn't find the book and asked them to leave, they didn't ask for any other books and just Constitution [Inaudible] -- Carl Rachlin: Well there is also this testimony that the sheriff himself said that they indicated to him that they wanted to -- to list on record 120, I think -- one second -- 118. The sheriff's testimony is that they said to him that they wanted to check out books and wanted to -- but they also wanted to [Inaudible] the library. There's no question about that. William J. Brennan, Jr.: Well is it a fair assumption that they would not have been there that morning? Had they not have been viewed that the library is not open? Carl Rachlin: I think that's a fair assumption, yes. Potter Stewart: You think what? Carl Rachlin: I think that's a fair assumption that they -- there's a good chance they would not have been there on that day except for the fact that this library -- I think if I might add at this point that Mr. Kilbourne can bear me out shortly after the trial in this case, the library was closed and it's closed as stated. Now that [Inaudible] and has been closed ever since as recently as Saturday of this week, I suppose permanently. Potter Stewart: The opinion of this testimony on page 118 of these people, the petitioners were from East Louisiana and West Louisiana. Carl Rachlin: Yes, sir. Potter Stewart: How far away is that from this library? Carl Rachlin: About 40 miles, they're all part of that one -- a three part type Parish library system. Now this was -- they were all part of the library who administers it at Clinton which was the administrative head of the three Parish system. Potter Stewart: But East and West Louisiana were included in the library despite of the law. Carl Rachlin: East Louisiana, West Louisiana and St. Helena Parish, I believe are the three Parish system. Hugo L. Black: Did the evidence of the policy directly against the policy of the library? Carl Rachlin: Yes. It was -- there was a substantial testimony given by a Mrs. Spears who until shortly before this proceeding, a Negro lady, had been a librarian there on the blue bookmobile. Her testimony begins at 136 of the record. And she, for example, in the middle of 137, questioned, what procedure is adopted in registering a person for books? Well we issued a card to a person who filled the required information out and the card stamp with the word “Negro” and the date. Now little further on, do you ever register any White persons to borrow books? Her answer to that question was no. And little -- at the end of the page, have you ever registered any White persons? No. On the top of the next page, why is it that you haven't? Answer - On 138, well the only persons who use the blue bookmobile is Negroes and the blue bookmobile serves the three parishes for all Negroes. And occasionally if a White person would come to the blue bookmobile, I would give them a schedule telling them when the red bookmobile would come or the nearest branch to that. That Negroes customarily used the branch library located in City of Clinton. In addition, Mrs. Perkins had testified that to the best of her knowledge as administrative head of the library, every Negro who was registered in the library system, the three parishes was registered only in the blue bookmobile. Earl Warren: Did they have any -- any library -- branch libraries specifically for Negroes? Carl Rachlin: None at all. The only sort the Negroes could use was the blue bookmobile or the mails there. And as -- as indicated in this -- in the book in this very case, the one which was so mixed up about the title, the card that came to Brown indicated to return it either to the blue bookmobile or return it by mail. And that was specifically as I say is part of this record. And now the -- I think a significant question that was asked on page -- on the record 121 of the sheriff, so the disturbance of the peace if any in this case consisted of refusing to leave when order to do so by you, is that right? Answer by Sheriff Doughty, that's right. They were convicted as indicated and the judge in his opinion, I think also makes very clear in the middle of page 140 and I would like to briefly refer to that because I think it indicates what we consider the constitutional violation. In the middle of the page, clearly this is the judge's all opinion. William O. Douglas: What were you reading? Carl Rachlin: 140, sir, record 140, the middle of the page, this is the judgment -- judge's opinion. Clearly the evidence shows that these parties did not congregate when they came to the town of Clinton to the Audubon Parish Library, merely for the purpose of seeking service that they had a specific motive and a specific intent. And that was, as was shown beyond any reasonable doubt, to refuse to leave the library even after they had been served and after they had been requested three times. Now the statute however in the -- is somewhat different. And we -- this Court has had occasion to look into the statute and make well known in the case of Cox against Louisiana. The statute says, whoever with intend to provoke or under circumstances such that a breach maybe occasion, crowds or congregates with others in any public place or building and who fails or refuses to move on when ordered to do so. The sheriff arrested them as we've indicated solely because they refused to leave the public building in his mind at least as his testimony shows that would consisted nub of disturbance of a peace. And as the judge indicated nub for disturbance of the peace, again, with the same thing to refuse to leave the library after they had been served and after they had been requested to do so. Abe Fortas: Well Mr. Rachlin, do you dispute a finding or a statement of the Court on page 140, the one that you just read. Carl Rachlin: No, I -- I will concede that they refused to leave the library. Abe Fortas: And your point is that that statement is an indication that the arrest and conviction here were not authorized by the statute. Carl Rachlin: But not authorized by the -- even -- well -- I think Your Honor, I have to say they were authorized by the statute because the Supreme Court of Louisiana affirmed without opinion the – the judge's ruling and therefore that is the -- the necess -- that is the interpretation of the statute Louisiana has. And accordingly, we urge that the statute is unconstitutional for being as broad as to involve an illegal unconstitutional arrest upon people who committed no possible afterwards they could be arrested. Abe Fortas: Does it make any difference in your theory of this case whether Mr. Brown and his companions entered the library and asked for a book on the one hand or whether on the other hand, they just stand on the library and sat there. Carl Rachlin: Frankly, Your Honor, that I -- we think that the library is a public building and the people have a right to be in a public building providing they are orderly and providing that they are not breaking any of the reasonable rules. We certainly would recognize that the position that this Court has taken in Edwards and some of the other cases that the State has a right to set reasonable limitations and reasonable regulations for the use of public property. And -- but that, they would in no way were they violating any regulation or rule that isn't -- was known to any of the parties of the record of this case. They were there in the proper time of the library. They behaved quietly. The only question was whether the sheriff had the right under those circumstances to order them to leave and arrest – Potter Stewart: This question -- isn't the first question whether the lady in charge terms; has the right to ask them to leave. Carl Rachlin: I think that -- I think that is a product in question. Potter Stewart: And wouldn't that -- this argue be perfectly reasonable regulation and the person in charge of the library decide when it was getting too crowded and after people had been served to ask them to leave? Carl Rachlin: I would say Your Honor that would depend upon the circumstances. There is certainly -- there was no such rule prior to the – their opinion. Potter Stewart: Well I know, you don't know. And I don't know either whether there was any such rule but generally, a person in charge of a public place has some duties. Carl Rachlin: Yes. There's no question about that that the person on the place have some duties. Byron R. White: Well let's assume the -- assume the sheriff asked them to leave and they said no and then he attempted to eject them by force and they resisted by force. Would this make any difference to you? Carl Rachlin: If the sheriff had to use force first and they had resisted -- Byron R. White: Oh no, they -- he asked them and they say “No, we're going to stay.” And this is, “well, I'll have to remove you.” So he uses force to remove them and they resisted by force. Is this a different situation for you or would you just say, well they had the right to be there and whether they -- they could stay there if they wanted to. Carl Rachlin: Well I would say that they were not substantially different situation even though there are a lot of facts in this case unfortunately. Byron R. White: That's -- that's Carl Rachlin: Let's say a harder situation but I think the sheriff has the right to use force illegally then I have the right to use force illegally. Byron R. White: So you -- so you really do rely on the fact they have the right to stay in the public building in the library and just remain there as long as they're peaceful. Carl Rachlin: And so long as the library is open. I mean, I will -- I'm not raising the question whether I have the right to stay after hours. William J. Brennan, Jr.: Well does your argument, Mr. Rachlin, that whatever maybe the regulation, that this statute should only read to non-peaceful conduct-- Carl Rachlin: That's right. William J. Brennan, Jr.: And that on this sum total of facts, even though they didn't go when they were asked to leave, and even if that were legitimate regulation that they're not convicted, at least those proofs don't' add up to a violation of this statute. Carl Rachlin: That's right and -- and if the statute is so interpret as to make this an illegal act and we -- William J. Brennan, Jr.: And this was the statute we had in Cox, isn't it? Carl Rachlin: It's the same statute Your Honor. They are the statutes of very long -- William J. Brennan, Jr.: What's left to that statute after our decision in Cox? Carl Rachlin: Well the Cox part of the statute related to activities out in the open air. William J. Brennan, Jr.: This is -- this is part -- Carl Rachlin: This is -- this is the same -- the same paragraph in the book but it hasn't. It includes outside-inside public-private, all in subdivision one of -- William J. Brennan, Jr.: You don't argue that that there's nothing left to the statute after our decision of the Cox, is that it? Carl Rachlin: I would say that Louisiana would be bound by the interpretation of this decision of-- of the Court -- of this Court in Cox and I think there probably is something left of the statute if interpreted probably for example in -- in the case that is so often cited by many of the courts, particularly in southern courts but northern as well as in New York, we, in New York has called People against Galert which -- which cited the proposition that you have an automatic obligation to obey an order of a police officer no matter how -- no matter -- under what circumstances made. Well, in the case really, it does not stand on this proposition. All I would hope that this Court would lay that proposition to rest particularly in light of its decision in Shuttlesworth which is not identical with this case. It has many overlapping observations. For example in Galbert the opening indication was that there was an actual obstruction of the street unhappy that there had been many people congregating on the street. In other words, the presupposition of facts in Galprin was that the speed was obstructed and the police officer therefore asked everybody to move on. And in fact Judge Lehman there made it very clear when he said the police officers are not the final arbiters of the rights of citizens. So that for reasons that we have set forth specifically in our brief, we urge that this is -- the connection must be reversed that the interpretation of the statute by Louisiana is an unconstitutional interpretation, it is hopefully broad. It does advice citizens of how to perform under this Act any event the Act was -- as Judge Harlan was suggesting was perhaps that the First Amendment right that we think ought to be protected. And lastly our argument -- next, our argument is that the -- that the -- there was a -- we think there is any statement here under the Title 3 of the Civil Rights Act because the Title III was passed several months -- and that the Act was passed several months after the arrest here and Title III made it very clear that these -- that such -- we think that such kind of this was legal conduct. And therefore any statute which made it illegal was improper. Potter Stewart: The difficulty with that argument and it was much of what you said this morning for me is that this -- there was no refusal of service to these people. They were served and I've just look through the record again. As far as I find every request that they made was responded to with courtesy and with service. That -- that is the ultimate basic crucial fact that for me makes much of your argument irrelevant. I mean because it's -- it's -- this is unlikely of these other cases that you've been citing to me. Carl Rachlin: Well Your Honor, I think that in a sense and if it's known, this is a common not library. People will have to -- I don't think the person has an obligation to explain his presence in a public place and I would hope that -- that this Court would recognize that there were times and occasions where you don't have to tell why you're at some place. You may have a right to stay there providing your behaving in an orderly and proper manner. The record is clear that these people are behaving in a properly orderly manner. And to me, at least if you permit me, sir, it is highly irrelevant whether they were or they would not served. They were in publicly owned building doing nothing to disturb anybody. The only reason they were rejected is because they were the first Negroes to enter that building and the record is clear on that and the sheriff himself said he hadn't seen any Negroes in there before. Potter Stewart: But he said he'd only been to the library twice and it's all a lot. Carl Rachlin: His office is just down the block and he said he saw. That's true. Maybe it's a -- I trust it's not a perfect commentary on life in Clinton and I'm sure Mr. Kilbourne could indicate that there are many more people who use the library more often than twice. I would think that to me, sir, the nub of the case is the right not to have to explain yourself when you're behaving yourself properly in a public place. Earl Warren: Mr. Rachlin, I didn't quite understand your answer to Mr. Justice Fortas about this finding on -- on page 140. I -- I -- I thought you said that you did not contest that finding. Do you -- do you agree that the evidence shows that -- and I quote “That they had a specific motive and a specific intent” and that was as shown beyond any reasonable doubt to refuse to leave the library even after they had been served and after they had been requested three times. Carl Rachlin: I would be prepared -- Earl Warren: No, I'm not asking what you'd be prepared for. Do you -- Carl Rachlin: No, I mis -- I misunderstood it. Earl Warren: -- does the record sustain that? Carl Rachlin: No, the record does not sustain that completely. Earl Warren: Well isn't that what we're bound by, the record? Carl Rachlin: Yes, I would -- we are only bound -- this Court is only bound by the record. Earl Warren: Yes. Carl Rachlin: Now that is -- but I would say even if that were the fact as the judge so states -- Earl Warren: Well I think you have been over at that, the isn't what I asked you. Hugo L. Black: I'd like to ask you one question about that -- Carl Rachlin: Yes sir. Hugo L. Black: -- to see if I understand your position clearly. As I understand you, you take the position, the library or the public place, people can go in and sit down, stay there, who want no service, who do not wish to read but who simply wish to sit there and that the state is constitutionally without power, you say they can't do that, that's what I understand to be your argument. Carl Rachlin: No, I didn't say that. I said there might -- for example the state had had a reasonable regulation well known to people in advance, they might be able to do that. Hugo L. Black: Now then you're -- then you're not going on that basis. You're going on the basis that there was no regulation, no law which authorized the custodian to do what she did. Carl Rachlin: That's the -- that's part of our argument, yes, sir. Hugo L. Black: Suppose there was a law which authorized you had to do what she did. These people came in there not to get a book or came to get a book and found they couldn't get it and they decided they were just going to stay there. What is your position as to what authority it was? Carl Rachlin: I would say, if there was a regulation known and it said, people -- only people actually using library can remain beyond X minutes or whatever the time is, such a regulation would not be unreasonable providing with -- it was enforced in an equal manner because you -- yes. Hugo L. Black: That you are not arguing that a person can go into a public building, because it is a public building and defy the custodian of that building and stay there against the desire of the custodian which desires responsive to a trust which has been impost in the custodian by the -- by the government. Carl Rachlin: Well providing that the government imposed a custo -- a custodial authority which in itself was not a violation of the Constitution. That is -- if -- Hugo L. Black: Do you say it would violate the Constitution for instance for the Congress as the law to the effect, people couldn't come in and sit down on the outside here in the lobby that is beyond here, stay there, when the custodian comes and tells them that unless they have presented through the motion to get out. Do you see a law that could be beyond constitutional to that effect? Carl Rachlin: No, I don't -- I don't say a law to that effect would be necessarily unconstitutional. Hugo L. Black: And it would -- it would be on imperative so far as the responsibility of the library and say, would it not? Carl Rachlin: That is right, yes sir. Subject to any comments, I might make to how the law was enforced in any given moment but the law itself, I do not -- reasonable regulation. Hugo L. Black: Well of course, if it was discriminatory. Well that's a different thing. Carl Rachlin: That's a different thing, yes, sir. Earl Warren: Mr. Kilbourne. Richard Kilbourne: Mr. Chief Justice and may it please the Court, Your Honors. I would -- I would say at the outset, that had the petitioners in this case been refused all the services that they requested at the library at the time they went in and they've been just arbitrarily refused any recognition or any service and asked to leave, I can assure you that this case will not be here today. In fact, there wouldn't have been a case. If they hold the state, the State of Louisiana's entire case is based on the fact that the petitioners went in to the library and requested service. They requested a book and it was later ascertained that the book by that specific title did not exist, but a similar book did exist which was -- was sent to them and its position of the state of course is that was all that they had asked for. They had no further business there and when they just -- just sat there and looked, vacant stares into space, the librarian testified that she repeated statement that they didn't have the book and that she would try to get it -- get it for them. And when she repeated -- repeated it the second time, and they did nothing. They just sat there. That is when she asked them to leave. Earl Warren: Is there -- is there anything in the record to indicate that it is a common practice in that library for the librarian to -- the person asked for a book and the book is not there to ask them to leave immediately? Richard Kilbourne: No, there is nothing at all in the record and that -- that is not in the record. Earl Warren: That's what happened here, isn't it? Richard Kilbourne: Well substantially, I believe that would be correct, Mr. Justice -- Earl Warren: Yes. Richard Kilbourne: -- Mr. Chief Justice, I think it would be substantially correct that she said that she assumed when she took the order for the book that they would leave and when they did not, she asked them to leave. Now, of course, this is -- Hugo L. Black: MWhat kind of library? I haven't fully understood from the statements up to date, what is that library? Richard Kilbourne: Well at that time, it was a kind of arrangement by three parishes to -- to have this library, they voted a tax to maintain it. They call it the Audubon Regional Library. Hugo L. Black: Was it a reading library? Richard Kilbourne: No, sir, it was essentially, it's just to supply books and that is just about all it did to -- to serve the -- they did have branches of -- branches, small branch of library in St. Francis Building in West Louisiana Parish. William O. Douglas: Was there a table in it, chairs? Richard Kilbourne: It was a -- I believe there was one table and two chairs, I believe in there. I believe they said there were two chairs in it. Tom C. Clark: How large was it [Inaudible] Richard Kilbourne: Well they sir, it must have been about, -- about 15 by 20. It's rather a small room, it would be for a law office. Tom C. Clark: Just one room? Richard Kilbourne: One room there, yes sir, where the -- where the -- in the -- the lady, Mrs. Reeves who was there, I mean that's what she did. She sat there at her desk, and when people came in, she took their orders. Hugo L. Black: Is she the only one? Richard Kilbourne: Excuse me. Hugo L. Black: Is she the only one there? Richard Kilbourne: She was the only one there at that time. The head librarian was in the back room. There were several rooms to the building, all small rooms, I think maybe -- maybe four rooms all together that they get there -- Hugo L. Black: Do they have any other rooms where they have places for people to read? Richard Kilbourne: No sir, there was no other room, that was the only room where they took the orders for the books. Earl Warren: But there were several rooms there that were used for the library. Richard Kilbourne: Well they were used for the library, I mean, where they had the early employees working and where they had kept their records and the administrative (Voice Overlap) Potter Stewart: Well they had to keep the books somewhere. It was a library. Richard Kilbourne: Yes, they -- they had to keep the books on (Voice Overlap) Potter Stewart: Where were they kept? Richard Kilbourne: They had books -- Potter Stewart: In this main room or back in these other rooms. Richard Kilbourne: They had books in the main room alright and they had them in the back rooms too and which would not open to anyone. And the books that they didn't have well they order them and as they said, they even put them on one of the -- the order from the state library. They -- they have many other kind of – they have a photograph records, tape recordings, all that is supplied at the public by mail. Earl Warren: How many employees were there in the -- in these other rooms? Richard Kilbourne: There were only two people in the whole establishment that day. Mrs. Reeves, the lady there, she's on duty there. It was on a Saturday morning. They close at 12 o'clock and I believe this thing took place by 11:30 in the morning. And then the other lady, Mrs. Perkins who was at that time, the head librarian was in one of the back rooms. And that was the only -- those were the only two people in the building. Earl Warren: Does the record show [Inaudible] aspects -- Richard Kilbourne: I believe the record -- I believe the record does show that that was a -- that was one of the programs instituted by the Congress of Racial Equality. Earl Warren: Where do we -- where do we find that in the record? Richard Kilbourne: Well, -- Potter Stewart: At page 117. Richard Kilbourne: It's not going to be -- Earl Warren: I asked the counsel. Richard Kilbourne: Well, it's not going to [Attempt to Laughter] -- I -- I really don't believe it's going to be one specific page and one sentence. Now one of the – was called as a witness by the State and I spent -- if I was of course prosecuting the case and I spent a great long time, many question -- great many questions trying to develop this and it was in the record. I don't know if it's in this record but the piece from the next day paper where this witness had stated by Sunday morning that newspaper had stated that this was a program of the Congress of Racial Equality. It was a demonstration planned by them and that was introduced in the record in the lower court. Now this particular witness who would give the statement to the paper, she wasn't a friendly witness and I don't know -- I asked her so many questions, I lost -- lost count myself. But that was -- but I believe that the record is -- Potter Stewart: Which witness are you talking about? Richard Kilbourne: Miriam Finegold. Potter Stewart: Thank you. Richard Kilbourne: I believe – Tom C. Clark: I can get that in 117, the deputy [Inaudible] Richard Kilbourne: Well yes, I believe the sheriff -- now what the sheriff testified to as the best of my recollection and I reviewed this several times, was that he had received a telephone call if there was going to be -- something was going to happen at the library. And he didn't, if I remember right, he didn't -- he wasn't told what it was. He wasn't told it -- it was going to attempt to integrate the library or anything of that kind. He just told him something was going to happen. But I may say so and I believe this is in the record too. The sheriff testified -- I remember that he testified that on previous occasion when they have had the demonstrations of any kind by the Congress of Racial Equality that he was advised in advance because obviously there was always a possibility of something that might get out at hand and that was to enable him to take precautions to preserve the peace. And I believe the -- the people themselves, members of the Congress of Racial Equality often called him and told him that they were going to have pickets on the street, something or whatever they're going to do and want police protection and I don't mind saying they called me too. Well often not. That wasn't so -- that is one of the reasons I -- I think if the record would demonstrate that it was or one of the -- William O. Douglas: Well this -- does not make it -- to help make it an ingredient of an offense, doesn't it? Richard Kilbourne: No, sir, except in this way, the question of whether it was a preconceived plan to conduct himself in such a manner as would forcibly disturb the peace and which is what I believe was charged in here. Abe Fortas: Mr. Kilbourne, as I read your brief and as I listen to you here, I -- a question occurs to me is the State of Louisiana telling us that in this parish library facilities are not segregated. That is to say that a Negro can get service from any library facility, any public library facility in this Parish. Richard Kilbourne: I would -- yes, I believe that they can. Abe Fortas: Is that the representation of the State of Louisiana? Richard Kilbourne: Well that's a representation of the State of Louisiana which I make and which I certainly stand by it. Of course they only have the (Voice Overlap) Abe Fortas: Now these cards -- this library of cards. As I remember the record, there is a testimony to the effect that the library current issued to a Negro is stamped Negro. Richard Kilbourne: That's in the record. Abe Fortas: Is there any dispute about that? Richard Kilbourne: No sir, there's no dispute about that. Abe Fortas: Does that practice continue? Richard Kilbourne: I really -- I just couldn't answer that -- William O. Douglas: Well if there is a blue bookmobile for the Negroes and the red ones for the Whites, isn't it? Richard Kilbourne: In other words, it works -- William O. Douglas: How can you say it's not segregated? Richard Kilbourne: Well it's in the -- well I say it's not segregated because if a White person wants to use that blue bookmobile, they would let him use it. If a colored person want to use the red bookmobile, I know color is wrong there but I believe that's right, they would certainly wouldn't be able to refuse them service. Abe Fortas: Well the record says quite the contrary, doesn't it? Is there any testimony in the record to support what you have just said? Richard Kilbourne: I believe -- it is. Abe Fortas: (Voice Overlap) testimony of the record with the precise (Voice Overlap). Richard Kilbourne: I believe it is. Now you have to -- you see this certainly would come up actually before. Abe Fortas: You're experiencing now. Richard Kilbourne: Sir? Abe Fortas: I say it's happening now and I want to ask you about the last statement that you made. Is there anything in the record to the effect that a Negro who wants to get a book from the red bookmobile can't do something? There is a testimony of some woman that used to work with the library I've forgotten her name, to the precise officer. Richard Kilbourne: Well I -- I do not believe that that would be -- William O. Douglas: I think that -- I think Justice Fortas is referring to the testimony of Mrs. Laura Spears on page 136, 137 of the record. Richard Kilbourne: Yes. I believe – William O. Douglas: To 138 Richard Kilbourne: I think she -- I believe she did testify that -- William O. Douglas: Well she said, the only person who will use the blue bookmobile is Negroes and the blue bookmobile serves the three parishes for all Negroes and occasionally if a White person would come to the blue bookmobile, I've give him the schedule when the red bookmobile would come. Richard Kilbourne: Well, that -- I believe that would be the only testimony that's in the record. William O. Douglas: That looks like a segregated library system. Richard Kilbourne: Well I -- I often get confused when you -- when you segregated system or integrated system because in Louisiana -- I always feel like we had more integration in the place and then probably any place in the United States, I mean, just when the way people live. I don't -- segregation and integration seems to mean different things and different policy on contrary. Earl Warren: Prior to this -- prior to this incident, had Negroes ever gone into that library? Richard Kilbourne: You mean to get a book? Earl Warren: Because they have gone in there for -- Richard Kilbourne: They all went in there because -- Earl Warren: Gone in there for a service to the library as a White person went? Richard Kilbourne: I don't believe I had, no sir. Earl Warren: Now will you explain to us why that would be if you didn't have segregation? Richard Kilbourne: No, I really can't -- I can't explain why that could be accepted. As I see it was – there's no doubt it was a custom that they did not go in there at the library at that time. Tom C. Clark: People still run the bookmobile? Richard Kilbourne: Yes it is. The bookmobile still operates. They close the -- they closed this facility, they closed ones in West Louisiana and St. Helena Parish principally for the reason that they couldn't get anyone to work there. The -- the only people that work in these facilities or were working in them were women and they weren't paid much and -- Earl Warren: White women. Richard Kilbourne: They were White women, yes sir. Well they have colored women working in there too. Not in the branches but in the -- in the Clinton -- to where Clinton is. Earl Warren: But then these -- in these branches and White women wouldn't work. Richard Kilbourne: Only one woman then, I think it is time they were White. Earl Warren: And they couldn't get any White women to work in there if they allowed Negroes to -- to use the library, is that the fact? Richard Kilbourne: That's not what I'm saying. I'm saying they wouldn't work in that because they anticipated that it would be trouble and they didn't want to have any part of it and that was the reason. They were just scared to work in there either. Speaker: We're way outside the record. Richard Kilbourne: Yes, I guess we are. Hugo L. Black: Is there any evidence in the record that this library ever been to serve colored person at anytime during its past history? Richard Kilbourne: I didn't quite understand all your questions. Hugo L. Black: Was there any evidence in this record, did they offer any evidence or is there any evidence that there has ever been any person refused service in this library who has the books, any question, White or Black? Richard Kilbourne: No sir. Earl Warren: Is there any record about the availability of this service other than this testimony that -- that Justice Douglas read it on the page 136 and 137, Mrs. Spears that you had this double system, one for Negroes and one for -- one for Whites. Richard Kilbourne: Well I don't think there's any -- any other testimony to that effect. It was I think -- if I remember the record will show you the number of questions along those lines that was objected to and the objection was sustained. I objected to them because -- Earl Warren: Who objected? Richard Kilbourne: I did. Earl Warren: You did. Richard Kilbourne: Yes sir because I didn't feel like -- I didn't feel like I was trying to raise a case or anything to that kind. I thought it was irrelevant because actually all -- we -- my theory of the case was that anybody that went into the library conducted themselves in the manner that the petitioners did in this case would be violating the statute. Well Ku Klux Klan when they've come in and say I'm a man conducted themselves that way, I believe you would have the same kind of case. Earl Warren: Well Mr. Kilbourne, I -- I -- I thought that it was tried on the basis of being a racial case because the -- the sheriff testified the reason he put them under arrest was that these people had come there for a different purpose. And that was to establish racial equality in your -- and your court in this finding on 140 -- page 140 says clearly the evidence shows that these parties did not congregate when they came to the town of Clinton, to the Audubon Parish Library merely for the purpose of seeking service and that they had a specific motive and a specific intent, and that was as were shown beyond any reasonable doubt to refuse to leave the library even after they had -- had been served and after they'd been requested to leave. Now doesn't that -- doesn't that make the case turn on a racial question? Richard Kilbourne: Not in my judgment, Your Honor. I believe anybody who'd acted that way would -- would receive the same thing. That's why I -- I maintain that the question of the color of the petitioners was irrelevant and the question of segregation and integration not only -- only testimony that I remember about the question of the integration came up and it shares the testimony when he said that one of the petitioners had told them that they came over there to integrate the library and that was what he said one of them told him. And that -- wasn't all that took place on his questioning of the petitioners after -- after the arrest I believe is an abuse of them. I think one of them told them he couldn't read and so that's why I really didn't -- Abe Fortas: Now what about this testimony of your witness that you call, Miriam Fienberg – Finegold. You called her on page 69 of the record, unless I missed something in here she is still on the stand on page 86 and 87 and you're asking a lot of questions about the court. You asked her on page 87, you know if some colored person who's been accused service at the library. The answer, I know five such persons and then it says that if she means defendants and so on. And that make it appear to me that you have some awareness, Mr. Kilbourne that the trial with racial issues is not far. Richard Kilbourne: Well I -- I certainly had the -- actually, I certainly knew what the situation was if you permit me to say so as far as the racial situation was but in trying the case, I maintain that the race of the petitioners had nothing to with because I had the -- anyone who had conducted themselves in a similar manner [Inaudible] five strange men or four of them go in in and lady there them in the library by set and walk in and -- and just sit down and refused to leave. Well of course, she was afraid and anyone would be and my theory was and it still is, if anyone who conducted themselves in that manner would certainly be conducting in a manner that would conceivably provoke a disturbance of the peace and at all times, I was trying to prove if they -- it would be absolutely there with the intent to which I charge to provoke a disturbance of the peace. Now I did want to mention about the -- what I said about the -- Hugo L. Black: Suppose that -- suppose they had declined service then what would your position be? Richard Kilbourne: As I said in the opening -- Hugo L. Black: On account of the fact that you raise? Richard Kilbourne: As I said in my opening statement, the case would not be here today, there would not had been a case. Now that's exactly what the situation would have been. Now the talk -- the order -- there was some discussions here affecting about the Constitution. This man mentioned the Constitution. Now there's some confusion about just what he meant. You see only one of them the -- Brown was the only who spoke to us and the others and the other petitioners don't said anything at all. And when they asked him to leave, the librarian asked them to leave, he said what about the Constitution. Now just what he meant, he never knew because none of them -- none of the petitioners ever testified but my theory was that he was trying to convey to her the -- the -- his idea that the Constitution gave him a right to -- to conduct himself in a manner that he was doing and she -- and her answer was, we have -- we have it here. Now that was his [Inaudible] Speaker: How big a town is Clinton? Richard Kilbourne: About 1500 people. Speaker: Does the record show how old Mrs. Reeves was? Richard Kilbourne: Sir? Speaker: Does the record show the age of Mrs. Reeves? Richard Kilbourne: I believe it does. She's a middle aged lady. Speaker: Where did these defendants come from? Richard Kilbourne: One of them -- one of them lived in Clinton and the others – they were all strangers. They came from West Louisiana of Parish. I might say they all -- all of them were young men, young fellows and they were all around 18 to 19 years old except Mr. Brown and he was I think around 29. He was the leader in this group and I think -- Earl Warren: But these people -- these people and the -- in one of the three parishes that this -- Richard Kilbourne: Yes sir. Earl Warren: -- this library served. Richard Kilbourne: That's right. The West -- all of them in West Louisiana which was in the library service. Earl Warren: Yes. Richard Kilbourne: Thank you. Earl Warren: Thank you, Mr. Kilbourne.

Earl Warren: Number 371, Bessie Lasky and Jesse L. Lasky, Petitioners versus Commissioner of Internal Revenue. Mr. Ash. Robert Ash: May it please the Court. In this case, we have a quite a change of pace from the preceding case. We have a simple one-issue case with the facts undisputed and there is no question of constitutionality involved. Our question is this. Does the Tax Court have the discretionary power inherent in trial courts to vacate its decisions out of time in order to accomplish justice or does the statute, which says that a Tax Court decision becomes final if appeal is not taken within three months deprive it of such power? This is a case of first impression and this Court has never before passed upon the question. The facts are very interesting and unusual. Lasky owned a contractual right to participate in the profits from the motion picture, the story of “Sergeant York”. In addition, he was employed by Warner Brothers to -- as a producer of motion pictures. He got into a dispute with Warner Brothers as to the amounts that were due under his participation contract. In order to avoid litigation, which would have jeopardized his employment, he sold his rights under the participation contract to United Artists for $805,000. The gain on this sale was reported as a long-term capital gain in the separate returns filed by Lasky and his wife. Upon audit, the petitioners -- upon audit, the petitioners' tax returns from 1943, the Commissioner determined that the -- each taxpayer owed deficiencies in tax in excess of $224,000. Lasky employed an outstanding law firm in Los Angeles to contest the deficiency. Appeal was taken to the Tax Court and the Court was -- and the case was tried in December of 1951. However, the law firm, which Lasky employed, did not actually try the case but associated another law firm which did try the case. The case obviously was a close and difficult one because the Tax Court judge took approximately two years and four months to promulgate the findings of fact and opinion. Now, they were promulgated on April the 8th, 1954. On the same date, the Tax Court entered its decisions based on the findings of fact and opinion and mailed copies to the first counsel of record. The decisions in some way were filed in the correspondence file of the case and not in the legal or pleading file and did not come to the attention of counsel. Now, it's important to know that under the practice of the Tax Court, they first issue findings of facts and opinions. Thereafter, they enter a decision in accordance with the findings of fact and opinion, which fixes the tax liability in dollars and that this is a separate and distinct document. An appeal was -- is taken from this decision in dollars and then the limitations runs from the date of the decision, and I say that it was the file -- that these decisions got into the file without counsel knowing about it. Upon receipt of the findings of fact and the opinion by Lasky's counsel, the conference was held in the office of counsel. Questions of appeal and other items were discussed. Lasky was advised that he had three months from the date of the decisions within which to appeal and that the decisions had not been received. The matter of course was a great concern to Lasky. So, from time to time, he inquired counsel about the status of his case. He was informed each time that the decisions had not been received, that he had nothing to worry about and that as soon as the decisions were received, there be a further conference to decide what actions should be taken. On the early part of August 1954, which was more than three months from the -- from -- from April 8, Congress for Lasky telephoned -- counsel for Lasky telephoned him and told him that going through the file on the case, he discovered the decisions that were dated April the 8th, 1954. That they were on letter size paper then placed in the Lasky file on the correspondence side instead of on the legal or pleading side that he had overlooked them, and he expressed regret at the situation. It was then that I got into the case. I felt that immediate action was necessary and know I knew little of the facts. Immediately, on August 24, 1954, I filed a motion for leave to file a motion to vacate the decision out of time, and the motion to vacate the decisions. In my motion, I stated that I filed a statement of facts for the later date. After I learned the facts, I filed a statement of the facts on October 18, 1954 and amended my motion asking for rehearing of the case on the merits. Well, this -- the Government's brief says that our motion for rehearing was an afterthought because that made until several months after the original findings of fact decision. Now, the truth is that as soon as I am running the facts, it was evident to me that Lasky had a meritorious case and the justice demanded a new trial. On December the 13th, 1954, Judge Harron of the Tax Court granted our motion and set the case for further hearing in January of 1955. The case was reheard in January. Four witnesses were heard. Three of these witnesses have not been witnesses in the original trial. Two were officers of the United Artists Corporation, which had made the purchase. One was an accountant who specializes in motion picture affairs and Mr. Lasky was recalled. We felt that we've made out a case on rehearing before Judge Harron. However, she -- although she made additional findings, she reached the same conclusion that she had reached at the first trial. We appealed to the Ninth Circuit. That Court dismissed the appeal on the ground that the Tax Court was not a court at all but was merely an administrative agency which had assumed the powers of a District Court. We take the position that although a Tax Court for purposes of housing keeping is designated as an independent agency in the executive branch of the Government, it is in fact a court. The Government in its brief, at page 16, admits that this is true. As a Court, we say that it has the inherent power of any trial court within its discretion to vacate decisions out of time. Now, the -- we have authority for this position in the Reo Motor case which is on all fours practically with our case. That case went all the way to this Court. After the decision became final, the taxpayer asked leave of the Tax Court to file a motion to vacate the decision. The reason was, the stipulation -- stipulation of facts upon which the Tax Court originally decided the case contained a mistake of fact which resulted in an omission from invested capital of over $2 million. The Tax Court denied the motion but the Sixth Circuit reversed. The reasoning of the Sixth Circuit is set forth at page 17 of our original brief. Another supporting case is a Fifth Circuit decision, the Buttgenbach case which was decided way back in 1933. Speaker: What are the Circuits as to which there is a square conflict on this now? Robert Ash: The -- the square conflict was with the Sixth and with the Fifth. Now, the -- also, you might say that there's a conflict with the Third Circuit in the Stern case, which we discussed at page 19 of our brief which gives an excellent explanation of why the Tax Court is a court under the modern decisions. Felix Frankfurter: Well, that -- I'm always troubled when I have to decide and ask that question like that. What does that mean that it's a court? It certainly must be a -- the certain purposes of this Court, I mean in the sense that you can review its decision, but -- Robert Ash: Yes. Felix Frankfurter: Must I answer yes or no to that question, Mr. Ash? (Voice Overlap) Robert Ash: Well, I think this. I think that this Court can either hold that -- that the Tax Court is a -- is a court that has the inherent powers of a court and as I point out in my brief, he repeatedly approved the execution -- the assumption and -- of court powers by the Tax Court. Or you can -- you can also go the other way if -- if you wish and say -- and say that was (Voice Overlap). Felix Frankfurter: Do I -- do I decide this thing without any statutory materials or without anything? Just whether -- whether a Tax Court is -- Robert Ash: You're doing it all -- Felix Frankfurter: -- (Voice Overlap) can set aside something that it thinks it's wrong? Robert Ash: You're -- you're doing it all -- Felix Frankfurter: Is that an abstract to that, the question? Robert Ash: No, it isn't that abstract. I think there's ample authority for the position I'm taking. And for instance, this Court has consistently accepted the Tax Court as a Court in situations where it declared acts of Congress unconstitutional. Certainly, it had to be a court to do that where it's declared treasury regulations invalid. You've accepted the --- the Tax Court as a Court where they've applied rules of estoppel, of res judicata, estoppel by judgment of course, and so forth. And I -- it seems to me that if you would say or base your decisions on the fact that this Tax Court is not really a Court, you could cause all kinds of confusion in the administration of the taxing laws if -- if -- Felix Frankfurter: Well, it -- in a vital way, it isn't really a court in the sense of Article III. Robert Ash: Well, that is true. It is -- Felix Frankfurter: All right. So that -- where do we look from there? Well, it's really -- a really not -- really yes, really no? Robert Ash: Well, I -- I say, you -- you've accepted it as such, whether -- and -- and the courts have consistently accepted it as such. Over the years, let's say -- let's say it's been a growing thing of course in it, in a considerable length in my brief, I explained the history, the legislative and judicial history of the Court. Congress thinks the -- they have created a court. They repeated -- they have consistently so stated, the Committee Report so state and I don't think there's any doubt of what they believe that they have created a court. William J. Brennan, Jr.: Well, if -- Mr. Ash, does your argument really come down to this, that even though the Internal Revenue Code uses language of finality as regards actions to the Tax Court? Robert Ash: That's right. William J. Brennan, Jr.: You're trying to persuade us that this is so much a Court that it has powers notwithstanding that congressional language to do the thing that you wanted them to do here? Robert Ash: That's right and as I say, there's ample authority with the decisions of this Court -- William J. Brennan, Jr.: But that's the only significance of your argument that this is a Court? Robert Ash: That -- that's the significance of my argument. That if it's a Court, it has that power. Speaker: But even if it's a court, aren't you up against the same problem? Robert Ash: Well, you -- you keep passing on cases up here where they used the -- the word. I have in mind your draft cases where the statute says that the decision of a draft board as to the classification of a draftee is final, but you have no difficulty here in the -- in holding otherwise. There -- there are certain rules of judicial interpretation that I think should apply to a situation like this. They're accepted rules and of course, the -- the modern rule which is merely a codification of the established rules of courts, as your Rules of Civil Procedure, Rule 60 (b) which provides that a Court can -- can set aside a final decision in the interest of justice because of the circumstances set forth in that rule. And -- William J. Brennan, Jr.: But you don't suggest that the federal civil rules obtained in the procedures before the Tax Court? Robert Ash: No. The -- this -- the Rule of Civil Procedure by their very words apply to United States District Courts, but I say they are a codification that's accepted and established rules and they're in accordance with the modern trend. The Courts are going to have justice synonymous with law. William J. Brennan, Jr.: But when the Congress said that in the case of the Tax Court, certain things shall be final. It didn't add an exemption or qualification like Rule 60 (b), did it? Robert Ash: No, it did not. And it didn't in the draft board case. It didn't -- and -- and you have lots and lots of other cases up here in a similar situation. I have in mind the -- the California Eastern Lines case which was a case on appeal from the Tax Court because the Tax Court has a power to handle renegotiation cases. And the statute specifically provides that such cases shall not be reviewed or redetermined by any court or agency. The Tax Court decided that a particular contract was not a renegotiable contract. Appeal was taken to the Court of Appeals for the District of Columbia. They dismissed for lack of jurisdiction and this Court reversed. We've had lots and lots of -- of cases that float around this problem but don't hit it exactly, one of them -- another one -- a case of this Court is the Industrial Edition Association against Commissioner, decided in 1945. In that case, a taxpayer filed no return. It lost before the Tax Court an appeal to the Sixth Circuit, but under the statute, it should have appealed to the Court of Appeals for the District Court of Columbia. Now, more than three months after the date of the Tax Court decision, the party stipulated that the Sixth Circuit could hear the case. Then the Government made a motion to dismiss and the Sixth Circuit granted that motion. This Court reversed. The -- and say there have been numerous, numerous other -- other cases on the same subject to the powers of Court. Now, we have the -- have before this Court a bankruptcy case in 1937, the Wayne United Gas Company case where this Court held that a bankruptcy court may set aside an order dismissing a petition and rehear the case after the time for appeal had expired. I quote that and rely on it of course in my brief. The -- in deciding the case, the Court said, "We think this Court -- the Court had power for good reason to revise its judgments upon reasonable application, seasonable application and before rights it vested on the faith of this -- of its action.” The courts of law and equity have that power. And certainly, there's no more need of finality in a tax case than there is in a bankruptcy case because the rights of third parties are not involved in any of these tax cases. All the -- this Court has had some cases before it involving your power to grant the petitions for rehearing in Tax Court cases. The one that -- the latest one, the one the Government relies on principally is the Simpson case. Now, the statute says that this decision shall become final upon the denial of certiorari.But you say, you don't -- that is what it means. It means, according to the majority of the Court, it becomes final upon 25 days after the denial of certiorari. When Mr. Justice Douglas -- well, Mr. Justice Murphy nothing, Mr. Justice Rutledge, concurring was the opinion that that rule -- that decision arose out of your rule making power and that you have the power at all, they had it for the whole term and then -- then they could have vacated and set aside the decision at anytime during the -- the term. There, I would say there have been other cases of a similar nature were courts are involved. Hill against Hawes came up here in 1944. There, a judgment was entered by the District Court to the District of Columbia, but the Clerk failed to notify the parties. After the appeal time had expired, the District Court ordered a new -- entered a new judgment and directed the Clerk to notify the parties. The Court of Appeals for the District of Columbia dismissed. However, this Court reversed, saying that the judgment was under the control of the Court during the term. Hugo L. Black: Which case was that? Robert Ash: Hill against Hawes, 320 U.S.520. Felix Frankfurter: As a Tax Court term? Robert Ash: The Tax Court does not have terms. Felix Frankfurter: Does the Tax Court unlike other federal courts, did it have terms and that they have been abolished by -- Robert Ash: No, no, it's never had terms, Mr. Justice Frankfurter. Felix Frankfurter: So that -- so that the limitations derived from statutory restrictions if they do unless it's all (Inaudible) Robert Ash: Yes. Felix Frankfurter: You have to go to the whole structure of the tax law at the time for review and manner of review, et cetera, et cetera, is that right? Robert Ash: I would say that that's the general rule and yes, I have to admit that. Felix Frankfurter: And -- and if you just go by the legislation here, you have tranced in, but you say that there's an inherent power in any court -- Robert Ash: That's right. Felix Frankfurter: -- to relieve for injustice. This is a court U.A.D., is that it? Robert Ash: Yes, sir. If you are going to -- if you're going to sit up here and say that this Court has the power to declare acts unconstitutional, treasury regulations invalid, and do other things that a court does, it seems to me that when it does us some good that we also ought to have it held to be a court. Felix Frankfurter: And you say that it has power to declare it unconstitutional, what's that mean? Robert Ash: Well, you have approved their action in holding acts unconstitutional. Felix Frankfurter: That is we found it unconstitutional provision -- Robert Ash: They used it too. Felix Frankfurter: -- and so did they, is that -- Robert Ash: So did they, that's right. That's right. But to put -- but I'm sure that this Court would say that an administrative agency would have no power to even pass such a question. Now, I -- another D.C. case or a District of Columbia case that did not come here that I cite in the reply brief is the Turbeville case where -- which pretty much like this one, where an attorney filed -- failed to file an answer because the complaint become -- became mixed with another file. And the Court of Appeals for the District held that was excusable neglect under Rule 60, the Rules of Civil Procedure. They -- of course the -- the books are filled with cases on it where the rights of individuals or litigants will be protected if due to some oversight of counsel, their rights taken away from them. Yesterday, upon an old case in 10 Wallace, United Sates against Vigil, V-I-G-I-L where an appeal was not timely taken due according to a wording of the Court, be in attention of the United States Attorney and that this Court found a way to -- to help. But now, I -- I mentioned the -- the California case, the Ninth Circuit has recently accepted jurisdiction and a excess profit tax relief case in Helms Bakery Company which I cite in my brief, despite the fact that Section 732 of the Internal Revenue Code says that the -- this relief provision shall not be reviewed by any other court or agency. However, the Court -- the Ninth Circuit argued that the findings were not in -- the conclusions were not in accordance with the evidentiary findings of the -- of the Tax Court and remand it. Now, the -- now, the other remark I have is that the -- the Government's brief says that this -- in these cases that the tax cannot be assessed until the Tax Court become -- decision becomes final. That certainly is not true in all cases and in his appeal, if you lose in the Tax Court, the Commissioner can -- can assess the tax and does assess it unless you file upon before you file your appeal. The statement I have in the brief carefully trace the history of the Tax Court. I think, it is a -- is a -- it's construed by both Congress and the courts as being in fact a court and I think it should be given the power of a court and if it isn't recognized that it has the power of a court, it can cause all kinds of confusion in the administration of the tax laws. Earl Warren: Mr. Elman. Philip Elman: Mr. Chief Justice, may it please the Court. On the facts, I should like to clarify one point that may perhaps not be clear. As Mr. Ash pointed out, this case was decided by the Tax Court in favor of the Commissioner against the taxpayers. The Tax Court on April 8, 1954 entered an opinion, findings of fact and a formal decision to that effect. The Clerk of the Tax Court sent copies of all three of those documents by registered mail to counsel for the taxpayers. In case of the opinion, the findings of the fact that was mailed, they were mailed out on April 8th in a case of the formal decision that was mailed out the following day, on the 9th. The -- the taxpayer's lawyers in Los Angeles received copies of the opinion, findings of fact deciding the case against them. On April 14th, they held a conference attended by Mr. Lasky and by all of taxpayer's lawyers at which they considered what their next step should be, whether they should take an appeal, whether they should attempt to compromise the case. At that conference, Mr. Lasky was informed by his lawyers that he -- that there would be a period of three months from the date of the entry of the formal decision within which the petition for review to a Court of Appeals and that he would be kept informed. The case arises because it appears that the formal decision which was pro forma entry merely restating the Tax Court's decision. The copy of the Tax Court's formal decision, although was sent by the Clerk of the Tax Court, although was sent by registered mail, and although counsel for taxpayers knew that it was forthcoming that it was the established practice of the Tax Court to enter such decisions almost immediately thereafter. It's a matter -- a few minutes to prepare such an order. The Court will find it in the record pages 92 and 93. Although that was the situation, the copy of that decision apparently was misplaced in the files of the law firm representing Mr. Lasky. And no inquiry was made of the Clerk of the Tax Court as to what happened in the case until July 20th, 1954 which was three months and 12 days after the opinion and findings of facts were entered and three months and 12 days after the decision was entered and 12 days after the three months period for appeal had expired. So that the first -- first inquiry addressed to the Tax Court as to the -- as in this case from counsel for the taxpayers came after, the -- the period for petitioning for review has expired and after under the clear expressed terms of Section 1140 (a) of the Internal Revenue Code 1939, which is set out in our brief on page 52. After it had become final and the position of the Government is that under the statute, the decision of the Tax Court, whether it be considered Article III Court or a non-Article III Court or some other kind of court is immaterial because even if they were even if this is considered an Article III court which of course it isn't. But even if it were an Article III Court, Congress of course could make provision as it has in the -- in the Rules of Civil Procedure for the District Court. Congress can make provision as to when a decision becomes final and beyond the point of -- of reconsideration. And -- Speaker: Can I ask you a question? Am I correct in understanding that at the April conference, Mr. Lasky and his lawyers, they knew that they had lost the case, that they didn't have the pro forma entry of the order, entered on the opinion, is that it? Philip Elman: According to the affidavits of the taxpayer's counsel, they did not know at that time that there was in their office, the files of their office at that time, a copy of the Tax Court's formal decision. They knew -- they have the opinion. Speaker: They have the opinion -- Philip Elman: They have the opinion, which concludes on page 92 of the record. The respondent said to the Commissioner, “The respondent's determination is sustained. Decisions will be entered for the respondent.” That was served on him the date that it was entered, April 8. They received it sometime between April 8th and April 14th when this conference was held, so they knew they lost the case. And they also knew that under the statute, under Section 1142 on page 54 that there was -- there was a period provided for review of three months. The time for review runs from the date the decision is rendered, not from the date it's received by counsel. Section 1117 (c), on page 51, is -- is perfectly specific on that. That the decision of the Tax Court shall be held to be rendered upon the date that an order specifying the amount of the deficiency is entered in the records of the Tax Court Now, in this case, there was no need for any computation, where -- where they -- whether there's a need for computation, that sometimes takes a little longer. Here, the Commissioner's determination was sustained. All that was needed was a -- a dictation of a short order of decision. Judge Harron in the record in this case states what the practice of a Tax Court is in its respect. She stated that she was at a loss to understand the failure of any -- the counsel for taxpayers to raise any question about this until after the three-month period had expired. And -- and Mr. Ash frankly and candidly stated he too could not understand what the explanation for that was, that this was a case were papers have been lost -- William J. Brennan, Jr.: Mr. Elman, is 1113 at page 50 the only provision for service of their copy of decision? Philip Elman: Yes, sir, it's the only provision in the -- in the statute (Voice Overlap) -- William J. Brennan, Jr.: And that merely says that it shall be noticed. It doesn't say that it shall be -- that -- that it shall be supplied. Philip Elman: No, sir, and there's no -- there's -- there's no provision in the statute or in Tax Court's rules which is comparable to the provision of Rules of Civil Procedure, making it a duty of the -- of the Clerk to send a copy of the judgment to the party. The -- as a matter of fact is that it is done and -- William J. Brennan, Jr.: It was done here? Philip Elman: It was done here. And there was no -- this is not a case where a losing party discovers for the first time after the period for appeal has ran that he has lost the case. In this case, they knew almost immediately after the Tax Court's opinion and decision were entered, but -- but the cause was lost. William J. Brennan, Jr.: Did you say that there was some evidence that experienced practitioners in this field go find out for themselves? Philip Elman: Well, that was all fully developed in the record in this case at the hearing -- William J. Brennan, Jr.: I didn't read the record. What was the -- Philip Elman: And -- and it is the -- it is the practice familiar to all lawyers who have anything to do with the Tax Court that the decisions in such a case are entered almost simultaneously, usually the very same day. And Mr. Ash stated that he had been handling the case. He would have been down there a few days to find out why he had received the copy of the decision. Now, we think that Section 1140 in the context of the -- of all the provisions of the Code dealing with procedures, administration, collection of taxes that that provision provides a cutoff day, as the Tax Court decisions beyond which the power of -- of the Court, the Tax Court or of the court of review expires. That once -- once the decision of the Tax Court has become final as defined in the statute, it -- it's no longer subject to reconsideration, except possibly where there is an exceptional or extraordinary circumstances like fraud under no such circumstances he alleged have found here. Now, that statute was considered by this Court in two cases, the Northern Coal Company case in 1934 and the Simpson case in 1944 in 321 U.S. And the Court's decisions in those cases except the construction that we placed upon the statute of the Ninth Circuit in this case placed upon the statute, namely, that when one of the events specified by the statute has occurred to make a decision final, it no longer becomes -- no longer is subject to the process of correction or reexamination that might otherwise exist. In the Northern Coal Company case, the Court -- this Court had affirmed a Circuit Court of Appeals decision sustaining a Board of Tax Appeal decision against the Commissioner. It had affirmed it by an equally divided Court. Petition for rehearing was filed in this Court. It was denied a mandate issue. Under Section 1140 (b) (3), that tax -- that Board of Tax Appeal decision was final. Then thereafter, but during the very same term of court, this Court decided another case involving the same issue in favor of the Government. And the Government thereupon filed a petition for rehearing on the ground that the prior affirmance by an equally divided court should not stand. Now, it has become clear that the lower court decision was erroneous and so on. And this Court denied rehearing and entered a per curiam order of opinion stating that in view of the authoritative and explicit requirement of the statute, rehearing could not be had. Now, the same -- Hugo L. Black: Which case was that? Philip Elman: That's Helvering against Northern Coal Company in 293 U.S.191 Now, to the same effect, construing the same provision is the case of R.Simpson and Co.against. Commissioner, 321 U.S.225 decided in 1944. There, a petition -- there, the taxpayer had filed a petition for certiorari, which was denied. And thereafter, in the same term of court, a conflict of decision developed. The Court -- the taxpayer then filed a motion for leave to file a petition for rehearing out of time. That motion was granted. The order denying certiorari was vacated and certiorari was granted. However, the Court in its order granting rehearing of certiorari requested counsel to -- to discuss the question of its jurisdiction to grant rehearing in view of Section 1140 of the statute and in view of the case of Helvering against Northern Coal Company. In that, the case was argued. The Court entered a decision, opinion by Mr. Justice Jackson holding that since the denial of certiorari had become final by reason of the expiration of a 25-day period to file a petition for rehearing. Even though it was in the same term of court and even though this Court has on occasion granted untimely petitions for rehearing where because of subsequent development of a conflict subsequently or some other reason indicating the need for further review. Notwithstanding that, in cases originating in the Tax Court, once there was a denial of certiorari, the decision was final. And -- and it was held in the Simpson case that this Court had no jurisdiction to grant rehearing. Now, the Court -- that -- those two cases clearly drew a distinction between cases coming here from the Tax Court and cases coming here from other courts and that the reason for the distinction is the statute. Congress by putting these finality provisions in the Internal Revenue Code with respect to the Tax Court decisions has treated those cases differently from other cases and that -- and that -- that provision for finality has to be respected, whether you call it Tax Court, a court or an agency.It isn't quite immaterial. Now, there's an argument that there is -- there are inherent powers of -- of court to set aside decisions where good cause exists and that inherent power still resides in the Tax Court notwithstanding the statute. We don't see how that argument can be made in the face of the decision to the Simpson and the Northern Coal Company case -- cases. But in all events, even if -- even if there were no statute, even if this -- this case had come from a District Court, certainly, there is no absolute discretion that exists in the District Court to set aside a judgment which has become final by reason of the expiration time for review for any reason whatsoever at any time that there isn't such a completely open-ended judgment even in a District Court. Now, this -- the -- the so-called inherent power of the Court is accompanied by a limitation, which has been established for many years, which was reaffirmed in the very case upon which Mr. Ash relies, the Wayne Gas Company case in 300 U.S. Because in that case, the Court held and it was merely restating what had previously have been held many times. That rehearing could not be granted for the purpose of extending the time for appeal, so that if there was something in the way of fraud or -- or some fundamental character of error initiating the judgment itself, that was one situation. But where the only reason for granting the rehearing was to enter a fresh judgment to start the time for appeal, running all over again after it had expired that it -- that in any case where that was done, the appeal has to be dismissed. And the Ninth Circuit in this case, we think directly found that that's exactly what happened. Through this unfortunate error, the -- the time for appeal had run. The judgment of the Tax Court have become final and the Tax Court, that of feelings of sympathy perhaps entered a fresh judgment which had the effect of -- always -- always hope would have the effect of starting the time for appeal running all over again. Now, on -- on the question of -- Speaker: Do you contend that that was done by the Tax Court for the purpose of giving a right of appeal? Philip Elman: I -- I think that that's the only inference really that one can draw from the record. If -- if Your Honor will read through the proceedings following the motion to vacate, you will -- you will find no suggestion at all that there was any newly discovered evidence that previously could not have been presented or that there was fraud or that there was a -- that there was anything new in the situation. The only thing that was new occurred after the judgment and that namely, that the lawyers had not filed a petition for review within the three months required by statute. That was the only new factor in this situation and we -- we think that the decision in the Wayne Company case shows that the -- that the District Court had -- had undertaken to grant rehearing for that reason. It would not start the period for -- to appeal running all over again. But in any event, our basic proposition is that here, we have a statute which makes it unnecessary for the Court to consider any questions of -- of the inherent power to reopen. Congress has -- has dealt with the -- with this question of finality and my new meticulous detail, if Your Honors will examine Section 1140, you will find that it covers every conceivable contingency that it can develop in the litigation of a Tax Court case. If a petition for review isn't filed, that the petition for review is filed, if the Court of Appeals reverses or it modifies or affirms, if certiorari is denied, every possible disposition of the case on appeal is dealt with and every -- as well as the disposition of the case, there's no appeal was taken. Now, the reason why Congress did that was set out in the Senate Committee Report which the Court relied on and the Simpson case in which we quote on page 24 of -- of our brief that reported by -- you may read it. It's quite short, refers to Section 1005 of the Revenue Act of 1926 which is Section 1140 decision I'll quote, it says, "In as much as the statute of limitations upon assessments and suits for collection, both of which are suspended during review of the Commissioner's determination, commences it to run upon the day upon which the Board's decision becomes final. It is of utmost importance that this time be specified as accurately as possible. In some instances, in order to achieve this result, the usual rules of law applicable in court procedure must be changed. For example, the power of the Court of Review to recall its mandate is made to expire 30 days from the date of the issuance of the mandate.” Now, that latter situation was the one with Your Honors had in the Northern Coal Company case. The mandate of the Court had issued 30 days or after it expired under the statute, even though that this Court's affirmance was erroneous as a matter of law. The Court was powerless to change it. And -- and we -- we believe that the fact that a particular taxpayer may -- may have some justifiable feelings of -- in this case, a hardship was done. Nevertheless, the fact remains that this is a statute of limitations case. The petition for certiorari is filed in this Court on the 91st day. The Court has no jurisdiction to grant it, no matter how meritorious it is, that as to tax cases, Congress has -- has provided a system of collections in which the statute of limitation is important. It's provided for suspension of that statute during tax court proceedings. The statute begins to run from -- again, from the day the Tax Court decision becomes final. And that if -- if that -- if the statute were to be disregarded in a particular case because it might be considered that the result is a hard one, I would -- I would point out that the principle of finality does not merely benefit the Government. Its administration of -- of the tax law and a disposition of thousands of tax claims involving billions of dollars. It's not merely of a concern to the Government. It's a -- it's concern to taxpayers generally that if -- if the Government were free to reopen the Tax Court decision or to ask that it be reopened after it became final because papers were lost or because new -- new evidence could be presented to show respect -- Felix Frankfurter: A more astute new counsel. Philip Elman: I beg your pardon? Felix Frankfurter: A more astute new counsel? Philip Elman: A more astute counsel or for any other reason of that sort. I -- we think that the -- that the taxpayers cries would be long and loud and with good reason. Earl Warren: Mr. Ash. Robert Ash: I'd like to answer Mr. Justice Harlan's questions. The decision of the Tax Court is equivalent to judgment in ordinary court, sometimes are entered promptly, sometimes it's quite a question of many months if there has to be a computation under the Tax Court's Rule 50. I must admit that in the case where a single issue was decided in favor of the Government or in favor of either party that ordinarily it wouldn't take long to get the decision. But there -- it frequently happens if they're not issued immediately as counsel would indicate. Now, the statement was made that the inference was that this -- possibly, the decision was vacated to give a new trial. The fact is that this a close and difficult case on the merits. As I stated, it took Ms. Harron two years and four months to decide it. We made a good showing to her as to what we have proved if we have a rehearing. We put on competent witnesses who proved good important facts and -- and no doubt in the world about the sincerity of the Tax Court in -- in granting the rehearing and their effort to get the right answer. Also, I think it's -- if I haven't already emphasized here, this Lasky who is 76 years old through no fault of his own, finds himself with a staggering deficiency with his tax with his property all subjected to tax lien and will take everything he owns if he loses this case in the Court. We think that -- that this Court under its decisions could give him the right of appeal. It certainly should have that vital appeal to try out the case on its merits -- on his merits.

William H. Rehnquist: We'll hear argument now in Number 99-1571, Traffix Devices, Inc. v. Marketing Displays, Inc.-- Mr. Roberts. John G. Roberts, Jr.: Thank you, Mr. Chief Justice, and may it please the Court: The president and founder of Marketing Displays, Incorporated, MDI, invented a new type of sign stand, one with a dual-spring design that allowed the stand to resist the wind. MDI patented that invention and, for the term of its patents, MDI labeled its sign stands as patent-protected to warn of copiers, touted in its trade literature the benefit of its, quote, patented dual-spring design, end quote, and when another company, Windproof, tried to market a copy of MDI's patented stand, MDI sued it for patent infringement and won. But then MDI's patents expired, as under the Constitution all patents eventually must. Sometime thereafter, Traffix Devices, the petitioner, copied MDI's stand, added some improvements of its own, and marketed a competing version. No longer armed with its patents, MDI tried a new tack to exclude competition. It claimed that the configuration of its stand, the same dual-spring design that it had touted as patent-protected during the term of the patents, was protected as trade dress and could not be copied. Sandra Day O'Connor: Mr. Roberts, how do we determine what the patent covers? Does it... I mean, I can look at it, but I'm still not sure. I think in the record, in the material here, we have a copy. Does it include in this case the legs and the whole structure, or just the dual spring, and how do we normally determine what the patent covers? John G. Roberts, Jr.: Well, in this case, of course, it's easy to determine that the patent covers this particular sign stand because MDI labeled that sign stand as patent-protected. Sandra Day O'Connor: The whole thing? John G. Roberts, Jr.: The whole sign stand, yes. Sandra Day O'Connor: Legs, spring, and all? John G. Roberts, Jr.: And all, but in its trade literature, for example, it focused on the dual-spring design. That is what makes the invention work. That's what allows it to resist the wind, and it said, this is our patented dual-spring design and, of course, it not only labeled the stands but in its trade literature, and in the Windproof case it sued when somebody made an exact replica, the same replica that Traffix Devices-- Anthony M. Kennedy: So under your view of the case, if the legs that the patentee had had a very special color, like the John Deere green or something, that could be copied after the patent ran? Because I notice-- John G. Roberts, Jr.: --Well-- Anthony M. Kennedy: --in the pictures the legs were orange in your client's stand and aluminum in the other. John G. Roberts, Jr.: --Well, incidental ornamentation that is not part of what the patent protects does not give rise to the right to copy. There should be an exact symmetry. Whatever the patent had protected as part of the patent bargain, the public has the right to copy. Now, the color of the legs probably would not have been claimed in the patent, and wouldn't have been part of the invention, and therefore it would not give rise to a right to copy that color. Ruth Bader Ginsburg: In any event, they're different in this... if I'm looking at the right diagrams the... your client has a different... has the orange color. John G. Roberts, Jr.: Well, it depends on which stand is involved. The steel stand is one color and the aluminum stand is another, but in terms of what they claimed in the patent as... the part that makes the invention work, it's not the legs that made this invention. It's not the sign. It is the dual-spring design. That's what they said was patented. When they marketed this, when they had the exclusive right to do so, they focused on that in their trade literature, said this is our patented dual-spring design, and that is the same claim they now raise in their trade dress assertion. Ruth Bader Ginsburg: But Mr. Roberts, didn't the court of appeals say, at least as I understood it to say, okay, the dual springs Traffix could have, but you have to devise some kind of other stand, curved legs, or a double stand. I thought that's-- John G. Roberts, Jr.: It said we... it said we basically had to design around their stand. Now, if they said, you could use three springs or four springs, I guess it would never end, five springs, or you could put a little skirt around the springs so people wouldn't see them, or, as Your Honor points out, if you're going to use the springs you have to change something else so it doesn't look like it. But that's not what this Court's cases have held. What the Court has said, Singer and Kellogg and Sears, is that the public has the right to copy the patented invention in precisely the form in which it was practiced, and that's critically important. The idea of designing around what had previously been patented is a significant hindrance to competition, and this case is a good example. When we copied the sign we added an important improvement of our own, the step-and-drop leg. Under MDI's stand you have to bend over and pull the pins out. Under ours, you just step and the legs come out. Now, if the rule were the rule that the respondents are arguing for, we would have had to add that new improvement to some different sign stand, but the right to copy attaches to the product as it was practiced during the term of the patent. We don't have to design around their superior stand... that's why it succeeded in getting the patent... to add improvements of our own. Sandra Day O'Connor: --Does it depend in part on how we define functionality under the trade dress inquiry? John G. Roberts, Jr.: We think there is a freestanding right to copy from an expired patent, that it doesn't depend upon what functionality is. Sandra Day O'Connor: And you think that there can never be a trade dress protection in some aspect of an expired patented item? John G. Roberts, Jr.: If the item was simply incidental ornamentation... one of their amici used the example, if you're patenting a chair and the drawing shows a purple bow. Well, we don't think there's a right to copy the purple bow, because the purple bow is not covered. That's not the invention. Sandra Day O'Connor: So there could be a trade dress in an expired patented item. John G. Roberts, Jr.: In the item itself, yes, but not in the subject of the patent. Sandra Day O'Connor: And I suppose that depends on how we define functionality, in a sense. John G. Roberts, Jr.: Functionality I think leads to the same place that we come to from looking at patent law, if you define functionality as it has traditionally been defined, as turning on usefulness. If functional... if functional means useful, then our case comes out the same way, because you have to be useful to get a patent, and if it's been the subject of a patent, the feature has been useful, therefore it's functional, therefore it's not eligible for trade dress protection. Anthony M. Kennedy: Justice O'Connor's question suggests this to me. You're arguing for the rule that you maintain here so that you will not have to litigate functionality. John G. Roberts, Jr.: Exactly, and functionality-- Anthony M. Kennedy: But why isn't functionality sufficient protection, particularly in this case? John G. Roberts, Jr.: --Functionality is sufficient if functionality means useful, but if functionality means, as the lower court said in this case, something for which there is a competitive need, or for which there are not available alternatives, and there's a multi-factor balancing test to determine so-called legal functionality-- Sandra Day O'Connor: Well, I guess the court, the Sixth Circuit pulled that out of Qualitex' opinion. John G. Roberts, Jr.: --Well, we-- Sandra Day O'Connor: The competitive need. John G. Roberts, Jr.: --I don't think Qualitex opined on the exact definition of functionality in this case, or it was misread by the lower court. The definition in Qualitex had a very important connector there. It said, a useful product feature, or, and then it went on to talk about competitive need, so-- Sandra Day O'Connor: So as far as you're concerned, if it's useful, then it's functional? John G. Roberts, Jr.: --Period, without regard to competitive need, available alternatives... MDI's position is, look, you can make a sign that stands up to the wind that's just as good as our sign stand, so don't make it the way we made it, but the patent, the expired patent gives us the right to copy-- David H. Souter: Well, it gives you... this... I think my question is related to Justice O'Connor's, and this is a problem that I have in understanding, and maybe you can help me. You have a right to copy the invention. Does it follow that you have a right to copy the configuration that that invention took in the hands of the patent holder? John G. Roberts, Jr.: --I think Justice Brandeis' opinion in Kellogg answers that. Kellogg did not have to show that there was no way to make or sell shredded wheat other than in the pillow-shaped biscuit form that Nabisco had made famous when it had its patent. It was enough that that was the form in which Nabisco had practiced its patent. Kellogg therefore could copy it, even though they could have made shredded wheat some other way, and that's important precisely because of the purpose of the patent bargain to promote competition. As I said, why... if we have an improvement to this sign stand, the step-and-drop legs, why should we have to add it only to a very different sign stand? It's the commercially proven version that the public has the right to copy. That is important to enhance competition. To require people, if they're going to make improvements, to design around the form that the public had become accustomed to, would inhibit competition, and-- Ruth Bader Ginsburg: If we were dealing, Mr. Roberts, with just the patent law, that would be one thing and, as I understand it, although it's confusing, the word useful is a patent term of art and functionality is a trade dress term of art, but you're trying now to equate these two terms in answer to questions that you've had as one and the same, but they have different purposes, as I understand it, in the patent law, the idea of useful, trade dress, the idea of functionality. You recite the old cases like Kellogg. It's been argued that on the trade dress side the law has evolved since those old cases, and it's now, trade dress gets more protection. John G. Roberts, Jr.: --Yes. You're dealing with what is in the trade dress area essentially judge-made law, and it has expanded in various ways, and functionality... it doesn't interfere with the patent bargain if functionality means a broad range of other things, but so long as it is also satisfied completely by a demonstration that it is a useful product feature. There may be other limitations on a trade dress claim going to competitive need, available alternatives, any of the various multi-factor tests, but if functionality is going to serve the purpose of demarking the regime of trademark and trade dress and patent law, it must be satisfied by a showing that it is a useful product feature and in our case that's significant, because you can't get a utility patent as MDI had, without showing that it's a useful product feature, so the fact that they had a utility patent, that it covered the dual-spring design, should be enough to establish functionality and therefore should be enough to reject their trade dress claim. David H. Souter: Do you agree that at least one basis on which we could decide this case would simply be on the basis of how expensive a concept of configuration trade dress we want, because if we take your position, configuration trade dress is going to be, at least in formally patented matters, a pretty narrow concept, and if we're going to have coherence within the concept of configuration trade dress, we're going to have to make it equally narrow. I mean, we can't have different functionality tests, I presume, and if on the other hand we find good reason to think configuration trade dress is desirable, then we're going to go the other way with a different concept of functionality, I suppose. John G. Roberts, Jr.: I think it is the expansion of the concept of configuration trade dress that has given rise to this issue and the problem. If you go back to where trademark was limited to marks on the product, of course, the product could be patented, the trademark is fine. If you even then go the next step, and you're talking about trade dress and packaging, again, so long as it's distinct from the product, there's no interference with patent. But when you start saying that the configuration of the product itself is entitled to protection as trade dress, you bump right into the patent law, because the key to the patent bargain is, if you're going to control a useful product feature, as the Court said in Qualitex, that's the regime of patent law, and it's no answer to say, well, we're protected by patent law and when the patent expires we're protected under trade dress law, because that takes away the public's half of the patent bargain. We're giving exclusive right to an inventor for a term of years on the condition that he or she disclose what the invention is, and that the public obtains a right to copy it when the patent expires. So yes, I mean, it is the expansion of product configuration trade dress that has given rise to this problem, and I would at least suggest that the Court should not get on board with that expansion without waiting for Congress to say something about it, particularly given the fact that it so directly impinges upon the central patent bargain underlying the patent system. John Paul Stevens: Of course, Mr. Roberts, you rely heavily on the patent in this case, and that's the question presented. You've presented only that narrow question. But I take it you would argue even if there had been no patent issued in this case, no patent application, that this was nevertheless functional? John G. Roberts, Jr.: Certainly, yes, and-- John Paul Stevens: The fact of the patent really is just evidentiary support for the ultimate conclusion that this is a functional feature. John G. Roberts, Jr.: --Well, it gives rise to an important distinction. In other words, having been covered by the patent, another producer knows that when it comes off patent he can copy it, and that's how it worked in this case. Traffix Devices knew... they were in the business... this was a patented sign stand, they couldn't make it, it comes off patent, they can make it. Now, if they at that point had to... instead, if respondent's position were adopted, they had to go to their lawyer and say, is this legally functional, their lawyer would tell them, well, it depends. There are six factors in this circuit, there are eight factors in the other circuit. We've got to get expert economic testimony. It depends on consumer surveys. By that time the producer says, forget it, it's not worth the candle, I'll go make something else, and competition suffers. Stephen G. Breyer: The difficulty, I guess is, would you make the test absolute, because if you make it absolute, you know, you're going to get into huge litigation about whether this thing in the patent was or it was not an essential element, and then somebody will say, oh yeah, I guess I did include it as one of the specifications in the patent, but it really wasn't that important. I mean, should you make it absolute never, or should you allow somebody to defend on the ground that, look, it wasn't that crucial to the patent, and everybody's come to identify it, and please let me make an exception here, and then they give some fabulous reasons. Should it be absolute, or leave them a little bit of a loophole? John G. Roberts, Jr.: Well, you know, a little bit of a loophole suddenly expands, particularly when you have a multi-- Stephen G. Breyer: But it goes both ways, because if you allow no loophole you're going to get the same kind of arguments about whether it was or was not an essential part of a patent. John G. Roberts, Jr.: --Well, of course, in this case it's easy. The key to the invention-- Stephen G. Breyer: In this case it may be easy, but the question is, what about the rule? John G. Roberts, Jr.: --and producers all the time compete all the time in the confines of patents. They have to look at a patent and decide, can I make a competing product or not, so it's not a new inquiry, and in the typical case such as this, where you have a product coming off patent, you will have the conduct of the patentee, which will illuminate exactly what he thought was covered. Here, we not only have the labeling and the trade literature, we have the Windproof litigation. Someone made the exact same sign here and he said, a-ha, that infringes my patent. Well, if it did infringe his patent, and the Ninth Circuit concluded it did, then the public has a right to copy. I'd like to reserve-- Ruth Bader Ginsburg: Wasn't the exact same sign... I thought one of the points that was made was that in the patent infringement case, that sign didn't look as much like the Market Display signs-- John G. Roberts, Jr.: --Yes. The patent displays what they call a business sign, with two springs far apart. The Traffix sign, the one at issue in Windproof and at issue here, the springs are closely together. MDI argued successfully that made no difference, that the two closely spaced springs were covered by the patent to the same extent as the farther apart springs. Thank you, Your Honor. William H. Rehnquist: --Very well, Mr. Roberts. Mr. Wallace, we'll hear from you. Lawrence G. Wallace: Thank you, Mr. Chief Justice, and may it please the Court: Our brief is built on the premise that the functionality doctrine, the traditional functionality doctrine of trademark law is what makes trademark protection of trade dress and other symbolic elements consistent with this Court's patent law jurisprudence, as synthesized and reaffirmed as recently as the Bonito Boats case, but I think part of the reason the two laws harmonize is because the use of functionality doctrine is to limit the scope of protection of the device. Its traditional function was to bar the holder of a patent or other utilitarian device, even if nonpatented, from withdrawing that device from the public domain when there's no longer the protection of the patent as trade... withdrawing it from the public domain as trade dress because people have a right to practice and use as the building blocks for further innovation whatever devices are in the public domain that are utilitarian in nature, including their overall configuration, but there is still protection against confusing similarity through requirements of labeling, packaging, avoiding palming off and other misrepresentations. Functionality really goes to the scope of protection, and limits the scope of protection available under trademark law by preventing someone from monopolizing and withdrawing from the public domain utilitarian features or the entire utilitarian device in the absence of valid patent protection. That is the domain of patent law, and one must qualify for a patent and have a valid patent in order to have a legal monopoly that withdraws, that prevents others from using the device, but there... as I say, these other protections are still available as well as the ability to exclude ornamental or incidental features. That is what to us harmonizes the two statutory schemes. The traditional understanding of functionality was not an artificial concept. It was the ordinary meaning of the word. What enables the device to function is what is functional. That was reflected in a very terse quotation we have in a footnote on page 17 of our brief by Representative Lanham himself, when someone raised concerns about whether the trademark law might result in compromising of the public's right to use useful inventions, and he said-- Ruth Bader Ginsburg: Mr. Wallace, may I ask if you would answer the question that Justice Stevens posed to Mr. Roberts in the same way? That is, the definition you're now giving us as functional sounds like you would come out the same way on this alleged trade dress infringement, even if there had never been any patent in the picture, because this sign, all the ingredients are functional. There's no purple bow on it. Lawrence G. Wallace: --That is absolutely correct. We would come out the same way as we were... I think this Court's decision in Bonito Boats is an example of that, because there was no patent shown in the record, as the court noted, of the boat hull that they said could not be copied. Anthony M. Kennedy: So your position is the utilitarian feature of the patent is a conclusive presumption in a trade dress suit where functionality would otherwise be at issue? Lawrence G. Wallace: With regard to the scope of protection, that others cannot be excluded from using something utilitarian. As we compressed our brief down to our allotted 30 pages we carefully preserved a quotation on page 11 that you can see at the top of the page from the 1917, or 1911, excuse me, Seventh Circuit decision because it states the common sense of it. If you have utilitarian features that didn't even meet the standard for getting a patent, they should not be given a perpetual monopoly in contrast to what was then the 17-year monopoly that you could get if you met the criteria for patentability. The other protections available against confusing similarity make the need for a right to exclude imitation of trade dress relatively unimportant compared to the policies this Court has reiterated at least since 1896 in the Singer case about the need for utilitarian features to be used as building blocks and to be in the public domain except for the limited period of time in which they are protected by a valid and unexpired patent, and we understand this Court's decision in Qualitex to mean much the same thing. The difficulty has arisen because an alternative test of functionality has also become appropriate as the scope of trademark protection has extended to matters that don't have utilitarian features to them. We point particularly to the protection of color as an example, where there is relevance to looking at competitive need in... we give an example in our brief of an orange-colored can of soda. There were other amicus submissions in the Qualitex case in which people were making claims that raised issues that went quite beyond what was involved in the press pad that was at issue in Qualitex. One of them, for example, involved orange-colored sprinkler system piping. Well, it raised other questions. I don't say the result would necessarily be different but one would have to examine whether a competitor who wanted to compete for replacing a portion of the piping would be disadvantaged if he couldn't match the color of it. It was a different case from the Federal Circuit's Corning, Owens-Corning case involving the pink-colored insulation, because that goes behind the wall and people don't see it. The orange coloring in some contexts connotes danger, and perhaps there is marketing significance to that. But the mistake that I think some of the courts of appeals have made, including the Sixth Circuit in this case, is to say that that is now the exclusive approach, and you wind up with multi-factored tests that don't really give an adequate guidance to what the law is. A very good example is found on page 17 of the light green amicus brief filed by the International Trademark Association in this case, in which they speak approvingly of various multi-factored tests that the courts of appeals have adopted in this area, which leaves open what this Court in its salutary opinion in Wal-Mart v. Samara Brothers referred to as the plausible threat of litigation which can discourage competitors and become an impediment to the benefits that consumers would get from competition, and to have tests of this kind applied to displace the traditional approach to functionality would be very detrimental to competitors for the very reasons the Court has recognized in the cases synthesized in the Bonito Boats opinion. Antonin Scalia: Mr. Wallace, I'm not sure what your proposal is, that we use the simple test for what, for useful features-- Lawrence G. Wallace: That-- Antonin Scalia: --whether or not they are patented, and the more complex test for... for what? Lawrence G. Wallace: --Both... either test can show that something is functional, whichever one suits the needs of the particular factual situation. William H. Rehnquist: Thank you, Mr. Wallace. Mr. Artz, we'll hear from you. John A. Artz: Mr. Chief Justice, and may it please the Court: This Court granted certiorari due to a conflict between regional courts of appeals on one issue, and that is whether or not the visual image and appearance of a product... with a product whose operation and performance was covered by a utility patent, can still be protected as trade dress under section 43(a) of the Lanham Act. The imposition of any per se rule, whether the Government's rule or Traffix rule, which says it cannot be protected in my opinion is unnecessary, unjustified, and unworkable. It's unnecessary because there are already adequate rules in place, the trade dress rules and functionality that have been referred to already. It's unjustified because it would cause harm to the public's right not to be confused or deceived. Those are paramount in trade dress and trademark cases under the Lanham Act. That's a touchstone of the Lanham Act. It would also-- Sandra Day O'Connor: It's a touchstone of patent law that an expired patent can be copied, so we really do have to make the two doctrines mesh well. John A. Artz: --Yes. Sandra Day O'Connor: And the concern we have is with this expanded competitive need test that some of the lower courts have begun employing, and I am quite interested to know how you think the two doctrines can fit neatly together, because in an ideal world a trade dress could not cover something that was covered by a patent that's now expired. John A. Artz: Well, Justice O'Connor, the mediating factor between the two is the functionality test, in my opinion. There's... you've got the patent laws, you've got the trademark laws and the Lanham Act, two federal laws-- Sandra Day O'Connor: And it's possible that some of the courts have lowered the bar too much on the functionality inquiry. I mean, I think that's what we need to look at. John A. Artz: --Well, in the Qualitex case, the Qualitex gave a specific definition of functionality, and remember now, in 1998-1999, Congress made some amendments to the trademark act, or Lanham Act, and in this they specifically mentioned functionality several times. They added it to the fact that you can't have functional trademarks... you can't have trademark that's functional but if it's nonfunctional you can, and they knew about the Vornado case at that time because it was decided in 1995, and that's the Tenth Circuit, and there's a lot of flurry of activity in the intellectual property bar because of that, so all that was before Congress when it amended it, and Congress did not go to any per se test at that time, and so you've got two Federal laws here, and under the Morton case and the Ruckelshaus case which are cited. William H. Rehnquist: Is there evidence, Mr. Artz, that Congress affirmatively approved the Tenth Circuit case? John A. Artz: No, they did not. I mean, because they... what they... they actually... the legislative history mentions the fact that their patent expiration, and people might be trying to get trademark protection after the expiration of the patent, and then they go on to add functionality. William H. Rehnquist: Well, I... you... I thought part of your argument was that the Tenth Circuit had decided this case in 1995 and it was quote, before, close quote, Congress at the time it made the amendments. What is the purport of that? John A. Artz: Well, what I'm saying is, in 1995 that Vornado case was there, and in 1998 Congress amended the trademark act. Now, there's no legislative history that I can see that actually mentioned the Vornado case. I'm saying that it probably-- William H. Rehnquist: But you're not... you're arguing, I hope, something more than post hoc ergo propter hoc. John A. Artz: --Yes. Yes, I am, Your Honor. Stephen G. Breyer: Would you go back to Justice O'Connor, which I thought was the key question, and I didn't-- John A. Artz: Yes. Stephen G. Breyer: --hear the answer. I mean, I know Qualitex. I'm surprised not at your reading, because that's your job, but I'm pretty surprised at the Tenth Circuit, the court, which... I learned you read the whole case, what the context is not just a sentence taken out of context, so I obviously thought that Qualitex was about a doctrine called aesthetic functionality. I thought, on page 165 where the court quotes the tradition, what's in quotes, the definition, a product feature is functional if it is essential to the use or purpose of this article, all in quotes, or if it affects the cost or quality of the article, okay, end of the matter. Now it adds, because that's what happens to be relevant to aesthetic functionality, that is, if exclusive use of the feature would put competitors at a significant nonreputational disadvantage. That last clause is relevant to what happens to be the subject of this case, called aesthetic functionality. John A. Artz: Yes, Your Honor. Stephen G. Breyer: Two pages later, in case that wasn't clear, the case quotes Restatement Third about aesthetic functionality and says, in respect to aesthetic functionality, i.e., color, quote, the ultimate test is whether the recognition of trademark rights would significantly hinder competition, all right. John A. Artz: Yes. Stephen G. Breyer: But nothing in the case-- John A. Artz: No. Stephen G. Breyer: --purports to change any earlier test in respect to anything else-- John A. Artz: Well, that's-- Stephen G. Breyer: --or even change anything there, so as I read the case that seemed to be its reading, which would say in this case, which isn't about aesthetic functionality, we apply what is the traditional test. John A. Artz: --Well, every case which has actually looked at functionality actually has come up with the result that the Sixth Circuit did, the Seventh Circuit did-- Stephen G. Breyer: Maybe, but I thought the place you look for a test is in the Supreme Court opinions, and in the Supreme Court opinions, Qualitex quotes the traditional test. It didn't make it up. John A. Artz: --That's correct. Stephen G. Breyer: It said, in general terms a product feature is functional if it is essential to the use or purpose of this article, or it affects the cost or quality of the article. That's all in quotes. The rest is explanation as applied here. So if we take that as the test, why isn't that the test? John A. Artz: Well, the Supreme Court goes on in the Qualitex case and says, that is... that is, if exclusive use of the feature would put competitors at a significant nonreputational related disadvantage. Stephen G. Breyer: Well, that was my question. My question was as to that add-on, doesn't that have to do with an explanation of the test as relevant to the issue before the Court in Qualitex-- John A. Artz: I think that-- Stephen G. Breyer: --namely, aesthetic functionality, which is an aspect of quality I think people could argue about. John A. Artz: --I think that is the test, Your Honor, whether or not-- Stephen G. Breyer: The test in the case of aesthetic functionality? John A. Artz: --Yes. Stephen G. Breyer: Fine. Is this a case of aesthetic functionality? John A. Artz: I believe it is, yes. Stephen G. Breyer: Aesthetic? It involves color? John A. Artz: It involves how things look, the appearance, visual-- Stephen G. Breyer: Everything in design involves how things look. John A. Artz: --Okay. Stephen G. Breyer: I mean, that's-- John A. Artz: Well, it's aesthetic in that sense, but it's not... it doesn't involve color, no, it does not. It's not like the color that was allowed in the Qualitex case, but I think that is the test. Ruth Bader Ginsburg: --It involves size and shape, and this discussion about Qualitex and aesthetic functionality doesn't get into what effect the patents, if any, has on functionality, and in your view does the patent... your having had a patent, building up goodwill, free, over 20 years, nobody can compete with that, so if you've got secondary meaning it's because you have been able to keep everybody off. We've been dealing with cases in your discussion where there was no patent in the picture. How should the fact that there was a patent bear on the inquiry that was made in cases where there was no patent? John A. Artz: Justice Ginsburg, I think that the case, Midwest case by the Federal Circuit, the Thomas & Betts case of the Seventh Circuit, our case, Sixth Circuit, and the Sunbeam case, Fifth Circuit, all apply the proper test. There are different forms of intellectual property laws, or IP laws, as I call them, you've got five different basically Federal laws on intellectual property, patents, copyrights, trademarks, trade dress, unfair competition. They're all separate and distinct. The fact that you have a patent on something, that is different than whether or not you can have a trade dress on something. Patent would be relevant in the sense that under this commercial necessity test, if there's only one way to make that product, that was look and appearance, then it's functional, and so in that sense the functionality test would apply and the patent, if it says something about the functionality, that would be relevant to the functionality test in the trade dress area, but they're separate and distinct, and they always have. Design patents, for example-- Antonin Scalia: They may be separate and distinct, but they bear upon one another, and there seems to be something horribly unfair about allowing someone who has acquired a secondary meaning in the trade dress only because of the patent... let's say the shape of a Coca-Cola bottle. I mean, you know, if that wasn't patented, somebody else could have come out with the same shape bottle as soon as it... you know, as soon as the first ones came off the line they could say, gee, that's a nice-looking bottle, and they could have copied it, but you couldn't copy it because it was patented, and therefore, by reason of the patent, for 17 years Coca-Cola acquires a secondary meaning. Anyone who sees that bottle would say, it's Coca-Cola. Then, when the patent expires, Coca-Cola in effect extends the patent by parlaying what was the design patent into what is now trade dress protection, because they say, well, gee, everybody knows that that's a Coca-Cola bottle, but the only reason they know is because you've been given a monopoly for 17 years, and it doesn't seem right to enable you to extend that monopoly indefinitely. The only reason you acquired the secondary meaning was because of the patent. That's unlike other companies that get secondary meanings without a patent. Doesn't there seem any incompatibility with the patent law to you? John A. Artz: --No, I don't think it's unfair at all, Your Honor. I think they're separate and distinct. I agree that perhaps, if you have this 17-year monopoly on this patent, that might help you on the trade dress area with respect to secondary meaning, but then, of course, just as we found here, the functionality test, the fact that you had a patent on it actually hurts you. It might be a wash between those two. The trade dress has three separate and distinct tests. You have to show it's distinctive... in other words, it has secondary meaning... and the public recognizes it as something which comes from a certain source. It's a source identifier. You have to show it's nonfunctional. However, trademark law has been amended, which specifically says you have that burden of proof if it's unregistered. Under the Qualitex case in my opinion you have to show whether it's competitive necessity, then you've got to show whether there's a likelihood of confusion. You may have a product that looks exactly the same as yours, but if you can't show there's a likelihood of confusion, you don't win. You need all three of those tests in the trade dress area. Ruth Bader Ginsburg: There's a problem-- Antonin Scalia: --Well, it's the second that we're arguing about, I think. I think it's the second, when you have to show that it's functional, and I find it hard to think that it's not functional when you have a patent on it. You only give patents to things that are functional. John A. Artz: I think functionality, Your Honor, legal functionality is really a misnomer, like I believe in the Wal-Mart case the secondary meaning was looked at as being a misnomer. It was really acquired meaning, acquired meaning afterwards. Legal functionality really is a misnomer. Every product has a function. The Coke bottle has a function, obviously. It's useful, has a purpose. It's got a flat bottom so it doesn't tip over. It's got a narrow waist so you can grab it, a narrow spout so you can drink it easier, it's clear so you can see it. Those are all functional, useful, purposeful. Stephen G. Breyer: Aesthetic functionality isn't conceivably in this case. They're the ones that argue functionality, not you. They're the ones that say that the product is functional. They're not saying that the functionality of your product arises from the way it looks. They're not saying, like color, it warns people that the boat's black. They're saying that the functionality of the product is that the springs prevent it from twisting in the wind. Now, that isn't a claim of aesthetic functionality, and I don't see how you could even closely claim that it is. John A. Artz: Well, I think the functionality test that's been developed in Qualitex applies to any type of trade dress-- Stephen G. Breyer: Ah, wait. I thought what you said is, you agreed with me before that Qualitex is talking about aesthetic functionality, that we apply the normal test without that little add-on, but we apply Restatement Three, the aesthetic functionality test, which is the add-on, where they make the claim that the reason this product is functional is because of the way it looks, i.e., the pipes are painted orange as a warning, which is not their claim in this case. Am I... now, where am I wrong in that? John A. Artz: --I think the test that's set forth in Qualitex that Your Honor says is for just aesthetic functionality applies in every functionality test. I think that's the difference. Stephen G. Breyer: So then the pages written at 169 and 170, and trying to explain just what we're driving at are sort of beside the point. John A. Artz: Yes. It says in general terms a product feature is functional and cannot serve if, and then you say it's essential to use or purpose. I mean, that's broad and ambiguous. Everything has a use or purpose, and then you say, if it affects the cost or quality. Virtually everything affects the cost or quality, so it seems to me the only objective test you have here, because it relates to competitors and consumers, is whether or not it puts competitors at a significant disadvantage in the marketplace. Ruth Bader Ginsburg: Can we apply that test, because I'm having a little trouble connecting to the real world and the device before us and these multi-factor tests and even what you've just been saying. Tell me what it is in your formerly patented device that Traffix can copy now that the patent has expired. Can it make a sign with those two coil springs adjacent to each other? John A. Artz: Yes, it can, Your Honor. Ruth Bader Ginsburg: If you could describe to me what it can copy and what it must change I would have a more secure handle on what your case is. John A. Artz: Our trade dress, Your Honor, it's really a combination of five features. It's got your X-shaped legs, a narrow base, a pair of upright vertical coil springs, an upright attached to that, as well as this diamond-shaped sign above it, and I have a model of it that actually shows what it is here. This is in the record before the court of appeals. Now, they could change any one of those. They could keep the coil springs if they change some other configuration to make it look different, to give it a visual... different visual appearance. Like, right now, even the vice president and their technical expert say that when they see a sign like this one driving along the road, they know it comes from Marketing Displays. They know it's a Windmaster. Ruth Bader Ginsburg: But there aren't that many things to adjust. I mean, one of the things about Qualitex and the green/gold you could have tan/silver, any number of combinations that would serve that purpose, but for that road sign that's not going to blow in the wind you have to have those springs, and you have to have some kind of base, and there aren't that many variations. Antonin Scalia: And the law requires the shape of the sign. I mean, in many States that shape of a sign indicates a certain type of warning, so what's left? There's nothing left but the legs, and-- John A. Artz: You have-- Antonin Scalia: --And your friend over there says that they changed the legs. They did change the legs. John A. Artz: --Now-- Antonin Scalia: Somebody who sees their legs say, gee, it has the... what do you call them... step-down legs, or whatever it is, so the one thing it seemed to me that they could have changed, they did change. John A. Artz: --No, they kept the same visual appearance and image, Your Honor. This was what the patent covered with a product such as this. They could have gone to something like this, with a wide base, a pair of springs way apart, they could have gone to straight legs like this, they could have gone to an upright like this, rather than this, and attached the sign to it. This is what the patent covered. This is what was shown in the patent. This is only found to infringe, under the doctrine of equivalents, which took several years and several thousands of dollars for MDI to prove it, and that's the problem with a per se test. Ruth Bader Ginsburg: Because that one in your right hand probably works better. John A. Artz: I think so. [Laughter] Ruth Bader Ginsburg: Yes, and that's why they wanted to copy it, and not something that worked less well. John A. Artz: Well, the thing here is a competitive necessity test. I think it's important, because there are really, like, eight competitors in this marketplace, MDI, Traffix, and six others. Six others all came up with sign stands which looked different. They have different spring mechanisms in particular. There's flat springs, horizontal spring, there's a torsion spring, and so Traffix said, I had to copy MDI's, yet all the other competitors made their own design. They came up with sign stands which look different. They have different visual appearance. So there are seven types of sign stands out there, MDI's, six others, and then Traffix'. John Paul Stevens: You know, I have to confess that I'm... I find it a little difficult to imagine that most motorists are looking at what... the legs of the sign instead of the message on the sign. [Laughter] I find it hard to believe that people really identify with two legs or three. I don't have the slightest idea how many legs there were on most of the signs I've looked at when I was driving along. Anthony M. Kennedy: I've been looking in the last week. It's very interesting. [Laughter] Antonin Scalia: I gather you don't care about the motorists. You just care about the highway purchasing departments. John A. Artz: That's it, yes. Antonin Scalia: Right? John A. Artz: It does... confusion as to the purchaser, who the relevant purchasers-- Antonin Scalia: You couldn't care less about the motorists. You just want to sell the signs. [Laughter] Stephen G. Breyer: Could I ask you a question about the patent part? I'd like to ask you about the patent part, and will you assume for purpose of this that Qualitex is about color, which is a matter that doesn't easily fit within the terms, you know, purpose, use, cost or quality, and suppose here we're dealing with something that does easily fit within those terms, all right, so keep Qualitex out of it. Now, assuming that that's so, what would be wrong... and they come in and they say, look, these springs are part of the function. They're part of the function. They're essential to the use, these springs, in this way. Now, should there be an absolute presumption that if you one day said... I'm not saying what you did say, but we'll assume this. If you one day said in the patent application, I have a great idea here, and my idea is to have two springs just like this, and then later on, when it's expired, they say, that was the heart of it. It was useful. Should the fact that you said that one day in the patent be the end of the matter, nobody ever looks further? There is a... what the Government said here is where as an expired utility patent discloses that the feature alleges trade dress contributes to the operation of the formerly patented device, the feature must be considered function. Now, that's the Government's suggestion. John A. Artz: --Okay. Stephen G. Breyer: All right. Now, you can of course argue that wasn't essential, et cetera, but my problem's a general one, leaving this case out of it. Should that be the test? John A. Artz: No, it should not be the test. Stephen G. Breyer: Because? John A. Artz: Because I think what you say in the patent could be relevant, and the patent obviously is going to be put into every trade dress case, and that is one of the reasons I think that trade dress tests, that their absolute test is unworkable, because in every trademark case now what you're going to have is, a defendant's going to run out and scour the 5 million expired patents, find one which has a claim which may read on this trade dress, accused trade dress and say, a-ha, it's dedicated to the public on this other, somebody else's patent. See, one of the things that-- Anthony M. Kennedy: It would seem to me that would be, even under your rule, a... well, maybe not under your, but under the Government's rule, quite an appropriate thing to do, to show that there is functionality that the patent office has recognized. John A. Artz: --Well, again I don't want you to confuse legal functionality with something that's useful in purpose, because legal functionality is different. It's a legal test. It means, as in the Qualitex case, I believe, or it means what is competitive necessity to use it, and just now, recently, in the 1998-1999, Congress made amendments to the Lanham Act and it did not go for an absolute test. It did not go for a test for use or purpose. What it did, it just said, if it's... you know, burden of proof of functionality is going to be on the party saying it's nonfunctional. Antonin Scalia: Mr. Artz-- John A. Artz: Yes. Antonin Scalia: --I hadn't realized it, you are not complaining about their use of the double spring feature. That's not the complaint. You said they could have-- John A. Artz: No. Antonin Scalia: --used the double springs if they had put them separate-- John A. Artz: Yes. Antonin Scalia: --separately and apart. John A. Artz: --possibly, in a bit different visual image and appearance, Your Honor. Antonin Scalia: And the double springs next to each other was not part of your original patent application-- John A. Artz: No, it was not. Antonin Scalia: --that they were originally apart. John A. Artz: That's right. Antonin Scalia: So the issue, really, is simply the functionality of putting the springs close together. Now, what if putting the springs close together... it would have nothing to do with the patent, but what if putting the springs close together makes the sign more stable? John A. Artz: Actually, technically it would make it less stable. It would make it easier, more easy to twist. Antonin Scalia: Okay, but if it made it more stable, then you would acknowledge that they could copy even that feature, the unpatented feature? John A. Artz: No. They have an improvement in performance that they say is more stable, but it doesn't mean that they can still copy it if it's part of our trade dress. There's a... the... our trade dress has a number of features, as I mentioned before. It's not just the coil springs. They could use coil springs close together as long as they change the base, or change the legs, or change something which gave it a different visual appearance to the public. One of the touchstones here of the trademark Lanham Act is to prevent confusion of the public, the public buying this. You don't want to confuse or deceive the public, which this does-- Sandra Day O'Connor: Well, the public isn't buying it. It's highway departments that are buying it. The public isn't buying this sign, is it? John A. Artz: --That's the relevant public for this purpose, Your Honor, yes. Sandra Day O'Connor: Yeah, it's the highway department purchasers. John A. Artz: That's correct. Sandra Day O'Connor: And doesn't the State typically regulate the shape of the sign, as Justice Scalia asked you? John A. Artz: Yes. Sandra Day O'Connor: I mean, diamond shape indicates a certain kind of warning, does it not? John A. Artz: Correct. Sandra Day O'Connor: So they can use that shape and color, presumably. That's necessary. John A. Artz: Yes, I agree, Your Honor. Sandra Day O'Connor: So what are we arguing about, the legs? John A. Artz: The... yes, legs, the shape, the base, and the springs, and then the upright. It's a single upright, too. This doesn't have the single upright because it's a small model. William H. Rehnquist: Well, what is the base, after you get through with the legs, and the upright, and the springs? John A. Artz: Uh-huh. William H. Rehnquist: I mean, could you... you indicate, what are we arguing about, the legs and the base. John A. Artz: There's no... I don't think there's any doubt that these have a different visual appearance. One has a wide base, one has a narrow base, one has straight legs, one has X-shaped legs. William H. Rehnquist: So when you say base, that really is another way of saying the legs? John A. Artz: No, it's what the legs are attached to. It would be this... this part in between the legs, and here are the bases. It's what the legs are connected to. Sandra Day O'Connor: But obviously you're holding up one that's a rectangle, so it makes sense to have the posts on either side, as opposed to the diamond shape, where it makes sense to have it in the middle. I mean, you're not showing us an equivalent-shaped sign. John A. Artz: Well, this, under the doctrine of equivalents, this was held to be an infringement. But right, individual appearance, I think they are different, and so from a trade dress standpoint these are two different products. Antonin Scalia: Well, you're willing to fight out the... I gather you're willing to fight out the functionality battle as to whether putting the two springs right next to each other instead of apart is a functional matter. You're willing... are you willing to combat on that ground? John A. Artz: Well, I... whether it's useful, has a purpose, I mean, if that's functionality-- Antonin Scalia: Whether it's functional within the meaning of the trade dress restriction. John A. Artz: --Well then the answer, I agree... I think is no, because is there a competitive necessity to have them together? The answer is no. Antonin Scalia: Okay, but you would agree that that inquiry would be addressed to the spacing of the springs. John A. Artz: Only-- Antonin Scalia: Even if we think that the use of double springs is automatically no basis for giving you trade dress protection, since you had patented the double springs, you hadn't patented whether they were close together or far apart and so whether putting them close together, as your opponent did, is a violation of trade dress protection would depend upon whether putting them close together is functional within the meaning of trade dress law, right? John A. Artz: --It's whether or not their whole visual appearance, of a combination of five features, is functional in the competitive necessity test. That's why-- John Paul Stevens: I thought you a minute ago acknowledged that if the two springs were closer together it would be less wind-resistant than otherwise, which seems to me demonstrates it has some functional significance whether they're close or not. If one is a... better resistant to the wind than the other, doesn't... isn't that functional, isn't that enough to prove functionality? John A. Artz: --Not the legal functionality test-- John Paul Stevens: Not under all these tests, but why shouldn't it be enough? The Government argues that the competitive need is a sufficient proof but not a necessary proof of it as a defense to the trade dress argument. John A. Artz: --Well, the problem you have, Your Honor, is that tests... either the Government's test or Traffix' test is going to be unworkable, because you could have company A that makes this product, or comes up with this idea, company B. Company A gets a patent on it, goes 17 years. Company B doesn't get a patent, and gets trade dress protection on it, and yet company A for some reason doesn't sue them, but when this patent expires, that means all the trade dress that company B has developed over all those years is shot. It's out the window, because it happens to be the subject of a patent. See, that's a problem with this per se test that they're saying. Stephen G. Breyer: I don't... I thought as a factual matter that there are five features in your patent, including the legs, all the other things of appearance, but the district court found that there are a lot of other competitors that have every one of those features, so it's not unique but for the spaced-apart coil springs, so that all were... is that true? John A. Artz: That's true. Stephen G. Breyer: All right, so all we're talking about... and then I thought also as a factual matter that somebody before the patent expired used those two spaced-apart springs in that narrow configuration that your finger's on right now. John A. Artz: Uh-huh. Stephen G. Breyer: And you sued them, and it was found in your claim, in your view, those spaced-apart that much, not wide apart, violated your patent, and you won. John A. Artz: Well, the patent covered some other things other than that. They had to have initial compression along the coils of the spring. They also had to meet a certain geometric relationship with the center of gravity-- Stephen G. Breyer: But they didn't get out of it... they didn't get out of your patent, because the springs were close together rather than being far apart. John A. Artz: --Well, that's the doctrine of equivalents, and-- Stephen G. Breyer: Yeah. John A. Artz: --one language of the claim which calls for spaced-apart springs, and then we-- Stephen G. Breyer: That's right. John A. Artz: --It was equivalent from a patent standpoint whether two springs together were the equivalent of two springs spaced apart. Stephen G. Breyer: That's right, so I-- John A. Artz: That was that issue. Stephen G. Breyer: --Yeah. John A. Artz: That's only one of several issues in that patent case, and the fact that the others happened to use this coil spring, they used the other parts, that shows you that you can change one or two parts of this particular trade dress and comes up... have something that looks completely different. In that case, the competitors made a flat spring, they had a horizontal spring, they put two springs at 45-degree angles, you could change the legs, you could change the upright... all of those might give a different visual impression. That's what the Sixth Circuit said. See, the district court in this case concentrated on just the two springs, and the Sixth Circuit said that was not proper because it's the overall appearance, visual, visual and image of the product which really controls. You can't look at one-- Antonin Scalia: But it seems to me if the different spacing is the functional... is a functional equivalent for patent law, then it seems to me that the spacing of the spring is part of your patent protection. John A. Artz: --All right. Antonin Scalia: As well as the nature of the springs, and so the square stand is no different for purposes of the issue in this case than the diamond-shaped stand. John A. Artz: As long as you don't confuse the patent law with the trade dress law, Your Honor, two separate and distinct, but from a patent law standpoint you're right, but not from the trade dress standpoint. There's another... right now we're looking at the public domain, and the difference is where it comes from. If it comes from a patent, it's given special recognition. You can't use it for the trade dress, but if it doesn't, then you can use it. Now, that to me is not a real consistent... not a real consistent argument. You also have the fact that as... where do you look at the trade dress and this functionality, look at one patent, look at two patents, what if there are several patents that show it. You know, what if you don't even own the patents? What if we were just a licensee and asserted it? What if you didn't own it? Would that make a difference, or if a third party owns the patent. There are several things, questions we raise at the back of our brief that Traffix and the Government really can't answer. They really do admit that if someone is the subject matter of one patent by one person, and it expires, somebody else's trade dress will expire. I mean, right now we also have a situation where they're trying to get special protection for utility patents, which is different than, for example, for design patents. Or, talk about something being nonfunctional, design patenting in which having this right, as you mentioned before, of an exclusive period of 14 years develop secondary meaning. There's no question whatsoever that courts do allow parties to get trade dress protection in such a matter of design patents, and there you've got this secondary meaning over 14 years in which you've used it exclusively, and that goes to the look and appearance of the product, but there's no problem with having trade dress protection afterwards because it isn't functional, so why should utility patents be treated any differently? And as I said initially, there are different areas of intellectual property law, you have different standards, different tests, different remedies. You know, in trade dress law you have... in trademark law you have much different remedies to protect the public and consumers. Here-- William H. Rehnquist: Thank you, Mr. Artz. John A. Artz: --Thank you, Your Honor. William H. Rehnquist: Mr. Roberts, you have 2 minutes remaining. John G. Roberts, Jr.: Thank you, Your Honor. There was until this morning no dispute that moving the springs closer together was functional. If you look at petition appendix page 54a, there is the explanation from MDI's chief engineer that doing so makes the sign more compact and weighs less, very important if you're ferrying these things up and down the highway, and also makes it less expensive to manufacture. As far as the two different sign stands, the diamond one with the closely spaced springs, joint appendix page 236, MDI said that those signs, even though the other one was depicted in their patent, that the closely spaced springs were, quote, slavish copies from the standpoint of function of the sign stand described and claimed in the Sartesian patents. Third, that is the form in which they practiced their patent, the closely spaced springs. Kellogg, Singer, Sears, that line of cases gives Traffix Devices and any member of the public the right to copy the patent in the form in which it was practiced. That is critically important to maintain competition. Whether you begin with patent law and the right to copy from an expired patent, or trade dress law and the definition of functionality that focuses on usefulness, is it a useful product figure, you come to the same point. Traffix Devices had the right to copy the MDI sign stand when it came off patent, and it did so. It did so in the way Bonito Boats explains enhances competition, imitation and refinement through imitation by adding an improvement of its own that made a more competitive product better for highway safety departments. William H. Rehnquist: Thank you, Mr. Roberts. The case is submitted.

John G. Roberts, Jr.: We'll hear argument next in Case 11-696 -- 697, Kirtsaeng v. John Wiley & Sons. Mr. Rosenkranz. E. Joshua Rosenkranz: Thank you, Mr. Chief Justice, and may it please the Court: This case presents a stark choice between two plausible definitions of the phrase, lawfully made under this title. Our definition is the more consistent with the English language, and is the only definition that does not do mischief with the same use of that phrase each time it's repeated. Ours is the only one consistent with a 400-year common law history, and 65-year-old right that was in the statute through 1976, and consistent with the principle that Congress doesn't abolish those things without being clear. Ours gives the copyright owners much of what they asked for when they were seeking an importation provision, just not everything; whereas, Wiley's grants them rights far beyond anything that anyone could have imagined asking for back then. Ours-- Ruth Bader Ginsburg: But your reading -- your reading is essentially, once a copy is sold anywhere, the copyright owner loses control of distribution everywhere. That is essentially your argument. E. Joshua Rosenkranz: --That is correct, Your Honor. And to put a finer point on it, ours is that lawfully made under this title means made wherever, in a way that satisfies U.S. copyright standards, made in accordance with-- Ruth Bader Ginsburg: No -- but -- so this notion of sold anywhere, end of distribution rights everywhere, that has been called, I think, the universal exhaustion principle. E. Joshua Rosenkranz: --International exhaustion. Yes, Your Honor. Ruth Bader Ginsburg: And we are told that no country has adopted that international exhaustion regime, that most countries adhere to the national exhaustion regime, which nobody is contesting here. That is, if it's manufactured in the United States and sold in the United States, that copy belongs to the person who purchased it, end of case. But if the exhaustion doctrine applies only nationally, then your argument is asking for something that runs against the regime that is accepted in most places. E. Joshua Rosenkranz: Your Honor, I have a few answers to that. The first is it is not true that no country adopts national exhaustion. Congress adopted national exhaustion in sections 905 and 906 6 years after the statute was passed, as to microchips. But second, Wiley is making the point that there is now a norm. They say most States -- most countries, that is. Back in 1976 Wiley is not even arguing that there was any international norm, much less that the drafters of the statute were focused on international norms; and the truth is that there isn't an international consensus around national exhaustion. We know that for a fact. In 1994 when 125 nations got together, they -- they agreed to disagree on international copyright exhaustion principles, and they codified that disagreement, to each his own, in the TRIPS agreement. Ruth Bader Ginsburg: Well, let's take, for example, the European Union, the position in -- in those countries. Suppose we -- we just transformed -- transferred this case to one of those countries, the exact same case; and my understanding is that they would follow the national exhaustion. E. Joshua Rosenkranz: No, Your Honor, not to quibble; they don't follow national exhaustion. They follow regional exhaustion. So-- Ruth Bader Ginsburg: Yes, but not -- not exhaust -- you sell a copy in -- in Thailand; then it's home free all over the world. E. Joshua Rosenkranz: --Agreed, Your Honor, but it is regional, it's not national. And -- and the point here is we've got to of course read what Congress wrote. What Congress wrote was “ lawfully made under this title ”, not "lawfully made in the United States. " or not "lawfully made under this title and made in the United States. " When Congress wants to say that, Congress says that very explicitly. Antonin Scalia: Do you mean by “ lawfully made under this title ”, simply lawfully made in a manner that does not violate United States copyright law? E. Joshua Rosenkranz: No, Your Honor. Just, I -- I would say “ lawfully made under this title ” means lawfully made in a manner that does not violate the standards articulated. Antonin Scalia: The standards, okay. So -- so it could be lawfully made in England, let's say; in a country that has compulsory licensing, it could be lawfully made there, but it would not be lawfully made under our -- under our copyright law, because we don't have that. E. Joshua Rosenkranz: Yes, Your Honor. Let me give a -- an example that actually is consistent with what-- Antonin Scalia: So -- so at least they are correct in contending that what you are arguing for is -- is not lawfully made under -- lawfully made if the United States copyright law had applied where it was made; is that what you are saying? E. Joshua Rosenkranz: --No, Your Honor. And the reason is-- Antonin Scalia: No? E. Joshua Rosenkranz: --that that statute that you just described would only do a third of the job of the first-sale doctrine. Everyone agrees the first-sale doctrine applies at a minimum to products made in the United States. And if you use that counterfactual, if U.S. law had applied, it would indicate that it, the first-sale doctrine, does not apply in situations where it was made in the United States. So the counterfactual-- Antonin Scalia: I don't -- I don't follow that. E. Joshua Rosenkranz: --So the first-sale doctrine applies to goods made in the United States-- Antonin Scalia: Right. E. Joshua Rosenkranz: --and to goods made outside of the United States, is our argument. Antonin Scalia: Okay. E. Joshua Rosenkranz: If it applies in the United States, if we're talking about goods made in the United States, the counterfactual “ if this title had applied ” would not work, because this title does apply to the goods made in the United States, and that's the core of the first-sale doctrine. Elena Kagan: So, Mr. Rosenkranz, is what -- is your theory of this statute essentially that this language means nonpiratical copies as that is defined by U.S. copyright law? E. Joshua Rosenkranz: Yes, Your Honor, if I may just change one word, because “ piratical ” is a mischievous word. Back in the day when the 1976 statute was passed, “ piratical ” meant unlawful under the laws of other countries. Elena Kagan: No. E. Joshua Rosenkranz: Yes. So-- Elena Kagan: I said as defined by U.S. copyright law. E. Joshua Rosenkranz: --Absolutely. And -- and the key-- Elena Kagan: So that's, that's what the statute means. It's -- the statute in your view is setting up a distinction between piratical, pirated, whatever the term is -- copies-- E. Joshua Rosenkranz: --Counterfeit. Elena Kagan: --and other copies, and saying that that distinction should be measured by U.S. copyright law? E. Joshua Rosenkranz: That is right. And Your Honor, the reason was -- what was driving copyright owners crazy was this notion that there were lawless states out there that had no significant copyright protection. And we were applying their standards to products that were infiltrating the U.S. market. And one of the most important things to underscore here, which I think got lost in the Costco argument, is that the space -- that 602 does an enormous amount of work even with 109, the first-sale doctrine, carved out of it. Copyright owners wanted three things out of the 1976 act with respect to importation, and they got two and a half of them. The first was what we've just been talking about, Your Honor. It was driving them crazy that there were lawless states out there; they gave the example of Russia, which -- where an agency approved the making and distribution within Russia of classic English language works. They got imported to the U.S. and they were competing with U.S. works, U.S. copies within our domestic market. And they got their wish to shut that down, to use U.S. law as the standard for those works. Secondly, they got coverage for copies that were lawfully made but stolen. And this was the one ask that the film industry had. We see it in the colloquies. They rented films abroad. The films -- that was their business model. The films would get stolen; and the U.S. market would be awash with stolen films. And so they wanted to shut down with the importation provision those stolen goods coming into the U.S. market. And the third thing that they wanted is -- is what's been dominating this debate. But it's only the third thing, and that was help dividing geographic markets, so that they could go after the rogue distributors, yes, but also go after the downstream sales. They got half of that. They got a cause of action against the rogue distributors. They did not get a cause of action that went downstream. Sonia Sotomayor: Mr. Rosenkranz, can I ask you, just -- it is a practical question, but I think it has theoretical impact. A manufacturer can choose to contract or a copyright holder choose to contract with someone here to manufacture their goods. They could contract with someone abroad, anywhere in the world, directly. They can choose to license their trademark and permit a distributor abroad to manufacture under their U.S. copyright; or they can permit the licensee to register the copyright abroad and distribute. In your definition of “ lawfully made under this title ”, does “ lawfully made under this title ” apply to all of those situations, i.e.-- E. Joshua Rosenkranz: Yes. Sonia Sotomayor: --I think clearly to the manufacturer who manufactures abroad-- E. Joshua Rosenkranz: Yes. Sonia Sotomayor: --clearly to the manufacturer who licensed a distributor to do it for it. But does it also apply to the -- to the copyright owner who basically gives the copyright to a foreign distributor and lets the foreign distributor register it abroad? E. Joshua Rosenkranz: Yes, Your Honor. The only question under our definition is, was the making lawful, which is to say, was it authorized, whether it's by transfer of licensing or by transfer of copyright or in any other way? Is it lawful as measured by U.S. standards? And -- and that-- Sonia Sotomayor: That is -- that is broader than I thought. And I'm not quite sure why you don't mean if this title applied. Because if the-- E. Joshua Rosenkranz: --If-- Sonia Sotomayor: --the manufacturer who is manufacturing under the English copyright, because the distributor has an English copyright, is not manufacturing under the U.S. copyright, they are manufacturing under the English copyright. E. Joshua Rosenkranz: --Right. And, Your Honor, the reason that the language works the way we've described is because we are not focusing on whether the making was under this title; we're focusing on whether it was lawful under this title. Does this -- would this title, when you apply it to wherever it happens to be, whether in the United States or abroad, would this title say that this is authorized? Now, let me just circle back again. The reason if this title had been applicable doesn't work is because there are enormous numbers of situations, probably three-quarters of them, that the First Sale Doctrine applies to where this title does apply. And so trying to say where -- you know, if this title had applied would work for foreign goods coming in, but not for U.S. goods, which is the core of the First Sale Doctrine. Stephen G. Breyer: But you don't have to say -- you can say both, either it was manufactured directly and received an American copyright and satisfied all the conditions, or, if that wasn't the case, it was manufactured in a way that satisfied the conditions of the American statute, even though, for technical reasons, it didn't apply. E. Joshua Rosenkranz: Yes, Your Honor. And, in fact, (a)(2)-- Stephen G. Breyer: That's what your argument is, I take it. E. Joshua Rosenkranz: --Yes. In 2008-- Stephen G. Breyer: So we are off on a kind of curly cue here. E. Joshua Rosenkranz: --Yes, Your Honor. But -- so what Congress did was to find a much simpler, more efficient way to say all of that. In 2008, it figured that out and put-- Stephen G. Breyer: I took it that the reason they wrote -- or changed the statute was just because they were worried about bailees or lessees or somebody under the old statutes not satisfying the first -- they were worried about that -- somebody -- a printer lawfully obtains a book, and he shouldn't have advantage of the First Sale Doctrine. E. Joshua Rosenkranz: --Well, Your-- Stephen G. Breyer: He's in the middle of printing it. And therefore you have to change the language. So they changed the language to lawfully made under this title. E. Joshua Rosenkranz: --Correct. Stephen G. Breyer: Am I right; or, if I am wrong, why did they change it? E. Joshua Rosenkranz: Your Honor, that is exactly right. And just not to diminish it-- Ruth Bader Ginsburg: Did they give all rights -- wasn't there also the question of allowing manufacturers to segment markets so we'd have the copyright by abroad, governed by foreign law, copyright in the United States governed by U.S. law? Wasn't segmentation of the market allowing people to do just what these people are doing? E. Joshua Rosenkranz: --So, Justice Ginsburg, my answer to Justice Breyer was about why the language in 109 was changed, that is, from obtained possession to lawfully made. And that was -- what Justice Breyer pointed out was exactly why, because -- and not to minimize bailees, bailees was the movie industry problem. Bailees was stealing things from the manufacturers' loading docks or from shippers. But yes, Your Honor, there was also a segment of the publishing industry that wanted that third thing. Stephen G. Breyer: I couldn't find a word. I could not find a word of that in the legislative history. Irvin Carp, who was the strongest representative for the publishers, said you couldn't do that ten years earlier. So is there-- E. Joshua Rosenkranz: No. Stephen G. Breyer: --No, but you just said yes in answer to Justice Ginsburg's question. So she'll find exactly what there is there, so I would like to know what it is. E. Joshua Rosenkranz: Your Honor, I was answering yes to was this a motivation of the publishers. And if I misunderstood the question, Your Honor-- Elena Kagan: But a motivation for 109, or a motivation for 602? E. Joshua Rosenkranz: --A motivation for 602. When the conversation turned to 109, Your Honor, not a word was uttered about dividing distribution or divided markets. It was all about this problem-- Elena Kagan: So on 602, you said that one of the things that they wanted was the segmentation of markets. They got half of it. They got the rogue distributors' half. And I guess Mr. Olson makes the point, and it seems a good one, it's like that's a crazy half to have gotten. That's the kind that they don't need because they have a contractual remedy about -- against the distributors. And then they don't get people like, frankly, your client, who are rogue something elses, with no contractual privity. And what sense does that make? E. Joshua Rosenkranz: --Well, it makes perfect sense, Your Honor. Obviously, you know, the industry, at least back in 1976, did not get everything that they wanted. What they got was a much more powerful weapon than a contract. I mean, a copyright weapon gives you injunctive relief, gives you multiples of damages which you don't get out of a contract remedy. But to Justice Breyer's point, because I think it's an important one, when you go to the history -- and I think you are right, Your Honor, that there is exactly one spot in the drafting history where the relationship between 602 and 109 was discussed. It was that conversation between Clark and Goldman, who was the general counsel of the copyright office. It's on pages 11 to 12 of our reply brief. It's recited in extensive detail in the amicus brief that Costco submitted. And here's what happened. They got their importation provision. And Carp says, now, wait a minute, I don't get it. You have got this importation provision, and you've got this First Sale Doctrine. They are at war with each other. Which one wins? They seem to be agreeing that first sale wins, but they realize that there is this problem. And what they do, the general counsel of the copyright office says, we obviously haven't thought this through. We need to do more work on this, says the librarian of Congress. And the next thing that happens, you see it in a red line on page 13 of our reply brief, is that for the first time in the drafting history, the two are reconciled by making 602 subordinate to 109, in exactly the way that Quality King found it to be. So the copyright owners got half the loaf. It may not have been the half that was more important to them, but they got a lot more from the extension of the importation provision. Elena Kagan: Mr. Rosenkranz, there is that passage in Quality King, which is, I think it's fair to say, unfortunate to your position. Is your basic view of that passage that it was simply ill-considered dicta that we should ignore? E. Joshua Rosenkranz: To put it bluntly, yes. That's my ultimate position. But I do think it can be reconciled with our position. Let's start with the question presented in Quality King is exactly the question that is presented here, and the Court answered it yes, that is, do imports -- is 109 applicable to imports. The whole driving logic of Quality King is about 109 trumping 602. And it's only in that part IV, where the court is rebutting various attacks on its position, that it gets to that dictum, and that dictum is in the third tier explanation to one of five rebuttals. I believe it can be reconciled, certainly in result. What you had there was the foreign distributor who had only British rights importing directly into the United States. There was never a first sale. Elena Kagan: Well, in result, but not in reasoning. The passage specifically says this was presumably not to be lawfully made under this title. E. Joshua Rosenkranz: And I have an -- I agree with you, Your Honor. I have an explanation. I offer it tentatively. I'm not sure whether it's right or not, either as to what the Court intended or under the statute. My hunch is the Court was thinking about a scenario where the British publisher only needs 10,000 copies to cover Britain; but, instead, what it does is to print 100,000 copies. Everyone would know that that is not authorized, it's not lawfully made under this title, because the intent is to send it over to the United States. So it's not lawfully made at that moment. Let me also just mention an important undergirding to our position, which is that our position is the only one that does not make a complete hash out of every uses of the same phrase -- every use of the same phrase in the rest of the statute. Wiley's reading makes almost all of them nonsensical. So let me just give you an example. Section 110, the classroom provision. Wiley acknowledges this is the result but doesn't explain why Congress would ever have wanted it. The result is that a teacher can go and buy a Beethoven record and play it to her class if it was made in the United States. But if she flips one past it to the next Beethoven record that happens to have been made in Asia, she can't play that for her class. Or section 109(c), the public display, the Buffalo Cafe owner is allowed to purchase something in the United States and put it up on her walls, you know, say, a picture of Niagara Falls. That is permissible if it was made in the United States. But off the same retail rack, she flips one past; if it was made in Asia, it's not permissible. Nor does Wiley explain why Congress would adopt an exception to the First Sale Doctrine that is not at all about sales, that is only about where copies were made. So a U.S. manufacturer who wants to sell into the U.S. market has this incentive to go and send jobs overseas. It's an irresistible incentive if the law is -- if this Court says the law is what Wiley says. Ruth Bader Ginsburg: Has that ever happened? I mean, the Ninth Circuit cases have been around for some time. Has any manufacturer ever moved abroad? E. Joshua Rosenkranz: Your Honor, I'm sure it has. They haven't announced it. Now, let me just be clear. The Ninth Circuit came out with its opinion, this Court has intervened twice, so the law has never been settled in Wiley's favor. The courts were split. The moment that a manufacturer learns that this Court says you get what we've called the Holy Grail of manufacturing, endless eternal downstream control over sales and rentals, you can ruin secondary markets that are competing with you, the moment that happens, that will be yet another reason for manufacturers silently to decide that they're headed -- that they're sending their manufacturing overseas. Antonin Scalia: Of -- of those -- of those courts that did hold the way your -- your opponent would -- would have it, am I correct that only one of them adopted the absolutist rule? E. Joshua Rosenkranz: Well, Your Honor, there are only three courts of appeals that have weighed in, but yes, the Second Circuit is the only one that has adopted the absolutist rule, and that's yet another problem with Wiley's position. Wiley urges its position as a matter of statutory interpretation, but is refusing to stand by it. The moment it gets past the language of the statute, every argument it makes is an argument that is about tempering what -- you know, like a sky hook coming down from on high, tempering its interpretation in a manner that is completely inconsistent with the statutory language. Anthony M. Kennedy: The government argues in effect for -- what we might call it -- a common law adaptation of Bobbs-Merrill. E. Joshua Rosenkranz: Yes, Your Honor, which -- which is even -- creates even more mischief. The government's position, as I understand it, is 109 doesn't have to do any work. In service of giving more berth, you know, greater magnitude to 602, we're going to make 109 completely superfluous because Bobbs-Merrill does all of the work. Now, 109 Congress said -- it put into the statute, it said it on every recodification to codify Bobbs-Merrill, and the government is now making 109 completely irrelevant, but picking and choosing, deciding that it wants the limitation on us from 109, but borrowing from Bobbs-Merrill some reservoir of law that modifies the first-sale doctrine. If there are no further questions, I would like-- Elena Kagan: Mr. Rosenkranz, can I take you back to Justice Ginsburg's opening question? Just as a matter of copyright theory, I had always understood copyright to -- a copyright holder has a kind of a bundle of rights. It's not one right that applies everywhere in the world. It's you have your U.S. rights and you have your Chinese rights, you have your rights under each jurisdiction's law. And your position is essentially to say that when I sell my Chinese rights to somebody, I'm also selling my U.S. rights to that same person, because the person who has the Chinese rights can just turn around and import the goods. I mean, that's the nature of your position, isn't it, that your U.S. rights are always attached when you sell more -- your rights under the jurisdiction of another country? E. Joshua Rosenkranz: --Well -- so first, Your Honor, back in 1976, this notion of geographic division was very, very new, so it's not at all clear what Congress was thinking with that -- with respect to that. But secondly, no, we're not -- we're not saying that when the owner sells his Chinese -- its Chinese rights to the Chinese company, it is selling all rights. Certainly, the Chinese company cannot sell everywhere, but after that first sale, all of the manufacturer's rights are cut off. If I may reserve the rest of my time for rebuttal. John G. Roberts, Jr.: Thank you, counsel. E. Joshua Rosenkranz: Thank you, Your Honors. John G. Roberts, Jr.: Mr. Olson. Theodore B. Olson: Mr. Chief Justice, and may it please the Court: Petitioner's commercial enterprise is precisely what Section 602(a)(1) was enacted to address, an international gray market in copyrighted works. This Court unanimously recognized in the Quality King case that 602(a)(1) encompasses copies of books that were lawfully made not under the United States' Copyright Act, but under the law of some other country. 602(a) is broader than 6 -- 109(a), because it encompasses copies not subject to the first-sale doctrine, for example copies made under the law of another country. These are the words of every member of this Court in the Quality King case. Now, referring to it as dicta misstates what was going on, on the Quality King case. The argument was that if you interpret 602(a) and 109(a) as allowing a defense, a first-sale defense, you emasculate Section 602(a), and so the Court was explaining on page 147 and 148, I believe, why there were three reasons why 602(a) would have viability. And one of those reasons had to do with direct action against someone that was engaged in pirating, and some of it had to do with bailees and lessees. These are relatively small problems either otherwise dealt with by contract law or otherwise dealt with by the provisions of the statute. But the third reason for the Court's interpretation and its decision in that case was precisely the case that we're talking about here. Samuel A. Alito, Jr.: Well, it may be important dictum, but do you really want to argue it wasn't dictum? Theodore B. Olson: I do. Samuel A. Alito, Jr.: It was the holding of the case? Theodore B. Olson: It was the holding of the case in the sense that it was necessary, the Court felt. And we could -- you know, I don't -- I don't feel I want to spend a lot of time arguing what the word “ dicta ” means, but it was a necessary ingredient to what the Court felt was an explanation for why it was deciding the case that it was deciding. Stephen G. Breyer: You don't need that. Elena Kagan: It wasn't necessary, was it? Stephen G. Breyer: Your -- 602(a) has plenty of meaning. I mean, an American copyright holder licenses a British company to publish the work under British copyright law. 602(a) says he can't import the books into the United States, period. Theodore B. Olson: That's-- Stephen G. Breyer: Now, the only -- so there's plenty of meaning there. The question is what happens when he sells it to his bookstore and you or I go in and buy it and we want to give a copy to our wife when we get back to the United States. The question is, did -- is that unlawful? Theodore B. Olson: --Well, we're -- well, if we're reading the provisions of the statute, is that copy -- now, there are exceptions for the books that are brought in-- Stephen G. Breyer: No, no exception I take it once I bring back five copies and I give one to my son. Theodore B. Olson: --Well, there are fair use exceptions and there's-- Stephen G. Breyer: Oh, fair use. Theodore B. Olson: --other exceptions and -- and there are exceptions for the one that you bring back for your wife and your-- Sonia Sotomayor: I'm sorry. Is your reading now that when the library imports in a book or a film or whatever it's importing in, it goes to the customs agent and it says to the customs agent: I don't have the express authorization of the copyright owner, but I'm a library, so I can import this book in? Theodore B. Olson: --It says-- Sonia Sotomayor: I'm -- I'm a person who's bought the book in England and I'm bringing it to my wife? What provision gives me the right to do that? Theodore B. Olson: --The provisions in the statute that deal with the libraries talk about bringing -- importing books for lending-- Sonia Sotomayor: So deal with the wife. Theodore B. Olson: --for lending purposes. Sonia Sotomayor: How does the wife get her book? Theodore B. Olson: What I'm -- what I'm-- Sonia Sotomayor: No, no. Is there -- what provision gives the wife a right under your reading? Theodore B. Olson: --With respect to the copy brought in, in the suitcase for -- to give to a -- a family member or to turn over to someone else? Sonia Sotomayor: No, to keep for yourself. As far as I understand-- Theodore B. Olson: Oh, to keep for yourself-- Sonia Sotomayor: --your reading, I brought it abroad, I can't import it in. Theodore B. Olson: --What -- I believe that that is covered by the various provisions of the copyright statute. And the question is, is it covered by section 2 -- 602(a)(1)? Yes, it's an import of an acquired copy. Do you have a defense under the first-sale doctrine? And I go to the exact explicit language of the statute. There may be exceptions under other provisions of the copyright law, but the first-sale doctrine, 109(a) specifically says “ lawfully made under this title ”. Stephen G. Breyer: The reason -- what I was trying to bring up and I didn't do it artfully-- Theodore B. Olson: Well, and this-- Stephen G. Breyer: --is, imagine Toyota, all right? Millions sold in the United States. They have copyrighted sound systems. They have copyrighted GPS systems. When people buy them in America, they think they're going to be able to resell them. Now, under your reading -- now, this is one of their horribles, I gather, and I want to know your answer to it. Under their reading, the millions of Americans who buy Toyotas could not resell them without getting the permission of the copyright holder of every item in that car which is copyrighted? Theodore B. Olson: --There may be-- Stephen G. Breyer: Is that right? Theodore B. Olson: --There may be just-- Stephen G. Breyer: Am I right or am I wrong? Am I off base or am I wrong -- am I right? Theodore B. Olson: --There are other defenses, but that is not this case. This case is not-- Stephen G. Breyer: Well, how do you distinguish? How do you distinguish? Theodore B. Olson: --The government -- the government would argue for a broader interpretation under what was made under this statute, whether that would include the importation or the distribution in commerce. That's an argument that the government makes, but it's not necessary to decide this case. Stephen G. Breyer: Now, explain to me, because they're horribles if I summarize them, millions and millions of dollars' worth of items with copyrighted indications of some kind in them that we import every year; libraries with three hundred million books bought from foreign publishers that they might sell, resale, or use; museums that buy Picassos that now, under our last case, receive American protection as soon as that Picasso comes to the United States, and they can't display it without getting permission from the five heirs who are disputing ownership of the Picasso copyrights. Those are some of the horribles that they sketch. And if I am looking for the bear in the mouse hole, I look at those horribles, and there I see that bear. So I'm asking you to spend some time telling me why I'm wrong. Theodore B. Olson: Well, I'm -- first of all, I would say that when we talk about all the horribles that might apply in cases other than this -- museums, used Toyotas, books and luggage, and that sort of thing -- we're not talking about this case. And what we are talking about is the language used by the statute that does apply to this case. And that-- Stephen G. Breyer: But we need-- Sonia Sotomayor: Don't those horribles-- Stephen G. Breyer: --interpretation-- Anthony M. Kennedy: But you have to look at those hypotheticals in order to decide this case. Theodore B. Olson: --Well, and that's-- Anthony M. Kennedy: You're aware of the fact that if we write an opinion with the -- with the rule that you propose, that we should, as a matter of common sense, ask about the consequences of that rule. And that's what we are asking. Theodore B. Olson: --And -- exactly, Justice Kennedy. And that's what you were doing in the -- in the Quality King, when we were -- we were discussing with Justice Alito whether this is dicta or not. The Court was specifically saying what it would apply to, and it -- what -- what the Court was talking about in that case was books made not pursuant to title, but pursuant to some other country's copyright law. This copyright law provisions-- Sonia Sotomayor: --Why is it that a U.S. copyright owner who contracts in England to make books -- he doesn't have an English copyright, he just simply chooses that place to manufacture as opposed to the U.S. -- why is he making that copy under English law and not under his rights of U.S. copyright? Theodore B. Olson: --Well, if he is doing -- if he is manufacturing the book in England, he's not -- because the copyright law does not have extraterritorial application, he is not making those copies under this title. And this Court-- Sonia Sotomayor: But he's selling it no -- no differently than Quality King was -- or the Quality King-- Theodore B. Olson: --But the problem is -- the statutes may not be perfect with respect to this, and there may be horribles that occur under one set of interpretations of the statute, and the other interpretation of the statute is to interpret it as -- as the petitioner-- Sonia Sotomayor: --Mr. Olson, we know from the Carp exchange that the response was, this is something that we have to study with care, in 1976. The parade of horribles is now causing the Solicitor General and at least one, if not two, courts of appeals to write exceptions into the language to take care of what they perceive as horribles. Isn't it incumbent upon us to give the statute what is plainly a more rational plain meaning than to try to give it a meaning and then fix it because we understand that the meaning doesn't make sense? Theodore B. Olson: --I -- there -- there is a body of the government of the United States that is entitled and capable of fixing this. These parade of horribles have been -- people have been arguing about these for years. For 30 years, the statute has been interpreted the way that we are suggesting that it should be under this title, which this Court earlier this year, in another case, in the Novo Nordisk case, specifically said, under this title means pursuant to the provisions of this title. This Court said that before in -- in the Ardestani case. The under this title occurs not only in section 109(a), but under this title occurs in 602(a) itself; and then under this section appears twice in section 602(a)-- Ruth Bader Ginsburg: Mr. Rosenkranz told us that under this title means different things in other sections, and he gave a number of examples. Theodore B. Olson: --Yes, and -- and in each case -- first of all, if the interpretation that my opponent is arguing for was the law, that -- those are the words that are in 602(b) and 602(a)(2). So Congress could have used those words that our opponents are arguing for, and did use those words, one of which was written on the same time in the same -- passed in the same time, in 1976, that 602(a)(1) was. Elena Kagan: Well, Mr. Olson, can I just take you to-- Theodore B. Olson: With respect to those other-- Elena Kagan: --Please. Theodore B. Olson: --With respect to those other provisions, Justice Ginsburg, the -- the government specifically goes over each one of those, but each one of those, if you interpret the statute as under this title as pursuant to this title, each one of those provisions makes sense in the context in which that term is used there. And -- and there is only one real way to interpret under this title in the provisions in 109(a) in -- in conjunction with 602(a)(1), and that is the way the Court decided it in the Quality King case, specifically looking at this question. Now the facts were slightly different in the sense that that was a round trip; this isn't a round trip. Elena Kagan: Can I take you back to the words here, lawfully made under this title, which you say clearly means what you say it means. So, I find this language a little bit perplexing, and I can kind of see it both ways. So what you say is made under this title, that must mean made in the United States, and lawfully, just as this little word that's -- that modifies that basic phrase, made under this title, which means made in the United States. But what Mr. Rosenkranz essentially says -- he doesn't say it in these words, but he says, "The focus of this provision is on “ lawfully made ”. " That is what the focus is on. It's on lawfully made as opposed to unlawfully made. Now, when we just say lawfully made, you know, we need something to measure, well, how do we know whether it's lawfully made? Well, you look to the rules in the copyright law. So if you just -- if you focus more on the lawfully word, lawfully made, and then under this title doesn't mean made in the United States, it means lawfully made under the rules of this title. Theodore B. Olson: Lawfully made under this title is lawfully made under the copyright laws of the United States. It can't say, lawfully made in the United States, because then something might-- Elena Kagan: Well, lawfully made, under the rules of the United States, regardless where the thing was manufactured, is what I'm saying. That's the way -- it just seems to me as though-- Theodore B. Olson: --It-- Elena Kagan: --you are saying made must be manufactured. But lawfully made is a lawfully made copy. How do we know if it's lawfully made? We look to this title. Theodore B. Olson: --I think under this title means that it was made pursuant to the provisions of the copyright law. I can't imagine the difficulties that would ensue with litigation over whether or not something made in another country, made under another country's different laws -- and they vary enormously throughout the world -- whether that was somehow compatible with the laws of the United States. Stephen G. Breyer: --But what about litigation in this respect? I want to bring you back to the horribles. Theodore B. Olson: Because the-- Stephen G. Breyer: The main point is that horribles haven't occurred. Right? Theodore B. Olson: --The main -- main-- Stephen G. Breyer: Sometimes horribles don't occur because no one can believe it. Now, for example, I believe there is going to be a storm, but it hasn't started yet. So I would like to know -- I would like to know, if you were the lawyer for the Toyota distributor, and if you were the lawyer for the Metropolitan Museum of Art, or you are the lawyer for a university library, and your client comes to you and says, my God, I just read the Supreme Court opinion. It says that we can't start selling these old books or -- or lending them or putting them in our word processor or reselling the Toyota without the -- without looking -- displaying the Picasso without the permission of the copyright holder, who may or may not be Toyota itself. What, as their lawyer, do you tell them? Do you tell them, hey, no problem; or, do you tell them, you might become a law violator; or, do you tell them, I better litigate this? What do you tell them? Theodore B. Olson: --Well, each one of those situations that you posit, Justice Breyer, has a whole panoply of set of facts. With respect to the museums, with respect to the person bringing books into the United States, there are other defenses, including fair use. There are other defenses under the copyright law. But -- and one of the things is that, to a certain extent, if you're going to use the product created by someone else in a way that's contemplated by the copyright laws, maybe it's required that you actually comply with the copyright laws by going to the owner of the copyright and saying, look, here's what I propose to do, can I have a license to do this? It's a nonprofit. It's a museum. And I'm-- John G. Roberts, Jr.: Counsel, you said there are other defenses, including fair use. In -- in the catalogue that Justice Breyer recited, are all those fair uses? Theodore B. Olson: --No. And some of -- but -- but they're-- John G. Roberts, Jr.: Well, which ones are -- I mean, I'm -- it seems unlikely to me that, if your position is right, that a court would say, it's a fair use to resell the Toyota, it's a fair use to display the Picasso. Theodore B. Olson: --It may be a fair use. It may be an implied license, for example, with respect to copyrighted items or trademarked items that appear in a product that was licensed abroad. The government has offered another alternative interpretation of the word “ made ”, as putting it in the flow of commerce. That might deal with some of these situations. But the point I guess I am making, Mr. Chief Justice, is that Congress was clearly intending to talk about the vast gray market problem. This provision-- Elena Kagan: Well, intending where? I mean, I -- you spend a lot of time talking about the legislative history and the purposes behind 602. But the language that we're supposed to be interpreting is the language in section 109. And the language in section 109, as far as I can see, there's really nothing to support your argument that that language was intended to address this gray market problem. Isn't that correct? Theodore B. Olson: --Well, no. I think that section 109 and 602(a) were adopted in the same statute. They were put in the draft of the statute at the same time, in 1964. Elena Kagan: But you know, section 109 is just a rewording of a prior provision that you would clearly lose under, where the prior wording had nothing to do with where any product was manufactured. And what you're suggesting is that we should read this change in wording -- which actually, there's a real theory behind what the change in wording meant that has nothing to do with the place of manufacture, that we should read it as incorporating a place of manufacture requirement, because there was a separate debate going on in section 602 about that question. Theodore B. Olson: But the two pro -- what I'm -- I guess what I'm trying to explain is that the two were enacted at the same time. They were out there and available to the public for 12 years before they were finally adopted. These parade of horribles could have been addressed by Congress in a different way at the time, and the interpretation -- this is a -- 109 is a defense -- is offered as a defense to section -- to section 602(a)(1). So what does it mean? What provide -- what is the defense that's provided? And you then have to interpret, “ made under this ” -- “ lawfully made under this title ”. What does that mean? And you have done that in the Quality King case. You explained in the Quality King unanimously that it makes a difference because you are -- exhausting -- Congress intended to allow segmentation of the market. It only makes sense to interpret it this way if you allow segmentation of the market pursuant to these provisions, because it is exhausting the copyright under the laws of the United States once you make a sale of a product produced in the United States subject to the United States' copyright laws. You are not exhausting your U.S. copyright when you make something, or allow something to be made abroad. You are not exhausting that copyright. You have not done that yet. So the first sale is not something that happens abroad that uses up the copyright laws -- of the protection under the copyright laws of the United States. So it seems to me that this does make perfect sense. And it makes -- there is not going to be a perfect solution in every case. The Court has dealt with that frequently with respect to copyright laws. But if you interpret it as my opponent interprets it, you are opening the door to commercial enterprises precisely like this. It's not necessary in this case to decide every single permutation of a problem that someone crosses a border with a product, but this section 602 specifically contemplates products that are acquired abroad and then brought back into the United States. Here, we have a commercial enterprise doing exactly what is contemplated by the people who were talking about 602(a) and section 109 when the two were adopted at the same time. Ruth Bader Ginsburg: Mr. Olson, do you have an answer to the outsourcing problem and the charges that if you read the statute as you are urging, then you are inviting the outsourcing of manufacturing jobs? Theodore B. Olson: There are several answers to that. One, that's Congress's concern. And -- and there is no evidence that that would really actually happen. And Congress was concerned with creating a segmentation of the market. But it's entirely speculative as to whether or not people are going to start manufacturing books or other items outside the United States. Congress can address that if that should become a problem, but it's not something that was suggested as a part of what was taking place at that time. John G. Roberts, Jr.: Thank you, Mr. Olson. Mr. Stewart. Malcolm L. Stewart: Mr. Chief Justice, and may it please the Court: I would like to discuss -- begin by discussing our Bobbs-Merrill argument, because it's a part of our brief that's different from both the parties' submissions, and I do think it's very important to understanding the practical implications of the Court's decision. Ruth Bader Ginsburg: Mr. Stewart, may I ask you a preliminary question. In Quality King the government took the position that the Petitioner is taking here. What led the government to change its mind? Was it just what has been called dictum in Quality King, or is there another reason why the government has switched sides? Malcolm L. Stewart: I think there are two related reasons, and one of them is the dictum, but I'll get to that second. I think in both cases, our overriding objective was to offer a reading of section 109(a) that would not supersede, or would not effectively negate the implication prohibition in section 602(a)(1), because from the Copyright Office's perspective, we agree with Mr. Olson that the primary reason for the enactment of 602(a)(1) was to facilitate market segmentation. And the argument we made in Quality King was you can accomplish that; you can prevent section 109(a)-- Sonia Sotomayor: Could you point to something in the legislative history to support that? Malcolm L. Stewart: --I think the best thing I could point to is a report of the Registrar of Copyrights that was issued in 1965, in which the Copyright Office identified as one of the circumstances that would be covered by the importation ban, the situation in which, quote, "the copyright owner had authorized the manufacture of copies in a foreign country for distribution only in that country. " It didn't use the phrase “ market segmentation ”, but clearly, the point was the same. You are authorizing copies to be made abroad for distribution only in that place, not for redistribution here. And so-- Elena Kagan: So Mr. Stewart, if I understand your argument, both here and in Quality King you want the copyright holder to have some control over importation, but at the same time you don't want the copyright holder to have control over all downstream sales. Malcolm L. Stewart: --That's correct. Elena Kagan: And that's what your Bobbs-Merrill argument is designed to do. It's designed to prevent that. Malcolm L. Stewart: That's correct. Elena Kagan: Coming back to Justice Ginsburg's question, do you think that truly the way to do those two things, to give the copyright holder control over importation but not over downstream sales, that our problem really is, do you think in your heart of hearts that we got it wrong in Quality King? Malcolm L. Stewart: Well, we lost that case 9-0, and so I am not arguing too vociferously that the Court should change its opinion. But yes, we think that we still would adhere to our view that section 109(a) should not be read as a limitation on section 602(a)(1). If the Court had gone that path, it could read “ lawfully made under this title ” to encompass both foreign-made and domestic-made copies, without doing damage to the copyright holder's ability to segment markets. On the other hand-- Sonia Sotomayor: So you get what you wanted anyway. That's really the bottom line. We undo Quality King, except that the price is that people have to ship their manufacturing abroad. Malcolm L. Stewart: --Well, we're not urging the Court to take that course, but yes, that would have been one way to accomplish the same objective. And so-- Elena Kagan: So you are essentially saying that the appropriate way to read this statute, to make sense of all of its provisions, is to give the copyright holder control over the importation, to give Wiley the ability to go after this importer, Mr. Kirtsaeng, but to find a way to stop it there. Malcolm L. Stewart: --I think that's correct, but I think our Bobbs-Merrill argument does provide a very principled way to stop it there without going back on what the Court said in Quality King. That is, Bobbs-Merrill was a 1908 case in which the publisher sold books to retailers on the proviso that they not be sold at retail for less than a specified amount. One of the retailers violated that resale restriction and was sued for copyright infringement. And this Court in Bobbs-Merrill said -- parsed the statutory language, which at that time gave the copyright owner the exclusive right to vend copies of the work. Samuel A. Alito, Jr.: But you're saying Bobbs-Merrill means something beyond section 109, but when -- the 1909 Copyright Act said that it was codifying the holding in Bobbs-Merrill, and the 1976 statute which is now before us said it wasn't changing the meaning of the earlier law. So I don't know how -- Bobbs-Merrill wasn't a constitutional decision, it was a question of statutory interpretation. So how does some sliver of Bobbs-Merrill still survive all of this? Malcolm L. Stewart: Maybe I can put it this way: If I buy a piratical copy of a book, one that was illegally made without the consent of the copyright owner, and all I do is read it and put it on my shelf, I can't rely on 109(a) because the copy was not lawfully made under this title. But I still couldn't be held liable for copyright infringement because there is no exclusive right to read the book or to own it. I wouldn't have been infringing any of the copyright owner's rights. And so in order to have a valid claim for copyright infringement, the copyright holder would have to show both that 109(a) was inapplicable, and that what the defendant was doing was a violation, an infringement of one of the exclusive rights. And Mr. Rosenkranz seems to postulate a situation in which a cagey manufacturer would locate its facilities overseas, make the copies there, import them into the United States, sell them in this country, subject to conditions on resale. And if the goods were resold in violation of those restrictions, the copyright owner would sue for infringement. And I think the first argument the defendant would make is that is exactly the conduct that the Court in Bobbs-Merrill said did not infringe the exclusive right to vend. Now -- namely the resale in violation of restrictions on resale. How can you now say it's now an infringement of the exclusive right to distribute? And it would be a particularly difficult argument for the copyright owner to make because what the House Report said in 1909, it didn't say exactly that it was codifying the holding of Bobbs-Merrill; it said that it was amending the statute in other respects, and it wanted to make clear that there was no intent to enlarge the exclusive right to vend. And so the Plaintiff, in Mr. Rosenkranz's hypothetical, would in effect be arguing that by codifying section 109(a), Congress had implicitly expanded the scope of the implicit -- of the exclusive right to vend or distribute, even though it said it was doing the various opposite. John G. Roberts, Jr.: That's an awfully difficult maze for somebody to -- to get through. You have to start with the difficulty of the language here, and then you have to proceed and put the Quality King gloss over it; and, when you finally get to that point, you say, well, now you've got to read Bobbs-Merrill and figure out how the common law governs all that. Malcolm L. Stewart: But I think that would be true under anybody's reading. That is, once a court in a case determined for whatever reason that section 109(a) was inapplicable, it didn't provide a safe harbor, the next step could never be simply to proceed to judgment and say that there was infringement. The next step would always have to be to look at what the defendant had done-- John G. Roberts, Jr.: Well, it's not that complicated under the Petitioner's approach. It says once you've you had a first sale, that's it. Malcolm L. Stewart: --The other point I would make about the Petitioner's approach is that it -- it really has no grounding in the statutory text. That is, the Petitioner is arguing that if the publisher in Thailand, if the manufacturer of the books had shipped them directly into this country, that person could have been sued for infringement for the importation and-- Stephen G. Breyer: Well, the word has grounding. It is Coke upon Littleton, 1628, where it says that if a man be possessed of a chattel and give or sell his whole interest upon a condition, that condition is no good. And Coke says, and that's how it should be. And now that's picked up in Bobbs-Merrill; it's picked up in Dr. Miles. It's been the law. Now if, in fact, there are two ways of interpreting the statute, and one is consistent with that basic principle of commercial law, and the other produces some of the complexities that you have just mentioned, isn't it better to go with the common law and simply reaffirm a principle that's been in the commercial law almost forever? Malcolm L. Stewart: --I -- I give two answers for that. And the first is that Coke was saying that, in most circumstances at least, a sale is sufficient in order to divest the owner of his prior right to control distribution, but it doesn't say that a sale is necessary. And my point is that when Mr. Rosenkranz says the hypothetical foreign publisher who makes copies with authorization but ships it into the -- them into the United States without could be held liable for infringement, there is nothing in section 109(a) that would allow a court to draw that distinction; that is, although 109(a) is sometimes referred to as a codification of the First Sale Doctrine, it doesn't require an antecedent first sale. So as long as the foreign publisher was the owner of the books at the type -- time they were manufactured, if those books were lawfully made under this title, under Petitioner's reading they could be imported and distributed. We know also that this was not an oversight, that Congress didn't intend the provision to be subject to a sort of implicit first authorized sale requirement, because the language was intended to cover copies that were made pursuant to a compulsory license. Samuel A. Alito, Jr.: Which of the following is worse: All of the horribles that the Petitioner outlines to the extent they are realistic, or the frustration of market segmentation, to the extent that would occur, if Petitioner's position were accepted? Malcolm L. Stewart: Well, if they actually happened, then I think the -- the horribles would be worse. But, as I say, we -- we feel that we have offered a reading of all the statutory provisions together that would avoid both. The other couple of things I would say as to why a first sale by itself-- Samuel A. Alito, Jr.: If the -- if that middle ground is -- were found to be not viable, which of the two sets of consequences is worse from the government's perspective, or can you not say? Malcolm L. Stewart: --I would say that the consequence that all foreign-made goods, even if imported into the United States with the authorization of the U.S. copyright owner, are subject to continuing licensing requirements, etc. , I would say that would be worse than the frustration of market segmentation that would occur under Petitioner's view. John G. Roberts, Jr.: Thank you, counsel. Mr. Rosenkranz, you have four minutes. E. Joshua Rosenkranz: Thank you, Mr. Chief Justice. I just want to step back and take a look at what the government's doing here. After eloquently arguing in Quality King in the last two pages of its brief that our position on the meaning of this language is right, it's saying our position is wrong. And then, it's trying to come up with a middle ground that has absolutely no basis in the statute. If Bobbs-Merrill provides the content for the First Sale Doctrine, then what does section 109 do? And so the government is creating a scenario in which, in order to save 602 from being superfluous in the way it is described, although we believe it's not superfluous at all, it is making 109 superfluous. Justice Kagan asked a question about essentially sentence diagramming. Our view is that under this title modifies lawfully. You use the U.S. metric of U.S. law to figure out whether it's lawful. The government's and Wiley's position is that under this title modifies both made and lawfully. And at least the way I learned grammar, you can't use the same phrase to modify both terms. I want to correct something that I said to Justice Ginsburg because I said it backwards. 905 and 906 are examples of the United States Congress in a copyright context applying national exhaustion, and that was six years after this statute was passed. To Justice Breyer's question, the bear is there. It is very much there. The only reason no one has ever pursued these legal arguments is that the legal arguments that are the baseline for all of this have yet to be accepted by this Court. But I have not heard any argument for why the vast majority of them will not necessarily obtain, and they are not in any of the briefs. To use the Toyota example, there simply is no other defense. There is none. Fair use doesn't apply to the vast majority of the scenarios that I've just described. Finally, outsourcing: Congress did not want U.S. jobs to go overseas. Congress in the very same statute in section 601 was hoarding manufacturing jobs to the United States; and as the government said on the last page of its Quality King, "it is highly unlikely that the same Congress that hoarded jobs in the United States was prepared to tolerate a situation in which there was eternal downstream control. " that the copyright owners would be encouraged to seize by sending jobs overseas. So unless there are further questions from the Court -- I saw, I just realized I said the same thing twice incorrectly to Justice Ginsburg. 905 and 906 are examples of international exhaustion. Unless there are further questions, I thank the Court and respectfully request that the Court reverse the judgment below. John G. Roberts, Jr.: Thank you, counsel, counsel. The case is submitted.

Warren E. Burger: Number 60, Evans and others against Abney and others. Mr. Nabrit you may proceed whenever you're ready. James M. Nabrit, III,: Mr. Chief Justice and may it please the Court. This case is here on certiorari to review a judgment of the Supreme Court of Georgia. It is a sequel to Evans versus Newton decided here in January 1966. The issue then as well as the Georgia Courts could substitute private trustees for the City of Macon in order to permit a municipal park given to the city in a will probated in 1914 to continue to be operated only for white people as the testator directed. That part of the controversy was settled by this Court's decision which is now the law of the case, that the park is subject to the Fourteenth Amendment prohibition of racial discrimination. The issue now is different, I think radically different. It is whether the decision of this Court can practically -- can be practically frustrated and subverted by the holding now here, the holding of the Georgia Courts that a municipal park is forfeited and reverts to the heirs of the long dead testator merely because the constitution in this Court's decision requires that the city admit negroes to the park along with whites. The petitioners are negro citizens of Macon who argue that Baconsfield Park must be operated as a public park without racial discrimination and we contend for several reasons that the Georgia Court's ruling, that the public must forfeit this park to the testator's estate violates the federal constitution, specifically, the Supremacy Clause of article six and the Equal Protection Clause of the Fourteenth Amendment. Now the factual record in this case is also radically different in that it is much more complete than the record in Evans against Newton. Let me briefly describe the background of the case. Augustus Octavius Bacon died in 1914. He had been elected to four terms in the United States Senate and he was also a distinguished lawyer who, it is relevant to, of note, had published a digest of the opinions of the Judges of the Supreme Court in 1872. He wrote his 32-page will in his own hand in 1911 and that Will left Bacon's farm and trust to his wife and surviving daughter during their lives, and after their deaths, in trust for and I quote “The sole perpetual and unending use, benefit and enjoyment of the white women, white girls, white boys and white children of the City of Macon. The Will made no provision for any reversion of the property and it was not a conditional gift. Rather Bacon conveyed to the city and again I quote, “all right, title and interest in and to said property here and before described and bounded both legal and equitable, including all remainders and reversions in every estate in the same of whatsoever kind.” Bacon's will provide that the land should be forever used and enjoyed as a park and pleasure ground and he said that under no circumstances should it be sold or alienated or dedicated to any other use. The will mentioned that he wanted the park to be a memorial for his two dead sons that he had no descendants baring the name Bacon and he stipulated that the park should forever be known as Baconsfield. Now as my adversary has emphasized, Bacon quite plainly stated that he did not want negroes to use this park, and this was not he said because of any unkindness or want of consideration for negroes but because he thought that the two races should be separate in social relations and should not occupy the same recreation grounds. So we cheerfully concede that it violates Bacon's solemn intent for negroes to use this park but we also want it to be clear that it equally violates Bacon's intent to destroy the park and revert it to his heirs but he never contemplated this situation. His will contains nothing to indicate that Bacon prefer that his park be destroyed and revert to his heirs rather than to have negroes use it. His intent on this question cannot be known, it's unknowable and that's conceded in the opinion below in the brief and opposition to certiorari. Now the city acquired Baconsfield actually in 1920, but buying the heir's interest during the life of Bacon's surviving daughter for an annuity for $1,665.00 yearly. The city paid that to the heirs for 25 years and it ultimately cost the city over $41,000.00. Incidentally that 1920 deed indicates that the total land involved was a 117.7 acres at 1917, 1920. Since 1920 -- Potter Stewart: The effect of that was simply to accelerate the transfer of the property to the city, am I correct? James M. Nabrit, III,: That's right, Bacon's surviving daughter didn't die until 1944. Potter Stewart: And so it accelerated that. James M. Nabrit, III,: So the city would not have had this park until 1944 if Bacon's Will had been followed literally but they got the park in 1920 and since then, it has been of the -- that's in those in the fifty years since then there has been a vast and direct investment of public funds. Of course the property has been tax-exempt for this nearly fifty years and that represents a large subsidy but beyond this, the basic development and landscaping of this park was done by the WPA the Works Progress Administration and Agency of the United States. The City Parks Superintendent testified that until the time he went out there with the WPA work as mere set him out he said. “Baconsfield was a wilderness to use his word, this was around 1935.” It was just a wilderness and the WPA met under his supervision work for a year, or more than a year, cutting down the underbrush, laying out the pass, digging the ponds, building benches and transforming Baconsfield from a wilderness into a usable park. Warren E. Burger: Do you know of any reason Mr. Nabrit why the -- assuming a reversion would be otherwise valid which of course we haven't come to yet. Do you know of any reason why the reversion couldn't be subjected to the lien of all this costs? James M. Nabrit, III,: I have not -- I have no knowledge as to what the United States policy is on that. Warren E. Burger: I assume that the -- James M. Nabrit, III,: There are specific statutory rights that the United States might have which I'm going to come to particularly with regard to the clubhouse building that the WPA built, a major building on the property and in that case the Mayor of the city and the Treasurer of the city made specific assurances to the United States that this property would not be released by the city during its useful life of the improvements and further, amazingly, that there would be no discrimination in this park property of the city, the city solemnly swore that this property was for the public at large in 1939. The conception of the public didn't include negroes apparently. I didn't mean to evade your question about the land but -- Warren E. Burger: I can well say it too and -- James M. Nabrit, III,: I think there might be one. Warren E. Burger: As a litigation matter I can see why the person, the clients you represent would not undertake to raise that question. James M. Nabrit, III,: I don't -- if there's a -- I don't know that -- my client's contribution has been the contribution of tax payers generally to this park, city taxpayers and federal taxpayers and in all these capacities they have an investment in this park. The roads through the park were built by the city, there's a swimming pool out there that cost the city a hundred thousand dollars. There's a bath house that cost $40,000.00 in 1948, $17,000.00 worth of improvements added to that in subsequent years. All these was taxpayers money invested in this property and all of it's been reverted by the judgment below stands. The -- when we inspected this clubhouse building I mentioned a moment ago with Superior Court's permission, my colleague, William Alexander found the WPA plaque, all this WPA buildings have a plaque, you know. My colleague found this WPA plaque with only with some difficulty on that women's clubhouse because someone had hung a mirror over it during a redecoration so another plaque coding the racial limitation in Bacon's will was rather prominently displayed. I think there's no little irony in that considering the solemn assurances of none discrimination that the city official sign. All the maintenance in this park until 1964 was done by the City Park Department. They treated this just like any other park and the man who had been superintendent for -- since 1915 testified. He treated Baconsfield like all the rest of his parks. The only exception was that some of the thrust income was used to add, to help beautify Baconsfield in addition to city funds. The thrust property I quickly want to mention that's been reverted also includes a shopping center across this street from this park and furnishes $5.00 or $7,000.00 a year annually. This was income for the thrust, it also includes a $131,000.00 or more in cash or bonds in the bank that they got for the highway condemned further the property but this case involves -- this case involves more than who gets this money when it's the people they ask. It involves principle. It involves whether or not the law is going to -- they are going to perpetuate this kind or racism. When negroes began using Baconsfield in 1963 the city concluded that it could not exclude them from the park and that was obviously correct since this Court had ruled as early as 1955, park segregation was unconstitutional and it ruled in 1957 that a municipal trust couldn't be discriminatory in the Girard College case, Pennsylvania against the Board of City trust and the city's answer in this case in the Superior Court stating that they couldn't discriminate was filed. It happens the day that this district Court decided right against Georgia where the Court invalidated Savannah's effort that keeps negroes out of the city park. When the Georgia Courts approve the city's resignation to -- to attempt to continue the park as an all-white facility, this Court reversed. So now in response, the Georgia Courts have ruled that the trust failed and accordingly returned to our arguments. We are given -- Hugo L. Black: Did you said they have rule? What did you say that Georgia Supreme Court had now ruled? James M. Nabrit, III,: That the trust has failed and I'm about to argue why I think that decision of Georgia law violates the command of the federal constitution. Hugo L. Black: With what consequence do they say that trust has failed? James M. Nabrit, III,: They say that the trust has failed and that accordingly the land and the other assets revert to the donor's estate as a resulting trust and that therefore it's to be distributed as part of his estate in accordance with the Will provision of the residual estate. Now I think each of the four arguments we make is sufficient to justify a reversal. Let me identify the four arguments each in a sense or two before beginning to develop the first one. The first point is, that the decision below which forfeits public property applies a sanction against a federal interest and violates doctrines of national supremacy running all the way back to McCulloch against Maryland. This forfeiture has affected in a way it happens which also discourages desegregation and is done without any justification. The second point we will make is that, since nothing has happened -- John M. Harlan II: Can I ask you a question, would you be making that argument if they are going to specific or ordinary clause in the will? James M. Nabrit, III,: Well, Mr. Justice Harlan, I think that the reason -- that I would argue if I had to face that more difficult question that our legal system, that our Courts can't be used by dead men to perpetuate their bigotry in the law, and that racism has to die with the bigot and that the legal system can't give it perpetuity. So I don't believe, if I had the case here, that I would concede or I believe that I would argue, that racist trust can't be enforced but I don't think that case is here. John M. Harlan II: Perhaps that case here? James M. Nabrit, III,: No. Warren E. Burger: Suppose we -- since we have you stopped for a moment, suppose you have a case that case here where -- that donor in 1925 or 30 had given land for use as an airport and for no other purpose. With either whether private reversion clause in the gift or subject to a state reversion by law and then time passed and the city grew and the airplanes got bigger and neither the runways and by rezoning became illegal to run an airport at that place so that you have a comparable posture illegal to use it for the original purpose. Would you -- do you see any parallel there or is that a totally different kind of problem? James M. Nabrit, III,: The way we analyze this case, Mr. Chief Justice and this has to do with the second argument I was going to summarize, is that that hasn't quite happened here. We don't think the uses, that the purpose of the trust has become illegal in our case. The park is still there for the white women and children, the boys of Macon to play in. Nothing has happened which keeps them the beneficiaries from getting the benefit of the trust. Now something has happened which keeps them from getting the sole use and Bacon wanted them to have the sole use to be sure but he didn't -- Warren E. Burger: But the purpose described in the limitation is illegal now, is it not? James M. Nabrit, III,: No I think not. The purpose of providing a park for the white women and children can still be fulfilled. They cannot have sole use of it. Negroes have to be admitted too but the point is, that negro use in this kind of a situation at least where you have a vast park land, negro use doesn't diminish the white use. It's not a case like, as for example where you have a trust fund and if it went to one group, it had to be divided with another group, the only amount left for the first group would be diminished. That kind of trust was the -- if a trust for whites only had been declared, scholarship funds had been declared unconstitutional when Evans against Newton, it would be plain that the whites would have less if they had to share it with the blacks but that's not true in a public park. There's nothing that's happened. The white children of Macon today are in fact using Baconsfield Park because it was a state as in effect and the park is there open to public today. So I think it's not like an airport where the runways are too short for the planes. The park is big enough for everybody now. The third argument and I -- let me make an overall point. I think there is nothing special about Trust Law that exempts it from the command of the Equal Protection clause. Not as the fact that the law involved is common law and that statute law place it outside the reach of the constitution. We think this point is amply established by the decision last termed in Presbyterian Church against the Hall church where the Court unanimously concluded that Georgia Courts deciding a common law trust law must do so in conformity with the First Amendment guarantees made applicable to the states by the Fourteenth Amendment. Innumerous cases and all -- in different context make the point of our common law. Judge May law being subject to the Fourteenth Amendment. New York Times against Sullivan makes that point in very plain language. The state's libel law has to march the Fourteenth Amendment and Edwards against South Carolina involving a common law crime illustrates the same idea in another context. Of course trust law is normally a matter for state determination. Of course Georgia has the last word in defining its common law trust as a general matter but that only opens the question we submit of whether the law is settled by Georgia conforms to the command of the constitution as to that question that I address myself with these four arguments. Our first argument as I indicated is rooted in the fundamental proposition announced in McCulloch against Maryland in 1890. The states have no power to take action hostile to a national interest not even as then when using the basic taxing problem may they penalize a federal interest. And we think the decision below violates the command of federal supremacy, not because this Court's mandate has been directly flouted, but rather because the state has decreed that valuable city property must be forfeited entirely on the ground that the constitution and the decision of this Court require that the city admit negroes to Baconsfield. We complain not that there will still be segregation. We can't know how the heirs will use the land. We complain about the fact of the forfeiture itself and this valuable facility which is valuable to the taxpayers in part because of its -- of the original value and in part because the taxpayers have added to it in multiple ways, is being taken away solely to prevent negroes from using this park. This is a direct drastic sanction against compliance with what the constitution compelled and this Court's decision compel. Now here the sanction has the added characteristic and the added impact of discouraging this desegregation just as in the Prince Edward County School closing case. The case -- the closing of the park conveys to negroes unmistakably the plain message that if you will search your Fourteenth Amendment rights it won't get you anything. All you'll do is destroy the parks for everyone and that obviously discourages compliance with the constitution. That might be our -- the only possible justification that might be offered for such a forfeiture would be a clear direction by attesting that Bacon made no such choice. The Georgia Courts made this choice. Our respondents argue that the trust fails automatically on January 17, 1966, the day the moment this Court announced its decision. That's a groundless and artificial argument. They never adopted it until a month -- more than a month later. The minutes of their board meeting at page 346 of the appendix show that in the Board of Marriages of Baconsfield discussing this Court's decision didn't conclude that it reverted. It was only after the Georgia Supreme Court in March that reverted, the disposition became announced for many of them the only sound jurisprudential view is that the Georgia law comes from human decisions and this is the premise on which such basic law is Uriah against Tompkins stands. I have talked a little bit about our second argument, the fact that nothing's happened which prevents white women and children from using the park and the point we make in our brief is that the only manner in which the State Court could have logically reached its conclusion that the uses of the trust have failed is by a legal premise, an implicit legal premise, that negro use as a matter of law diminishes the white use because negroes are per se offensive or obnoxious. And such a ground we say, imposes a badge of inferiority on blacks which the Fourteenth Amendment prohibits. We do not contend that this was consciously the theory adopted. It never said anything like that. What we contend is that's the only logical foundation on which the conclusion can rest. The case might be more difficult if the court below had not have had no alternative under its law but it play -- but there were no Georgia decisions. No one has come up with any settled Georgia case law that forced this resolve. The side place statute offer plain alternative and the only case that has ever been cited, it is not cited, the respondents don't cite it here but they didn't -- in the court below. This is Adams against Bass case, but in 1855 Georgia refused to apply cy pres to resettle slaves in certain states on the grounds of that particular states would not receive them and that's the only case they've found. It is before the civil war amendments and in any event it had to be read in the light of the Georgia law which made it illegal to free a slave. Our third argument which I will not have time to argue because I would like to reserve some of my time but I will state it. It follows the reasoning in Mr. Justice White's concurring opinion in evidence against Newton, we add to that only that this Georgia law in 1905 which provided for racially oriented parks it facilitated testators making brands of this kind but beyond that we think that the law plainly encouraged racial discrimination, and it -- as Mr. Justice White's opinion in 1966 stated, we think incurably taints the racial condition in the trust and we think that tainted provision should not be given any effect, should not be even be given effect in effecting the reverter. Byron R. White: Mr. Nabrit would it have been illegal for him to, for the testator to have left the park for joint use of whites and negroes? James M. Nabrit, III,: I think it's still, as to judges the white women and children and negro women and children I think there is plainly no authorization for it so -- Byron R. White: You mean as a matter of trust law or -- James M. Nabrit, III,: No, well I am talking about 69504 now. Byron R. White: But was there a law against whites and negroes using public parks together? James M. Nabrit, III,: I am -- I have not found a law making it a crime, statewide. There were certainly local laws of that kind. That was one in the Holmes case, Holmes against --I know of none applying to, to make it in 1914 ,1912. But well let me amend that. Section 69505 which is the companion to 69504 made it the obligation of the city to use its police powers to enforce the racial condition in Bacon's trust. So as soon as the city accepted Bacon's trust, Bacon's command the racism did become the law of Macon and for that reason additionally we urge that the case ought to be treated like an invalid city code. Thank you. Warren E. Burger: Mr. Claiborne. Louis F. Claiborne: Mr. Chief Justice and may it please the Court. It seems to us relevant that this case is both a Wills case and a packs case neither one alone but both together. And yet it is not a case about how to construe a will nor is it even a case about which restrictions in Wills should be enforced nor even which racial restrictions are bad at which to be ignored. We are dealing with a racial restriction made some years ago, half a century ago, and the question is, what effect, if any, can be given to it now, half a century later, in light of the constitutional rule which has become clearer in that span of time but importantly also we are dealing with the provision in the will that affects not any sort of property but public property, a public facility of some substance here in the city of Macon. And in that sense we are concerned with the question whether a public facility shall be closed because the rule of non-discrimination has been held to apply to it as this Court held two terms ago. We are not saying simply that State Courts can never enforce a restrictive covenant or restrictive provision in the will. We are saying rather that a provision which has been held unenforceable. No question about that at this point. This is not Shelly and Kraemer. The Court has held that this restrictive covenant with respect to this park cannot be enforced. So the question is rather whether indirect effect can be given to that provision by decreeing a reversion, the effect of which is to withdraw a public facility from the municipality which otherwise enjoyed it and from all the people in it, and to do so with the inevitable impact that effect of discouraging those who in similar circumstances would sue to gain entry as they have a constitutional right to do when we are dealing with this sought public facility. We might rest on the proposition that when this factors coincide, the State Court cannot effectuate a racial covenant by decreeing a reversion even if the testator had provided specifically that that should be the result in the event that segregation were no longer possible in this public facility. It seems to us however that this case is a good deal easier because here clearly the State Court had alternatives. We are not faced with Senator Bacon's clear intent that in these circumstances there shall be a reversion. Nor are we faced with a state law that does not provide for some accommodation when the exact intention of the testator is impossible. We're not faced with one of those few states where cy pres is not the law. Here we have a Georgia law which on its face seems to permit carrying out the dominant purpose of the testator and varying some of his incidental provisions when they become impossible of performance as here the racial limitation has become impossible at the foremost. The case is easy both because it seems obvious that the Georgia Courts had options and because having options and having seemed to strain, the injury is all the greater to those who -- because of whose threatened presence in the park, the park is closed. Whenever the stage is seen to strain on the face of it in order to prevent the rule of desegregation from going into effect, obviously the injury to those excluded is all the greater and the discouragement in like circumstances is clear. Warren E. Burger: What would you think Mr. Claiborne about the hypothetical case I suggested to Mr. Nabrit, if the illegality which was used to trigger a reversion was a rezoning which had made the use of the land no longer legal and permissible as an airport? Louis F. Claiborne: I would think there were two answers Mr. Chief Justice. The ones Mr. Nabrit gave which is that in that circumstance there was no way of approximating the purpose of the testator in providing funds for an airport. Warren E. Burger: Now are you talking about some form of cy pres? Louis F. Claiborne: In that circumstance cy pres would not seem to offer an obvious alternative but more importantly from the point of view of this Court there it seems to me there'll be no federal constitutional question there because there is no denial of equal protection in those circumstances. Here we're dealing not merely with withdrawal from the public of a public facility which injures everybody. We are dealing with a withdrawal of a public facility on account of race which in both concrete and other ways injures a particular class of citizens. Warren E. Burger: But it injures them all equally, does it not here? I think in several respects it does not injure them all equally Mr. Chief Justice. First it is -- I think plain that the least advantage members of the community have the greater need for the park and therefore suffer more by its closure. But that is a small part of our argument. It does favor discrimination and discourage challenges to discrimination in comparable circumstances when challenging the exclusionary policy of any public facility which is subject to this sort of condition and when the result is that the facility is closed and you gain nothing by your efforts, obviously this has been a discouragement to the exercise of the constitutional right to seek entry on a non discriminatory basis to public facilities. And finally there is always the injury which results when the state puts its power, its prestige, its official declaration, on the side of discrimination and sends in effect the entry of these negroes to this park would be so obnoxious that we presume Senator Bacon would have closed his park rather than to have allowed them in. The case would be -- Hugo L. Black: May I ask you, suppose Senator Bacon, the day after he died, this Court had ended down an opinion that the park could not be run as this one he directed it be run and his heirs had two days later raised the question on it in challenge.Would you like to make the same arguments you are making now? Louis F. Claiborne: I think the -- Hugo L. Black: Then so dedicated to the public that it couldn't be withdrawn. I think that argument might be available Mr. Justice Black. I think this case is far stronger because the park has operated for half a century as a public facility which not only increases the injury which results from its closure, the implications involved in that closure on account of race, but also in the traditional terms of the cy pres doctrine, the effort to continue a Will which has taken effect, which has been in existence for some time is recognized as being much stronger than in the event -- Hugo L. Black: 3509 Louis F. Claiborne: -- when it is simply declared at the beginning that the trust has failed. Hugo L. Black: You mean constitutional this far? What provision of the constitution will make it strong there to you? Louis F. Claiborne: That there I think it's only in terms of the injury, Mr. Justice Black, but also in terms of the options available to the estate after all, constitutional law is some measure a question of possibilities and alternatives when the alternatives are evenly balanced, it may be that the constitution views the act as neutral. When withdrawing a public facility after half a century is done for the sole purpose of avoiding a mixing of the races in that public area. It seems all the more a reflection of an official policy against desegregation and that is constitutionally relevant. This case, it seems to us in the end when we talk about the Georgia Court having preferred one option to another, we don't of course impugn the individual judges to judge the Courts involved. The case would be perfectly clear, I suggest if the Georgia Courts had been applying a federal, a state statute which provide it in these terms whenever a racial restriction is included in the Will which establishes a public facility notwithstanding any indication as to the testator's intent as to what should happen when that racial restriction that can no longer be enforced, there shall be a reversion. That would be the clearest indication of the state's singling out this condition as critical as distinguished from all the other circumstances where cy pres would be applied. That is really this case. For these reasons we suggest that the judgment below should be reversed. Warren E. Burger: Mr. Jones you have only about three minutes, do you wish to outline a few preliminary matters for us? Frank C. Jones: Yes, I'll take advantage of that opportunity. Mr. Chief Justice, and may it please the Court. The case for the respondents can be stated very simply I believe. Senator Bacon devised his property in trust with the sole and exclusive benefit of the white women and children of the city of Macon. This Court decided in Evans versus Newton that Baconsfield cannot be operated in accordance with that racial restriction, either by the city of Macon is trustee or by private trustees, excepting and acting in accordance with that decision. The Supreme Court of Georgia then held that under state law, the sole purpose for which this trust was created applying several rules of construction under state law had failed that the trust terminated for that reason without regard to the racial limitation in the slightest. And because of a state statute providing that whenever a trust failed for any reason, a resulting lack of trust is implied for the benefit of the donor or testator or his heirs because of that statute again having nothing to do with race or discrimination in any respect, this property reverts under state law back to the heirs. Hugo L. Black: How long is that statute applied? Frank C. Jones: Your honor it is a statute of long vintage. It's certainly predated 1911 when this will was made. So far as I know its been in the Georgia Law for a hundred years or more. I could get the exact date if the Court would like to have it. It's a statute of long-standing. So our position may it please the court, the decision of the Georgia Supreme Court involved nothing more than the application of state law to a state will and is completely consistent with the holding of this court in Evans versus Newton. We say that no constitutional rights of the petitioners in this case have been denied and respectfully urge that the Supreme Court of Georgia decision should be availed. I'll complete my argument tomorrow sir.

William H. Rehnquist: We'll wait just a moment, Mr. Lefstein, till the court clears. 0.... Very well. You may proceed whenever you're ready. Stuart R. Lefstein: Mr. Chief Justice, and may it please the Court: This is an anti-trust case and a state law tortious interference with business expectancies case that was filed in the United States District Court in Rock Island, Illinois. Summary judgment was granted for the Plaintiffs, Charles Christianson, and his business, International Trade Service. The Defendant, Colt, then took an appeal to the United States Court of Appeals for the Federal Circuit. The Federal Circuit, pursuant to the Plaintiffs' motion, transferred the case to the Seventh Circuit on the ground it did not have jurisdiction. The Seventh Circuit, after hearing arguments on the merits, briefing and oral arguments, sua sponte, wrote an opinion saying it did not have jurisdiction but that, indeed, the Court of Appeals for the Federal Circuit had jurisdiction. William H. Rehnquist: Do you mean the opinion was written sua sponte or the holding was that it had no jurisdiction sua sponte? Courts write opinions sua sponte. Stuart R. Lefstein: Okay. I'll accept the correction. The case was then sent back to the Federal Circuit. The Federal Circuit then wrote a lengthy opinion, most of which dealt with the subject of jurisdiction. It explained very carefully why it was right the first time, why it did not have jurisdiction. It specifically held, as it said in its first order, it had no jurisdiction pursuant to congressional enactment, and then it said, nonetheless, despite the lack of a statutory grant of jurisdiction, it was going to decide the merits, and in deciding the merits, it reversed the judgment below that was in favor of the Plaintiff and, of course, then after that, this Court granted certiorari. The certiorari petition had actually submitted the question of jurisdiction and the question was phrased whether the United States Court of Appeals may rule on the merits of an appeal when it expressly rules that it does not have subject matter jurisdiction pursuant to statute. That question was granted and the Court directed the parties to brief and argue a second question, which it did, in fact, the Federal Circuit have jurisdiction from the appeal. Now, with respect to the first question,-- Thurgood Marshall: Mr. Lefstein, before you get to that, what exactly do you want us to do with this? Stuart R. Lefstein: --What we are actually asking, the relief we're asking for at this particular time is that the appeal be dismissed. Thurgood Marshall: No more than that? Stuart R. Lefstein: That's what we're asking for. Thurgood Marshall: What happens then? Stuart R. Lefstein: Well, then, it would be remanded to the District Court for further proceedings. Thurgood Marshall: Wouldn't we have to say that? Stuart R. Lefstein: If that was the Court's order, yes. Thurgood Marshall: Because I just don't know what position the case is in. Stuart R. Lefstein: Well, the case-- Thurgood Marshall: We have a court that says I don't have jurisdiction, but I decide, and I am at a loss as to what you do with a decision like that. Stuart R. Lefstein: --Well, we are requesting for reasons that we've placed in our brief that if we are correct and that is and if the Federal Circuit is correct, that it did not have jurisdiction, that, therefore, the remedy is dismissal, and we've said that actually for a couple of reasons, and one of the reasons is that Colt did not cross petition and, therefore, they're not entitled under prior holdings of this Court, which we've cited, to obtain the remedy of transfer and, of course, the remedy of transfer pursuant to Section 1631 may only be granted if it is in the interest of justice. We've cited reasons why we believe it is not in the interest of justice to bring about a transfer, and that is because we believe that Colt, in its briefing on the jurisdictional question, which was presented to both courts, and even in its brief to the Seventh Circuit, made statements in it which we believe actually misled the Seventh Circuit into coming to the conclusion that the Federal Circuit and not the Seventh Circuit had jurisdiction. Byron R. White: What if we decide that the Court of Appeals shouldn't have decided the merits? Why shouldn't we just remand the case to them? Stuart R. Lefstein: To the Court of Appeals? Byron R. White: Yes. Stuart R. Lefstein: Well, you might remand it to the Court of Appeals, but I assume that you would then have to give directions as to what would have to be done. Byron R. White: Well, I guess the Court of Appeals would have some sense of its own about what ought to be done. Stuart R. Lefstein: Well, that's obviously one of the options that this Court could exercise. William H. Rehnquist: Well, your motives and ours may be somewhat different. I think probably this Court's interest is to see which of the two Courts of Appeals was correct as to where this appeal should have gone to, and your motive is obviously to obtain a victory for your client, just like any good lawyer. But your appeal has... it was not heard on the merits in the Seventh Circuit, was it? Stuart R. Lefstein: That's correct, Your Honor. William H. Rehnquist: And was it heard on the merits... it was heard on the merits-- Stuart R. Lefstein: Well, wait a minute. I want to back off that answer for just a second. William H. Rehnquist: --Okay. Stuart R. Lefstein: It was argued on the merits. It was briefed on the merits. An oral argument was presented on the merits. But the Court of Appeals for the Seventh Circuit did not decide the merits. They didn't reach the question. They said we don't have jurisdiction. William H. Rehnquist: And it was your client... well, no. It was your opponent who took the appeal... was it you or your opponent that took the appeal originally from the Rock Island court? Stuart R. Lefstein: The... it was our opponent, Colt, the Defendant, who had a summary judgment entered against it by the District Judge, who took the appeal initially to the Federal Circuit, and then the Plaintiff, Charles Christianson, moved to transfer the case to the Seventh Circuit on the ground that the Federal Circuit did not have jurisdiction, and at that point, the Federal Circuit, after receiving briefs on that question, and presumably considering the whole issue, entered an order which specifically said that we don't... I think the language was probably a three-line order, which said we see no basis for any jurisdiction in our court, and accordingly, and I'm paraphrasing now, we transfer the case to the United States Court of Appeals for the Seventh Circuit. William J. Brennan, Jr.: Yes, but the only question for us to decide, I gather, is which of the courts was the proper court for which the appeal should have been taken. Stuart R. Lefstein: Well, that's obviously one of the questions. William J. Brennan, Jr.: But if we were to decide that, then can't we send back the merits to whichever court we think should have had the appeal? Stuart R. Lefstein: That's obviously one option, but-- Byron R. White: If you decide the Federal Circuit had jurisdiction, the Federal Circuit has already decided the merits. Stuart R. Lefstein: --Well, if that's your answer, that's one of the approaches that you could take. I might just mention that we have presented... the first question actually states "may a court rule on the merits after it expressly states that it has no jurisdiction. " and I suppose, technically, if you answer that question in the negative, and if you viewed that question as dispositive, then I think you could actually say that the Federal Circuit should not have decided it also. Byron R. White: Well, yes, but we told you to brief and argue the second question, the question of jurisdiction. Stuart R. Lefstein: That's right, Your Honor. That's correct. And if you view that one as dispositive-- Byron R. White: If we decided that first and agreed with the Federal Circuit as to jurisdiction, we could just say then that they shouldn't have decided the merits. But then where does that leave the case? Stuart R. Lefstein: --Okay. It you agree-- William J. Brennan, Jr.: There is no question presented as to the correctness of the decision on merits. Stuart R. Lefstein: --Well, there was a question-- Byron R. White: There is none here. Stuart R. Lefstein: --At the present time, there is not such a question. In our prayer for relief at the conclusion of our briefs, we have suggested that if the Court should decide that the Federal Circuit was wrong in saying it did not have jurisdiction and, in fact, had jurisdiction, we have renewed our request that you accept certiorari on the merits. I realize that's strictly up to this Court. William H. Rehnquist: There has never been an appellate opinion on the merits in this case, is that correct? Stuart R. Lefstein: No, that's incorrect. The Federal Circuit gave an opinion on the merits. Antonin Scalia: You do not question that if we decide that the Federal Circuit did riot have jurisdiction, an available form of relief would be for us to simply send the case back to the Seventh Circuit? Could we do that? Stuart R. Lefstein: That is one of the options. I've always assumed this Court in exercising-- Antonin Scalia: Could do any type... oh, I see. We like to think there's some statutory policy. Right. Stuart R. Lefstein: --Well, the statutory power is under Section 1631, which indicates a transfer if it is in the interests of justice, and, so, we've made some arguments concerning the matter of whether it is in the interest of justice. Thurgood Marshall: I renew my question. What do you want us to do with it? Stuart R. Lefstein: Our preference is that you dismiss the appeal. That you send it back to the Federal Circuit with directions that the appeal be dismissed. Anthony M. Kennedy: In other words, you don't want us to let the Seventh Circuit hear the merits if the Federal Circuit had no jurisdiction? Stuart R. Lefstein: If you agree with us that it's not in the interest of justice to retransfer it,-- Anthony M. Kennedy: And the reason you say it's not in the interest of justice is because Colt made some misleading statements in characterizing your complaint? Stuart R. Lefstein: --That's correct, Your Honor. Anthony M. Kennedy: But this was the same complaint that two circuits was inartfully drafted? Stuart R. Lefstein: That's correct, Your Honor. John Paul Stevens: Well, you also make a point they didn't cross petition. Stuart R. Lefstein: That's correct, and I think that that's a highly significant point, and because what Colt is really seeking is a form of remedy which is a transfer back to the Seventh Circuit which could get Colt more or less relief than what they received from the Federal Circuit. They could get more relief because they also had a claim for a cross motion for summary judgment. The Federal Circuit did not give them that relief, but, arguably, the Seventh Circuit could, so a transfer could get them more relief than, of course, under one of the cases we cite, I think the Federal Energy case. Even if there's going to be a modification which would give less relief, there's a duty to cross petition. John Paul Stevens: May I ask, though? There a lot of things that can be done here, but would you tell me which court you think had jurisdiction and why? Stuart R. Lefstein: I certainly will. The court that we say had jurisdiction is the Federal Circuit, and... I'm sorry. Is the Seventh Circuit, and the reason for that is that we're dealing with the well-pleaded complaint doctrine. We're dealing with the traditional concepts of arising under jurisdiction. The Seventh Circuit had jurisdiction it the Federal Circuit did not. The Federal Circuit only has jurisdiction of those cases that 1338> ["]. John Paul Stevens: Let me ask. You basically agree with Judge Markey's discussion on the jurisdiction issue, I gather? Stuart R. Lefstein: Oh, yes. Yes. John Paul Stevens: What would you say if half way through the trial, you had filed an amended complaint which clearly was predicated on the patent laws and the section that they construed in this case, would there... which court would have jurisdiction then? Not the original complaint, but you amended your complaint. Didn't wait to conform to the rules, but... and then, from then on, that's all the Court did, was resolve the issues raised by your amended complaint, who would have jurisdiction? Stuart R. Lefstein: I think under the well-pleaded complaint doctrine, the Seventh Circuit would still have jurisdiction. John Paul Stevens: You look at the original complaint and you don't even look at any substantive amendments? Stuart R. Lefstein: Even if, arguably, you look at subsequent amendments, I think you still have to, under the well-pleaded complaint doctrine, and I think this is explained very careful in the Franchise Tax Board case, you're still dealing with what is the Plaintiff's cause of action. John Paul Stevens: Yes, but those cases really dealt with the question of whether the trial court had federal jurisdiction. Here, the question is whether an appellate court has jurisdiction, and why does it make a lot more sense to say at the time of the appeal, let's see what was decided in the trial court and what is a fair constructive complaint at that time. Stuart R. Lefstein: Okay. And the simple reason for this is that when Congress set up the jurisdiction of the Federal Circuit, Congress didn't create some new standard for the Federal Circuit. What Congress said was the Federal Circuit's appellate jurisdiction is going to hinge precisely on the jurisdiction of the District Court. So, your question seemingly assumes that there's different standard under Section 1295 which relates to the Federal Circuit, but 1295 jurisdiction hinges on whether there was a rise in under-jurisdiction in the District Court, and if-- John Paul Stevens: So that your answer is basically that even thought it might make a lot of sense, that's not what the statute does. Stuart R. Lefstein: --That's a good answer. I think Congress has spoken on this, and if you read the reports which have been cited, and I might say, with all the disagreements that Colt and Christianson have in this case, right in their brief, they agree right at the outset that what we're dealing with are the traditional concepts of arising under jurisdiction and they cite the same congressional report that we cite, and that Congress specifically rejected some form of issue jurisdiction for the Federal Circuit as opposed to case jurisdiction because case jurisdiction is the standard under the arising understanding. Sandra Day O'Connor: Well, sometimes it's hard to know the answer under the arising under standard. Should any special presumption or expertise be given to the Court of Appeals for the Federal Circuit in deciding those questions of its own jurisdiction or not? Stuart R. Lefstein: I think the concepts of arising under, although we have a hundred years of history with respect to those concepts, nonetheless, I think they are tests which probably any court is competent or should be competent to decide. I might say this, this issue arose for the first time in the Federal Circuit. It didn't arise in the Seventh Circuit, and what we have is a situation where the Seventh Circuit clearly has jurisdiction if the Federal Circuit did not, and, therefore, what we were really dealing with was the jurisdiction of the Federal Circuit, even though it impacts on the Seventh Circuit. And it simply seems to us that the Federal Circuit having examined whether it had jurisdiction and having heard briefs on the matter and having entered an order that that order should have been given respect by the Seventh Circuit. In fact, there's an argument in both briefs on the law of the case doctrine. William H. Rehnquist: If we went off on that ground, we would settle nothing except this case. Stuart R. Lefstein: Well, that's certainly so, but I've read several opinions where this Court has said that they decide matters on narrow grounds, but if the Court is going to fashion a decision which is going to address the matter of which Court, in fact, had jurisdiction, then obviously you couldn't go on some type of law of the case argument. But what I would like to emphasize, I suppose, and I think Justice Stevens just a few minutes ago asked me to explain why the Federal Circuit did not have jurisdiction and the Seventh Circuit did, simply is that we had an anti-trust complaint. We made no allegation, except there was one reference in one paragraph that even mentioned this patent issue, this so-called 112 issue, and that paragraph didn't say, didn't make any claim at all that there were invalid patents. Byron R. White: Well, the claim is that the case went forward in the District Court solely or principally on the patent issues. Stuart R. Lefstein: Well, the case on-- Byron R. White: And, so, it's as though the complaint hadn't been amended. Stuart R. Lefstein: --Well, but, of course, using that analysis would contravene all of the years of teaching on this subject and as it culminated in Franchise Tax Board, which is that we look at the complaint, and the posture in which that issue arose-- Byron R. White: What I'm saying is it's just as though there's an amended complaint filed because if the patent issues, we're predominated. Stuart R. Lefstein: --Well, if that was the case, then we could have had that resolved in Franchise Tax Board because the clear holding in the language of Franchise Tax Board is that even where the only issue truly at issue in the case is the matter that's decided, if that didn't arise in the complaint, if that was a defense, then we don't have jurisdiction, and what we had here was an anti-trust-- John Paul Stevens: Mr. Lefstein, suppose there are cases in which there is a tradition of construing federal jurisdiction narrowly, as the federal courts are courts of limited jurisdiction, but here Congress was concerned about creating a specialized tribunal who would decide patent issues because there was expertise there that wasn't share by the courts around the country. So, is it really compulsory that we follow the same strict analysis that would apply in the federal jurisdiction cases in a case like this? I think we're talking about appellate jurisdiction, too. Stuart R. Lefstein: --I understand. I can only answer that by saying that Congress has spoken in this particular area. John Paul Stevens: You think they considered this problem of amended complaints and maybe a case does change its posture as it develops in the trial? Stuart R. Lefstein: I think they did, and what I base that on-- John Paul Stevens: What's the most illuminating discussion of this particular aspect of it that you can point me to? Stuart R. Lefstein: --There is a statement and it's cited in both briefs, and we didn't tag on one further statement to it, but the statement in the congressional reports... I think... I'm not sure if it's the Senate or the House, it states that the test of appellate jurisdiction depends on District Court jurisdiction and that there is arising under jurisdiction in the District Court in the same sense that there is arising under, and I'm paraphrasing now, that there is arising under jurisdiction with federal question jurisdiction. John Paul Stevens: Well, I understand that. That's right. That's in the legislative history, but I'm asking you is there any discussion in the legislative history that you're aware of of the problem of a case during the process of trial changing its character somewhat from what it looked like on the complaint to what it looks like after you get into the evidence and perhaps amend the pleadings and that. I don't think that's even discussed in the history. Stuart R. Lefstein: I don't recall anything directed to that, and I might add that with the statement I just paraphrased from the congressional record, they then state contrast Coastal States which was a case of the temporary emergency Court of Appeals, which went off on issue jurisdiction. So, the congressional record was clearly saying we're not going to do that here. John Paul Stevens: Mr. Lefstein, you think the majority of members in Congress and the President understood the well-pleaded complaint doctrine? Stuart R. Lefstein: I hesitate to speak for them all. Antonin Scalia: This is all very fanciful, isn't it? Stuart R. Lefstein: I can't speak to that. I assume Congress has some lawyers. Maybe they understand it, maybe they don't. Antonin Scalia: They wrote something that reads very much like 1331, though, doesn't it? Stuart R. Lefstein: I'm sorry? Antonin Scalia: They wrote something that reads very much like the provision of the statute that uses the well-pleaded complaint doctrine. That's what they enacted, isn't it? Stuart R. Lefstein: Yes, yes. Well, actually,-- Antonin Scalia: You don't know if they understood the well-pleaded complaint doctrine? Stuart R. Lefstein: --I obviously can't speak to that. Antonin Scalia: You think... you want to make a guess about it? Stuart R. Lefstein: It depends what the experience of the lawyers were, who were on these committees. If they had occasion to go into the well-pleaded complaint doctrine. I think, though, on that statute, what I should emphasize is they didn't enact a new District Court jurisdictional statute. They let Section 1338 just as it was, and they said, we're going to peg the appellate jurisdiction to what the jurisdiction... to what 1338 says. Byron R. White: Would it make a whole lot of sense in terms of the theory of the Federal Circuit jurisdiction to say that if a case turns solely on a patent issue, that except for the well-pleaded complaint rule, would be appealable to the Federal Circuit? Does it make much sense to apply the well-pleaded complaint rule to that, and in this case, say that the Court of Appeals for the Seventh Circuit should dispose of the patent issue on which the case turns? Stuart R. Lefstein: Well, I think it does makes sense, even if we want to ignore what Congress seemingly said, and even if we want to Look at mere policy because what we have is a situation where Congress also said we want to avoid undue specialization. There is discussion of that in the congressional reports. That we don't want one court that's just going to be deciding one particular thing, and I might also point out that in this particular area, what we're doing here with the 112 issue as it arose in this case, it is a federal pre-emption question, and the irony of the case is that the Federal Circuit has specifically said, and we cite the case, Cable Electric, that federal pre-emption questions, which this Section 112 issue is, we do not believe that we have a mandate from Congress to unify the law on questions of federal pre-emption, and that we're going to follow the law of the regional circuit. So that had the Court of Appeals for the Federal Circuit actually come out with a different result on the merits, they would have looked to Seventh Circuit law to the extent that they could have divined it to determine whether or not there was federal pre-emption under the patent laws and, of course, this particular case is going to mean that if the result was different because of the exclusivity provision in Section 1338, which means that the states must hear... where the states now have a right to hear cases involving patent issues, but not patent cases, that any decision in a case such as this, and the Federal Circuit gave an example, if there was a state law anti-trust case brought, that that would mean even though they've heard these cases for a hundred years because of that exclusivity provision, they would have to come out of the state courts and into the federal courts. So, I think an answer to the question that as a matter of policy, the arising under concept makes sense because I don't think it's beneficial to bring all of the traditional cases that the states have held and bring them into the federal courts. John Paul Stevens: May I ask another question? The language of 1295(a)(1) is that there's jurisdiction in the Federal Circuit if the claim was one that arose in whole or in part under 1338. Stuart R. Lefstein: Right. John Paul Stevens: Does that mean that if there's a single allegation in your complaint, and I know you deny that there is, but under the patent, that that would be enough to... that would be... satisfy in part and, therefore, there would be a federal jurisdiction? Stuart R. Lefstein: No. I think that has to do with specific claims. In other words, we've got one anti-trust count. In other words, the in whole or in part language is not in Section 1338. The in whole or in part language is in Section 1295. John Paul Stevens: Correct. Stuart R. Lefstein: So that you still have to have a genuine arising under case in your complaint, and I think we touch that in our reply brief, but, basically, we have a situation where we have solely an anti-trust case. So, there's no count at all that's based on the patent laws. Anthony M. Kennedy: Counsel, what should the Federal Circuit have done here in your view when it gets this case back a second time? Stuart R. Lefstein: We think they should have dismissed it and then Colt could have sought certiorari or they could have sought mandamus against one or both of the Courts of Appeals. Anthony M. Kennedy: Not sent it back to the Seventh Circuit? Stuart R. Lefstein: No. I think that would have been unseemingly. Anthony M. Kennedy: Not certified? Stuart R. Lefstein: I think they could have certified it. I think that would have been appropriate. I'd like to reserve my time. William H. Rehnquist: Thank you, Mr. Lefstein. Mr. Radice, we'll hear now from you. Anthony M. Radice: Thank you, Mr. Chief Justice, and may it please the Court: The issue is whether the appeal of a judgment which invalidates nine patents, disgorges trade secrets, and imposes other liability as a remedy for patent law violations belongs in the Federal Circuit, Court of Appeals, or a regional circuit. In short, is this a case that arises under the patent laws? The District Court's decision and judgment on liability held Colt liable for patent violations, specifically that it failed to comply with Section 112 of the Patent Act in failing to disclose all of the M-16's manufacturing specifications in connection with certain... I'm sorry? Byron R. White: Why did it reach those issues? Anthony M. Radice: It reached those issues because those are the issues presented to the District Court for summary judgment. Byron R. White: By? Anthony M. Radice: By the Plaintiff, by Christianson. Byron R. White: Well, didn't the Defendant rely on the patents? Anthony M. Radice: In the summary judgment motion, the argument was made that-- Byron R. White: Well, what about in the answer to the complaint? Anthony M. Radice: --In the answer to the complaint, we did allege patent invalidity in response to paragraph 18. In paragraph 18 of the complaint, which is the critical one as both the Seventh and Federal Circuits have recognized, is not well drafted It's confusing, and essentially Colt appears to allege patent validity and the patent invalidity. We responded with a denial and then a specific allegation of patent invalidity, but we understood the complaint at that time, Your Honor, to be alleging patent invalidity and trade secret invalidity based on 112, and we understood it that way because this was not the first time we had seen that theory. The action began when-- Byron R. White: Was there a pre-trial conference or was there just a motion for summary judgment? Anthony M. Radice: --I believe our adversaries have announced a desire to make a motion for a summary judgment at a conference at which we discussed the scheduling of a trial, and, so,-- Byron R. White: Well, had there been a pre-trial conference outlining the issues? Anthony M. Radice: --There had been conferences. Not a conference where the issues were outlined or where there was a pre-trial order, Your Honor. Byron R. White: Is that in the record? I suppose it is somewhere. Anthony M. Radice: It's certainly a notation in the docket of the conference, but I'm not sure whether there was a transcript made. Certainly not a pre-trial order outlining the issues. The District Court on the summary judgment motion held Colt liable for violating the patent laws and the relief or the remedy was the declaration of invalidity of nine patents and all of the trade secrets. There were no independent anti-trust findings by the District Court or any trust questions analyzing it. The District Court decision thus contains the actual basis of liability imposed and defines the well-pleaded complaint. Whether or not the allegations are well expressed in the complaint, we say, the District Court-- William H. Rehnquist: You say the District Court judgment defines the well-pleaded complaint? Anthony M. Radice: --In setting forth the elements of liability that were imposed, Your Honor, particularly important here because the complaint was so incomplete and poorly drafted. William H. Rehnquist: 1338, I think as your opponent points out, it talks about having original jurisdiction of any civil action arising under any act of Congress relating to patents. Now, you say you can simply rely on the judgment? Anthony M. Radice: We are saying that... two things, Your Honor. First, that you can use the decision, the judgment, the summary judgment motion to determine what are the necessary allegations of the complaint. William H. Rehnquist: But ordinarily you think of 1338 as a grant of jurisdiction, and that people should know when the complaint is filed whether the Court has jurisdiction or not. Anthony M. Radice: Ordinarily, and it would be the first issue if the question were state versus federal jurisdiction, but the alternative basis for jurisdiction here would be under the anti-trust laws. So, there's no question of federal jurisdiction per se. So, the question didn't come up at that time. It was either, you know, patent-- William H. Rehnquist: Yes, but if you take your view, you would never know whether a case was one arising under an act of Congress until you saw the judgment. Anthony M. Radice: --I use the judgment as just one way to interpret the complaint, Your Honor. The summary judgment motion itself, the theory of the summary judgment motion helps to interpret the complaint. William H. Rehnquist: But lots of times, the theory of a case changes entirely from the time a complaint is filed, and this may have been one of them, till the time judgment is entered. So, you really got to address yourself as to what point in the litigation does the arising under business apply. Anthony M. Radice: This is similar to Justice Stevens' question that an amendment, for example, of a complaint is something that comes after the complaint and would change, could change the jurisdiction of the District Court. A case that has no patent element in it could be amended... amended complaint filed in the jurisdiction of the District Court at that point. After the beginning of the case, would be based, in part, on Section 1338, and the Federal Circuit has interpreted its jurisdiction in response to a question asked to my adversary, has interpreted its amendment jurisdiction this way. It has recognized amendments that either add a patent claim or delete a patent claim as effecting its jurisdiction and has very recently interpreted consolidation to have the same effect. Those cases are cited, I believe,-- Anthony M. Kennedy: What was the ultimate relief granted by the District Court? It wasn't just to invalidate the patents, was it? Anthony M. Radice: --No. It went beyond that. It declared the patents invalid, first. Anthony M. Kennedy: And wasn't that just a threshold step toward assessing liability under boycott and anti-trust theory? Anthony M. Radice: Perhaps a threshold step, but, nevertheless, the result was-- Anthony M. Kennedy: But the relief-- Anthony M. Radice: --the validity which we could no longer enforce those patents. Anthony M. Kennedy: --But the ultimate relief the Plaintiff was seeking and that the District Court was driving toward was damages under the anti-trust law and boycott theories, was it not? Anthony M. Radice: The... well, can I answer that question first with respect to the District Court? The District Court, in its decision, granted first the patent invalidity relief; second, the trade secret invalidity and disgorgement relief; and, then, third, imposed damage liability with a trial to be held at another time. So, it didn't reach the amount of damages. But all of that relief flowed, and this is inescapable from reading the District Court's decision, flowed from the patent violations. There were no independent anti-trust issues-- Anthony M. Kennedy: Are you saying that this case could not have been brought in state court under a state anti-trust law? Anthony M. Radice: --It could not in the present form. Perhaps the best analogy would be-- Anthony M. Kennedy: I don't know Illinois law, but suppose under New York, the Little-Sherman Act, could this be brought in state court? Same complaint? Anthony M. Radice: --This case as liability was imposed could not. This case would be a patent case because, fundamentally, liability was imposed solely as a basis-- Anthony M. Kennedy: No jurisdiction in the state court from the outset? Anthony M. Radice: --Because it is a patent case and, therefore,-- Anthony M. Kennedy: That's your position? Anthony M. Radice: --Yes, it is. Antonin Scalia: It wasn't your position, though, when you got the complaint because, in fact, your answer to the complaint indicated that you didn't think there was a patent issue. Anthony M. Radice: I think it's fair to say we didn't think about it at the time, Your Honor. Antonin Scalia: Well, that's what... I mean, there you are. You say you admitted that Colt patents are valid until the end of each of their respective lifetimes. You regarded the complaint as not raising a patent issue. Anthony M. Radice: Well, we also had... if you're reading our response to paragraph 18, we also denied the allegation which we interpreted in paragraph 18 to be an assertion of patent and trade secret invalidity. So, we began by denying that allegation. Antonin Scalia: Denying what? The allegation generally, but when you come to talk specifically about patents, you admit that the patents are valid. In other words, you're saying there's no patent issue in this case. That's what your answer says. Anthony M. Radice: I think that the allegations may not match each other, Your Honor. Perhaps it's poor draftsmanship. It perhaps should have read as an averral of patent validity. Paragraph 18 is a confusing paragraph, and we would all have been better served had, as Judge Nichols said in his dissent, we called for an amended complaint at the time or a more definite statement of what the complaint was, but we did not, and now we must try to interpret what that complaint means, and it's our position that the way that one can... the best way, the most reliable way to determine what the necessary allegations are of Plaintiff's real case is to look at the summary judgment motion, to look at the claim that was actually litigated and actually adjudicated. Whether we do that under the... following the principles of the well-pleaded complaint rule, there are cases that go beyond the four corners of the bare words of the complaint to try to interpret what are the necessary allegations of the complaint, or whether we apply Rule 15(b) of the Federal Rules of Civil Procedure, we come to the same conclusion. Rule 15(b), even without a formal amendment, requires that the pleadings be treated as amended to conform to the proof. Antonin Scalia: Well, that's the end of the well-pleaded complaint doctrine then, isn't it? Anthony M. Radice: I don't think so, Your Honor. Antonin Scalia: We could call it the well-tried case doctrine because whatever comes out automatically is considered to amend the complaint and whatever the case shows is determined by federal jurisdiction. Anthony M. Radice: If it comes up under 1295, only as regards the Federal Circuit's jurisdiction versus another appellate court's jurisdiction, and it's only at that stage that you have a record in between-- Antonin Scalia: Under 1331? Anthony M. Radice: --I think it's consistent, Your Honor. The cases... I'm sorry. The Federated Department Store case, for example, looked at matters outside the bare pleadings. It looked at the belated litigation to determine... that was the case where a state anti-trust action was brought, but there had been a prior action, the Plaintiffs had discontinued their action and tried to file the same action in state court, and the courts below and the Supreme Court affirmed, looked at the related litigation to determine what the real cause of action was, and, so, I think what we're saying is really consistent with the well-pleaded complaint rule, but it operates... it certainly does not change the inquiry that must be addressed when the question is federal jurisdiction per se. That question must be addressed at the outset of the case where virtually all you have is the complaint. Perhaps a removal petition. Antonin Scalia: Do you have any... I mean, looking to other litigation is really just trying to find out what the complaint historically meant. You can perhaps give it some clarity by looking at other litigation that was there at the same time, but that's quite different from saying we're going to look at the way the case developed. The way the case develops does not necessarily have anything to do with what the complaint meant. It seems to me the best indication if you're going to look outside its face what the complaint meant is what kind of an answer did it provoke from the defendant. And here you admit that there's no patent issue. Anthony M. Radice: But a case can change, particularly complex litigation, and, therefore, the jurisdictional basis can change. Antonin Scalia: Yes. You are relying on the fact that a case can change while it's being tried. Anthony M. Radice: That's one thing, Your Honor. Antonin Scalia: So, you don't think that whether there's federal jurisdiction or not is fixed when the complaint is filed. So, you're not looking for historical fact what the complaint meant. Anthony M. Radice: It is fixed. Number one, it can change. Number two, we do read this complaint as a patent complaint and we did so at the time, and one of the reasons we did was because this was not the first time we had seen this issue. In the Springfield litigation, which we brought Mr. Christianson into the Springfield litigation as a defendant, in that action, we were also seeking to enforce trade secrets. The defense in that action was this Section 112 theory that our trade secrets and patents were invalid because of 112. The action went up on appeal, got a preliminary injunction, and we were upheld. The preliminary injunction was upheld. So that when we drop Christianson after we went back to the District Court, he turned around and filed this complaint, the instant complaint. We interpret it as turning the defense into an offense. We had seen the issue before. That's the way we understood it at the time. I certainly recognize this is not an easy complaint to read. It's not a model of draftsmanship, and that's why I suggest that looking at the subsequent proceedings assists the District Court or the appellate court in determining what the complaint really means. Sandra Day O'Connor: Well, counsel, aren't there motions that you might have made during the course of the proceedings to force an amendment of the complaint or force a more definite statement? Anthony M. Radice: Those motions were available to us. We did not make them. Sandra Day O'Connor: And you didn't make them, and, yet, you want to rely on it as though those things had been done, and I'm not sure that's the way the system is supposed to work. Anthony M. Radice: Well, I think Rule 15(b) was written precisely for this situation, that where the parties had not recognized or the Court has not recognized the change in the theory between pleading and trial, that one... de facto, it should be recognized and considered an amended pleading. We... and the course of events was only about four or five months between this complaint and the bringing of the summary judgment motion, we cross moved for summary judgment motion, but it really just met the Section 112 theory. The motions didn't go beyond that. Sandra Day O'Connor: Wouldn't damages at the end of the line be calculated on an anti-trust theory no matter what happened to the patent? Anthony M. Radice: Well, they could be. They could be. Sandra Day O'Connor: Wouldn't they have to be? Anthony M. Radice: Yes. We've never reached that stage. We're not... it seems to me that there are two ways because of the diversity between the... the divergence between the original complaint and what we were held liable for. There's two ways of looking at this action. One is that it's solely a patent action, that it was brought as an action to declare patents invalid, which is a recognized action that arises under the patent laws, and that the relief went too far. The judge took the unprecedented step of patent violations and disgorged trade secrets. Secondly, to try to reconcile the original complaint, for example, with the decision, if it's an action that arises under the anti-trust laws, the closest analogy that we could use would be the Walker Process kind of case. The Plaintiffs' complaint here arises... it's... I'm sorry. The action created by the anti-trust laws would be under Section 2 of the Sherman Act. The Plaintiff is proceeding to show that our patents are invalid and that the enforcement of those patents plus all the other elements of Section 2 amounts to a monopoly. Viewed that way, we must come to the same conclusion, though. The Walker Process teaches and the related cases that fundamental to such an anti-trust claim is that the patents must not only be invalid, technically invalid, they must be obtained by fraud from the Patent Office. So, inherent in Plaintiffs' claim, not a defense, is the invalidity element, and this law has been applied in the trade secret area, too. Anthony M. Kennedy: The Federal Circuit has not granted jurisdiction in any such case or has it? Anthony M. Radice: In the Walker Process case, it's never come up. Certainly not at the Federal Circuit level. Anthony M. Kennedy: And, in fact, the other circuits have retained jurisdiction in themselves, have they not? Ethicon. Anthony M. Radice: The closest case... the only case that I'm aware of is the Handgards case, but... I'm sure Your Honor is familiar with that one. I believe you were on one of the panels. At the time that issue was considered and the regional circuit kept the case, it appears to me from the decision that there was no longer a patent question in the case. It's our position that where there is a patent invalidity issue at the heart of the Plaintiffs' anti-trust case, the issue, the case arises under the patent laws and the appeal would still go to the Federal Circuit, and I believe what little there is in the statutory history is consistent with this. There is very little devoted in the Senate report to the hybrid-kind of patent anti-trust case, but there's a couple of things that are notable. There's a couple of statements in the Senate report, for example, that says specifically that they expect that all patent appeals to go to the Federal Circuit. They were more concerned... there was some concern expressed that a frivolous patent appeal be attached to an anti-trust complaint and that the District Court should be able to deal with this, to prevent that steering jurisdiction to the Federal Circuit. But probably the most that is said on the subject is attached to the Senate Report. I think it's Appendix B, which is a letter from... to Senator Dole from the Office of Court Administration that deals with the kind of mixed anti-trust and patent questions, and it characterizes most of these kinds of patent abuse claims, including the Walker Process claim, as fundamentally patent issues that it expected would go to the patent court, to the Federal Circuit. Antonin Scalia: Mr. Radice, could I ask about... I don't understand how you expect your Rule 15(b) argument to work when the proof shows that there is a patent claim the complaint is deemed amended to conform to that proof. Let's assume I'm sitting on the Seventh Circuit and half way... I think I have jurisdiction because it doesn't seem to me that there's any patent limit and deep into the trial, it appears that we're getting into a patent issue and, boy, this case is really going to boil down, what do I do then. I transfer to the Federal Circuit. Anthony M. Radice: If you are on the Seventh Circuit, you don't get the case until the trial is over and a judgment has been written. Antonin Scalia: And it doesn't arise at the District Court level? Why doesn't it arise at the District Court level insofar as the-- Anthony M. Radice: The District Court I do not believe either has the power nor is there a procedure for the District Court to determine the appellate court's jurisdiction. The next thing that would happen after the trial and the judgment is one of the parties has to file a notice of appeal, and the issue would come up if the other party questioned where that notice of appeal was directed. Antonin Scalia: --You say there's a constantly shifting jurisdictional basis in the District Court, but it doesn't make any difference. Anthony M. Radice: Not constantly shifting. This is a pretty rare case. Sandra Day O'Connor: Well, what if it started in a state court? You wouldn't have the luxury of letting the District Court resolve it. You'd be in the middle of the trial and you'd have to figure out where it belonged under your theory. Anthony M. Radice: Whether-- Antonin Scalia: Doesn't the District Court have to know what law it's going to be governed by? Let's assume the Federal Circuit and the Seventh Circuit have quite different resolutions of a particular issue. As the trial proceeds, the district judge says, oh, I'm back to the Federal Circuit now, and then the evidence changes, whoops, I'm back at the Seventh Circuit. This goes back and forth during the whole trial. Anthony M. Radice: --On the choice of law question, at least the way the law seems to be developing, the Federal Circuit has taken the position that in areas outside its specialty, non-patent areas, it would apply the law of the circuit. So, on the anti-trust issues, and this would be on an issue-by-issue basis, the theory would be that the... whether in the regional circuit or the Federal Circuit, the federal... I'm sorry. The regional circuit's anti-trust law should apply. Antonin Scalia: Would apply anyway. So, it wouldn't matter. Anthony M. Radice: Consistent with that principle is that, and I don't know that there has been a holding to this effect, is that if a regional circuit got a patent issue is it should defer, there's a difference, because it has all the precedent. Thurgood Marshall: Counsel,-- Anthony M. Radice: Contrary to the Federal Circuit's precedent on patent law, and that's-- Thurgood Marshall: --Counsel, I might have missed it. Are you defending the Court's decision that it did not have jurisdiction? Anthony M. Radice: --No. We are-- Thurgood Marshall: It's easy. Yes or no? Anthony M. Radice: --We are defending that the Federal Circuit had jurisdiction and the rational-- Thurgood Marshall: That it did not have it? Anthony M. Radice: --That it had jurisdiction, but we say the proper rationale for its jurisdiction was best expressed in the Seventh Circuit's decision. Thurgood Marshall: Cross appeal? Anthony M. Radice: We did not because we did not submit a cross motion. Thurgood Marshall: So, my question is, you're not defending it? Anthony M. Radice: We are defending the result. We are not seeking any relief different from what-- Thurgood Marshall: You defend the judgment. That's all you're defending. Anthony M. Radice: --We are defending the judgment. We are not seeking relief or result different from what the Federal Circuit did. We do defend the jurisdictional basis on a different ground than what the Federal Circuit expressed. We think it had expressly under the statute jurisdiction because this was the patent case. William H. Rehnquist: And you must establish both that the... if you're supporting this particular judgement before us now, you have to say that the Federal Circuit did not have jurisdiction of the appeal in the first place, but it was justified in going on to decide the case under the interest of justice? Anthony M. Radice: No, Your Honor. We don't defend the interest of justice basis of jurisdiction. That, on the face of the statute, appears to just provide a transfer where a court lacks jurisdiction. What we defend is the court's exercise of jurisdiction. We say it had jurisdiction to reach the merits and it had jurisdiction for the basis expressed in the Seventh Circuit. William H. Rehnquist: So, the Seventh Circuit was right on jurisdiction. Anthony M. Radice: Exactly. William H. Rehnquist: The Federal Circuit was wrong, but since the Federal Circuit decided it and since you feel it had jurisdiction, then you support the judgment. Anthony M. Radice: That is precisely our position. Thurgood Marshall: Do we have to rule on both of them? Anthony M. Radice: I think-- Thurgood Marshall: You rely on the Seventh in that. Do you want us to rule that both of them are correct? Anthony M. Radice: --I think whichever way you rule, you necessarily rule on the other position because if the Federal Circuit had jurisdiction here, the Seventh-- Thurgood Marshall: Confusion. That's what you want. Anthony M. Radice: --No. We try to-- John Paul Stevens: You want us to say the reasons given by the Seventh Circuit are correct, but the judgment entered by the Federal Circuit was correct. Anthony M. Radice: --That's correct. John Paul Stevens: You have suggested the case, and I'm curious and I don't know if this is the law, but in your brief, you cite a case in which there was a patent claim asserted in the complaint, and then, during the course of the trial, the patent theory was abandoned, and the Federal Circuit held in that case that it would look at the later... would not look at the original complaint and they declined jurisdiction. Is that the general rule that's accepted, that they will... when it will deprive them of jurisdiction to look at later amendments, they will not just look at the well-pleaded complaint, they will look at the latest. Anthony M. Radice: I believe because there's been several cases on the subject in the Federal Circuit that's inconsistent. John Paul Stevens: Your opponent didn't discuss those cases, as I read the brief. Anthony M. Radice: They cited two or three, maybe both of those go the same way, but I think they have been consistent in recognizing that the amendment affects their jurisdiction. John Paul Stevens: What was the... the Atari case, which was heard en banc, was one that also looked at subsequent developments, was it not? Anthony M. Radice: Well, it looked at subsequent developments and in Atari, there was an attempt after the decision to separate the copyright case from which there had been a judgment and the patent part of the complaint and the Federal Circuit essentially held that that attempted separation was not affected. It's kind of a unique set of facts. Typically, a severance would occur much earlier. It really didn't reach the question of if there was an effective severance that resulted in separate trials and separate judgments, how that would affect its jurisdiction. John Paul Stevens: But in that case, at least you quote something your brief, that says they looked at the situation at the time of the appeal rather than the time of the complaint, which is also consistent with your view that you start out with a complaint alleging a patent violation and then later amend it to abandon it, they wouldn't have jurisdiction. Anthony M. Radice: They did look at subsequent events, and I think that's... I don't think that does violence to the well-pleaded complaint rule, Justice Stevens. I think that that's what courts have done where they are confronted with either a poorly-drafted complaint or a changed theory, and I think the opposite result being wedded to the complaint would do violence to the congressional purpose here because you could manipulate the jurisdiction by attaching a federal patent claim in your complaint, abandon it, and throughout the history of the case, all appeals would go to the Federal Circuit. Antonin Scalia: Well, even if you say that you can use it as a practical matter in this area, you certainly couldn't apply the well-pleaded complaint doctrine generally as far as federal versus state jurisdiction goes in that fashion, could you, because then a federal court would not know during the course of a trial whether it had jurisdiction or not? So, you're arguing for a different well-pleaded complaint rule here-- Anthony M. Radice: I don't think there's been any inconsistency. If a patent claim was attached, let's say, to a state claim and the court assumed jurisdiction and then determined that the patent claim was frivolous, I don't believe the District Court is supposed to proceed with jurisdiction. Antonin Scalia: --Well, let's leave patent claims out of it. The issue is just whether this is a federal case or not before a federal district court. No patent issue. Just another federal issue and during the course of the trial, sometimes it seems there is and sometimes it seems there isn't. You're saying that you can look to the end of the trial to determine whether the federal court has jurisdiction. Anthony M. Radice: I'm saying that that is the most advisable rule to determine appellate jurisdiction. Antonin Scalia: The well-pleaded complaint rule does not apply to appellate jurisdictions. It applies to District Court jurisdiction as well, doesn't it? Anthony M. Radice: It does. Antonin Scalia: And you're asserting that the principle you're now espousing is what is used in determining whether a federal court has jurisdiction, that you look at how the trial goes, and if the decision is ultimately based on a federal question, it had jurisdiction, and if it isn't, it didn't. Is that really-- Anthony M. Radice: I'm saying it's not something that changes minute-by-minute. This is a rather unique case where the District Court-- Antonin Scalia: --I'm talking generally and never mind the changing. At the end of the trial, it appears that there was a federal claim because of new evidence brought in, although the complaint clearly on the face of the complaint there wasn't any. You're saying that there would be federal jurisdiction under standard well-pleaded complaint doctrine. Anthony M. Radice: --The Court tried a federal question case, in this case, a patent question case, yes, we should look to that to determine appellate jurisdiction. Antonin Scalia: Do you have any cases, aside from this patent area? Anthony M. Radice: Not specifically. Antonin Scalia: Any case at all that does-- Anthony M. Radice: By operation of Rule 15(b). Antonin Scalia: --You have cases that you think the case would say that? Anthony M. Radice: The language of Rule 15(b) amends the complaint, but this situation I don't think could come up under normal federal jurisdiction per se because jurisdiction is determined at the outset. It could only come up when one has the advantage of a retrospective analysis. In the Coastal States case, I believe, which determined the jurisdiction of the temporary emergency Court of Appeals and Judge Newman, which ultimately determined that it was issued jurisdiction, said that the appellate court should take the advantage of looking in retrospect and not deal just with the frozen words of the original complaint because it is better able to determine whether that is the kind of case that should go to one Circuit Court of Appeals or the other. William J. Brennan, Jr.: I agree with you that the Federal Circuit has jurisdiction. What about the decision on the merits? Do you concede have reason to seek cert here for review of the merits? Anthony M. Radice: I do not think so. It's a decision that I think is, of course, on the merits, eminently correct. It applies traditional patent law. William J. Brennan, Jr.: Yes, but we have not had any appellate review of that decision, have we? Anthony M. Radice: Has had... we both have had appellate review in the Federal Circuit. The Federal Circuit reached the merits and it's been fully briefed and argued. Obviously, the Court can accept certiorari on the merits. We think the related point is that, you know, the question as to my adversaries, what does the Court do when it finds that the Seventh Circuit really had jurisdiction, and there's no support for a dismissal. In fact, the Harley-Davidson v. Buffington case that we cited in our briefs says that our right to an appellate... right to an appeal means a right to have an appellate determination. There is precedent for what this Court could do in at least three cases as recently as U.S. v. Hohri, where the Court determined that the D.C. Circuit did not have jurisdiction, but the Federal Circuit did. It simply remanded and directed a transfer under the transfer section of 1631. That is the, we say, appropriate remedy and unless the Court does want to reach the merits of the patent question. Thurgood Marshall: Counsel, help is at hand. Anthony M. Radice: I think it raises more questions. William H. Rehnquist: Thank you, Mr. Radice. Mr. Lefstein, you have three minutes remaining. Stuart R. Lefstein: Mr. Chief Justice, U.S. v. Hohri, which was just cited by Mr. Radice, is a case where there was a transfer, but there was a cross petition. Both parties petitioned in that particular case, and there was no discussion of the interest of justice question. John Paul Stevens: Mr. Lefstein, let me ask you one more question about the basic issue we're most interested in rather than what we do with the case. Do you think that the Federal Circuit was correct in the case in which it held that when there is in the complaint itself a clear patent claim, but then, during the course of the trial, that claim is dismissed, that it had no jurisdiction of that appeal? Stuart R. Lefstein: Yes. John Paul Stevens: How do you reconcile that with the arising under doctrine? Stuart R. Lefstein: Well, because the arising under doctrine simply has to do with our-- John Paul Stevens: Is that the time the complaint was filed it clearly did arise under the patent laws. Stuart R. Lefstein: --Okay. Let me say this first. John Paul Stevens: Because you don't discuss that case in your reply brief, I don't think. Stuart R. Lefstein: No. Okay. I think what's significant here, we don't agree at all that this complaint was ever amended. We don't agree that anything ever changed, and I think it's important to stress that the complaint was understood by Mr. Radice and Colt to the effect when he admitted patent validity and he did nothing, there's nothing in their answer that raised a 112 issue. John Paul Stevens: Well, I'm interested in your answer to the theoretical problem. If you have a complaint which clearly does make a patent claim, then in the course of the trial it's dismissed, so there are no patent claims in it, for determining appellate jurisdiction, do you look at what happened after the dismissal or at the time the original complaint was filed? Stuart R. Lefstein: Well, I think that they were looking at what happened when the complaint was filed. John Paul Stevens: But they dismissed the appeal. They would not take the appeal in that case. I don't understand how you reconcile your theory with the Gronholz and Schwarzkopf cases that they cite in their brief. Stuart R. Lefstein: Well, there's nothing different about our theory than every case. I mean, if you're going to say that in our case, you could have said that in Franchise Tax Board, and, of course, what happened here in our particular case was that the Section 112 issue was in the pleadings. It was in our reply to Colt's counter claims. So, this whole business about Section 15(b)... by the way, Section 15(b) doesn't say that the complaint is amended, it said that the pleadings can be so, and what we have in this particular situation, we had the 112 issue, but it came up way down stream from the complaint. So that we really had no patent issue in this case until Colt in its answer said we're justifying our anti-competitive conduct with a claim of state law protected trade secrets, and then, in an argument and in a reply to that claim of state law trade secrets, we injected the patent pre-emption issue for the first time, and that's the way it stayed through the end of this lawsuit. William H. Rehnquist: Thank you, Mr. Lefstein. The case is submitted.

John G. Roberts, Jr.: We'll hear argument next this morning in Case 12-464, Kaley vs. United States. Mr. Srebnick? Howard Srebnick: Thank you, Mr. Chief Justice, and may it please the Court: When the government restrains private property, the owner of that property has the right to be heard at a meaningful time and in a meaningful manner. For a criminal defendant who's facing a criminal trial, whose property has been restrained, that time is now, before the criminal trial, so that he or she can use those assets, that property, to retain and exercise counsel of choice. Antonin Scalia: Well, I -- you know, I -- I find it hard to think that -- that the right of property is any more sacrosanct than the -- the right to freedom of the person. And we allow a grand jury indictment without -- without a separate mini-trial to justify the arrest and -- and holding of -- of the individual. And if he -- if he doesn't have bail, he's permanently in jail until the trial is over. And we allow all of that just on the basis of a grand jury indictment. And you're telling us it's okay for that -- maybe you think it's not okay for that. But I think you're saying it's okay for that, but it's not okay for distraining his property. I -- I find it hard to -- to think that it's okay for the one and not okay for the other. Howard Srebnick: Justice Scalia, it's not okay for either. Antonin Scalia: Ah, okay. This is a bigger case than I thought. [Laughter] Howard Srebnick: The right to be released on bail, that is, the right not to be detained all the way until trial, under this Court's precedent in United States v. Salerno, the Court provided procedural safeguards to ensure that before someone is held all the way until trial, they would have a hearing, a hearing which would include a right to challenge the weight of the evidence and other factors. We ask for something no different. Indeed, the indictment itself can justify the detention of the body and the detention of the asset until such time-- Samuel A. Alito, Jr.: Well, that's -- I'm sorry. That's pretrial detention without bail. I thought Justice Scalia's question had to do with detaining someone who was indicted but couldn't make bail. Howard Srebnick: --Every person is limited by their own financial wherewithal. And so long as bail is set not as an excessive bail, he or she must rely on the assets that he or she owns. Samuel A. Alito, Jr.: But why in that situation would the defendant not have the constitutional right to have a determination by a judge as to whether there was probable cause? Howard Srebnick: In the context of a bail hearing, a judge does make that determination. Ruth Bader Ginsburg: Does it? There are several factors that are taken into account. One of them is weight of the evidence. Are you equating those two things, probable cause to believe that the defendant committed the offense and weight of the evidence as one of several factors to take account over the bail determination? Howard Srebnick: Yes, we are, Justice Ginsburg. In the United States v. Salerno, this Court upheld pretrial detention because there were procedural safeguards, a right to be heard, shortly after the arrest. In the context of the restraint of assets, as it stands now in the Eleventh Circuit, there is no right to be heard at any time until-- Ruth Bader Ginsburg: Right to be heard-- John G. Roberts, Jr.: I thought your answer might have been that, yes, in fact, the property is entitled to greater protection because it's going to be used to hire counsel that will keep the person out of jail long term, even if he can be put in jail pending the trial. Howard Srebnick: --Mr. Chief Justice, we've certainly made that argument in our brief. Some might find it more important to have those assets to retain counsel of choice than having their liberty deprived temporarily. In either case, the right to be heard should include the right to be heard by a judge, a judge who would have the authority to provide relief. Antonin Scalia: Is this only in the case where the person has no other assets, where all of his assets are seized so that he can't -- he can't hire counsel? Suppose only half of his assets are determined to -- or asserted by the government to have been the product of criminal activity, and he has a lot of other money with which he can hire an attorney. Is that a different case? And we're not -- that's not before us here. Howard Srebnick: That's not this case. So long as-- Antonin Scalia: So you have a hearing on whether he has other money, right? Howard Srebnick: --Such -- such a hearing took place in this case, indeed. But nevertheless, the Petitioners, the Kaleys, did not have sufficient other funds to retain counsel of choice. Ruth Bader Ginsburg: --If your -- if your position prevails, there would be nothing to stop the defendant from using those assets for something other than paying an attorney. If the assets are unfrozen, freely available to the defendant, the defendant might say: I will settle for a legal aid lawyer, I want to use this money for something that I care more about. It -- there would be no control on that, would there? Howard Srebnick: Justice Ginsburg, I believe there could be and should be. Indeed, if the court were to modify the restraining order to allow funds to be paid to counsel, the court would supervise the release of those funds to ensure that indeed the funds were be using -- were being used for the exercise of the right to counsel of choice. We are not asking for a vacation of the restraining order so that the moneys can be used for other purposes. Sonia Sotomayor: I see the government's strongest argument as being that the grand jury finding of probable cause is sacrosanct, and a hearing like the one that you are proposing would call the validity of that finding into question. Why don't you address that because we -- you were talking about in bail the validity of the charges are not at issue, just one factor in the court's determination of whether to restrain him or her is the strength of the government's case. Are you trying to draw a similar analogy here? Howard Srebnick: Justice Sotomayor, what we are proposing, and indeed it's been a hearing that's taken place in several of the circuits for some 25 years now-- Sonia Sotomayor: There is at least five who are ruling similarly to yours. Howard Srebnick: --So for 25 years the courts in those circuits have been holding these hearings. And what these hearings look like are similar to a pretrial detention hearings, they are similar to suppression hearings, they are similar indeed to what Rule 5.1 preliminary hearings might look like. And all these hearings require is a presentation by both sides. Each side makes its presentation. Of course, the grand jury is a one-sided presentation. Of course, the grand jury does not give the defendant an opportunity to be heard. Indeed the grand jury doesn't give the defendant an opportunity to have his adversary present exculpatory evidence to the grand jury based on this-- Ruth Bader Ginsburg: And how do you get at-- Antonin Scalia: Well, that's terrible. We shouldn't allow that. We shouldn't even hold the fellow. We've been doing it for a thousand years, though, and it's hard to say that it violates what our concept of fundamental fairness is. Howard Srebnick: --Justice Scalia, we are not quarrelling with the power of the grand jury to initiate the charge. We are simply saying the grand jury doesn't have the power to initiate and hold for the period between indictment and trial, the-- Ruth Bader Ginsburg: --But then there -- then there is the anomaly that the grand jury has said there is probable cause, this defendant can be prosecuted, and then you would have the judge make a determination that there isn't probable cause to believe. You are asking a judge who has determined there is no probable cause to preside at a trial because the grand jury has found that there is probable cause. And how -- how could a judge allow a trial to go on? If the judge concludes there is no probable cause to arrest this defendant for this crime, how could the judge then conduct a trial? The judge would be overriding the grand jury's determination, right? Howard Srebnick: --Justice Ginsburg, I don't believe so. What's at issue at the hearing is what the government presents at that hearing as compared to what the defense presents at that hearing, no different, I submit, than in civil cases under Rule 65 where a judge holds an interim hearing on the entry or nonentry of an injunction, that doesn't define the outcome of the case. Anthony M. Kennedy: In your view, what weight does the court, the trial court in this hearing, give to the fact of the indictment? Howard Srebnick: I believe the indictment authorizes the initiation of the restraint and not more. The government-- Anthony M. Kennedy: So no weight. We've now had a hearing. I ignore the indictment and let's have a trial. That's your position? Howard Srebnick: --Justice Kennedy, if the defendant makes a presentation at the hearing-- Anthony M. Kennedy: No. I would think the government has the burden of proof. Howard Srebnick: --If the defendant is entitled to the hearing because the defendant needs assets to retain counsel of choice, and the government rests on the indictment and the defense presents nothing more, I submit the government would prevail at that hearing if nothing is-- Anthony M. Kennedy: What about -- what about a detention hearing? Same rule? Howard Srebnick: --Under the statute-- Anthony M. Kennedy: It would be the government under a detention hearing -- pardon me. The trial court under the detention hearing ignores the fact of the indictment? Howard Srebnick: --Under the Bail Reform Act, there is a rebuttable presumption in certain offenses where an indictment has been returned that the person is a flight risk, but it is a rebuttal presumption. We are asking for the same opportunity to rebut the entry of the restraint. So we in no way are submitting that the prosecution is prevented from proceeding to trial. Antonin Scalia: But a grand jury indictment doesn't -- doesn't establish that there is probable cause to believe that the person is a flight risk. That doesn't contradict what the grand jury found. You're asking the judge here to contradict what the grand jury found. Howard Srebnick: We are asking the judge to make an independent finding based on what's presented to that judge at the hearing, the very hearings that have been occurring for 25 years. Ruth Bader Ginsburg: Wouldn't the next step be that the judge would then dismiss the indictment? The judge has found there is no probable cause to charge this man with this offense. And yet you're going to ask that same judge to try the case that -- it would seem to me that the logic of your position is if there is to be this hearing on probable cause and the judge finds that there is no probable cause, then the judge dismisses the indictment. How could you ask a judge who thinks there is no probable cause to then conduct a trial? Howard Srebnick: Justice Ginsburg, what the judge might conclude is at that hearing at that moment in time the government did not satisfy its burden, on that one day in time. It doesn't mean that the judge has gone back to look at what occurred before the grand jury. Samuel A. Alito, Jr.: At these hearings when they have been conducted, what do they look like? The rules of evidence would not apply, I assume, so the government could call, let's say, a case agent who would provide a summary of some of the evidence, enough of the evidence that was submitted to the grand jury to establish probable cause in the opinion of the prosecution, and then what would happen? Howard Srebnick: Justice Alito-- Samuel A. Alito, Jr.: You could call witnesses. Could you subpoena witnesses? Could you require the disclosure of the names of government witnesses? Howard Srebnick: --Justice Alito, what we are proposing and what indeed happened in this case, in the case of the Kaleys, the defense presented transcripts of testimony. All we asked the judge to do is to consider it. Indeed, the judge had presided over a trial of a co-defendant who was acquitted. Samuel A. Alito, Jr.: Well, this was an unusual -- that's a somewhat unusual situation where you had been -- there had already been a trial of someone else who was allegedly involved in the scheme. But what if that was not the case? In the more ordinary situation, what would happen? Howard Srebnick: In the more ordinary situation the defense, if it chose to offer evidence, it would be subject to the rules of the standard for issuing subpoenas under Nixon only if there were material exculpatory evidence that needed to be presented. This would not be a discovery exercise. This would not be an effort to simply learn identity of witnesses. Indeed, the government could and does rely upon hearsay witnesses, case agents, to summarize the case. But where the defense, as here, offers the judge evidence of innocence, where the judge himself has presided over the trial of a co-defendant and sees the defect in the indictment, sees the defect in the theory of prosecution, we believe due process does not allow the judge to close his eyes to that-- Antonin Scalia: And in the next case we have, if we agree with you, will be somebody saying due process does not allow you to proceed with a trial when it has been found by an impartial judge that there is no probable cause. That will be our next case, right? And you may well argue it. To tell you the truth, I would prefer -- to save your client, I would prefer a rule that says you cannot, even with a grand jury indictment, prevent the defendant from using funds that are in his possession to hire counsel. Don't need a hearing. Just, just it's unconstitutional for the rule to be any broader than withholding money that the defendant does not need to defend himself. Would you like that? I really prefer it to yours. I think yours leads us into really strange territory. Howard Srebnick: --Justice Scalia, I believe that was the issue in Monsanto and Caplin & Drysdale where this Court held 5 to 4 decision that assets that are demonstrably tainted can be restrained over the objection of the defendant who needs those assets to retain counsel of choice. Today, I'm asking the Court not to allow the restraint of those assets that are demonstrably not tainted. Elena Kagan: Can I ask what the prospects of success at a hearing like this are? You know, there's an amicus brief which lists 25 cases in the Second Circuit in which this kind of hearing was held. My clerk went back and found that in 24 of those cases, the motion was denied and in the 25th, the motion was granted, but then reversed on appeal. So, then, you know, it's not surprising really. I mean, probable cause, it's a pretty low bar. So what are we going through all this rigamarole for, for the prospect of, you know, coming out the same way in the end? Howard Srebnick: Justice Kagan-- Sonia Sotomayor: Just as a footnote, one in a million, which might be your case. I think that's the point. Howard Srebnick: --Actually, I believe that the brief of the New York Council of Defense Lawyers that Justice Kagan refers to points out that there are many other cases where at the courthouse steps the parties resolve the question of the restraint of those assets. John G. Roberts, Jr.: And I suppose if the government knows it's got to go through a hearing where it has to lay out part of its case, it may well decide at that point it's not worth it. So it's not 24 or 25. Who knows how many hundreds of times the government would have sought to seize the assets but didn't because they knew they would have to justify it at a hearing. Howard Srebnick: Mr. Chief Justice, that may be so, but it appears that the government does exactly that every day in Federal court during pretrial detention hearings when it proffers its case in order to convince a judge to detain a defendant and we're asking for something no different. Ruth Bader Ginsburg: But you said something about plainly tainted assets. I thought that the hearing was given on the traceability of the assets to the crime. So on that part, the defendant isn't allowed to challenge the connection between the assets and the offense, right? Howard Srebnick: Yes, Justice Ginsburg. Ruth Bader Ginsburg: Everybody agrees with that. So there is a possibility to say you said we have untainted assets, but the Defendant in this case said, I concede that these assets are related to the charged offense. Howard Srebnick: Yes, Justice Ginsburg. We distinguish between tainted and traceable to. The Court below granted us a hearing to determine whether the assets restrained were traceable to the conduct in the indictment. What we would like to show at a hearing, indeed, I think we have shown it on the record before district court, is that even though the assets that are under restraint are traceable to the conduct, the conduct is simply not criminal. And we'd like the Court to hold a hearing which would not bind the Court at trial. Again, no different than courts hold in civil cases with Rule 65, this interim decision is not a determination of whether the grand jury got it right or wrong. It's a determination of whether the government presented a sufficient case on that day to satisfy its burden. Samuel A. Alito, Jr.: There's been a suggestion that if the judge were to find that there was a lack of probable cause, the prosecutor would be under an ethical obligation to dismiss the charges. Do you agree with that? Howard Srebnick: Justice Alito, not necessarily. It would depend on why there was no so-called probable cause. If it was based on a -- something known to the prosecutor that would constrain him or her ethically, perhaps. But if it was simply because the prosecutor on the day of the hearing only presented one witness instead of all five, that would not constrain the prosecutor ethically in any way. The prosecutor retains the discretion to decide how strong a presentation to make at this hearing, no different than the prosecutor would have to make that same decision at a preliminary hearing, at a pretrial detention hearing or plaintiffs have to make at a Rule 65 hearing. Samuel A. Alito, Jr.: And what if it's the same evidence, the same evidence is introduced before the grand jury. Let's say it's a credibility determination. The grand jury finds the prosecution witness credible, the judge finds the prosecution witness not credible. Is there, then, an ethical obligation to dismiss the charges? Howard Srebnick: Justice Alito, again, not necessarily. People can differ about credibility. We're not talking here about knowingly presenting perjured testimony or anything of that sort that might raise ethical constraints. Sonia Sotomayor: We would, presumably, if -- like here -- if there's a legal dispute and the government thinks the judge is wrong, they would try the case and go up on appeal and say to the appellate court the judge below was wrong initially. Howard Srebnick: I believe, yes, Justice-- Sonia Sotomayor: You would have lost the money in that case, but-- Howard Srebnick: --Justice Sotomayor, forgive me. Justice Sotomayor, I believe the government could have -- and I haven't studied whether they would have a right to an interlocutory appeal from that unfreezing of the assets. I -- I suppose they would just like we did. Antonin Scalia: Does this hearing include an assessment of the reasonableness of attorneys' fees? I mean, if you're only withholding the amount of money necessary for the defense, what if this fellow wants to hire Clarence Darrow? Does -- does that give him all the money? How -- how do you decide that issue? Howard Srebnick: Justice Scalia, I think it's decided the same way courts every day decide the reasonableness of fees and the legitimacy of fees. So long as the money is being used for bona fide legal fees-- Antonin Scalia: But does he know his lawyer -- is his lawyer there saying, you know, this is the lawyer I'm going to hire and here's the fee I'm going to charge? Howard Srebnick: --In this case, yes, because counsel of choice had been retained two years before the indictment. Had been working on the case for two years when the indictment was returned and the restraining order was entered. So counsel of choice had already estimated fees, disclosed them to the Court, all a matter of record. There was never a dispute about the reasonableness of the fees, the bona fides of the fees, the legitimacy of the fees. Antonin Scalia: But you -- you acknowledge that that could be -- that could be an issue in the hearing in other cases. Howard Srebnick: Yes, Justice Scalia. If the fees were a sham, if the fees were unreasonable, if they were not consistent with the locality, of course, that could be-- Antonin Scalia: I don't know what the fees are. I don't even know who the lawyer's going to be. This defendant just comes in and says, I want to hire a lawyer. And the court says, you know, any particular lawyer? No, I just want a lawyer. The court's going to have to make up a fee, I assume, right? Howard Srebnick: --Justice Scalia, we're talking now about the right to counsel of choice. The lawyer would have been chosen by the defendant. The lawyer's fees would be disclosed to the court, and the court would then have information upon which to make a decision about whether the fees are reasonable and bona fide. Antonin Scalia: Okay. He has to choose a lawyer before this hearing, right? Howard Srebnick: If the defendant is seeking a particular amount to be unfrozen at the time of the transfer of funds, of course, the court would need to know who the lawyer was and how much the fee was. And so there's no problem with the court administering those issues. Indeed, the courts on a daily basis supervise the payment of appointed lawyers. And so all that the defense here is asking for is an opportunity to be heard in a meaningful manner, not simply about whether the asset restrained is traceable to the conduct. This Court's precedence has never limited due process to a tracing inquiry as suggested by the courts below. Ruth Bader Ginsburg: Did you say that in this case, because counsel had been retained two years earlier, that the court was presented with how much the lawyer was going to charge to represent the defendants at trial? Howard Srebnick: Yes. Ruth Bader Ginsburg: The -- the dollar amount was known so that the Court could then say, well, we'll unfreeze assets to that extent but no more. Howard Srebnick: Yes, Justice Ginsburg. So there is no mystery in this case. Who counsel is, what the estimate of fees are, that's not the issue in this case. The issue in this case is whether the Petitioners have an opportunity to be heard so as to challenge this restraining order that purports to remain in effect, indeed, has remained in effect, for six years. Ruth Bader Ginsburg: What was -- what was the figure? Counsel was identified. Howard Srebnick: Yes. Ruth Bader Ginsburg: What was -- what was the amount of money that the defendants wanted spared from the seizure order? Howard Srebnick: The estimate was a fee of up to $500,000 for two lawyers and the entire investigation costs, consultants, experts, et cetera. That was the budget. There was no actual dollar figure set in stone. It was a budget in order to allow the defense to have their counsel of choice. Anthony M. Kennedy: And it was a case with very substantial documents, et cetera? Howard Srebnick: Yes, Justice Kennedy. And there was never a question by the district court or, indeed, by the government as to the reasonableness of that budget if the case were to go all the way through trial. Antonin Scalia: Tell me something, because I don't know the answer. Can -- can the government track tainted funds that -- that have been given to other people, including lawyers? Howard Srebnick: Justice Scalia, I believe they can. Antonin Scalia: I think they can too. So what happens if this lawyer gets his $500,000 and you've had the traceability hearings, so these are tainted funds? If he is convicted, he gives the money back? Howard Srebnick: Justice Scalia, in this case, if the hearing would go forward, the only way the lawyers would be paid is if there would be a finding by the court that the conduct at issue will not give rise to forfeiture. And so the lawyers would, of course, try to rely upon that judicial decision to establish the bona fides of their accepting that fee in the event that the defendants were convicted and the government sought forfeiture. The defense lawyers might be at risk. Antonin Scalia: The -- the-- Howard Srebnick: Mr. Chief Justice, I'd like to reserve the balance of my time. Thank you. John G. Roberts, Jr.: Thank you, counsel. Mr. Dreeben. Michael R. Dreeben: Thank you, Mr. Chief Justice, and may it please the Court: For over 200 years, the rule in this Court and in all lower courts have been that the grand jury's determination of probable cause is conclusive for purposes of the criminal case. And that rule has been extended not only to bringing the defendant to trial, but also depriving the defendant of liberty, imposing occupational restrictions on the defendant, imposing firearms restrictions on the defendant. John G. Roberts, Jr.: But none of that goes to his ability to hire his counsel of choice. I mean, that seems to me to make this case quite different. It's not that property is more valuable than liberty or anything like that. It's that the property can be used to hire a lawyer who can keep him out of jail for the next 30 years. So the parallels don't strike me as useful. Michael R. Dreeben: Well, the parallels I think, Mr. Chief Justice, illustrate that the process for determining probable cause by a grand jury has been deemed sufficiently reliable so that further judicial inquiry is not warranted. And that is borne out by two features of the grand jury: One, the way it operates; and the second, the empirical realities of what it has produced. The grand jury is set up as an independent body to protect the defendant from unfounded prosecutions. It is structurally independent from the prosecution and the courts. And it's composed of-- John G. Roberts, Jr.: I understand the theory. In reality it's not terribly -- it's not great insulation from the overweaning power of the government. Michael R. Dreeben: --Well, it is a protection in the following sense, Mr. Chief Justice: If the court is seriously considering departing from the universal rule up till now in its cases and in other English-speaking courts and allowing a review of whether there is probable cause after the grand jury has found it, it ought at least to have a good reason for doing so, namely some reason to think that defendants will prevail in a-- Stephen G. Breyer: They do that, fine, done. What we interpret the statute as saying under constitutional compulsion, it uses the word “ may ”, and if the magistrate concludes that there is -- after all, the basic principle of hearings is you don't need a hearing where there's nothing to have a hearing about. So unless the defendant demonstrates that there is a sound reason to believe that the grand jury was wrong, they only heard one side of the story, and that there is no probable cause, you don't have to give him a hearing. But the word is “ may ”. And so, like five circuits, Mr. Magistrate, if you think that there is a good chance -- phrase that as you want -- that they can show that the grand jury was wrong and they want the money to pay a lawyer -- by the way, without a good lawyer, they're never going to make their case -- and then under those circumstances, the magistrate may. Now, that's a narrow exception. It preserves the lawyer. It's consistent with the words of the statute. It respects the grand jury, at least to the same extent that bail hearings -- and when you have -- oh, yes, and probably I could think of a few others or something. But the -- it's not undercutting the grand jury. What's wrong with it? Michael R. Dreeben: --Justice Breyer, just to start with the last thing that you said, it is inconsistent with the way this Court has analyzed the constitutional-- Stephen G. Breyer: No, it leaves open -- it leaves open the question in Monsanto explicitly. And the only change that I've made with that explicit leaving open the due process question in the footnote in Monsanto is, instead of turning it on the Constitution, I turned it on the principle of constitutional avoidance. Michael R. Dreeben: --I wasn't referring to Monsanto, Justice Breyer. I was referring-- Stephen G. Breyer: You say “ never ” is consistently, and I think it is consistent with the footnote. Michael R. Dreeben: --Justice Breyer, I'm not referring to Monsanto court's reservation of this issue. I agree with you, Monsanto did not decide whether there is a hearing. But in the bail context, this Court has determined that a grand jury indictment is sufficient to hold the defendant. There is no further judicial review of whether the defendant's liberty may be restrained. And so that's-- Anthony M. Kennedy: Is that how they interpret weight of the evidence at this -- the Bail Reform Act says that the trial judge must determine weight of the evidence. And in practice, and perhaps in reported decisions in the circuit, do the courts say we don't need to talk about weight of the evidence once there's a grand jury indictment-- Michael R. Dreeben: --No, Justice Kennedy-- Anthony M. Kennedy: --end of inquiry? Michael R. Dreeben: --But Salerno was different because Salerno was a specific statute in which Congress enumerated the factors that the judge is going to consider. There's never a reconsideration of whether there was probable cause for the indictment, as my brethren-- Anthony M. Kennedy: I'm asking, perhaps not too clearly, I'm asking what function, what weight, what relevance do courts give in day-to-day hearings on detention to the Bail Reform Act requirement that judges must determine, as part of the bail determination, the weight of the evidence? Michael R. Dreeben: --In a certain class of cases, Justice Kennedy, the indictment itself creates a presumption that no conditions will assure the safety of the community and the appearance of the defendant. Anthony M. Kennedy: But -- but that's two different things. Is the only thing the judge considers the risk of flight? Michael R. Dreeben: No. There's -- under Salerno-- Anthony M. Kennedy: So then don't talk about risk of flight. What weight does the judge give in determining whether or not the charges have merit to the Bail Reform Act's direction that he must determine the weight of the evidence? Michael R. Dreeben: --Justice Kennedy, when the government seeks to detain the defendant, the court has to make a determination under the Bail Reform Act, not because of the Constitution, but under the Bail Reform Act-- Anthony M. Kennedy: I understand that. Michael R. Dreeben: --that either the defendant poses a danger to the community or a risk of flight. In considering those issues, the court will consider a proffer from the government on the nature of the evidence of guilt. It's not a full-blown adversarial hearing in which new transcripts are being presented, new witnesses are being called, the government has a burden to justify its entire case. Anthony M. Kennedy: But the court must determine that under the Bail Reform Act. Michael R. Dreeben: The court will look at the weight of the evidence under the Bail Reform Act. It's not revisiting the question of probable cause. That's what's at issue in this case. Anthony M. Kennedy: No-- Antonin Scalia: Why? Why do we have to decide it that way? I mean, I don't like casting into doubt the judgment of the grand jury, but why couldn't we say that when you're taking away funds that are needed for hiring a lawyer for your defense, you need something more than probable cause? Couldn't we make that up? Michael R. Dreeben: That would-- Antonin Scalia: And then say due process requires something more than probable cause? Michael R. Dreeben: --That's squarely contrary to what this Court held in United States v. Monsanto. Monsanto considered against the backdrop of Caplin & Drysdale, which said forfeiture of funds that were desired to be used for attorney fees is constitutional; then turned to the question of can those funds be restrained so they will be available for forfeiture at the end of the day. John G. Roberts, Jr.: I don't see what this case, frankly, has to do with the grand jury at all, or review of the grand jury determination. You don't have to put forward in this hearing what you put forward before the grand jury at all. You could put forth different stuff. You could put forth less of it. Maybe you don't want to show your -- your whole hand. Maybe the party on the other side, they don't want to show their whole hand too, so they don't want to show all this other evidence that's going to prove -- prove their innocence. It's an entirely separate proceeding. Now, maybe the fact of the grand jury indictment should be given some weight or not. But it's not reviewing a particular determination. It's the judge making a determination on what he or she has before him at that particular hearing. Michael R. Dreeben: It's seeking to contradict the determination of probable cause-- John G. Roberts, Jr.: No. It's not, in the sense that before the grand jury you say: Okay, here, we showed the grand jury these six things and they said yes. You look at those six things; there's the probable cause. At this other hearing, you say: I've got -- I'm going to show you these two things, and the other side has these three things, and the judge at that point says: Well, you don't have enough to restrain the property. It's not reviewing the other determination. It's an entirely separate proceeding. Michael R. Dreeben: --But it is seeking to contradict the other determination because it's asking the judge to find that there is no probable cause when the grand jury has found that there is probable cause. And the grand jury's determination not only allows the government to bring the defendant to trial, which would be very odd if the court had found that there is really no probable cause for these charges, they are legally invalid. Sonia Sotomayor: Do you have to go that -- I mean, your adversary just said that there was a judicial finding of no probable cause. I don't know why that judicial finding has any legal effect other than to release the money at issue. The judge is basically saying, like he does in a bail hearing, this evidence is not the strongest I've seen. In balancing the government's desire for restraint and the fundamental right to hire a lawyer of choice, it's not strong enough in this situation with what I've been presented to continue restraining the money. I don't see it as a legal determination that no probable cause. I see it as defining the word “ may ” in the statute. If the judge has discretion, that discretion has to be informed by something. Michael R. Dreeben: I think United States v. Monsanto essentially rejected the argument that there is any discretion not to restrain the funds. Stephen G. Breyer: It didn't actually. What it says is, we reject the discretion in the context of Judge Widener having said that even where there is probable cause, we are going to balance a lot of factors, and what it says at the -- wait, I had it a second ago. I'll find it again. It says at the top of the next page, it says that the “ may ” thing refers to that. I'll get it for you later. Michael R. Dreeben: I understand that, Justice Breyer. There was analysis of the statute-- Stephen G. Breyer: Here it is. It says, "Thus, it's plainly aimed at implementing the commands at 853(a) and cannot sensibly be construed to give the district court discretion to permit the dissipation of the very property that 853(a) requires to be forfeited upon conviction. " Okay? Michael R. Dreeben: --Exactly. Stephen G. Breyer: Exactly. That's what it says. So the claim here is this is property that 850(a)(3)(A) does not require the defendant to forfeit upon conviction, for there can be no conviction because there is no evidence and, therefore, I don't find that that sentence in Monsanto destroys the use of the word which Congress put in, “ may ”. Michael R. Dreeben: I don't think that there is any serious question that Monsanto meant to preclude free floating discretion. What it did was focus on the question of probable cause, and the court squarely held that assets in the defendant's possession may be restrained in the way that they were here based on a finding of probable cause to believe that the assets were forfeitable. Stephen G. Breyer: Okay. So far this is very conceptual, which is absolutely fine. I just want to leave that plain for a moment, and if I leave the conceptual plain, what I find is that they have a pretty complicated case. They are saying that this, the defendant, took some medical devices with permission from hospitals that were old and used, and he didn't return them to the manufacturer, who didn't want them. And what he did is he figured out this way of selling them and making money. Now, they are saying that's not that and you're saying it is that, and so to make the arguments is complicated. You can't do it without a good lawyer. He has some money here to hire a lawyer and you say, oh, but it will undercut the grand jury. You say, this has been the law in five circuits and the government has not come to the end of its prosecutions, it hasn't injured prosecutions. So as a purely practical matter, First Amendment, no real harm to the government that I can see. And so let's impose some kind of statutory limitation on use of this, but where there is a good claim for it, let it be used. Michael R. Dreeben: Let me start with the fact that I think that there is harm and there is very little benefit, and I want to turn to both sides of that empirical equation. Before the Court concludes that for the first time a grand jury indictment can be contradicted by a judicial finding that there is no probable cause, albeit on different evidence, the Court should have a good reason to think that grand juries go awry in a sufficient number of cases so that this hearing which will have costs as I'll describe, is worth doing. There is no evidence to that effect in the 20 years since Monsanto. Petitioners can point to not a single instance in which a court has concluded there is no probable cause even though the grand jury found that there is probable cause. John G. Roberts, Jr.: That's because they didn't have the good lawyers they wanted to hire. [Laughter] Michael R. Dreeben: They do this, Mr. Chief Justice, usually with the lawyers who want to get the funds so they can be hired. And they try to get hearings, and as Justice Kagan pointed out, we have 25 reported cases. I would amend Justice Kagan's statement about those cases in only one respect: In 24 of them, the defendants lost outright. In the 25th one, they won and they were reversed on appeal. That is accurate. But the district court did not actually find that a grand jury had erred in finding probable cause, because that case involved a civil complaint, not a grand jury indictment. What we have is thousands of indictments, hundreds of thousands of indictments over the 10-year period that respondents have canvassed in talking about Hyde amendment fee awards where courts have found no probable cause for a prosecution. He has pointed to four cases. There have been 660,000 indictments during that time period. The ratio between the cases in which the system didn't work and the grand jury malfunctioned, and the cases where it did and where the defendant gets the opportunity for discovery, fishing expeditions-- John G. Roberts, Jr.: I'm sorry, are you talking about cases in like the Second Circuit and the D.C. Circuit where you do have these hearings? Michael R. Dreeben: --I'm talking about two things, Mr. Chief Justice. First of all in the D.C. Circuit, Second Circuit, Seventh Circuit, and elsewhere in the country where the law is not established, defendants can seek these hearings. In the 20 years that they have been available to be sought, not one has produced a finding of no probable cause. John G. Roberts, Jr.: I raised this point earlier. It may be because the government, particularly when it may have tenuous probable cause basis, decides it's not worth it to go through this hearing to seize and retain the assets. And it just seems that the statistics are phony in the sense that where the impact of this is going to be is not in reported cases; it's going to be when the U.S. attorney says it's not worth it, it would jeopardize the trial on the merits, and so they don't even go through the process of restraining the assets. Michael R. Dreeben: Well, Mr. Chief Justice, I agree with you that those cases exist. Anecdotally, they exist, where the government determines that the cost of exposing its witnesses, the dangers to witnesses, the potential undermining of the integrity of the trial, makes it too high a price to go through this hearing or-- John G. Roberts, Jr.: More that the facts, since the funds are traceable anyway and they'll have an opportunity to get them at the end even if they don't get their restraining order, makes it not worth it. Michael R. Dreeben: --No. That doesn't always work, Mr. Chief Justice. Let's keep in mind that this statute operates in its core in drug trafficking cases, in serious organized criminal cases, where the exposure of the identities of the government's witnesses can lead to serious problems of obstruction of justice. This is the real cost of these kinds of hearings. Stephen G. Breyer: Has that happened in the circuits that have permitted this? Michael R. Dreeben: The government is unlikely to jeopardize the safety of its witnesses-- Stephen G. Breyer: You know, I think in the circuit, you've now given us some statistics. So in how many cases in the circuits that have permitted what they want or my version of it, the circuits that have permitted some form of allowing the magistrate to look behind the grand jury indictment in appropriate cases and find that it's there, there is no probable cause, so you can use this to hire a lawyer. There are a bunch of circuits that have had rules like that. In how many cases in those circuits has the government faced the serious risks that you're talking about? Michael R. Dreeben: --We do face them. I cannot quantify them-- Stephen G. Breyer: Can you give me a guess? You are -- I mean, you make a huge point of how this will put the government at a disadvantage, so someone in your office, probably you, asked people in the Justice Department, do you have any examples? Or how many cases have there been where these serious problems arose? And you probably got some kind of answer. So you probably have some kind of idea. Michael R. Dreeben: --You're correct, I did ask, and I received anecdotal responses. Stephen G. Breyer: How many anecdotes? [Laughter] Michael R. Dreeben: I received several specific anecdotes of instances in which the government elected not to proceed with a hearing. Stephen G. Breyer: In a number of cases, several specific. Is that more like four or is it more like 24? Michael R. Dreeben: There are group numbers in which offices reported, we have encountered this a number of times. John G. Roberts, Jr.: You're making it sound like you would lose the whole case. This, to some extent, is a little bit of a side show. You want to send the Kaleys to jail and you want the assets that you think are traceable to it and that's all well and good. But it's not like the whole case falls apart depending on whether or not you can restrain the assets or not. Michael R. Dreeben: No, it's not just that, Mr. Chief Justice. These assets are generally used to pay restitution to victims of crime. John G. Roberts, Jr.: Yeah, but they're-- Michael R. Dreeben: And if the assets are paid out to attorneys, although in theory, as Justice Scalia explained, it is possible under the relation back principle to go into the attorneys' files and into their assets and recover them, in practice it is not so easy to do because-- John G. Roberts, Jr.: --Sure. But now you've touched on something that I think is very pertinent. They are used to pay restitution to the victims. I mean, the whole point here, and presumably it's something that your friends on the other side would raise in one of these hearings is there are no victims. Right? That's the theory, and maybe it will fall apart and the judge will say, of course, there are victims, but as I understand it, the hospitals, you know, gave them to the people; the companies didn't want them back because they would have to give a credit. You know, I'm sure the government has a different view of the facts, but that's a good example. Okay, this is going to be used to pay restitution to the victims. They come in and say, well, just give me five minutes, Your Honor, you'll see there are no victims. What's wrong with that? Michael R. Dreeben: --What's wrong with it is that it basically compels the government to try the entire case in a preliminary hearing before the case has even resulted in a-- Sonia Sotomayor: How often has that happened in the five circuits? Michael R. Dreeben: --The frequency of these hearings is limited, in part because it's rare that defendants are able to show that they have no other assets-- Sonia Sotomayor: And that's the whole point, which is you talk about compulsion on the government, but the compulsion of the defendant not to have a hearing because they are required to say something that could put them at greater risk, whether it's because of the enhancements for obstruction of justice or merely from losing the advantage of their defense at trial, that's why these hearings are so rare. I think it's less about the government not wanting to disclose its case and more about the inducements against the defense wanting to preview its case. Michael R. Dreeben: --And also the stark unlikelihood that the defense will prevail unless the government is forced not to go through with the hearing because of concerns about which-- Stephen G. Breyer: Can I ask you a related question, since it came up. I was curious as to how much of this forfeiture money gets to victims. So the best we could do is looking up three years and on the basis of the figures that I got out of the DOJ on that, about 25, 20 to 25 percent goes to a category called third-party interest. Now, the third-party interest includes mortgagees, it includes other creditors, it includes States, who want taxes, etcetera. And if you subtract all those, a rough guess would be 5 or 10 percent goes to victims. Now do you have a better estimate? Michael R. Dreeben: --I don't, Justice Breyer. I do know that one of the main purposes in seeking funds for forfeiture, particularly in white collar cases like this, is to pay restitution. Stephen G. Breyer: That is what the -- if you look at the actual amount in general. But the interests at issue here are: One, this money goes to pay for a lawyer so the person can prove that there is not even a claim against him; and the risks, of course, sometimes of depriving the recipients of the forfeiture moneys and those would normally be, almost entirely, the DOJ for the expenses of going to the forfeiture expense of the trial. It would -- various criminal justice organizations on the prosecution side, States, who want taxes. Very little is being deprived of victims. Is that a fair comment? Michael R. Dreeben: No, I'm not sure that it is a fair comment. In this case, for example, the government does believe that the medical providers from which these medical supplies were obtained and then sold into the black market by agents of a company are victims of the crime. They received restitution in the prosecution of one of the co-conspirators in this case and that is the way the government is planning to proceed. If the defense is able to come up and, based on case law that really has very little to do with any situation like this, has to do with the idea that public officials who receive bribes haven't deprived the State of its entitlement to that bribe money -- that's the lead case that the defendants argue. Anthony M. Kennedy: --Do you concede that there must be a traceability hearing? Michael R. Dreeben: If the defendant seeks one, yes. And there was the opportunity in this case for a hearing and the defendants-- Anthony M. Kennedy: I mean, in the general run case. so you agree that due process does require a traceability hearing? Michael R. Dreeben: --Yes. The defendants are entitled to show that the assets that are restrained are not actually the proceeds of the charged criminal offense or another way-- Anthony M. Kennedy: And the defendants have the burden of proof in that hearing? Michael R. Dreeben: --That would be up to this Court's decision. Anthony M. Kennedy: What is your view as to what the Constitution requires in that respect? Michael R. Dreeben: I'd be happy to have the defendants bear the burden of proof, but I think the courts typically have placed the burden of proof on the government to show traceability, and the government, therefore, presents limited evidence, but it's all against the background of the crime not being called into question. Anthony M. Kennedy: Mr. Dreeben, one other question. It's the question I asked before. I still don't understand. Under the Bail Reform Act, the issue is pretrial detention. The defendant says: Your Honor, under the Bail Reform Act you must determine the weight of the evidence and this is a skimpy case. The judge says: The grand jury is all I need as probable cause. Can and do judges say that? Does that suffice to comply with the statute? Michael R. Dreeben: I think typically, Justice Kennedy, the government makes a proffer of the evidence that it intends to use. The proffer is very limited, it's hearsay, it's a description of the crime rather than a detailed evidentiary presentation of the kind that Petitioners want here. Samuel A. Alito, Jr.: I think that -- I'm sorry. Michael R. Dreeben: I do not think that typically resting on the indictment alone will satisfy the weight of the evidence factor. But the hearing that is provided for in Salerno is not a hearing that this Court has said you must do as a matter of due process. It is what Congress has established as a requirement in the Bail Reform Act. When it comes to due process-- Anthony M. Kennedy: Well, if it's required anyway, then certainly the due process argument that you make is much less weighty. If we have to go through this anyway for detention, why not do it for distraint of property? Michael R. Dreeben: --It's not the same inquiry. The Bail Act hearings are usually very summary. They do not involve calling witnesses. They do not involve sworn testimony. Samuel A. Alito, Jr.: But that's what it seems to me this case is all about. All the talk about whether -- about defendants being exonerated, that the judge is going to find a lack of probable cause, that's, you know, that's fantasy land for the most part. But what it's really about is about discovery. Prosecutors hate preliminary examinations. When do they ever occur in Federal felony cases? They are always, almost always eliminated by indictment. The defense bar hates grand jury proceedings. They would like to have a preliminary hearing where they get some discovery of the government's trial case, and that's what this is all about. So it seems to me that what's important is the nature. If there is going to be any kind of a hearing, what is going to take place at this hearing? And what typically happens beyond what I mentioned before, a case agent taking the stand and providing some summary of the, of the evidence that was provided to the grand jury? How much further do they go? Is the defense entitled to any discovery? Do they subpoena witnesses? Michael R. Dreeben: They can do both of those things. This is largely within the discretion of district courts. The Second Circuit, which probably has the most experience with these hearings under Monsanto, has held that hearsay evidence is sufficient to meet the government's burden of probable cause. What happens, then, are frequently excruciating fishing expedition cross-examinations of the government agent in the defense efforts to attempt to find out more about the government's case, to ask for additional documents, to make later claims that Brady evidence wasn't produced in connection with the Monsanto hearing and various sanctions should fall on the government. And the hearings do generally take the form of efforts by defense to obtain some strategic advantage. They have never resulted in the finding of no probable cause. And the court's question I think here is really: Is there anything on the defendant's side of the scale other than the abstract desire to use money that the government says is forfeitable to pay for attorneys? Ruth Bader Ginsburg: On that point, Mr. Dreeben, would you clarify what happens at the end of the road if the defendant is convicted? I think you said in theory you could go after the lawyers to recoup the fee, but that would be difficult. Can you explain what is the difficulty? We know how much the fee was. Michael R. Dreeben: The difficulty is that we have to actually trace the specific assets into the defendant's own account. And if the defendant's lawyer has spent that money and has used, you know, paid it out in salary, paid it out in expenses, it's gone, the government can't make that tracing argument. It can't forfeit substitute assets from the attorney, so it has to go under some State law theory and then sue the lawyers and then argue that the funds were held in constructive trust for the government. State law varies widely on this. It's a big, messy, uncertain project and as a result it doesn't happen very often. Typically if the funds are released to the attorneys, they will be gone. And if the defendant is at the end of the day convicted of a serious financial crime and the government wants those assets available to compensate investors, to compensate victims of Food and Drug violations, the funds are not there. They have been spent on an attorney. And under this Court's decision in Caplin & Drysdale, those funds were never the defendant's funds at all. What happens is that they may have been released because the government chose at a hearing not to contest probable cause because it would suffer the kinds of ill effects that Justice Alito referred to, and that kind of -- “ blackmail ” may be too strong of a word, but it does put the government in a very-- Stephen G. Breyer: We could deal with that, couldn't we, by imposing conditions surrounding the use of the word “ may ” with conditions that would reject -- you would say they rejected it. The magistrate thought this was just a fishing expedition for evidence. That's not a ground. He has to believe it's not a fishing expedition for evidence and that there is good cause to think that the defendant will succeed. Michael R. Dreeben: --Well, that would be-- Stephen G. Breyer: Under those circumstances -- under -- which is pretty limited, under those circumstances, then he has discretionary authority to grant a hearing at which the defendant will be able to show, you know, that there is not probable cause to believe a crime was committed by his client. Michael R. Dreeben: --Those high bars would be helpful. But once the defendant clears them, the government faces the same pressures. And at the end of the day, the same consequence is going to occur, that if the judge does find in that one in a million case which has not yet been encountered that there was no probable cause for the indictment. You will have the defendant proceeding on to trial in a judicial system that is honoring the finding of the grand jury after the judge has concluded to the contrary. And-- Stephen G. Breyer: Well, it's about a different subject. It's not we work through osmosis here. It's about the subject of quashing a warrant or it's about the subject of injunction. Now, grant you, a grand jury thinks it's there, but it's also there when you're talking about certain bail hearings. Michael R. Dreeben: --It's different in the bail context, because the -- the judge at the bail hearing is never questioning probable cause. He's only questioning whether the evidence is sufficient to justify restraining the defendant. Thank you. John G. Roberts, Jr.: Thank you, Mr. Dreeben. Mr. Srebnick, you have three minutes remaining. Howard Srebnick: The government is asking for an extraordinary remedy. We're asking for limited relief. Justice Alito, we're asking for the kind of hearing that Federal courts do every day. This is not a fishing expedition. This is not a discovery exercise. Samuel A. Alito, Jr.: What do you mean this is the kind of hearing that's held every day? I thought these -- in some circuits, it is. But it's held occasionally. Howard Srebnick: The hearing looks very similar to a pretrial detention hearing. And in 2008, in front of the D.C. Circuit, the government was asked the question that this Court asks today: What would be the prejudice to the government or what has been the prejudice to the government in holding these hearings? And I quote from the D.C. Circuit: "The government could not identify any harm to its law enforcement efforts in the Second Circuit that has resulted from the Monsanto standard. " 521 Fed 3d at 419, Footnote 1. Today, we hear fears of lawyers abusing the process. We have a record. All we ask is the judge to read the trial record that he presided over and come to a conclusion that will not bind the court at trial. It will not bind the government at trial. John G. Roberts, Jr.: Counsel, I think your quotation from the D.C. Circuit was -- was not quite on point. My understanding is the court was asking for empirical evidence that this has caused a particular problem, not whether they could point to any concerns. I think we've seen the concerns laid out today. Howard Srebnick: I understand the hypothetical concerns that the prosecution raises. I understood the D.C. Circuit to say, is there any empirical evidence? In Matthews, the case that we cite and that we believe controls, this Court said, "Bare statistics rarely provide a satisfactory measure of fairness of a decision-making process. " And so rather than rely on statistics, we rely on the Due Process Clause, guarantee that you have an opportunity to be heard when the government wants to freeze the equity in my client's home and say to her and say to her husband they can't use the equity in their home to retain counsel of choice when they've shown the court that they can prevail. The government says the judge must close his eyes. The judge can't consider the trial that he presided over. Instead, he must be constrained by a one-sided proceeding that the judge never observed, the grand jury. We say the grand jury is enough to make my client go to trial. We'll be there, if we have to be there. But we say she and he should have the right to use their assets to retain their counsel of choice. After all, this Court has held that the right to counsel of choice is a structural right. It is per se reversible to deny someone their counsel of choice. I ask that this Court not rule that the government can beggar a defendant into submission. I ask this Court not to rule that the government -- that the government can impoverish someone without giving them a chance to be heard through their counsel of choice. If there are no further questions, I would submit the case. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

Earl Warren: Number 250, National Labor Relations Board versus the Babcock and Wilcox Company. Mr. Manoli. Dominick L. Manoli: May it please the Court. This case is here on writ of certiorari with the Fifth Circuit. The principal question which is presented by this case and the two companion cases which follow this one, is whether non-employee union organizers are entitled under the National Labor Relations Act to distribute literature, union literature, on a plant parking lot, where it is either impossible or unreasonably difficult for them to distribute such literature in the vicinity of the plant. The court below thought that there was no warrant for -- under the statute for such an intrusion upon the employer's property and it accordingly it rejected the Board's finding that the employers prohibition directed against these non-employee union organizers from distributing literature on the plant parking lot was an unreasonable impediment to the exercise -- to the employees to exercise their rights under the statute and constitute interference and reframe it in the meaning of Section 8(a)(1) of the statute. The Tenth Circuit in the Seamprufe case which follows this one and the Ninth Circuit in (Inaudible) case which is presently pending on the Board's petition for certiorari. The court has not yet acted on it, have agreed with Fifth Circuit's views on this question. On the other hand, the Sixth Circuit in the Ranco case which is the third case of the series of cases to be argued and the Fourth Circuit I might say in two cases which are not now before this Court, have agreed with the Board that such a prohibition under these circumstances constitutes interference and restraining in meaning the Section 8(a)(1) of the statute. The factual picture in these cases, all three of these cases, I will not attempt to give all at one time now, but I might say that the factual picture in these cases is substantially the same. In this particular case here -- Felix Frankfurter: Now, is that true? Dominick L. Manoli: I think it is, Your Honor. There are some -- some differences, but I believe that they are -- Felix Frankfurter: For instance, you take the difference between employees and non-employees in showing the proposed propaganda. Dominick L. Manoli: They're all non-employees in these -- Felix Frankfurter: What? Dominick L. Manoli: -- case. That that -- the prohibition here in all these cases, in all three of these cases is directed against non-employee or outside union organizers. Felix Frankfurter: Yes, but are there members, are the employee, members of the union, are there employees of the employer in the same status in all three cases? Dominick L. Manoli: That I am not sure I understand that question, Your Honor. Felix Frankfurter: If members of the -- if the employer have a given (Inaudible) members of the union that to me is a differentiating fact. Dominick L. Manoli: That's true in the Ranco case. Felix Frankfurter: Very well but it's not the same. Dominick L. Manoli: It's perhaps not in that respect. We think that -- Felix Frankfurter: Well, but it may become important to you. Dominick L. Manoli: I will call attention to that, Your Honor, when I come. I'm sure that the other side will. Felix Frankfurter: You've got a real -- real difference of opinion on that. It's within the board. Dominick L. Manoli: No, there's not a real difference of opinion on that, Your Honor within the Board. There is a real, there's been a difference of opinion within the board as to whether or not the organizers, whether it's unreasonable or -- or impossible for these organizers to reach these employees away from the plant. Felix Frankfurter: Well, is that situation here and also whether the -- whether they are employees, whether the employees are the members of the union that. There are differences. As I understand the board that some of these -- it's not location. The board has taken a distinction between employees who sought the propaganda when there are other employees in the union for which the effort is made. Is that true? Dominick L. Manoli: The Board has not drawn that distinction, Your Honor and I know of no case with a -- a disagreement based upon that -- upon those differences between the Boards as among the Board Members themselves. Felix Frankfurter: I mean -- Dominick L. Manoli: Perhaps, Your Honor is -- Felix Frankfurter: How about -- how about the people who speak to make contracting themselves employees against not employed. Is that a distinction? Dominick L. Manoli: If Your Honor is thinking of the LeTourneau case -- Felix Frankfurter: I'm -- I'm thinking of the opposite that is applicable to (Inaudible) the facts of the LeTourneau case, I'm not to say. Dominick L. Manoli: No, that's quite right. There the prohibition is I'm going to say in detail somewhat later. The prohibition was directed against the employees. In these -- in these cases here, the difference between LeTourneau and this one here is principally that here, the prohibition is directed against these outside organizers who are not employees. There is this difference however, Your Honor. I might say this with respect to these cases. That in the last of these cases, there were some employees who were members of the Union and whom the company permitted to distribute literature on the parking lot. I didn't mean to minimize that factor. I believe that -- Felix Frankfurter: (Inaudible) may become important unless you get a rigid rule of -- Dominick L. Manoli: I hope to show that it would not be material. But I -- I think I made an error perhaps, when I said that there was, for these cases, are substantially the same (Voice Overlap) -- Felix Frankfurter: And also what other facilities there are on its own. Dominick L. Manoli: Oh, yes, of course. Felix Frankfurter: I'll have to say then all of these cases? Dominick L. Manoli: Yes, substantially the same. That's right. I will hope to demonstrate that Your Honor. Speaker: And the Republic was, was limited also to the employees, the Republic Aviation. Dominick L. Manoli: Yes, that was not the question of distribution of literature but solicitation of membership and the wearing of union button. But that, too, is in those -- in that case, too, which was a companion of LeTourneau. The prohibition was directed against in the one case, employees distributing literature, in the other case the employees soliciting union membership and wearing buttons. Speaker: Well the Stowe case if you remember the case (Inaudible) Dominick L. Manoli: Well, the Stowe case had a considerable differences between Stowe and this case. Its true, that in Stowe, we were dealing with some outside union organizers. But, of course, there the question was, whether they were entitled to a theatre which, whether they were entitled to use a meeting hall. Speaker: And there's difference between a hall and a parking lot? Dominick L. Manoli: I -- considerably, I think Your Honor. I am aware that Your Honor thought that -- that in the Stowe Spinning case that you felt that the theatre was not an adjunct to the business. And -- but I think that we can properly say that here that the parking lot is an adjunct to the plant just as it was in the -- in the -- the LeTourneau case. Speaker: The majority thought there was an adjunct to the business there in the Stowe? Dominick L. Manoli: Pardon? Speaker: The majority thought there was an adjunct to the (Voice Overlap) -- Dominick L. Manoli: Yes the -- that's right. They did. Felix Frankfurter: I merely suggest that the applicable are the -- at least there are three cases and the court (Inaudible) has ordered not to desire to hear the same cases together that would anticipate. Ultimately, there's a question of balancing consideration. It's pretty important to have the exact considerations for the present (Inaudible) discriminating the people. Dominick L. Manoli: Then I will address myself to this particular case. Felix Frankfurter: I'll -- I'll leave that to your judgment. If you are urging (Inaudible) but there rigid groups and, of course, I can't get through if you will. That's one thing. But if it mean a balancing of consideration, then the consideration must be admitted. Dominick L. Manoli: It is a question of balancing considerations. Felix Frankfurter: Very well. Dominick L. Manoli: And I shall address myself to this particular case, although, if I may say so, Your Honor, I think the considerations which we think support the Board's order in this case, also support the Board's order in the other two cases. Felix Frankfurter: Very well, I can understand that. Dominick L. Manoli: All right. Now, let me turn briefly to the facts in this case here. The company's plant here is located in Paris, Texas. They are near -- in a rural area near Paris, Texas. It's approximately one mile from the city limits of Paris, Texas and approximately several miles from the center of the city of Paris, Texas. Paris, Texas has a population of approximately 21,000 people.40%, approximately 40% of the -- of the 500 employees of the company, live in Paris, Texas. The other 60% of the employees live in widely scattered communities within a radius of some 30 miles from the plant. There is virtually no public transportation to and from the plant. And because of that, virtually, all of the employees ride to and from work in private automobiles where they plant or where they park their automobiles in the plant parking lot which is adjacent to the plant itself. The -- the employees normally do no stop anywhere in the vicinity of the plant either as they are leaving the plant or as they are coming to the plant to work. They normally come on to the plant parking lot, park there, and then go on to the plant. And when they leave in the evening they then get into their cars as they normally drive away from the plant will stop -- without stopping anywhere in the vicinity of the plant area. And I would presume they would drive on home or the nearby city. The -- the parking lot is connected with the highway which passes the plant by driveway which is about 100 yards in length and some 30 feet in width. This driveway which connects the parking lot and the state highway is over company property, except for the last 30 some odd feet next to the highway, where it passes a public right of way. Along the road as the -- the maximum speed on this highway as it passes the plant is 60 miles an hour and posted along the plant are no stop -- not stop signs that have been put there by the authorities. Now, in 1953, the union here was attempting to organize the company's employees. And sometime that in several occasions during the summer of that year, they went to the plant and stationed themselves at the -- near the intersection of the state highway or the state highway and this driveway at the place where it is -- crosses the public right of way adjacent to the state highway. I hope I made myself clear as to where they were standing. They started and began to handout literature -- literature to the employees at that place and as a result there was traffic jam that was created. And the local authorities, who meanwhile had been called by the company, ordered the union representatives to discontinue distributing literature at that place because it created this traffic jam and created a serious traffic hazard. Thereafter, the union representatives wrote to the company asking for permission to distribute literature on the plant parking lot as the employees came to work or as they left. The company replied saying that it has generally forbidden the distribution of any kind of literature on its premises, and for that reason it declined to grant the union's request. Simultaneously, with its effort to distribute the literature at the -- near the plant, the union also sought to reach the employees at their homes and in the nearby town of Paris. However, the union was able to obtain only the names of about 100 of the 500 employees and was able to mail literature only to the -- to the one-fifth of the working force. And while some 60% of the employees have telephones, the union, of course, was able to reach some of them, but record doesn't show just how many they were able to reach. And the record also shows that the union reached or contacted or communicated with some of the employees on the streets of the nearby town at the nearby town of Paris. These are substantially the facts in this case. Speaker: Does the record show what isolation there was in this plant? Dominick L. Manoli: It's in a rural area, Your Honor, approximately one mile is from the city limits of this town and approximately several miles from the center of that town. Speaker: Any reason why they couldn't distribute these from opposite to the plant? Dominick L. Manoli: The employees just simply don't stop in that area. They just simply go right on. Speaker: But they could stop them. Dominick L. Manoli: If they wanted to. There are no stop signs, Your Honor. There are no stop signs along the road there. And the maximum speed of that road as I -- I said a moment ago, some 60 miles an hour. Speaker: Well, I -- I was thinking about the no field that the union could (Inaudible) put up the signs -- Dominick L. Manoli: There are -- there are undoubtedly are, some open fields in -- in that area, but normally, the employees, since the record shows, do not stop anywhere in the vicinity of the plant. They just simply get in their cars in their parking lot and drive on home or in the morning they're coming from their homes at the nearby town and they drive directly on to the driveway and into the parking lot. Speaker: (Inaudible) Dominick L. Manoli: About 200 feet, Your Honor. I believe the testimony is that the distance between the parking lot and the plant is some 200 feet in this -- in this case. Speaker: (Inaudible) Dominick L. Manoli: The -- both the -- both the parking lot and the plant and the area in between, that is all company property, Your Honor. Speaker: (Inaudible) Dominick L. Manoli: Yes, it is, Your Honor. If I may, I think it would might be helpful if we turned to the map which is on pages 225 of the record. You will notice here, Your Honor, Mr. Justice Minton that the parking lot is at the top of that, pages 225. Now, at the bottom of the line which the -- which -- which marks as a parking lot, there's a small letter d and then there's a little road there. That road leads to a sort of a plant gate and the employees enter into that plant gate to enter the plant itself or gate house as they call it. Now, the driveway that leads from the parking lot to the state highway is the one at the -- almost at the extreme bottom right -- right hand corner of the parking lot. That's approximately a 100 yards long and some 30 feet in width and the distributors of the -- the representatives of the union who sought to distribute literature on these occasions that I've mentioned, stood at that place which is at the very end of that driveway and is marked by a circle. And that -- and that is where the driveway crosses a -- public right of way which is adjacent to the highway itself. Now, that intermediate area, Your Honor, between the parking lot and the buildings, my understanding is, that is owned by the company. That is company property. Stanley Reed: Well, is the real purpose of the efforts of the organizers to get to talk to the employees while they're on the parking lot and away from being bothered by passing traffic and so forth and they won't stop to talk to them when they get out of the road, is that -- Dominick L. Manoli: That's right, Your Honor. I -- we, it's our -- it's the Board's position that unless these union representatives are permitted to have access on this parking lot that they would be unable to reach the employees. And that it's either impossible or extremely difficult for them to reach the employees anywhere near in the vicinity of the plant. And with respect to reaching them away from the plant at their homes and in the city as I will come to later, there are very serious difficulties that the union encounters in attempting to reach them there. Now, from the facts that I had summarized, the Board found, and I believe I've already indicated this to some extent, the Board found that it was either impossible or unreasonably difficult for the union representatives to distribute literature to the employees away from the plant area in the vicinity of the plant itself. And that this and because of that, the employer's prohibition against the distribution of the literature on the parking lot deprived the employees and the union organizers of an important avenue of communication with respect to the distribution of this literature so as to seriously impede the employees' right, the exercise of their right to receive organizational literature from the -- from the organizers. The Board concluded that the impediment was serious as to constitute interference within the meaning of Section 8 (a) (1) of the statute. And accordingly, it directed the company to permit the union organizers to distribute literature on the front parking lot subject to reasonable and non-discriminatory regulations in the interest of time efficiency and discipline. The court below, as I have already indicated, disagreed with the Board. It concluded that since these organizers were not employees, but in this, outsiders, non-employee organizers and since in its view the employees could be reached in the nearby town, that the prohibition did not invade or bridge any rights of the employees themselves or constitute a serious impediment to the employees' exercise of their rights under the statute. As I indicated earlier, the principal distinction between these to these cases or in this case and the LeTourneau case, here is the -- the prohibition here is directed against -- is directed the non-employees. Whereas, in the LeTourneau, the prohibition was directed against employees. Speaker: If I recall correctly in the LeTourneau, the public were criticized during the hearings on the Labor Management Relation Act. Dominick L. Manoli: Yes, that's correct, Your Honor. They were criticized. Speaker: Was -- was any change made in the law? Dominick L. Manoli: This Court has on two occasions in the Radio Officer case which Your Honor wrote the opinion for this Court and also the Universal Camera case, Your Honor has twice said here in the Court -- this Court has twice said it seems to us that the statute has not been -- has not affected the validity to those -- those two cases, either LeTourneau or the Republic. The -- in the LeTourneau case, this Court sustained the Board's ruling which set aside an employer rule which prohibited the employees from distributing literature on the plant parking lot. This Court agreed with the Board that in that situation, the employer's naked proprietary interest or his naked control over his property, was to be weighed in the balance against the employees' interest in the effective exercise of their rights. And this Court also agreed with the Board that, since on the one hand, the prohibition was not necessary for the protection of any legitimate interest of the employer and since, on the other hand, it deprived the employers of an important and otherwise appropriate avenue of communication with respect to the distribution and receipt of organizational literature, that the Board, setting aside of the employer's ruling -- rule against the distribution of literature, represented an appropriate and a valid accommodation between the employees' interest and the effective exercise of their rights under the statute and the employer's naked proprietary interest. The considerations which underlie that decision, and which we think are relevant here, were that -- were the employees as in that case, at their homes or dwellings scattered over a wide area that it is difficult and often impractical to have any systematic distribution of literature to them at their home.That from a practical standpoint, the logical, the natural and perhaps the most effective place for the distribution of literature is in the plant area. And that even though, as in that case, the employees were not wholly inaccessible away from the plant as they would have been if they had worked in a mining camp or a lumber camp which was owned by the employer, let them work in a place like that, that even though they were not wholly inaccessible away from the plant, nevertheless, the employer's prohibition against the distribution of the literature on the plant parking lot created such a serious impediment, deprived them of a -- an otherwise appropriate and important avenue of communication that on balance the -- it was -- it was wholly proper for the Board to subordinate the employer's naked proprietary interest to the employees' interest in the effective exercise of their rights including their right to receive organizational literature. Stanley Reed: Suppose this has been a private parking lot not owned by the company would the company have to provide, provide some facilities to make these employees available? Dominick L. Manoli: Well, I know of no case, Your Honor, which has presented that to the Board and I suspected that probably it might be -- it would make a serious difference if the employer doesn't own anything. He doesn't have to supply -- supply something which he doesn't already have. Stanley Reed: Might he not have to open up his plant? Dominick L. Manoli: Pardon me? Stanley Reed: Let them come in the plant. Dominick L. Manoli: The Board does not permit even the employees to come into the plant to distribute literature, Your Honor. That's under (Inaudible) case the -- the Board has drawn that line. While it -- the employees are entitled to permit to distribute literature on the front parking lot, the Board has never permitted employee, even employees to come into the plant for the purpose of distributing literature. Stanley Reed: Even though they don't have any place elsewhere? Dominick L. Manoli: I know of no case, Your Honor, where the Board has permitted the distribution of literature inside the plant. It feels that there, the -- the balance is in favor of the employer because of the danger of littering and other factors -- that flow from the -- the distribution of literature within the plant itself. Stanley Reed: The Board hasn't yet taken the position that the employer is bound to make these employees available. Dominick L. Manoli: Available? Stanley Reed: Yes, for organization purposes. Dominick L. Manoli: It's not so much of question of making them available, Your Honor. It's the question of the employees themselves exercising their own right to receive organizational literature. And that determination should not be made by the employer as to whether they will be available to -- or to -- to the organizers or not. But that decision should be made by the employees themselves. In fact I'm quite sure. I just spelled out the considerations which we thought this Court rested -- rested in, in deciding the LeTourneau case and which we think are applicable here, the Board in that case as I've said, sought to balance the competing interest, the naked proprietary interest of the employer, the employer as against interest of the employees in the effective exercise of their rights under the statute. In these -- in this case, if I may add, and the other two cases, that are here for argument, the Board has also weighed the competing interest. On the one hand, it has found that to set aside the prohibition against the distributing of literature on the parking lot by these outside organizers, that the employer suffers an inconvenience which is no more substantial than the inconvenience which the employer suffers in the LeTourneau case, where the distribution of the literature is being made the employees themselves. Felix Frankfurter: What is the difference, that the -- the employee himself will be questionable when he's talking with his fellow employees that there's something wrong. Dominick L. Manoli: Well -- Felix Frankfurter: The employee of the plant, it's very difficult to say you can't talk to your fellow employees on the parking lot. Dominick L. Manoli: It's more than that, Your Honor. I think -- Felix Frankfurter: Isn't that true? Isn't that what -- wouldn't it practically get down to the fact that I'm -- I'm restricted of my freedom to talk to you as a fellow employee and to take your time and -- Dominick L. Manoli: Well, that was true in the LeTourneau, in the Republic case where it was a question of solicitation. Here, I think it's something more than that. That is that there is a distribution of literature. Now, if -- if the distribution of literature in the LeTourneau case caused so slight an inconvenience to the -- to the employer, that on balance it should not outweigh the way the employer's interest in the effective exercise of their rights in the statute, so here we say the -- Felix Frankfurter: So, when you said effective exercise of their rights, is that -- if -- if I have to live with that statement, then I've already answered the problem. Dominick L. Manoli: Well, it's their right to receive organizational literature. Felix Frankfurter: Well, but that the question is whether they have right to receive it, if that's fine. Dominick L. Manoli: I understand that is, Your Honor. Now -- Felix Frankfurter: Well, that you can say it is (Inaudible) Dominick L. Manoli: At this point I'm trying to -- I'm trying to make the point that the inconvenience which the employer suffers from permitting these -- permitting these outside organizers to come into the parking lot with the purpose of distributing literature at the inconvenience from a practical standpoint, is no different, really, than the inconvenience which he suffers when the employees themselves distribute the literature. Felix Frankfurter: But the restriction upon the employee, if -- if I can talk to you or give a piece of literature to my fellow employees the way I could talk to them, give them the literature to my colleagues on this Court. It's a relationship statistics. Dominick L. Manoli: I know, Your Honor, but what difference is there really from a practical standpoint between the employees handing out a piece of literature to fellow employee or the union organizers handing him this piece of literature? Felix Frankfurter: I'm not looking merely at the employer (Inaudible) property, naked piece of property. I don't see what the word "naked" while that the insertion of that word "naked" is sort of prejudicial to the whole case why, that is relevant? Dominick L. Manoli: Well, Your Honor, I've -- that's relevant because -- Felix Frankfurter: On the other hand, this is the -- the inconvenience to the employer. I'm not saying the burden is on the employee, in that case, to be forbidden to talk (Inaudible) fellow employees. That was the essence, that was of the core of those cases you got by. Dominick L. Manoli: And what I think is at the core of this case. And I think it's a fact to which the court below has overlooked. That essentially, here, we are concerned with the rights of the employees to be informed because it is our position that whether -- whether the distributors of the literature be these outside organizers or whether they be the employees themselves, that at bottom, what is fundamentally involved in these cases is the right of the employees to receive organizational literature. Felix Frankfurter: Where at -- at a particular place have the abstract right? Dominick L. Manoli: At the parking lot where -- Felix Frankfurter: Well, but that's the question. Dominick L. Manoli: I know. Felix Frankfurter: That, we can't answer the question by assuming the answer. Dominick L. Manoli: I hope I'm not assuming the answer. I was trying to develop the considerations which I think the Board has taken into consideration. Felix Frankfurter: (Inaudible) but just as the rules have said. Dominick L. Manoli: The Board has balanced that. Felix Frankfurter: Where? Dominick L. Manoli: As a matter of fact -- Felix Frankfurter: Where? Dominick L. Manoli: -- in a -- in a series of cases -- Felix Frankfurter: What? Dominick L. Manoli: -- including these and as a matter -- Felix Frankfurter: (Inaudible) the difference as it discussed the difference. Dominick L. Manoli: Between -- Felix Frankfurter: Employee and non-employee as to this, in essence. Dominick L. Manoli: Yes, Your Honor. It has -- it has drawn -- Felix Frankfurter: As it was, give me the reference of the case. Dominick L. Manoli: There are two cases, Your Honor, on page -- Felix Frankfurter: I know the Board has not refused to draw a line, but what I ask, has it taken into account what seems to me, is very important. If it's up to me, I may (Inaudible) out, that the Board has the right to draw that line but hasn't drawn it or it had just assumed from the employee issues that as to non-employee union policy. Dominick L. Manoli: The Board has drawn a difference with -- it has taken into consideration the fact that these organizers are non -- are not -- Felix Frankfurter: It has said so. But doesn't -- the major consideration of doing obviously what it says. Dominick L. Manoli: It has made the consideration this way, Your Honor. That where the outside organizers are able to reach the employees in the immediate vicinity of the plant, in the public -- public area, to mean the vicinity of the plant, the Board in those cases, unlike the employee situations, has said we will not permit the outside organizers to come on to the plant and parking lot, because they have an adequate opportunity to distribute literature to the employees in the public area in the -- in the -- the immediate vicinity of the plant. Felix Frankfurter: Well, let me -- in all cases it says and it will consider all supremacy. I take it the Board has ruled that the -- the employees have no right to the -- to the propaganda is within the plant. Dominick L. Manoli: The important -- Felix Frankfurter: So, whether there is a greater facility or equal facilities on other (Inaudible) Then there's no occasion for using employer's (Inaudible) I'm assuming in all these cases that there's no suggestion from union and for any discrimination. Dominick L. Manoli: Oh, that's quite true, Your Honor. There is no discrimination at all and these are -- there's no suggestion of that kind, here, any more than LeTourneau case. And in (Voice Overlap) -- Felix Frankfurter: It's not through (Voice Overlap) -- what I want, I'd like to be referred to the court's opinion in which they canvassed the property that you and I could canvass in our State and they've considered it and said on the whole, they've never been able to account we reached this conclusion. Where have they done that? Dominick L. Manoli: I think they -- let me start -- start off by saying this, Your Honor, that the Board has regarded these cases as not significantly different from the LeTourneau case. Felix Frankfurter: That's my complaint with the Board. Dominick L. Manoli: And the -- in these cases here, the Board following the same lines of approach that it followed and which is as we thought this Court approved in the LeTourneau case. Felix Frankfurter: But that's an employee case. Dominick L. Manoli: I understand. It has balanced these competing -- this has balanced these competing considerations and it has concluded that the natural, the logical, perhaps the most effective place for the distribution of literature in a situation like this is either is somewhere in the plant area, either in the public area adjacent to the plant area, in the immediate vicinity to the plant or on the parking lot. Where the outside organizers are able to reach the employees on the public area in the immediate vicinity of the plant, the Board says, we will not permit them to come on to the plant. But in situations however, where they aren't -- where they employees aren't accessible in the immediate vicinity of the plant, then the Board has balanced the competing considerations at the inconvenience to the employer's relatively slight, no greater than it that was in the -- than the LeTourneau case and that the -- however, on the other hand, that the impediment to the employees' right to receive literature is a serious one because if deprives, it -- it forecloses what is in those circumstances the most important and effective avenue of communication between the employees and the outside organizers. Felix Frankfurter: Mr. Manoli, you well know that this is the -- this is at (Inaudible) this Court has sent cases back to the Board and said, you have great experience with this, and so, therefore, you have wide discretion. But your rule must be based on a consciously formulated recognition of factors that lead to your result. Way back (Inaudible) didn't deny the policies of -- of the Board but they didn't go into a decision. What it is on the basis on the basis of experience. Our problems mean that the problems I can see, the Board has drawn no difference between employees, (Inaudible) where that employee persuaded, a non-employee persuaded. To me, there is a considerable difference. If the Board in the result of its experience and as a result of a specific consideration as a respective factor, said that the considerations that appeal to them by talking are unreal, I value their judgment. But they haven't done so. Dominick L. Manoli: But, Your Honor, I think that they -- Felix Frankfurter: Have decided but they haven't considered. Dominick L. Manoli: That they've considered them in the sense that this is a largely the same kind of a problem. Felix Frankfurter: But I don't think it is the same. Dominick L. Manoli: That the Board -- Felix Frankfurter: The only advisory is why are they the same (Inaudible) this is your way to the fact that one employee talking to another employee is very different when it is an outside story. Dominick L. Manoli: Well, let me go back to the considerations, Your Honor which were -- which underly the LeTourneau case, which I think are significant here, as I indicated before. That case seems to rest up on these considerations which the Board about virtue of the record in that case, its experience within, in the facts of industrial life drew mainly that where the employees' homes are scattered over a wide area, that it is difficult and impractical to reach them whether it be by the employees themselves or by outside organizers for the purpose of distributing literature. That in that situation whether its employees who are involved or whether its outside organizers that are involved, the natural and the most effective and the logical place for the distributors of literature to get together with the employees is in the -- in the plant area. And that -- Felix Frankfurter: Added, considered alternatives, and maybe a problem in burden of proof.In the case of an employee to employee. I wouldn't put the burden of proof on the employee. But in the case of the outsider, I would put it on the outsider. Dominick L. Manoli: The Board does as a matter of fact. Felix Frankfurter: But has it dealt with this problem so that we can (Inaudible) being spelled out. Dominick L. Manoli: I cannot refer you to any one single case. I think you must -- Felix Frankfurter: You get to perfectly conclude here but with discussion. Dominick L. Manoli: I -- I can only -- I can only say this. That the Board's rule with respect to these cases is discussion of them must be obtained from reading a series of cases all of which have been cited in our brief. William J. Brennan, Jr.: Mr. Manoli is -- could any other solicitor or political parties or religious persuasion or advertising anything go upon this one? Dominick L. Manoli: No, Your Honor. There's a difference, we think, between those two situations. William J. Brennan, Jr.: It's just that -- that you make the -- a difference, or to leave the solicitors for union organization. Dominick L. Manoli: And let me indicate why we think there is a difference. William J. Brennan, Jr.: Well, I -- I see your time is up. So, I don't want to take your time. I just want to get your statement of this. Dominick L. Manoli: I was just wondering if I could take -- Earl Warren: You may not (Inaudible) Dominick L. Manoli: -- a little more of my time on -- on the -- the next case if that's -- Earl Warren: That's directly to it. Dominick L. Manoli: -- my argument on this one. Earl Warren: I would like to know what the difference is, too, if you consider it. Dominick L. Manoli: Yes. With respect to the distributors of literature, they aren't under the same kind of handicap or difficult when it comes to distributing literature that the union organizers are. Speaker: You mean a political campaigner can go around all the places. Dominick L. Manoli: To all the homes, that's right. But he is just -- Speaker: And your people can't. Dominick L. Manoli: No. They -- because their homes are scattered. Very often the organizers doesn't have the names of all the employees. Whereas, in the case of a -- in the case of a person distributing new literature he merely has to go up and down the street and pass them out to whoever is coming by or simply go from one house to the next. But that is impossible. That, of course, cannot be done by the union organizers because obviously in a community such as this as the record here shows the employees homes are scattered within a radius of some 30 miles. Speaker: Then you ought to sell automobiles. Dominick L. Manoli: Well, I think the same would apply there. That he can reach them somewhere else. The -- and the distribution of literature of this kind of literature, has a special protection under this statute. It is not like, as this Court said in -- in the Martin versus Hunter's if I remember correctly that you can't lump constitutional rights, or rights which are protected by the statute with the right to sell tea kettles or what have you. That there is a difference between the two. I'll stop here, Your Honor. Earl Warren: Mr. Fisher. O. B. Fisher: May it please the Court. Mr. Manoli here -- I couldn't expect to know how to make an argument in this Court, when this is the first time and it's been my privilege to appear in this Court. The first natural impulse when (Inaudible) what my opponent say was to refer to the Fifth Amendment. That was done. Intricacies and various considerations were given some time. And then it was decided that probably this Court would dispose of this case without regard to the Fifth Amendment. However, it is the position of the respondent that the Fifth Amendment is involved. Next, not knowing how to present this case in this Court, I attempted to contemplate the -- or recognize the position of the Board as taken from its brief. And then attempted to think of -- of what would be said. That doesn't fit either at -- at this time. So, even at the risk of taking too much of my time, I do want to point out to this Court some things about the facts that are before the Court, some things in particular and then in general. Now, first, I would like to mention that the argument has been made to this Court that these employees a mile out from this country town of Paris, Texas I don't know just how much judicial knowledge the Court takes, the record shows that it is of town of 21,000 people. Hugo L. Black: You don't call that country town, do you? O. B. Fisher: Yes, we do, Your Honor. It's a county seat town and a county seat lawyer is addressing you which probably account for wanting (Inaudible) by the Fifth Amendment instead of the Labor Law, having engaged in General Practice and not a specialized practice. And it's mentioned in the -- the brief of the Board in this case that -- that is, the facts are stated in a negative way, so to speak, and this plant is one mile from the corporate limits, that's true. The record may show its several miles from the center of town, if though I will want to give the chamber of commerce that information. But it's unimportant of the question has been asked with reference to what was the situation around this plant. The Court showed an interest in just what the situation was. And Mr. Manoli correctly told the Court that property just across the road was vacant property. That it was probably available to anybody and for any lawful use. That addition by me, of course. He only stated correctly that there was a vacant property across the road. This plant is, it is out in the country, it's three quarters of a mile to the first road leaving the farmed market road on which the plant is situated that is traversing it east and west when you travel north from the plant. Such is the findings in the record. It's some two or three miles south of the plant before a road is reached leading east, either or west from the side of the plant. Now, it's been stated that the employees leaving that plant normally drive direct home, directly home without stopping. That maybe true. If there's any evidence in this record to that affect it passed my attention. I just did -- It just as did the evidence in the record which is brought out in the brief of the Board in this case or (Inaudible) that this company policy or company rule not only applies to union organizers and outsiders but it's made to apply to their own employees. I didn't remember that until it was noted and then I do find that representative of the company on the witness stand was asked of the trial examiner or of the counsel for general counsel. Is it not a fact that you would object under your company policy to permitting the employees to drive to the -- to the distribute literature on a parking lot because it would litter it up. And he gave an affirmative answer. That was something insignificant. In this case until it reached the -- the Appellate Court and this Court. It had no significant in the sense of time. If the evidence shows that those employees drive directly home from the plant why, it was insignificant at the time and it still insignificant. The union has accessibility or has access rather to the employees of this Babcock & Wilcox plant at Paris, Texas on the streets, in their homes, at meeting halls and at all the other places that are normally found in a county seat town of 21,000 people. Likewise, they have all the area between the plant and Paris, Texas and all of the area south and east and west to attract the attention of the employees if they should really and energetically desire to do so. The record shows that the plant is situated in a farming and grazing community. The land is either in cultivation or it is in pasture land.. So, all of that space around this approximately 100 acres that is occupied for this plant is just as available to the union as it is to any other individual. The record in this case shows that the union did reach the employees right at the plant gate and in mentioning that we certainly do not want to admit to this Court -- admit to this Court that we agree with the contention that it's necessary to carry out for the purposes of the law that the organizers be able to meet with and see and discuss matters with the employees right at the company gate or in the immediate vicinity of the plant if such is true. Nevertheless, they did see them there on three occasions. There were at that time approximately 500 employees. On one occasion they delivered literature to 325 of the 500 are to -- are delivered 250 pieces of literature to 345. On another occasion they delivered a lesser number of pieces of literature up to 250. And on another occasion some different number all of which is set out in the brief in this case. Now, they were able to reach the employees in the immediate vicinity with the plant, but we don't want to capitalize that if you please. Of course, our position is that the maternal case is not a kin to the case that's now before this Court that it's different, a proposition all together as has been indicated. Mr. Manoli, has said now that the Board does not consider this case different from the LeTourneau case. Such is the sense of the brief of the Board when it's taken as a whole. So that seems to be issue on number one maybe that before this Court at this time. If it is we think we are prepared and we think we have demonstrated that we are prepared to show the difference between this case and LeTourneau case. It has been mentioned in colloquially with Mr. Manoli. First, there is an outside organizer not only involved here, there you were dealing with the employees of the plant in Paris, Texas and as we understand property rights, we look upon those employees not only as being employees, but they are persons at the plant, there are licensees there. They are there to do their work and the fact that they are there working doesn't mean that they will cease breathing. They've ceased eating, they ceased any usual activity of life and nor does it mean that they will lose all their interest in citizenship when they go to work there. Therefore, we go along with the idea that no restriction should be put upon their activity in the plant regardless of what it is, unless it interferes with production or discipline within the plant. There is nothing like that in this law suit. We are simply dealing with the question that I think is fairly and squarely presented by the Court of Appeals in its opinion and that is whether or not on outside organizer shall be accorded or permitted to go on to the premises. My authority, not of any constitutional right but by authority of the decision in the LeTourneau case. That is what the Board seems to base its position upon here, now. And it's our position that the Board has misconstrued and misapplied of what this honorable court intended by the LeTourneau decision. It's been said in oral argument here that not -- that the immediate vicinity of the plant as stated in the brief of the Board is the most appropriate and the most desirable place to distribute union literature. But now, it's carried one step further and is argued that the plant area itself is the most appropriate place. And it's also mentioned that in many instances the union organizers have difficulty in communicating with employees because they don't have their names. That's not this case now before this Court. The evidence shows and the record shows that the union had communication with the employees. That it wrote letters to the tune of 100 or more on different occasions to the employees of the company at page 36 of the brief for respondent, I believe. The facts in this case when brought to a quick conclusion are that the union organizer sought to avoid going to the homes of people, avoid or sought to avoid seeing them on the streets, sought to avoid going to probably call him on the telephone and sought to avoid writing them letters or by seeing him at the gate of the plant. Now, then after that was done and a congestion resulted there being a public area between the plant property and the travel portion of highway. And after a letter had been written which is here say insofar as we're concerned telling the union that it was dangerous to distribute literature there he terminated such activity. This case, this matter in this case received very little attention at the outset. This respondent was charged with 16 separate ungrounded violations of law, so to speak or acts of unfair labor practice. The Board determined that it was not guilty of any of the 15. This was the 16th and the last and it determined that it was guilty of an unfair labor practice because it did not give permission to the union to distribute a literature upon its premises. There is no question, -- Earl Warren: Just proceed Mr. -- O. B. Fisher: Thank you, sir. There -- there is no serious question of inaccessibility in this case.Or there is no question of discrimination. The -- there's no history of unfair labor practices. There is no history of any anti-union campaign by the company. The company, under this record, and under the findings has occupied a hands-off policy. It was charged with surveillance. It was charged with interrogation of employees and those charges were dismissed by the Board. Felix Frankfurter: Would you mind -- would you mind telling us without indicating whether you are right or wrong -- O. B. Fisher: I'll tell you anything I know, sir. Felix Frankfurter: As a matter of law (Inaudible) O. B. Fisher: Thank you, sir. Felix Frankfurter: -- in spite of that the evidence that are important, apart from merely legal rights (Voice Overlap) -- O. B. Fisher: It certain -- it certainly is, sir. Yes. Oh, I'm glad to respond to that question in -- in my way which will certainly not be in any technical fashion, I fear. As a country lawyer, my interest in this case is protecting of what I consider a valuable right and the necessary element of freedom and democracy. If we do not have the right to own and control property subject to reasonable regulations, why, then we have lost a lot of our citizens here, a lot of that that inspires or impels us to get up at morning and go to work and to work late at night. We have lost a lot of what it takes to energetically going about doing things. That would be number one maybe. Number two, because I do not think that it's fair to call upon one man whether it be Babcock & Wilcox's company with a country plant out in Texas or whether it be an individual to furnish his facilities and his property to some other person or some group of persons to operate on. And that does what this sort of thing would lead to, if we are compelled, not we, but I mean, if the company is compelled by the Board to let this group men in. Certainly, the company will be compelled to let another group in. And certainly then we will be furnishing an arena for the operation of two or more unions probably, with follow up that you have the sanction and disturbances among the employees. The reason I am here, is because I think, a happy situation exists down there at this time, I fear that an unhappy situation will exist if we do not sustain this court of civil appeals in this action that refused to enforce this order. I think it's a human right as well that we're defending and I'm glad to have come here for that purpose even though there -- there's nothing involved except just whether a man goes on there and hands out some papers. I'm not concerned about the littering we read about perticular but we can clean that up. But there's no way we can regain that right we have lost if the property is taken away from us without due process of law or without just compensation. I thought it would be if -- if that parking lot is to be dedicated to an arena for union activity and if we the people of the United States should desire to furnish that arena, then we should enter a condemnation proceeding against my client. Take the property and compensate the -- the client for it and invite the union representative and the employees there. But we have (Voice Overlap) -- Speaker: (Voice Overlap) -- what do you think (Inaudible) O. B. Fisher: (Inaudible) Speaker: In other words, you think the union ought to rent a hall. O. B. Fisher: That'd be fine or if we are dispose to why, so if the Government wants to rent one for them, that's all -- that's all right, too. We'll furnish a town hall. There are town halls (Inaudible) in Paris. It may not be in the record. I don't want to get out of the record, but we have everything with a town that size has. And there are plenty of places to meet, Your Honor and Mr. Justice Minton. And we just don't feel obligated to permit these people to come in there on a profit/loss company. We're not going to do it until this Honorable Court tells us we must do it. Hugo L. Black: Any other -- are there any other practical reasons why (Inaudible) O. B. Fisher: What I know -- Hugo L. Black: Except those you have mentioned. I mean -- O. B. Fisher: Yes, sir. That there are others, Mr Justice Black. I don't know what the consequence would be. I know what the -- the relationship is between an invitee or a licensee or a grantor or an employer, but just what is the relationship between this plant ownership and the union organizer if this court should require that the company is permitting to come in there? He's a licensee of the Board or of the Court. He's coming in there, I don't know what the company liability would to him. I don't know how much duty to protect him we'd have. I don't know whether he if he stumbled on a railing and broke his leg, we'd be liable in damages. Hugo L. Black: It has a (Inaudible) O. B. Fisher: Yes, sir. There are some, very well (Inaudible) Speaker: I love that sort of (Inaudible) O. B. Fisher: Yes, I think they'll -- I'll think they'll show me. They're all in the map. If he stumbled over that why, I don't know what the company liability would be but just this sort of thing leads to so many things that I think at this moment before this Court comprehend even a small part of them. Because I -- I may not be thinking now just like I think in (Inaudible) Texas and under these circumstances. But we do want to urge our position upon the Court and I have to outline here what I want to say and haven't said any of it.[Laughter] First of all I want to make it brief. First is I gave you the facts. I haven't done all of that but I've given you part of them. They're in the brief and in the record. The Board's position is to stand in old LeTournea as far as I am concerned. Our position is that LeTourneau doesn't stand for the proposition that the Board is now urging. That strangers are not involved in LeTourneau but they are here. And that even if -- if LeTourneau, if all of the reasoning in LeTourneau applied why, it wouldn't mean that this order of this Board should be enforced. If this order is enforced it will be an extension of the LeTourneau reasoning that we fear will later result in disturbance and affecting of affecting of people, employees and persons who were not employees, whether they'd be owners of farms or owners of homes in the community where this plant is located. I don't believe there are people. And I'm not talking about my client, the company, but our people would understand just why it was that the law would require a man to open his farm, his backyard or his front porch to a stranger. All of such claims they're reasoning, how it's offered here. That is that, the union cannot readily, if the Court please, just cannot readily, that's the most defining amount and if they cannot readily communicate with the employees of the plant property and that is expensive. And that the whole extent of this finding. Thank you for listening to me.

Earl Warren: Number 26, the Leiter Minerals Incorporated, Petitioner, versus United States of America. Mr. Plauche. Samuel W. Plauche, Jr.: May it please the Court. Earl Warren: Mr. Plauche, you may proceed. Samuel W. Plauche, Jr.: What the -- this is a review of an interlocutory order of injunction issued by the District Court below and affirmed by the Court of Appeals, Fifth Circuit. The fundamental question presented is whether or not the District Court's order was authorized improper, despite the federal anti-injunction statute, and in the face of the rule of committee which prevents the District Court or prevented it as we say from interfering with previously acquired and subsisting in rem jurisdiction of petitioner's suit which was pending in a state court of Louisiana. The brief history of the litigation is this. In August of 1953, petitioner brought its petitory action in a state court of Louisiana in -- in for Plaquemines Parish. The Court there was a court of general or plenary jurisdiction of the State. It was a petitory action brought by petitioner claiming recognition of its right entitled to the mineral rights which underlay some 8700 acres of marsh land in Plaquemines Parish. It was brought, as it was authorized to do and as it was expressly required by Louisiana practice to do against those parties in possession of the mineral rights, the California Company and a man named Lobrano, who, it was alleged by petitioner were wrongfully withholding the possession of petitioner's rights from petitioner and the possession was alleged to on behalf of petitioner to have been unlawful. It is true that the claim by petitioner in the state court rested upon its claim of -- its right to recognition of its title to the minerals. Promptly upon the suit having been brought in accordance -- strict accordance of the Court of Louisiana procedure, the defendants, California Company and Lobrano, undertook to remove the case to the federal court in and for the Eastern District of Louisiana. Petitioner filed a motion to remand which was granted by Judge Wright who later issued the injunction which is under review here. Judge Wright -- it was removed on the ostensible ground that there was a federal question presented by petitioner's state court complaint. Judge Wright in remanding said, “There may be a federal question lurking in the background, but it is not sufficiently disclosed -- disclosed by petitioner's state court complaint and at present is not a substantial one.” Upon the remand to the state court, the California Company and Lobrano who claimed under leases from the United States, joined the issue with petitioner. They challenged the jurisdiction of the state court. They claimed that United States which was in effect they say being sued was an indispensable party. It had withheld its consent and couldn't be sued and also and finally, that the state court petition claiming the right to the possession of the minerals being wrongfully withheld, we say, disclosed no claim for legal relief. In other words, that our suit, even if everything we said was true and all the documents that were attached were admitted as they read, we had no cause from a substantive stand point. Those issues went before the District Judge in the state court, Judge Bruce Nunez. They were exhaustively briefed and argued orally. And ultimately, sometime later in March of 1954, he overruled all of the defendant's defenses and held in effect that petitioner's case was sound, both procedurally and substantively. Six days before he ruled this present action in which this interlocutory order under review was issued, was commenced by the United States in the federal court for the Eastern District of Louisiana. This is an action claiming on behalf of the United States, title to the same minerals, seeking to erase and cancel petitioner's muniments of title which are of record and asking, and this is what is at issue here, and praying for a temporary injunction against petitioner's prosecution of its state court action. Immediately upon Judge Nunez's order, a ruling in the state court coming down six days after the suit commenced. The United States prayed for and obtained a temporary restraining order restraining any further prosecution that without notice of the state court action. Petitioner met this federal court action for the injunctive relief by a motion based on three grounds, the motion to dismiss or rebate. First, on the ground that it was argued prohibited by the federal anti-injunction statute. Second, that it interfered with the previously acquired in rem or quasi in rem jurisdiction of the state court over the Reese and that the state court had been resorted to first, some seven months before this injunction suit was filed. And finally, and in the alternative that since petitioner's claim that the minerals was based squarely and entirely upon an Act of the Louisiana Legislature, Act 315 of 1940 which I should come to in a moment. And since the -- the claim of petitioner based upon that Act would involve or might well involve substantial federal constitutional questions and since the Highest Court of the State of Louisiana had not rendered a definitive interpretation of the statute against such a federal case, that this Court -- that the federal court, meaning the District Court that should stay at hand or abstain from deciding prematurely such a federal constitutional question under what has aptly has been termed by Your Honors, the doctrine of extension. Those issues were presented to the District Court, briefed and argued and taken under advisement and Judge Wright after considering, denied petitioner's motion and entered a temporary injunction prayed for. On appeal the Fifth Circuit affirmed. The decision of the court below, both courts below based on the proposition as contended for by the Government and by the other respondents that the federal court had exclusive jurisdiction of petitioner's claim of the United States claim for it -- for the property which is the same reason that's in controversy in the previously filed state court. That the state court had no jurisdiction whatsoever and further, that the United States was an indispensable party to the state court litigation which had previously been filed by petitioner and which now stands enjoined. The crucial and the chronological facts leading up to the legal questions of which are involved are these. In 1935, an option was granted by the trustees of the estate of Joseph Leiter, deceased, to the United States covering this 8711 acres of marsh land in Louisiana for the future or -- or a possible future purpose of a migratory bird sanctuary or refuge. In that preliminary act which is not -- was not recorded, that was the mineral reservation that in the event, the option was exercised and in the event the deal was made or consummated the minerals would be reserved under certain terms. In 1938, December of 1938, Thomas Leiter, the sole heir of Joseph Leiter, deceased, actually made the deed, executed the deed and -- and consummated the deal and reserved the minerals under the land which of them -- which is the reason in controversy here, for an expressed term of 10 years. Now, if I may digress just a moment. Under the law of Louisiana, that the grant of reservation of minerals, creates non-ownership of those minerals as specific things apart from the soil which they underlie but under the law of Louisiana, the civil law, that concept of property. It creates merely a servitude or an easement or -- or a right to go and explore for and produce those minerals which may underlie the land, which servitude a reason if not exercised for 10 years, expires by a prescription or a limitation. In 1940, a year and a half after Thomas Leiter made his reservation when he made his deed to the Government of minerals for 10 years, the legislature of Louisiana passed Act 315 of -- of that year, providing and Your -- if Your Honors care to read it that the -- the 1940 Act is quoted verbatim, page 45, appendix (a) in the petitioner's brief. It's very short, “Providing that where minerals are reserved in a deed to the United States affecting land in Louisiana and the minerals are reserved, such mineral rights shall be imprescriptible.” In other words, they -- they will not as -- as were ordered otherwise or were previously would have happened. They will not expire for none use or exercise, but they will remain permanently in the reserve order. Now, Judge Nunez had this issue before and in the state court before he was restrained. He decided in favor of petitioner on the question of the merit, you see because the California Company and Lobrano had put an issue, not only the procedure aspects but also the -- the merit of petitioner's claim which was expressly fixed upon the Act of 1940. He took a middle ground which was something like this. The Act -- the reservation as I have stated and if Your Honors care to make a note where the reservation appears in extent so it's page 46 of petitioner's brief. The reservation in three parts, in three separate places reserves those minerals for 10 years which is what the term would have been for minerals in an ordinary reservation, but for the Act of 1940. There's another terminal data from which respondents rely on the merits which of course are not really at issue here. The -- in the First Circuit set ups of the reserving clause, it is provided that the right of inquiry for these minerals will terminate or expire on April 1st, 1945. Remember, this is now the 5th of 19 -- December 1938 deed, six and a half years after the execution of the deed in the reservation. There is this seeming inconsistent expiration date. Judge Nunez concluded from the language of the deed and from the effect of the Act that the earliest and you can see the inconsistent terminal date or cutoff date related only to the right of inquiry. It didn't affect the reservation of the minerals as a whole and he said that as to the mineral reservation at of the whole which was expressly for 10 years, the Act of 1940 suspended that prescription and made imprescriptible petitioner's rights. Well no respondents really make fun of petitioner's contention on the merits, although those again are not here before Your Honors. They say it would be absurd to say that you'd a right to enter or -- or explore for minerals if you didn't have a right to enter and explore for minerals, but that's not absurd at all. If I'm -- I'm still digressing on the merits because respondents you see make or take great issue with us and present the merits of the case and it does here only on review of an interlocutory order of injunction, but we feel that we should at least present the issues not to Your Honor to show that Judge had -- Nunez had questions of substance before you, substance in deciding and in petitioner's favor. And so, it gives weight to petitioner's claims that -- of -- of title and the right to recover the wrongfully withheld possession that is certainly not a capricious or fictitious claim. Judge Nunez in holding that the right of entry only expires and that the right to the minerals themselves were reserved and made imprescriptible is entirely consistent with what is known in the industry as directional drilling. As -- as Your Honors no doubt, has known for many years it has been possible to explore a point, produce mines and minerals and from the Pegasus type without ever entering the premises at all. The science had developed for years to such an extent that even though no entry at all in the premises to which the mineral rights apply -- mineral rights apply is made. You may make a surface location and deviate from the vertical directionally as to angles up to 45 degrees and for distances along the horizontal plane for distances in excess of a mile. So, it would be entirely consistent to say as Judge Nunez did, taking in an -- a contract interpretation approach here, that the right of entry expired, but the expressed reservation of the minerals for 10 years was effective and the legislature of Louisiana made it imprescriptible in an Act which was a validly an exercise of the public policy of the State to preserve the minerals for its citizens. With that, the status of the case when the restraining order was granted, there had been a decision in the state court in this in rem or quasi in rem suit and it'd been a decision favorable to petitioner and that entire litigation is now enjoined at the hands of the District Court and that has received the approval of the Circuit Court for three reasons which we urge in our motion. It is submitted by petitioner that the order below was incorrect. At the threshold, the injunction was forbidden by the anti-injunction statute which I think if Your Honors want to refer to in its extreme degree, you're familiar with it, I'm sure. It's on page 3 of petitioner's brief. It's now -- since 1948, Section 22-83 of title 28 of the United States Code and it reads, “A code of the United States may not stay proceedings in the state court, except as of -- expressly authorized by an Act of Congress or where necessary in aid of its jurisdiction or to protect or effectuate its judgments.” Of the three exceptions that are carved out of it by the expressed language of the -- of 2283, two may be laid aside immediately. First, there is no congressional authorization to the injunction below, respondent's point denied. There is no judgment which is attempted that is beneath this issue it signed or executed which it attempted to be protected or effectuated. Similarly, the phrase, the third exception where necessary in aid of its jurisdiction will not comfort or aid respondents here. The purpose of the phrase in aide of its jurisdiction was included in the 1948 revision of the Code. According to the expressed reviser's note, “To make it conform to another section of the judicial code and to make clear, the Court -- the federal court's recognized power to stay state court proceedings in cases removed to it, under the removal procedure. Further, if as respondents say, that phrase of -- of -- in aid of its jurisdiction, if that were to supersede or allow it to overcome the anti-injunction law on -- on the ground that since the federal court has general jurisdiction of claims brought by the United States, if it completely in all respect supersede the anti-injunction law, because the language of the -- of 13-45 which confer it generally jurisdiction of the United States courts to in cases brought by United States is exactly phrased as is the regular diversity jurisdiction or in cases of general federal questions or as in 13-37, cases arising under any Act of Congress which regulates Commerce between the states. So, if we were to say that merely because the United States Courts have -- have general jurisdiction, not exclusive of the suits brought to the United States, if that were to be allowed to -- to overcome the anti-injunction law, then you have no anti-injunction statute at all because the -- the act of conferring general jurisdiction on the federal court in cases brought by the Government is in the same language as all of the other is executed of jurisdiction upon the District Court. And Your Honors, we say, held that very thing in a case which is if not precisely the same because the parties weren't the same is entirely parallel in its reasoning and as -- in as to its subject matter last year in -- in Amalgamated Clothing Workers versus -- versus Richmond Brothers, where although the United States do not bear a party. Jurisdiction of the federal court was invoked under an Act that conferring jurisdiction upon the United States courts under 13-37, an act or an action arising on an Act of Congress relating to commerce between the States. And the injunction sought for the federal court in Richmond sought to stay a state court proceeding where not only was it asserted that the state court had no jurisdiction, Your Honors held or assumed that the state court had no jurisdiction and that the state court was there invading an exclusive federally created domain of -- of labor relations as governed by the Taft-Hartley Law. Speaker: Deny -- Harold Burton: It just say they had not attempted to make the United States a party to the states, is it? Samuel W. Plauche, Jr.: Sir? William J. Brennan, Jr.: The United States had not been -- been made a party to the States? Samuel W. Plauche, Jr.: In our case, Your Honor? No, sir, we -- we -- and as we could not have done so. We have as pointed out in those little subsequent portion of our argument, we have suggested the prescription of a formula set up by an earlier decision of Your Honors in 1936, suggesting that the United States intervene as an actor, a plaintiff suing in its own rights in the state court to assert whatever interest it may have, but it is not a party and no attempt has been made. Speaker: Now, if what is it -- if it's in the chain of title of the defendants in that case would -- Samuel W. Plauche, Jr.: Sir? Speaker: If the United States had granted the right to the defendants of the state case. Samuel W. Plauche, Jr.: In our -- you're talking about that case? They -- they so claimed and we allege that they did on information and belief, although none of the documents are in the record. We now know from documents they've introduced in court that they are claiming under a color of right or lease from the United States, according to the same documents, claims of the title of the property. Felix Frankfurter: May I ask you a question? Samuel W. Plauche, Jr.: Yes, Your Honor. Felix Frankfurter: In why no one view at all on the merits of your legal position but I'd like us to -- with the issue of their practicality. What, are you free to state or would you be good enough to state what difference it makes for you whether it -- the state case goes on or the federal or the thing is litigated in the federal court. Samuel W. Plauche, Jr.: Your Honor, I'll be glad to answer that. We want the state court to go on, state court case. And our reasons if -- if I may articulate them or something akin to the reasons -- Felix Frankfurter: But the statutes (Inaudible) Samuel W. Plauche, Jr.: Yes. No, no, sir. Felix Frankfurter: (Inaudible) Samuel W. Plauche, Jr.: Oh I -- no, I -- I'd be pleased to answer. Felix Frankfurter: I like to see the -- Samuel W. Plauche, Jr.: Yes. Felix Frankfurter: -- (Voice Overlap) of their -- Samuel W. Plauche, Jr.: I'd rather be pleased to answer. But for one thing, we're a simple law state, it -- unique in -- from all the other States in the -- Felix Frankfurter: Of course your federal judges are also (Inaudible) to the law. Samuel W. Plauche, Jr.: Not, but one of eight in our Fifth Circuit as a Louisiana lawyer, if Your Honor pleases. Felix Frankfurter: You don't want to answer. Samuel W. Plauche, Jr.: Well, sir, I don't want to take a chance on their being uneducated. If the Court please, I -- I'll say I'm imperilled by -- and I think basically by the same reasons that activate the Court here to refuse to reach for state constitutional questions before a State final court has passed or interpreted an Act which is an issue and put to the constitutional test. We would like to have our 1940 Act to prove which our claim solely relies, pass upon at least first by a State Supreme Court. If we lose there, we'll just have to take our licking in as good race as we can, but I think that's really are the basic motivation I have. And if the Court please, referring again briefly for a moment to the -- what was a threat, special obstacle to this injunction, the 22-83. It is true that there are a number of lower court federal decisions which are contrary to the argument that I have just advanced. They commenced in 1923 in a District Court decision from Washington and that it -- there -- it has -- the error has been perpetuated several times since. The -- we have a response of course cited. In fact, on this, and we've cited a few. Our list is more complete than theirs. We will check it and because we want all of those decisions to come to light because we think that they're basically erroneous and typically demonstrated to be so and since Your Honors' decision last year in Richmond which to our way of looking at it reaffirmed the position of this Court on the anti-injunction statute with the -- that's up 15 years ago in Toucey versus New York Life. We -- if we see the decision, this Court will nor permit a judicial departure from the clear-cut prohibition of the anti-injunction statute, nor will you accept the argument which respondents made that in -- in the 1948 revision say, accepted the -- the judicial gloss of this other erroneous decision and that they became part and parcel of what's established of the anti-injunction law. Well, Your Honors, so completely rejected that in the Toucey case where you disapproved a long and -- and much earlier and much more dignified set of decisions from this very Court and said that actually silence of the Congress was not to be construed as more powerful than its own expressed clear-cut prohibition. So, we ask you. We've listened, set the cases up and we asked Your Honor to disapprove them. Finally, with the respondents rely in -- in trying to overcome which to us is a clear-cut prohibition against this injunction. The ancient rule that whether the United States is not named in -- in a statute which seeks to divest persons of rights, that the old ancient rule that the sovereign shall not be governed or controlled unless you'd expressed and they avert to that, but that rule is really inapplicable to this statute. The anti-injunction statute doesn't run to persons and divest persons of rights. It didn't say who may or who may not apply for a federal court injunction. It prohibits the federal courts from issuing any injunction. If -- there's no question of what class of person shall be affected. It's the Court that is deprived and completely divested of jurisdiction. Felix Frankfurter: Now, is the opinion of this Court in the United Mine Workers case, is a -- is a little qualification on -- on that contention, is it? Samuel W. Plauche, Jr.: Well, sir, it -- it does. It deserves -- brought our comment, I should say. It -- it deserves comment at any rate. I do not -- Felix Frankfurter: I was hoping I'd get one from you. Samuel W. Plauche, Jr.: I -- I have -- it -- it's in the brief. Felix Frankfurter: It seems that the Court is a pathetic listener than I am. Samuel W. Plauche, Jr.: And if the Court please. Of all of the members of the Court who expressed himself specifically on the question and of course there has been now Norris-LaGuardia prohibition running in 2803. You said that even despite some language in the Norris LaGuardia Act, which the majority concurred in by three said, “Necessarily excluded the United States from its operation,” four -- four of the members of the Court held the evil with that preclusion here in language if I may say. The -- the Court was still deprived and divested of jurisdiction. The majority which was concurred in by three members in the United (Inaudible) was not content to rest its decision on the question of injunction upon this ancient in a rule of the sovereign not being included, were not mentioned. They -- they expressed that we -- we -- this is not enough. So then, they went on to point out that the language of the Act, the Norris Laguardia Act inevitably made the prohibition there applicable to the United States. Felix Frankfurter: The reason I think the question is because that too pointing the question of that too was in legislation considered as a party that was the limitation upon the Court. Samuel W. Plauche, Jr.: That's -- that's true, Your Honor, and it doesn't say, “Of the members who expressed themselves on the precise point,” more agreed with the contention that I've just made than -- than otherwise expressed themselves to the contrary. Felix Frankfurter: Are you going to say something about the -- the underlying consideration of the anti-injunction statute, namely, you said this is a threshold person? Samuel W. Plauche, Jr.: Yes, sir. Felix Frankfurter: Someone is going to take the opposite position and says that you can get -- this is something you desire the position of the United States. It -- is it a threshold person, because the anti-injunction statute directs itself in conflict between two, the Court that to sovereignty. Samuel W. Plauche, Jr.: Well, Your Honor -- Felix Frankfurter: If here, if Uncle Sam is the determining the fact that you can't have litigation without him, this conflict is brought into play. Samuel W. Plauche, Jr.: If the Court please, I -- Felix Frankfurter: What do you say to that? Samuel W. Plauche, Jr.: Well, I -- I'll be happy to discuss briefly the situation of it, the background. The -- the anti-injunction statute, of course, was designed and in -- since -- in 1793, it has been designed in slightly varying lengths to avoid these direct collisions, which we say is presented here, a direct collision between courts, if not necessarily -- Speaker: But why does the Court need to -- Samuel W. Plauche, Jr.: If the Court please, it's not necessarily so. I -- I'm -- Speaker: All right. Samuel W. Plauche, Jr.: -- not necessarily so. If the nature of the actions is such that -- that only one court can proceed to a final adjudication if the nature of the action is in rem or quasi in rem which is the second point I'm getting to. Then, actually jurisdiction over all the parties in each case is not necessary, a criterion. In other words, the parties need not be identical, particularly whereas here, we could not make the parties identical because we couldn't sue the United States in the state court. It -- Felix Frankfurter: That's -- that's why they say you can't sue anybody. Samuel W. Plauche, Jr.: Well, if the Court please, I know that [Laughs] and so far -- Speaker: (Voice Overlap) -- Samuel W. Plauche, Jr.: Yes, sir. And I'm now coming to that end. Here, we have a -- a -- the two types of cases, a state court case and a subsequent federal case, the nature of which is such that only one of the suits can proceed to final judgment because only one of the -- the -- the two sets, of course, can proceed to adjudicate and effectuate its decree in order to give relief. The rule that the Reese cases which we have -- which is our second point and which is really is -- is a fundamental question. It -- it's been recognized by this Court for 120 years since Hagan versus Lucas was decided. It is no test of the Reese doctrine which is I say, has been for almost a -- a century and a quarter that the Reese, be in custodia legis or be currently under seizure. It is just -- the test is whether or not in the action, it will ultimately become necessary to control or dispose of or have jurisdiction physically of the Reese and that's the situation here. Actually, the -- the whether the two actions qualify the nature in rem or quasi in rem so as to fit into the Reese doctrine it -- it's a matter of this real test and conceded below. They go up on a question of jurisdiction upon this and the fact that we're in effect suing the United States at which -- which is not conceded to be sued in the state court. Well, of course, we say that they‘re not at this juncture to examine the state court's jurisdiction. We say that if the examine we're still on primary ground for since 1936, the Reese doctrine and all of the attributes which are invoked here by petitioner has been fully applicable to the United States. For it was in 1936 that Your Honors decided, United States versus Bank of New York & Trust Company. And there, the respondent's arguments made in that case could have been put out of the United States reports in the head notes and in -- pasted in the briefs and there'd be no substantial difference here that -- Felix Frankfurter: That -- that makes them short. Samuel W. Plauche, Jr.: Yes, sir. If the Court please, the same authorities were liable to the United States. The United States went into federal court subsequent to dependency of state court actions involving money there, a fund. Here, it's mineral rights. They claimed that the United States Court had exclusive jurisdiction to determine the Government's claim to this reach. That there was really no -- no in rem case in the state court because the property wasn't in custodial lease, it was in personam at that junction. It further claimed that the sovereign immunity of the United States prevented it from being sued in the state court and that in effect, they were really suing the United States when they were proceeding against property, money that was, that the United States was claiming as its own. All of those contentions would reject it unanimously with the Court. The Court there held and this needs the fundamental argument of respondents in the (Inaudible) holding below. That the United States Court does not have exclusive jurisdiction of a claim by the United States to it -- to an interest in property or to ownership of property. Further, that the doctrine of sovereign immunity was no bar to the application of the Reese doctrine. They even said there, that the United States may intervene in the state court suits where these claims were being made against these banks, where the moneys were on deposit. As an actor, asserting its -- the Government's claim to this money with no sacrifice of its -- its dignity as a sovereign and with no reduction of its sovereign immunity. There again in the state court of New York where these two suits were pending in 1933 and 1934, the United States was not a party, because these Russian Insurance Companies and it's still surviving the record who had brought the state court actions claiming ownership of the record couldn't have sued the United States. If the absence of the United States in a state court proceeding where it can't be sued is -- is already in complete answer to -- to the Reese doctrine, then, it should never been applied to the United States at all and yet the doctrine in counsel, it forced to admit it under the Bank of New York case, the doctrine is fully applicable to the United States. And if the -- the objection here which it was focused by Mr. Justice Frankfurter's question, that since the United States is not in the state court, it has no jurisdiction and therefore, the rule you rely on is -- is inapplicable. That whole question would never be presented because if the United States' absence was to be made a presence, was to made a test of the Reese doctrine, then it would never have been established as applicable to the United States in the fist place and for 20 years as I say the rule has been established and never modified that the doctrine, the fundamental doctrine which we invoke is applicable to the Government of the United States. Again, we say, we -- actually, if we stand where the Richmond Brothers case stands, we do not need to discuss, we think, the merits of the state court's jurisdiction. But even if we are required to debate upon the merits of the state court's jurisdiction of the case that's now there enjoined, we feel that we are on firm ground, both under state procedure in the state jurisprudence, and under the decisions that we think are controlling of this Court. We think that the action was properly brought against these parties, who we say and allege are wrongfully withholding from us possession of our property. And on up -- our showing of our claim of right to it, we should be restored. That is -- been the -- the rule of the Louisiana since 1836 and we say consistently since then. There's some debate on that subject, which I should think that the Louisiana courts, as to its jurisprudence, would be the agency best able to resolve. Under this -- Hugo L. Black: But you were -- you were successful of the state court. Samuel W. Plauche, Jr.: Yes, procedurally and substantively. Hugo L. Black: And substantively. Samuel W. Plauche, Jr.: Yes. Hugo L. Black: What effect would this have on this suit? Samuel W. Plauche, Jr.: Well, Your Honor, I don't think -- I'm not going to be so bold as to say Erie Railroads would have any bearing would make the rule established there applicable to any federal court. It was a lower echelon decision. It first based in other the words, that we rounded, but we don't contend that it established a rule of state law, that's binding upon this Court. It does suggest this though, that petitioner's claim both procedurally and on the merits is one that has substance. For the only Court that has spoken thus far on our claim says, “Petitioner had a lot of minerals. You have a good claim and you're properly in Court. You have a good claim on the merits and you're properly in Court.” Stanley Reed: What it -- what it -- that's why there's a later proceeding against the United States for damages because of the fact that they'd lost the land below. That -- that decision under state court will have no effect on the federal court. Samuel W. Plauche, Jr.: No, sir, I wouldn't think so. If we could -- if we could ultimately make out a claim for damages say on the Federal Tort Claims Act, maybe some kind of a notion under the Tucker Act, I would not contend, I think, that the lower court's state decision would have any bearing of -- would be controlling under the federal court. We do say this, that the -- the Louisiana Supreme Court's decision on the statute of Louisiana upon which petitioner pitches its claim, is the final authoritative decision and of -- of acceptance so far as federal constitutional questions may arise. And there of course, or -- or with that one exception. Louisiana -- the Louisiana Supreme Court has the final word as to what the Act of 1940 means, wherefore its reaches, how deeply it affects this reservation. Does it affect it as the petitioner says? Does it -- does it suspend all prescription or -- or limitation, whether it be conventional or statutory, or does it affect only the 10-year none-use of prescription which Judge Nunez said it did and he avoided by taking the middle ground of interpretation, where he avoided the -- the earlier terminal day by saying, “That related only to the right of entry” and that the 10-year prescription as to the minerals, the ownership of the minerals and sales was alone suspended. Felix Frankfurter: May I ask you this question? Samuel W. Plauche, Jr.: Yes, sir. Felix Frankfurter: Do you say that the rights that would be established at the state suit or allowed to complete its course and establish in your favor involved no overlapping claims by the United -- asserted by the United States in (Inaudible) in a federal court to acquire title. Samuel W. Plauche, Jr.: I -- I'm afraid I didn't -- I understood all of your language until the end, and I -- I didn't quite get the impact of your question. Felix Frankfurter: Does that -- does that -- does all that would be involved in a judgment in your favor if the state proceeding were allowed to run its course does not -- does not overlap any interest asserted by the United States in (Inaudible) to acquire title. Samuel W. Plauche, Jr.: Yes, Your Honor, I think there is an overlap. I think that we are claiming -- we are claiming the ownership of and the right to possession of the same Reese. We are claiming again the state court against the only persons that we may claim it against that's people in possession who have withheld the possession from us. Felix Frankfurter: And they -- and they derived and that's -- Samuel W. Plauche, Jr.: They -- Felix Frankfurter: -- to be derived from the United States. Samuel W. Plauche, Jr.: Yes. They claimed to do so. We alleged on information. Felix Frankfurter: All right. I understand -- I understand that as -- Samuel W. Plauche, Jr.: Yes, yes -- Felix Frankfurter: -- proactive claim, the denial of claim -- Samuel W. Plauche, Jr.: Yes, sir. They -- Felix Frankfurter: (Voice Overlap) there is this overlapping claim to see what would be adjudicated in the state court and what the United States asserted. That's right. Samuel W. Plauche, Jr.: Yes, sir. That's correct. Felix Frankfurter: Well then -- then suppose you get, suppose your case goes to judgment -- is -- does -- does that affect the suit by the United States? Would it be bound by that (Voice Overlap)? Samuel W. Plauche, Jr.: No, sir. It would not be bound. Felix Frankfurter: Therefore, it would be -- Samuel W. Plauche, Jr.: It couldn't be. Felix Frankfurter: -- something. Samuel W. Plauche, Jr.: Sir? Felix Frankfurter: That it would -- it could and would if they're doing it. We litigated something and we get a conclusion maybe it's by your court all you need to do is to do -- do the answer, is that right? Samuel W. Plauche, Jr.: It might do so. It would certainly be procedurally entitled to do so, because it would not be res judicata if the -- if the state courts win it -- state case wins its cause in its present posture without the United States intervening as an actor. Then, it is certainly true the United States would not be bound by the final state of adjudication. Felix Frankfurter: You know that will affect you're saying. The United States need not be a part of this. It's not a necessary part of the State's position, and that suit may proceed without any adverse effect upon the United States because the United States is unaffected juridically speaking by whatever the state court may decide. Samuel W. Plauche, Jr.: That's right, Your Honor. Felix Frankfurter: Is that your position? Samuel W. Plauche, Jr.: That -- that's my position and that really is the underlying foundation of -- of the case three quarters of a century ago in United States versus Lee. Because if the state court final adjudication would actually bind the United States, then it would be difficult to escape the contention that you're in effect suing the United States if you bind them with or without its presence in -- in action which you bring yourself. And that again was reaffirmed in -- in Land versus Dollar where the -- all of the stock or the controlling stock in the Dollar Steamship Line was at issue. And the possession of which was sought by the Dollar family on the ground that they owned and never acquired a title with it. And they said that the members of the Maritime Commission were withholding out the possession wrongfully. And the Court pointed out it there, just as it had pointed out then some 68 years previously in United States versus Lee that the United States will not be precluded by this decree from bringing its own action after the State, after this case has run its course. And so, we say that procedurally, if we're -- if we're forced into the area where we have to debate upon the merits, the jurisdiction of the state court, we say both under the Louisiana law, which we, of course, we've tried elaborately enough to agree. And under that -- which we think are the controlling decisions here, we may proceed in the state court untrammeled by this injunction and to get a final judgment insofar as it lies within the power of the United -- of the state court to grant it, which of course, would fall short of being a binding adjudication upon the United States. Hugo L. Black: Do you think -- excuse me. Samuel W. Plauche, Jr.: Go ahead, sir. Hugo L. Black: Do you think that the interpretation of this Louisiana statute is crucial in an ultimate dispute between the United States at your client? Samuel W. Plauche, Jr.: You -- Your Honor, I think that's the whole case on the merits. Hugo L. Black: Well, then, what you are saying, I guess is, that am I right or wrong I think I get what you said last. A judgment wouldn't -- could not be pleaded as res judicata. Samuel W. Plauche, Jr.: Against the United States? Hugo L. Black: That's right. Samuel W. Plauche, Jr.: That's right. Hugo L. Black: Because they're not a party. Samuel W. Plauche, Jr.: That's right, sir. Hugo L. Black: But if the Supreme Court of the State were give a particular interpretation to the statute in your lawsuit, do you think that the Erie-Tompkins doctrine would compel the federal courts to respect that interpretation. Samuel W. Plauche, Jr.: Well, I would say this in certain respect, it accept insofar as the federal constitutional question of the Court. Hugo L. Black: Well, of course, yes. Samuel W. Plauche, Jr.: But barring that, I think if the state court interpretation of the Act of 1940 would be binding upon this Court, I think even before Erie Railroad versus Tompkins. That would have been the law. Hugo L. Black: Well, but that -- that -- Samuel W. Plauche, Jr.: Yes, sir. That's my position. Hugo L. Black: -- and that should be the real point you have. Samuel W. Plauche, Jr.: Yes, sir. Felix Frankfurter: Although it -- Samuel W. Plauche, Jr.: That's -- Felix Frankfurter: -- involve United States properly. Samuel W. Plauche, Jr.: Sir? Felix Frankfurter: Although if you involve the proprietary from the United States. Samuel W. Plauche, Jr.: Allegedly by them. We do not -- Felix Frankfurter: Unless -- Samuel W. Plauche, Jr.: -- concede as allegedly. Felix Frankfurter: Allegedly. Samuel W. Plauche, Jr.: Of course, in -- in the Land versus Dollar the -- Felix Frankfurter: But the construction of the statute, does that -- does that determine whether their allegation of interest is correct or not? Samuel W. Plauche, Jr.: Yes, in a way it does, Your Honor, and I think in -- in a vital way it does, because an interpretation of the statute will determine the effect of the reservation that we -- that our predecessor made in 1938. Was it retroactive transactions prior to that time? Was it -- did it deal only with the statutory limitation? Felix Frankfurter: What initial date of the -- against the United States? Samuel W. Plauche, Jr.: The date -- it was the date of our initial interest in December 1938. That is the date. Mr. Leiter deeded this marsh land to the Government and reserved the minerals. We say we have never lost the minerals. Hugo L. Black: When was the statute filed? Felix Frankfurter: 1940, a year-and-a-half later. Of course, we say that if the Fifth Circuit held in a case, not exactly on all force, it -- it was a statute dealing with the remedy and it under well established doctrine of construction of -- of statutes that it may be retroactive without impairing the obligation of a contract. Of course, our -- our counsel, of our friends here say that it -- you construed as we say or as we have said previously, it should be construed. Felix Frankfurter: But under the problem, Mr. Plauche. If it -- it it's of United States -- arose in 1938 (Inaudible) Why -- wasn't the interest of United States fixed as of that date regardless of what your legislature did in 1940. Samuel W. Plauche, Jr.: If -- if the Court, if -- if Mr. Justice if you please. That is when they got the deed. But in the deed, the minerals were expressly withheld. It is only the minerals that are at issue here. Even under their most ambitious theory, they didn't come into possession of -- of the right of ownership of the minerals until 1945. And because that is the first that they -- if they can point to that they say, “We got these minerals.” We withheld the minerals. It was a withholding from the grant to the United States. All they got was 8000 acres of marsh. Felix Frankfurter: And isn't the -- isn't scope the legal consequences of controlling in 1938, fixed as 1938 so far as any claim of the United States is concerned, what that withholding a residence (Inaudible) Samuel W. Plauche, Jr.: With the -- I think that an argument can be made on that score. And that -- that really just brings me directly into my third point. That brings into the question of what was the effective scope of the 1940 Act that we pitch our claim exclusively upon. For it -- it would not, for that Act, we would not have been here. We would not have been in the state court of Louisiana and that brings directly -- William J. Brennan, Jr.: Do you mean by that that the end of 10 years, except for the 1940 Act, United States would have succeeded to the minerals? Samuel W. Plauche, Jr.: We would have been out as I -- it's my appreciation of the law. So, that leads me to the third and final point which our -- we argued and pleaded from the inception, and which the Court of Appeals did not even mention and that was what, as I said before, we have termed that Your Honors have termed that with a doctrine of extension and that is that that no doctrine more settled on -- as a matter of fact I think Mr. Justice Black adverted to it ex parte this morning in another connection. No doctrine is more settled and that this Court admonishes itself and the courts below, not to reach prematurely for constitutional questions, that whenever the constitutionality of a state statute is drawn into question on the ground that it violates the Federal Constitution, and since more and more, those questions have become interwoven with doubts upon local law. You will insist not merely permit into discretion. You will insist that the Court do not reach for the constitutional question in order to avoid a premature decision in respect of a matter of local law. William J. Brennan, Jr.: Well -- well are you going to tell us how and by agreement? You said the United States could have these mineral rights after 10 years, now intervening statute. It says your agreement (Inaudible) Samuel W. Plauche, Jr.: If the Court please, the Fifth Circuit has rendered a decision on -- involving the statute in which Judge Borah, which, as I say, not exactly the same as here because it was an -- an antecedent reservation, not the one directed to the Government, which held that it was a procedural remedy that Louisiana had created a limitation on minerals that where in other places they're forever to see, Louisiana had -- had given them a limited light, it says it had the power to give them the limited light if it could shorten or extend or eliminate that term entirely. William J. Brennan, Jr.: Yes, but didn't I understand -- Samuel W. Plauche, Jr.: Is that what the -- sir? William J. Brennan, Jr.: Didn't I understand that the express agreement in the 1938 had a provision which provided that the United States should succeed to these rights at the end of that time when it was made? Samuel W. Plauche, Jr.: If the Court please, that would say nothing more. We say, counsel differ with us, than what the law said and added -- took nothing from what the law would have provided. Now, they make the -- the argument that there were additional conditions imposed, but we say essentially as Judge Nunez in the state court decreed before he was stopped from going further. Essentially, that was a -- what the law of Louisiana provided in respect of a term that he'd meant, that since Louisiana could -- limits the term of the minerals. It could eliminate the limitation, and that's what they did to benefit the citizens of the State in cases of sales to the United States in the year 1940. So, that (Voice Overlap), as I say in the -- in the case of United States versus Nebo Oil Company, the retroactivity of the 1940 statute was passed on in a different connection, but it's leased insofar as the retroactivity, it was passed. William J. Brennan, Jr.: Well, was there anything in the agreement with the Government in 1938 which says, so to speak, “Well, we're limiting this for 10 years only because that's the law that we did.” Samuel W. Plauche, Jr.: No, sir, it was not. They say that -- William J. Brennan, Jr.: (Voice Overlap) -- in agreement. Samuel W. Plauche, Jr.: Sir? William J. Brennan, Jr.: On the face of an agreement. Samuel W. Plauche, Jr.: No, sir. There was no. That it didn't refer expressly to law that -- that this is what they were doing. Stanley Reed: But -- but it did, as I understand Justice Brennan's question, it -- it did agree that at the end of the 10 years, it should go to the United States. Samuel W. Plauche, Jr.: Yes, sir. That's -- no. It didn't do that, Your Honor. It actually said in this seemingly inconsistent date at the end of six-and-a-half years -- Stanley Reed: Well -- Samuel W. Plauche, Jr.: -- is what they say it should go. But there, Judge Nunez construed that its meaning only relating to the right of entry and that the 10 years unqualified reservation was the one that was suspended for the Act of 1940. If I may speed along in the minute or two minutes that are left, respondents say that there would be no point in -- in Your Honors applying the doctrine of extension here, because they say that the Supreme Court of Louisiana has already held in another case that in the absence of the United States, it won't pass upon this constitutional question. So, they say, “Why should we -- why should Your Honors do what the Supreme -- send it back to the state court when Supreme Court has declared itself unwilling to act?” Well, it's true that the Supreme Court of Louisiana, a few years ago in Whitney National Bank versus Little Creek Oil did refuse to pass upon the federal constitutionality of the Act of 1940, which we have under discussion. But they did so for the sole reason that the party who raised the - the constitutional question was Little Creek Oil Company, which had no lease from the United States. It had utterly no interest to raise the question. It could not be prejudiced or held one way or the other. And that was the only reason that the Supreme Court of Louisiana abstained from deciding the federal constitutional questions. William J. Brennan, Jr.: Well, wouldn't it be proper to say that your position is, that both these suits may continue at the same time? Samuel W. Plauche, Jr.: No, sir. It would not be -- that is not my contention. It is my view Your Honors first that the injunction is wrong. William J. Brennan, Jr.: I don't mean the injunction. Samuel W. Plauche, Jr.: Yes. For getting a -- a part from the injunction -- William J. Brennan, Jr.: Because that's -- Samuel W. Plauche, Jr.: -- that the Reese cases that the inherent nature of the cases prevents both suits from proceeding at once. Now, the relief to be obtained, it -- it's a question, whether the federal action should be dismissed outright which was the action Your Honors took in the Bank of New York & Trust Company case in 1936. You dismissed or affirmed the business or merely a state. We think that the requirements of the law would be satisfied. That is the anti-injunction statute and the doctrine of the Reese cases and the doctrine of extension would be satisfied by State only to send that case back to the Federal District Court with instructions to retain the bill, pending the outcome of the state case, where at least there will be a -- a definitive interpretation of the Act of 1940. That -- that interpretation may run wholly unnecessary that federal constitutional question that Mr. Justice Brennan was worried about, or that certainly would emerge and that is not a question of whether that federal constitutional question -- it maybe is going to come up. It's already come up in the state courts. They have already urged the same -- the federal constitutional inhibition against the Act of 1940 in the state court before Judge Nunez was stopped by the lower court injunction. That would also, I think, well meet the irreparable damage of which is painted in vivid language by respondents. And I think it had a lot to do with the issuance of the improvident injunction below that the -- the loss of all the producible oil, I think the -- there's really a -- a masterly presentation of the irreparable damage to support an injunction that had no legal foundation whatsoever. Well, that's the -- the alternative suggestion as to the relief, would I think be a sufficient answer because if the case were reversed and the -- the instructions to the lower court would retain the bill, they could renew the application for the restraining order in any appropriate time that they felt the lessees were being -- going to be ousted from this oil field. Again, and finally, the respondents paint the -- the deplorable consequences of a reversal, the -- the lack of uniformity to what exists of -- of both procedurally and substantively if the state courts were permitted in 48 different jurisdictions to decide these questions of land law upon which might depend the rights of the United States. Well, I'm not sure that that's a deplorable consequence at all because -- particularly in this case where the law of Louisiana is unique. Why should -- why should a local land law of Louisiana be decided in -- in conformity with the laws of Oregon, or -- or -- and of course with the concepts that any common law judge throughout the rest of the country might entertain? And I don't think the Constitution contemplates it. In fact, I think that the Constitution denounces it because in matters of local land law, the -- the laws of the separate states have always been considered entirely supreme. And finally, with respect to these deplorable consequences, I should like to refer to Mr. Justice Miller's language in the Lee case which in a similar manner, 75 years ago, the same deplorable consequences were predicted. And he said that the hypothetical evils may always be suggested by a fruitful imagination when, in regard to laws upon which that defend the rights of the individual or the Government. But if the existence of such laws is to be made upon their capacity to withstand such criticism, then the whole fabric of the law must fail. Petitioner submits this case. Earl Warren: We'll recess, now.

Warren E. Burger: We’ll hear arguments first this morning in United States against Clark. Mrs. Shapiro, you may proceed whenever you’re ready. Harriet S. Shapiro: Mr. Chief Justice, and may it please the Court. This case is here on appeal by the Government from a judgment of Court of Claims, requiring a payment of survivorship benefits to two illegitimate children of a deceased federal employee. The Court of Claims found the children were entitled to payment even though they weren’t -- could not meet the eligibility requirements of the Civil Service Retirement Act. It relied upon its decision in a previous case in in which it concluded that the statutory requirement denied equal protection to illegitimate children. The Government contends here first that the Court of Claims had no jurisdiction to award benefits in this case and second, that in any event, the statutory requirement is constitutional. George Isaacson was a federal employee when he was killed in an automobile accident in 1974. He was unmarried, but he was survived by two illegitimate children, Shawn and Tricia Clark, who are represented by the appellee here. Isaacson had recognized them and was subject to a court order requiring him to make monthly payments for their support. Although he had lived with them for a few years, he had stopped living with them more than two years before his death. The Clark children applied for benefits under the Civil Service Retirement Act. That Act provides for the payment of monthly benefits to the surviving children of covered federal employees. The statute defines a child to include adopted children, as well as, stepchildren and recognized natural children who lived with a wage earner in a regular parent-child relationship. The Civil Service Commission and the Office of Personnel Management which is a successor of this Commission have consistently interpreted the statute as denying benefits to stepchildren and to illegitimate children who were not living with the employee when he died. Since the Clark children -- Harry A. Blackmun: Mrs. Shapiro? Harriet S. Shapiro: Yes. Harry A. Blackmun: You say that though, haven’t they proposed the elimination of the “lived with” requirement? Harriet S. Shapiro: There is a proposal that was passed by the House last week, a Bill. Harry A. Blackmun: But doesn’t that come from the Commission? Harriet S. Shapiro: Yes. The Commission proposed this statute which would amend the Act to make payments to dependent children, but would provide that either a child who lived with or who received contributions from the employee would be considered dependent. John Paul Stevens: Mrs. Shapiro, when you say that the Act is consistently been construed to require that the “lived with” requirement be met at the time of the death of the wage earner. How many examples would there be in the reported materials that we could look at in some way or another of cases in which there was a lived with at some prior time, but not at the day the death, would there be other cases like this? Harriet S. Shapiro: I don’t believe there are significant numbers. I am not sure -- John Paul Stevens: I just don’t have any feel for how often this problem arises? Harriet S. Shapiro: It’s a consistent administrative interpretation. John Paul Stevens: But does that mean twice or a hundred times, would we know? Harriet S. Shapiro: As far as -- John Paul Stevens: Or once maybe just this case, wasn’t it? Harriet S. Shapiro: No. I know that it’s a more -- John Paul Stevens: I know normally they do things as of the date to death, but I’m just wondering how often it really a significant that the target -- Harriet S. Shapiro: I’m not sure that it has been litigated before, but the -- Harry A. Blackmun: I think what bothers me is your use of the word “consistent” because if the Commission in now behind this proposed legislation, they’re receding from what may have been a consistent position, aren’t they? Harriet S. Shapiro: The legislation is based on the Court decisions. It’s not that they have made an administrative determination. William H. Rehnquist: The Commission interpret the Act as passed by Congress or just make recommendations for changing? Harriet S. Shapiro: Well, the Commission, it interprets it in an administrative act in paying benefits. The Clark children sued in the Court of Claims under the Tucker Act, challenging both the Commission’s interpretation of the Act and its constitutionality as so interpreted. They argued first that they were entitled to benefits under the Act because they had once lived with Isaacson. Alternatively, they argued that the Act as interpreted by the Commission denied them equal protection because they could not qualify for benefits by proving that they were actually dependent on their father. After this suit was filed, but before it was decided by the Court of Claims, that court decided another case challenging the “lived with” requirement in the Civil Service Retirement Act, that case was Gentry versus United States. Gentry involved a child who had never lived with the federal employee, and the court in that case found that the statutory requirement was unconstitutional. So when it decided this case, the Court of Claims followed Gentry. The Government didn’t seek to ask -- didn’t ask this Court to review this decision in Gentry because we lost track of it after the Court of Claims remanded the case for further findings by the Commission. We learned of the entry of the final judgment only a few days before our time to petition for certiorari expired and substantially after the time for a note on appeal. By that time, we knew that the Clark case and others were coming along and that the Commission was working on legislation. In November of 1977, the District Court for the District of Columbia decided Proctor versus United States and enjoined the Commission from applying a “lived with” requirement to illegitimate children. So, the Commission began paying benefits under that order from and after December 1, 1977. Finally, in the only class action so far, Jenkins versus the Office of Personnel Management, the District Court for the District of Columbia ordered the Office of Personnel Management to pay benefits retroactively to February 1972. That order imposed a much heavier burden on the resources of the retirement fund. That factor, plus the importance of the retroactivity question for other federal benefit programs has led to our decision to seek review in this Court in this case. I propose to focus today on the question of whether the Court of Claims had jurisdiction to decide this case. William J. Brennan, Jr.: Do I understand Mrs. Shapiro that the Clark children are now for the reasons you gave us, receiving benefits? Harriet S. Shapiro: They are receiving benefits under the decision of the Court of Claims. They have not received the lump sum that would take them from the time their father died up till the time the stipulation for the entry of judgment was entered, but they are currently receiving $187.00 a month. I intend to rely primarily on of our briefs for the issues raised by the appellee concerning this Court’s jurisdiction and the correctness of the agency’s interpretation of the Act. I would like to discuss the jurisdiction of the Court of Claims and I have a few comments to add towards the discussion in our brief on the merits. Harry A. Blackmun: Somewhere along the line, have you discussed the appellee’s suggestion that “lived with” may be applied to some period other than at the time of death? Harriet S. Shapiro: Well, our argument on that really is fairly simple. The purpose of the statute is to replace the support that was lost when the wage earner died, and the “lived with” requirement as interpreted by the agency and is that the time when the support was lost was at the wage earner’s death for children who are living with the wage earner at that time. If they stopped living with the wage earner as the Clark children did several years previously, that is the point at which the statute assumes the support was lost. Warren E. Burger: What if they never lived with the father, but he arranged for them to be somewhere else and paid for all their living? Harriet S. Shapiro: Well then, they are not qualified under the statute because they were not living within in a regular parent-child relationship when he died or -- Warren E. Burger: So that the support factor vanishes under that language? Harriet S. Shapiro: Well, the theory behind the statute is that for illegitimate children, the easiest and simplest and most accurate way of determining whether there was support is by simply looking to see whether they were living with the wage earner. Warren E. Burger: Well, on the contrary, if the man can show canceled checks over the period of 10 years, tax deduction every year for support, then that would be pretty good evidence, wouldn’t it? Harriet S. Shapiro: It would be an alternative way of proving that the -- Warren E. Burger: The support factor? Harriet S. Shapiro: Yes. Warren E. Burger: As distinguished from the “lived with” factor? Harriet S. Shapiro: That’s right, but the congressional judgment was that as this current Court has frequently recognized, the classifications may be minimally inaccurate in some situations. You don’t focus on the facts of the individual collocation look to see whether the classification for the general universe is reasonable. Warren E. Burger: Theoretically, they could live with the father without receiving any support from whom with a grandmother paying the father for all their care? Harriet S. Shapiro: It certainly is theoretically possible. The congressional judgment was that in the usual case, the illegitimate child who is living with his father is the one who is most likely to be supported and that’s the situation in which payments are to be made and that these other unusual situations fall outside the statute. Byron R. White: What about legitimate children? Harriet S. Shapiro: Legitimate children are deemed to have been supported whether or not they’re living with the wage earner. Warren E. Burger: Or whether or not they are in fact supported? Harriet S. Shapiro: Right. The statute as the statute in Lucas is somewhat over inclusive for legitimate children. Byron R. White: What do you suggest the Congress is attempting to do to avoid that the problems of the proof in individual cases? Harriet S. Shapiro: They provided for a “lived with” requirement that isn’t -- Byron R. White: Why? Harriet S. Shapiro: Act, because it’s an accurate indicator of support in generality of the cases. Byron R. White: In the generality, but, so the only advantage was to avoid individualizing cases? Harriet S. Shapiro: That’s right. And the census report that we cited in our reply brief indicates that in fact, it’s an accurate indicator in all, but 4% of the cases. Byron R. White: Well, there’s the 4%. Harriet S. Shapiro: There’s the 4%. Byron R. White: And you just don’t think that it is necessary in legitimacy cases to individualize? Harriet S. Shapiro: That’s what we get from reading Lalli in combination with Lucas and Jimenez is that, although the statute may be somewhat unjust in individual cases, as long as it’s finally tuned and substantially related it’s constitutional. Warren E. Burger: But it isn’t finely-tuned with respect to this one category of children, is it? Harriet S. Shapiro: At most, there are 4% of the total universe and that’s a finely-tuned statute. John Paul Stevens: That 4% figure, I think is somewhat misleading, isn’t it? Does that include the children who’ve been acknowledged by the illegitimate father? Harriet S. Shapiro: Yes, it includes -- John Paul Stevens: I mean, it isn’t limited to that is what I mean. That’s all illegitimate children, isn’t it? Harriet S. Shapiro: That’s -- John Paul Stevens: And where the statute already excludes illegitimate children who have not been acknowledged by their father, and the only relevance statistic and the additional requirement of “lived with” would be those who have not only lived with their parent, but also had been acknowledged, and your figure doesn’t take that into account at all. There’s 4% of all illegitimate children is what you’re lived with or never married mothers. Harriet S. Shapiro: Right. John Paul Stevens: But isn’t the universe cut down to those who’ve been acknowledged by their father, by the statute? Harriet S. Shapiro: But even so, there’s no more than 4% of any illegitimate children who are receiving support -- payments from their father. So that -- John Paul Stevens: I just don’t see how that’s relevant to the “lived with” requirement. Now, if you struck the “lived with” requirement out entirely, you still have the 4% figure? Harriet S. Shapiro: That may mean that the “lived with” requirement is somewhat over inclusive. John Paul Stevens: And probably didn’t -- well, may I ask you this on the “lived with” requirement. Is the congressional judgment that -- is it your theory that the congressional judgment, if you have a child, an illegitimate child who was acknowledged by his father and lived with the father for a particular of time and then stopped living with him, that it’s reasonable to assume that the father then discontinued support because he did in this case? Is there any example that we know of anywhere where a father both acknowledged the child, lived with him for a substantial period of time and left and then stop supporting them? It seems to me the law would not permit him to stop supporting. Harriet S. Shapiro: Well, -- John Paul Stevens: Under that said affair and how could Congress have reasonably assumed that he would then just walk away from the child and no further obligation? Harriet S. Shapiro: Well, whether or not there was a court order that it doesn’t necessarily follow that he complied with it -- John Paul Stevens: But which is the more probable? That you have both a formal acknowledgment and a family relationship, and then the father abandons the child. Wouldn’t there normally be -- and he continues to earn money, he’s got a job and is paying, the Government job in this case, and then you would think then, the Congress reasonably thought that in the normal run of cases he would stop providing any support for the child. The only case we know about is this one which it didn’t happen. Harriet S. Shapiro: Well, that’s the congressional judging. John Paul Stevens: Do you think that Congress actually made that judgment? See, they make a contrary judgment, if you construe the statute to mean “lived with” at anytime, but that’s critical to your case, for your construction of the statute, if Congress really thought that? Harriet S. Shapiro: That’s correct, and this is the construction that the agency is following -- John Paul Stevens: It does exist and it followed in at least one case. And didn’t the Court of Claims also construe the statute that way, the Gentry case in holding it unconstitutional? Harriet S. Shapiro: No. In the Gentry case, that issue was not involved because the Gentry children, they had not lived with their father at all. Potter Stewart: Ever, ever? Harriet S. Shapiro: Yes. Potter Stewart: But by implication, I suppose they did it here, didn’t they? Harriet S. Shapiro: Well here, they didn’t -- they followed Gentry -- Potter Stewart: I mean, they wouldn’t have held it unconstitutional if they construed the statute as in the ways suggested by my brother Stevens' question? Harriet S. Shapiro: That’s, that’s true. Potter Stewart: Correct? Harriet S. Shapiro: That’s true. This case is not is not a statutory construction case. Potter Stewart: It’s a constitutional. Harriet S. Shapiro: It’s a constitutional. Potter Stewart: Right and they wouldn’t certainly logic wouldn’t have held it unconstitutional had they construed the statute? Harriet S. Shapiro: That’s true. Potter Stewart: The other way? Harriet S. Shapiro: Yes. Warren E. Burger: What would be the situation of an illegitimate child whose father having acknowledged as here was a military officer or foreign service officer moving from one place to another all over the world, and so he arrange to have the children and when they were in there teens for example to be in private schools in the school year and summer camps in the summer? Harriet S. Shapiro: That would be considered to be living with in a normal parent-child relationship. It’s not -- Warren E. Burger: It would be? Harriet S. Shapiro: Yes, it would be. It’s not that they have to be under the same house. Warren E. Burger: That’s not consistent. Harriet S. Shapiro: Under same roof. Warren E. Burger: That’s not consistent with the answer you gave me earlier. You said in the hypothetical case of the man who paid their support, but had to move somewhere, there would be out? Harriet S. Shapiro: Well, if the situation is that they are in school or in summer camp or in other situation that’s similar to what happens was in normal parent-child relationship. Warren E. Burger: Do you know whether there are any administrative decisions that would be consistent with your answer in these cases? Harriet S. Shapiro: I’m not aware of any that go along this line. Warren E. Burger: I got the impression from your earlier discussion that “lived with” meant precise to that lived with in the normal, I thought you said normal and ordinary parent-child relationship? Harriet S. Shapiro: Well, I don’t think that sending a child to school with the intent that on summer vacations or when it’s feasible, they will resume the normal relationship of living together in the same house is inconsistent with living within the normal parent-child relationship. It’s -- William H. Rehnquist: And all we’re dealing with is children under 18 years of age here, are we not? Harriet S. Shapiro: Yes. William H. Rehnquist: It is not the question about 30-year-old child -- Harriet S. Shapiro: Oh, no. William H. Rehnquist: -- who might have lived with for 18 years and then simply became emancipated? Harriet S. Shapiro: No, no, no. And the statute does have a provision as a Social Security Act does for children over 18 who are in school or students. They are continued -- benefits continued until they reach 22, I believe it is. But, the point is that what the Act is looking for is an indication that this is a normal family relationship that these children are being treated as children usually are. They go to school, they go to camp or -- but they are still children in the family. Warren E. Burger: If the people in these hypothetical situations where treated that way, then they are making an individualized judgment and not a rigid categorical judgment? If they’re going behind the “lived with” requirement and considering the evidence that the father is really paying for their support, but doesn’t want to maintain or can’t maintain a home? Harriet S. Shapiro: Well, I think -- Warren E. Burger: A familial home. Harriet S. Shapiro: You’ve got two different situations. The situation that I thought you were referring to originally is a situation in which the child is living either in a foster home or in some other situation -- Warren E. Burger: Let’s say, living with his grandmother and that the father is paying abundantly for support. Harriet S. Shapiro: With no intent that they ever going to resume living together -- Warren E. Burger: Just exactly what I have told you? Harriet S. Shapiro: Well, in that case, that does not sound to me, again, this is something for the agency but it does not sound to me like the normal parent-child relationship. In contrast to the situation where you’re sending a child to school or sending him to camp and when he is through with that, he comes home. There are two are distinct situations. Byron R. White: Well, would you say that -- say that there is an acknowledged illegitimate child living with the father at the time of his death, but he has been supporting the child, does that -- is that -- would that be construed to be a regular parent-child relationship? Harriet S. Shapiro: If he is living with him, yes. Byron R. White: Well, he is not supporting him. Harriet S. Shapiro: Well -- Byron R. White: He is just living with him. As a matter of fact, he is not supporting himself? Harriet S. Shapiro: Well, that is what the statute -- the statute does not specifically says support, but the statute says -- Byron R. White: It says regular parent-child relationship. Harriet S. Shapiro: Yes, but -- Byron R. White: What do you mean by that? Harriet S. Shapiro: That refers to the living with. Byron R. White: It must assume -- so it is not open to the Government to deny benefits on the ground that the father isn’t actually supporting the child? Harriet S. Shapiro: Not if he is living in the same household with him or this is other situation. The Tucker Act gives the Court of Claims jurisdiction over a claim against the United States founded on the Constitution or an Act of Congress. There must be money already due to plaintiff from the Government before the Court of Claims has jurisdiction. If it has jurisdiction because money is due, the Court of Claims may also grant perspective relief, but only as an ancillary remedy. This means that the Court of Claims here could properly order the government to put Shawn and Tricia Clark on the Civil Service annuity rolls only if they had accrued claim based on some statute or on the Constitution against the Government for money already due them, and they did not. The Court of Claims believed that the children’s claim for accrued benefits was based on the Civil Service Retirement Act read in the light of the Constitution, but that makes an unconstitutional intent to deny benefits into an intent to grant benefits. Whether or not the statutory denial of benefits to the illegitimate children who are not living with the wage earner is constitutional, that denial is what Congress enacted and only Congress and not a Court can change it into a statutory direction to pay benefits. A Court can decide that “lived with” requirement unconstitutionally discriminates against illegitimate children. So that the Act can no longer be enforced as written. And if a District Court reaches that conclusion, it can enjoin the agency from continuing to make the unconstitutional discrimination required by the Act. But of course, that’s an independent injunction power that the Court of Claims doesn’t have. John Paul Stevens: What would that mean Mrs. Shapiro? There just don’t be anymore child’s benefits? Harriet S. Shapiro: Well, that’s one alternative. John Paul Stevens: Well, that’s the alternative that you recommend. Pay no more child’s benefits until the statute is made constitutional? Harriet S. Shapiro: No, that’s -- if a suit in the Court of Claims -- our submission is that the Court of Claims is the wrong court in which to be presenting this claim. John Paul Stevens: It had no jurisdiction? Harriet S. Shapiro: It had no jurisdiction because there was no accrued claim -- Potter Stewart: Because jurisdiction is for claims for money based upon the constitutionary statute? Harriet S. Shapiro: Exactly. John Paul Stevens: But your position is that the plaintiff should then go to another forum and get an injunction against paying any child benefits to anybody, that’s what would have to be done if the statute -- Harriet S. Shapiro: In fact, that the -- John Paul Stevens: You think that is what Congress would have wanted in this situation? Harriet S. Shapiro: In this particular situation -- John Paul Stevens: That upholds child’s benefits. Harriet S. Shapiro: These, for the Clark children are presumably part of the Jenkins class and the Jenkins case is in the District Court. [Voice overlap] John Paul Stevens: But you argued there, do you -- does the Government argue there that all child’s benefits should cease until Congress remedies the situation? Harriet S. Shapiro: No. What we are arguing in Jenkins is that the benefits have been paid since December 1, 1977 under the Proctor decision. John Paul Stevens: Without statutory authority occurring [Voice Overlap] Harriet S. Shapiro: Well, that’s right. That is no -- John Paul Stevens: But your argument there, I take it then, is that no benefits should be paid? Harriet S. Shapiro: The argument there is that no benefits should be paid before December 1, 1977. John Paul Stevens: But why even currently? What’s the statutory authority for current benefits? Harriet S. Shapiro: Well, it is not a statutory authority. That’s the standard doctrine of severability. As I said, when a Court finds that the denial of benefits is -- the discriminatory treatment is unconstitutional then it can as an alternative to holding that no benefits are payable. It can direct that benefits be paid either to all children. Well, in this situation, you could have either benefits paid to all legitimate children who meet the “lived with” requirement, that is you apply the qualification equally to all children. John Paul Stevens: Well, take, assume these plaintiffs were not in the Court of Claims, but were in the Federal District Court and assume they win on the merits, what remedy would be appropriate in the Government’s view? Harriet S. Shapiro: If these children were in the District Court? John Paul Stevens: Yes. Harriet S. Shapiro: Well, then the Court would have two alternatives and we would not argue that the “lived with” requirement should be applied to all children. We would agree that it would be appropriate under the injunction power to require payment to these children even though they could not meet the statutory requirement. Potter Stewart: But the Court would have the alternative of say, of enjoining any payments to any children at all? Harriet S. Shapiro: Any payments -- Potter Stewart: That alternative was illustrated on the case last term in which Justice Powell disagreed with the holding of the Court? Harriet S. Shapiro: I believe that’s -- William H. Rehnquist: Mrs. Shapiro, we have had a number of cases you can almost learn who has been Secretary of HEW from the case as Weinberger, Matthews, Califano, etcetera and many of them have involved challenges to congressional limitations on payments to illegitimate children. Have any of them up to now ever been brought in the Court of Claims? Harriet S. Shapiro: I don’t believe so. I don’t think they have. Warren E. Burger: Assume a three-judge Courts perhaps all of them, I am not sure? Harriet S. Shapiro: Yes. I am not sure that all of them. Byron R. White: In answering Mr. Justice Stevens, in what remedy would be available in District Court, you said, the Court would have a choice and it could order the payment of benefits, how about back benefits? Harriet S. Shapiro: No, that is the same -- that is barred by sovereign immunity and that’s the same argument in the District Court. It is not a jurisdictional argument because the District Court does have the jurisdiction to issue. Byron R. White: I understand, but you say that even if the District Court decided that you’ve been incorrectly construing the Act -- Harriet S. Shapiro: That’s right. Byron R. White: -- and that you should have been paying these benefits the entire time. The District Court could not enter a judgment for past benefits. Harriet S. Shapiro: Precisely. Byron R. White: Because as you construed the Act, Congress has not waived sovereign immunity to that extent? Harriet S. Shapiro: That’s exactly right, yes. That the waiver of sovereign immunity under 5 U.S.C. 702 extends only to injunctions for the future requirement. Byron R. White: Is there some authority for that? Is that -- Harriet S. Shapiro: This is what we -- Byron R. White: In fact that the Court of Claims disagrees with you. Harriet S. Shapiro: Well, we retest this Court’s decision in Testan; Edelman v. Jordan certainly suggests that result. Warren E. Burger: On your hypothesis responding to Mr. Justice White, the only remedy then to enforce the judgment of the Court of Claims would be to get a private bill in the Congress? Harriet S. Shapiro: For retroactive benefits. The Court of Claims, as I say, is the wrong court, but if you had a decision in a District Court, you could get future payments but for retroactive payments, it’s only Congress whether it’s a private bill or it’s an amendment of the statute saying that they intend to have it be paid retroactively. Warren E. Burger: At times, the Court of Claims in -- not in these situations, but in some where back payments were involved, having their opinions recommended that the Congress make up an active private bill, have they not? Harriet S. Shapiro: I am not sure. Perhaps, but that is certainly would be an alternative. Warren E. Burger: It was established as an arm of Congress, of course, originally? Harriet S. Shapiro: I see my time is up. Warren E. Burger: Mr. Merrigan. Edward L. Merrigan: Mr. Chief Justice, may it please the Court. With just a brief word about the facts Your Honors, and I think the Court fully understands this case from the questions such you propounded to the Government. The two federal employees involved in this case, one was the father, Mr. Isaacson; the other was the lady involved, Ms. Patricia Aileen Clark, both worked for the Veterans Administration at Fort Harrison, Montana and they commenced to live together in 1965 and early 1966. And during the period of time they lived together, they had two children, Shawn Clark and Tricia Clark and they continued to live together with the children in a regular husband-wife, parent-child relationship for the world to know, through 1971. In 1971, Mr. Isaacson moved out of the common dwelling and Mrs. Clark brought a paternity action in the Court in Montana. Mr. Isaacson while alive appeared in that case, was represented by counsel. The Court entered a paternity order against Mr. Isaacson which specifically declared him to be the father of these two children. Then by stipulation and judgment of the Court, he was ordered to pay $5,000.00 representing the back support payments he owed the children for the time he had moved out of the house. He then stipulated and was ordered by the Court to $120.00 a month for their future support. He then stipulated and was ordered by the Court to make them the beneficiaries of two life insurance policies, one in New York Life Insurance Company policy and the other is Federal Government Employees Group policy. He made all of the support payments to the children forward to his death not directly, but by deductions or allotments out of his federal salary up to the time of his death in 1974 in an automobile accident. Warren E. Burger: So, would you say that he was doing what was suggested in some of the hypothetical questions that is he was providing support for them without providing a familial home for them? Edward L. Merrigan: He did everything for the children except to [Attempt to Laughter] marry the mother and continued to actually live with them physically until the date of his death from about 1972 to 1974. He was a father in every sense of the word by court order, by support payments, by living with them for long period of time and the Government in this case in its reply brief concedes that there is no need under the “lived with” requirement of the statute for a permanent “living with.” The Government concedes that it can be a temporary or a periodic separation in that relationship without breaking the chain supposedly. This has never been judicially declared, but the Government concedes it in its reply brief. Potter Stewart: But the difference in opinion between you is that the “lived with” has to be at the time of the death? Edward L. Merrigan: Well, I think if you construe the statute itself -- Potter Stewart: Did the Government said, or did it say not? Edward L. Merrigan: Mr. Justice Stewart, you construe the -- Potter Stewart: Well, isn’t that -- Edward L. Merrigan: That’s the difference. Potter Stewart: Have I directly identified the difference of opinion? Edward L. Merrigan: When we sued in the Court of Claims, we specifically asked the Court to award a judgment here based on an Act of Congress with the “lived with” requirement in the law because we say that it says “lived with”, it does not say “live with” or “living with” in the statute. It says “lived with” and here the Court and the Government and everybody involved concedes that they lived with and that there was that [Attempt to Laughter] open to the word “lived with” in the past. I think that the problem that we run into in this case is the construction given to the statute by the Civil Service Commission which says -- Potter Stewart: Well, then by the Court of Claims? Edward L. Merrigan: Well, not really by the Court of Claims. Potter Stewart: How could they have held it unconstitutional, had they not construed it the way the Government does? Edward L. Merrigan: Well, I think that the statute was declared unconstitutional in Gentry. There is no long discussion of the constitutionality in our case because they simply adopt the Gentry. Potter Stewart: I know there is no long discussion on it, but as a matter of logic, how could they have it? Edward L. Merrigan: They simply held that the “lived with” requirement, as I am trying to point, Your Honor, in a moment, is simply a total bar to any recovery for illegitimates in 90% of the cases by the very term illegitimate, [Attempt to Laughter] meaning that the father and mother are not married. In more than 90% of the cases, the father is either married to somebody else, or he is a bachelor who does not want to marry the mother and is therefore living somewhere else and so if you can’t meet the “lived with” requirement with the father, are you totally barred from benefits at all? So -- Potter Stewart: So, but you’re not arguing that your clients can meet the “lived with” requirement? Edward L. Merrigan: We say that in this case, truly, jurisdiction in this case I think, this case should be settled in our judgment if we can propose to the Court that if you looked at the statute and construed that they had lived with for the period of time that we just referred to, that there was the support, that they did meet the requirement of the statute, and therefore, the Court of Claims clearly had jurisdiction because we are suing on an Act of Congress where including the “lived with” requirement and therefore they are entitled to judgment on this 28 U.S.C. 1491. Byron R. White: You’re seeking the support of judgment on a different ground than the Court of Claims gave you judgment? Edward L. Merrigan: I say that this Court could if it wanted to avoid the constitutional question in this case say that the statute properly construed, should have grant a judgment here without reaching the constitutional question. William H. Rehnquist: What if the father had lived with the child for the first three months of its life and then not lived with it for the subsequent 17 years, nine months of its life and the child was 18 at the time of the father’s death? Edward L. Merrigan: When you start these types of requirements in the statute, obviously, as you change the facts, it gets even worse, it gets better. William H. Rehnquist: Yes, isn't that just why Congress has to draw a line? Edward L. Merrigan: Well, Congress did not draw the line at “lived with” or “living with”. The amendment that is now proposed in Congress today talks in terms of living with meaning -- William H. Rehnquist: But what were the -- no one has any claim under an amendment that is proposed in Congress today, did it? Edward L. Merrigan: I do not say that we are relying on the amendment that is proposed today. The statute today speaks in terms of “lived with.” The amendment proposed in Congress today is talking in terms of “living with” meaning -- Byron R. White: But the agency construction is of the present language is “living with?” Edward L. Merrigan: “Living with,” I think they have changed the Act of Congress. And what I am trying to say to you, Your Honors, is that if we wanted to avoid the constitutional issue in this case, as we originally sued in our petition of the Court of Claims, is that these children, truly in this case, meet the statutory requirements. And if that be true, everything that Mrs. Shapiro said this morning about the jurisdiction of the Court of Claims automatically falls because we are suing on an Act of Congress. Byron R. White: But wasn't your -- wasn't -- did the Court of Claims reject your construction of the statute in Gentry? Edward L. Merrigan: No, Your Honor. Byron R. White: I know you weren’t in Gentry but was that issue before you were on it? Edward L. Merrigan: No, Your Honor, It was not because the children never lived with their parent in Gentry. What happened is by the time -- Byron R. White: But the Court of Claims, in affect then in this case, rejected your statutory claim? Edward L. Merrigan: No, the Court of Claims did not pass on it, Your Honor. What happened is, we moved for summary judgment. Byron R. White: What makes you think it didn’t enter a judgment? Edward L. Merrigan: Well, what I think happened in our case, Your Honor, is this. Between the time we filed our petition in the Court of Claims and the time they rendered summary judgment, this statute had been declared unconstitutional five times. William H. Rehnquist: Are you suggesting that any federal court has the authority to reach a constitutional issue without first passing on a necessarily included statutory question? Edward L. Merrigan: I think in this case, if Your Honors will look at the judgment in this case, which is of course in the appendix, what happened is the Court of Claims had previously ruled a “lived with” provision to be unconstitutional. And therefore, rather than reach -- rather than re-construe or apply the provision in our case, they deemed it to have been declared unconstitutional in the past. Byron R. White: Any way here? Warren E. Burger: But doesn’t that mean they were adopting the Gentry approach? Edward L. Merrigan: I think they – there’s no question but that the Court of Claims in our case ruled that the statute was unconstitutional. I am suggesting too, Your Honors, that we have been swept under the facts of this case if you construed the statute to mean “lived with” to cover the facts of our case, that we meet the terms of the statute without the constitutional issue being raised. And if that be true, there’s no question, but that the Court of Claims had jurisdiction under 28 U.S.C. 1491. There’s no question that this Court would not have jurisdiction under 1252 of Title 28 because of course, there is no constitutional issue raised if you would decide this case on that basis. But I am not trying to avoid the constitutional issue because when you move on to that issue in this case, the “lived with” requirement which is the only test as to whether or not an illegitimate child can recover for all practical purposes is a total bar to almost all illegitimates because what it means in most cases is an illegitimate child is the child of a mother and father who are not married, in more than 90% of the cases do not live together. Under the laws of most states, the mother has custody of the child. In most cases, the father is either living with another wife or living as a bachelor who does not want to live with the other woman who had the child and so the poor child is left [Laughter Attempt] without a father, without the ability to lived with, without the ability to meet the test in any circumstance. So, by making the “lived with” requirement alone, the test is the equivalent of striking most illegitimates’ ability to recover under the statute at all and I think that is what made five courts in the federal system, two of them three-judge courts declare the statute uniformly unconstitutional. Some of the questions, Your Honors have asked, make it clear. A federal employee for example who did want to live with the child, who is assigned to Saudi Arabia in his government job, would be over there, the child would be here with the mother, not eligible. A Government employee who has no home, who travels all the time, the child lives with the mother, no ability for the child to recover the benefits. In other cases, where the parents lived together for a long period of time, 10 years, 12 years, and then the father suddenly moves out in spat with the mother, no ability for the child to recover because he can’t show he was physically living with the child at the moment of death. Now, the Government says, children can protect themselves against that, that they can insist that they lived with the father. Well, here is a three-year old child, a six-year old child. “Mother, I insist on living with my father to protect my federal annuity” or “Father, I insist on you letting me move in with you to protect my federal annuity.” That’s what the Government is asking us to do in this case. Your Honors, as far as the statute itself is clearly enacted by Congress to protect dependents who are looking to the deceased employee for support. In this case, we have the order of a Montana Court decreeing support. We have the support being made throughout the employee’s life right up to his death through allotments out of his federal salary. So, there is no guess work on the part of the Government as to whether he was supporting the children, it came from his salary. Then we have the father in the life insurance policy, the federal group life insurance policy paying after death for the support of the children and yet they have been denied the benefits in this case on the ground that they simply did not physically lived with him at the moment of death. The Government says, perhaps spurious claims are prevented by this sort of a statute. Well, let’s take the case that is so well-known today of young women moving in with a federal employee, let's say, bringing in a small child that she had from some other relationship and then the federal employee dies, so the mother says, “chance for our federal annuity.” This child was the federal employee’s child. We were living with him at the time of his death and therefore, I want the annuity. Under the statute, that is all she'd have to say, if she is willing to lie because then she could show they were living together in regular parent-child relationship. Potter Stewart: She has to prove the father acknowledge the child? Edward L. Merrigan: No. Not under the statute. Potter Stewart: Well, she does have to prove that the child or children were the father -- the issue of the father. Edward L. Merrigan: Well, the children -- Potter Stewart: But you say that can be proved by her perjury? Edward L. Merrigan: It could be proved spuriously. That’s the only suggestion I am making, Your Honor. I am not trying to say that this sort of claim should be set-up but I think the statute promotes it. John Paul Stevens: What about the word “recognized stepchild” or “recognized natural child,” doesn’t that mean recognized by the natural father? Edward L. Merrigan: Recognized, right. John Paul Stevens: I could assume that it did, yes. So, that in your hypothetical case, the women would not recover it? Edward L. Merrigan: The woman could recover on other grants because adopted children or stepchildren could be included in the same “lived with” requirement. But I say -- all I am trying to say, Your Honor, is it opens the door for spurious claims on the ground that children that were not really the children of that particular father were living with him at the time of death and the mother then can fabricate a claim around it. All I am trying to say is -- I am not trying to say this should be allowed, I am not trying to say that that spurious claim is a sound claim, but what I am trying to say is that this particular type of statute promotes that particular type of claim. William H. Rehnquist: But she would have to perjure herself both as to the question whether the father was the actual father and as to whether he recognized the child. Edward L. Merrigan: Well, Your Honor, I think that is true. William H. Rehnquist: I mean, presumably, there are an of a lot of lawsuits you can imagine that could go of on an unjust result as a result of perjury which wasn't detected by the finder of fact. Edward L. Merrigan: I raised the possibility only because one of the defenses for this statute is that it was enacted to protect the Government rather against spurious claims. Warren E. Burger: You don’t need a broad holding here to support your position. All you need is that a child who has been legally recognized by a Court here finding -- Edward L. Merrigan: No question, Your Honor, no question. I think we fit in this particular case every requirement that could possibly be made for an illegitimate child. There was the living together. There was the parent-child relationship. There was the decree of the Montana Court and there was the support payments not only through death, but after death through the insurance. Lewis F. Powell, Jr.: How does the commission construe the word “recognized?” Does it require some formal act of recognition by the father or by Court? How does it construe it? Edward L. Merrigan: I truly don’t know that, Your Honor because -- Lewis F. Powell, Jr.: But in all of these hypotheticals you give, the recognition is rather important, isn’t it? Edward L. Merrigan: Well, it’s rather important. I would -- Lewis F. Powell, Jr.: You have an easy case, but you have been arguing with a rather broad brush, I suggest? Edward L. Merrigan: The word recognition, of course, I think is clear cut in any case where you have an order affiliation. Lewis F. Powell, Jr.: It’s clear cut here, yes. Edward L. Merrigan: Such as you have in Montana. Lewis F. Powell, Jr.: Yes. But this example you gave of moving in and dying, and the wife coming along and saying what you say he said? Edward L. Merrigan: I want you to understand, Your Honor, that that idea did not only originated with me. It was discussed in Proctor decision, it was discussed in the Gentry decision that this thing could happen. Lewis F. Powell, Jr.: But all you are saying today is that there must be a court order, so far as you are concerned? Edward L. Merrigan: Certainly, there should be it. When there is a court order that there can be further doubt. I think the other thing is that showing of actual support that he contributed to support And what the Government is now proposing to Congress, and it is already passed the House and is well along in the Senate is that there be a “living with” as opposed to “lived with” and that there be a showing that he contributed to the support of the child prior to death. I suggest to you that that’s going to require a rather case-by-case determination. It is not exactly the uniform presentation that would usually be required under these other statutes. So, Your Honors, where I think we find ourselves in this case is this. Here we have five Federal Courts in the past that have uniformly held the present statute to be unconstitutional and as a result, all of the children in those cases are now recognized to receive their benefits under the statute. On the right, we have the agency itself seeking an amendment to the law that will protect all children in the future that may be the law before this Court acts in this case. So, we find ourselves right in the middle of the law as it has been interpreted by other Federal Courts uniformly in the past and as Congress is changing it in the future. And we urge this Court for all of the reasons I have stated, either to uphold the Court of Claims decision on the constitutional issue or to construe this statute or and avoid the constitutional issue to say that under the facts of this case has conceded on the record by the Government, these children would be entitled to judgment under the statute, even with the unconstitutional provision in it. On the jurisdiction of the Court of Claims just briefly, there is no question but that the Court of Claims under Section 1491 of Title 28 has clear cut jurisdiction over any claim based on an Act of Congress. It has clear cut jurisdiction on any claim based on the Constitution of the United States. What the Court of Claims rule in Gentry is that this particular provision is a relatively minor provision of the statute which was enacted by Congress to provide support to children of the deceased federal employees. It was severable provision, it severed that provision, and with that severed provision out, then it granted judgment based on that Act of Congress and I urge the Court that that is correct. Potter Stewart: But you need a track on it. That’s not the Act of Congress legislated? Edward L. Merrigan: Well, Your Honor, the Court of Claims has jurisdiction to render judgments on the Constitution as well as on the -- Potter Stewart: Yes, because nothing in the Constitution that -- William H. Rehnquist: It was founded on the Constitution -- Potter Stewart: Nothing on the Constitution that entitles your plans to prepayment of any kind, for anything? Edward L. Merrigan: Well, the claim based on the Constitution here would be that they are entitled to judgment [Attempt to Laughter] under the statute as interpreted in the Court on the Fifth Amendment. Potter Stewart: But not as enactment? William H. Rehnquist: Do you think the Constitution would require the Treasury to draw a check to your clients without any Act of Congress in establishing a Social Security System? Edward L. Merrigan: No, I don't think that’s true at all, Your Honor. I think that what -- William H. Rehnquist: How can you say, this is a claim founded on the Constitution? Edward L. Merrigan: I say that this is a claim founded on the Act of Congress with the power of the Court of Claims to sever an unconstitutional provision from that statute. In the Testan case, for example, Your Honor which is the case that was referred to by Mrs. Shapiro, in that case, there was a claim by federal employees that they had been misclassified by the Civil Service Commission. Moreover, there was no statute that gave them any right of recovery based on the misclassification of position, and therefore, there was no statute. Here the judgment of the Court of Claims is firmly grounded on the very statute Congress passed. William H. Rehnquist: But you say they had declared that it was unconstitutional in order to get to it? Edward L. Merrigan: Not the whole statute, Your Honor. William H. Rehnquist: If, well but apart -- this is a large statute. They had to declare one section of the statute unconstitutional? Edward L. Merrigan: They declared a tiny sentence in this statute. William H. Rehnquist: Well, a section of the statute -- Edward L. Merrigan: A section of the statute. William H. Rehnquist: -- of which there was bore on your client’s rights. Edward L. Merrigan: That’s correct, but what I am trying to say to you, Your Honor, then that they then pegged their decision very firmly on an Act of Congress with the voided provision out of it. And I think that they do have the right because they do have the power to consider a claim based on the Constitution as well as Acts of Congress to look at an Act of Congress, to declare a section which is clearly violative of the Fifth Amendment void and then to grant a judgment against the United States founded on that Act of Congress. Harry A. Blackmun: Mr. Merrigan, is it correct to say that your argument comes down to whether the statute is severable, whether that section is severable and if it is, then you say, jurisdictional question is resolved? Edward L. Merrigan: I think that’s correct. Byron R. White: That was the Court of Claims’ argument in Gentry? Edward L. Merrigan: That is entirely correct, Mr. Justice White. Byron R. White: Without being able to say in any prior authority to that effect? Edward L. Merrigan: I think the Court of Claims did cite some authorities [Attempt to Laughter] to that effect, although it escapes my mind at the moment. Byron R. White: Yes, I may have. William H. Rehnquist: The Court of Claims certainly has had a propensity throughout its life to try to expand its jurisdiction, hasn’t it? Edward L. Merrigan: Well, I hope we won’t find this case as the limiting factor on that propensity but -- Byron R. White: May I ask you, do you recall Judge Skelton’s concurring position? Edward L. Merrigan: I do recall it, Your Honor. Byron R. White: Did you present that position in your case or not? Edward L. Merrigan: We relied on Gentry totally, as well the concurring opinion of Judge Skelton. Byron R. White: So you said, not only should the statute be construed to award benefits when the “living with” had occurred any time, but you have also argued that the statute should be construed to permit proof of support in any case? Edward L. Merrigan: Yes, Your Honor. Byron R. White: And because the Court of Claims apparently rejected that position in Gentry, but you represented it -- you presented it in your case anyway? Edward L. Merrigan: We did. We relied totally on the Gentry decision and in fact, I think what happened in our case is the Court of Claims looking at five straight federal decisions on the subject did not reach the construction of the statute as we urged on it. It simply ruled on the constitutional issue. Thank you, Your Honor. Potter Stewart: Mr. Merrigan, you have not addressed orally, unless I missed it to the question of sovereign immunity with respect to the back payments. Edward L. Merrigan: Your Honor, clearly, the statute itself provides for payments from the moment of death of the federal employee. The Act was passed for that purpose. The Congress intended the Act for that purpose. There was no withholding of sovereign immunity on the liability of the Federal Government for such payments and the only way that sovereign immunity comes into this is a claim that like in Testan where there was no statute at all, therefore, there is sovereign immunity claim of no ability of the Court of Claims to judge it. What we are trying to say here is that the provision was severable. There is an Act of Congress. There is a direction of the Congress that they be paid back to the date of death. Can you imagine, construing this -- the law in such a fashion that we have nowhere to go to collect a true debt of the United States -- Potter Stewart: Well, that’s what sovereign immunity means. You have no where to go if the only person who would otherwise be liable to you is the sovereign and he inserts his immunity, that is exactly what sovereign immunity means? Edward L. Merrigan: And that usually arises in the case where there is no statute passed by the Congress authorizing the payment of the debt of the United States and here, there is a clear cut debt of the United States running back to the very day that the employee died. Byron R. White: And otherwise, the Government will come in and say, “Of course, you are within the class that was intended to be benefited by the statute and we owe you the money, but you just cannot sue for it.” Edward L. Merrigan: I think that’s generally correct and by the way -- Byron R. White: You mean that would be the position. Edward L. Merrigan: That would be it. And by the way, with that Your Honor, we would then be scooped into a class if I don’t know how many employees, some of whom have completely different positions than we have on all of the facts. In other words, here we have a showing of support. We have a showing of “lived with” and so forth and so on. A class would be so general that we may fall with the class. And even under the new [Laughter Attempt] statute, we may somehow fall with the class and so, I think that the Gentry decision is a sound decision. I think it treated the question of sovereign immunity. It treated the question of the Court’s jurisdiction correctly and we urge the Court to affirm us. And I think what we are really here about is an appeal from Gentry which the Government never took. The Government never took any appeal from any of the other decisions in the past up to this one. And I think that we are now trying to carry on our shoulders all of the claims [Attempt to Laughter] that go the all way back to Gentry. Potter Stewart: This lawsuit wasn't brought as a class action? Edward L. Merrigan: No, Your Honor. It was not. Potter Stewart: Always an individual action. Edward L. Merrigan: Always an individual action. Thank you very much. Warren E. Burger: Thank you counsel. The case is submitted.

William H. Rehnquist: We'll hear argument now in Number 96-1291, Delores Oubre v. Entergy Operations, Inc.-- Ms. Haynie. Barbara G. Haynie: Mr. Chief Justice, and may it please the Court: After 2 years of careful consideration, in response to a regulatory void, Congress enacted the Older Worker Benefit Protection Act to protect the rights of older workers who were in greater force leaving... being forced to leave the work place. The Older Worker Benefit Protection Act mandates that an older worker may not waive their rights secured under the ADEA unless such waiver is knowing and voluntary as defined by the act. If an employer chooses to utilize a waiver of age discrimination rights, Congress requires an employer to provide the older worker with the requisite information and time to assess the value of the right to be waived. The Fifth Circuit Court of Appeals' adoption of the common law contract principles of ratification and tender-back in addressing a situation where the employer uses a waiver which is... does not comply with the Older Worker Benefit Protection Act will in all practical purpose render the act meaningless. Anthony M. Kennedy: What would happen in the case if the day after the release is signed, but before any money changed hands, the employer says, we've made a mistake, it's a good faith mistake, we didn't know about the ADEA, we want to rescind the release? Barbara G. Haynie: Well, Your Honor, pursuant to the statute there is a revocation period of 7 days after the release is signed. Anthony M. Kennedy: No, but this is the employer. Barbara G. Haynie: I understand. There will be a 7-day--that release is not effective pursuant to-- Anthony M. Kennedy: Well, let's change the hypothetical. Suppose... I want the release to be effective. Barbara G. Haynie: --7 days after it. The employer would not have the right to rescind the release. It is an invalid release with regard to ADEA claims if it does not comply with the statute. If they rescind the release to all other waivers, I believe the plaintiff or the older worker will have the right to proceed against the employer. Anthony M. Kennedy: But in other words you couldn't have-- --doesn't have to rescind it. Excuse me. You couldn't have an equitable action to rescind the release at the employer's behest? Let's assume a good faith mistake on his part. Barbara G. Haynie: No, sir. If the waiver does not comply with the requirements of the act, it is a void waiver pursuant to-- Anthony M. Kennedy: Well then, he wouldn't have to pay... he wouldn't have to pay any of the money, either? Right. If it's void, he wouldn't have to pay the money. Barbara G. Haynie: --Well, the problem with not having to pay the money, Your Honor, is that the waiver includes, and particularly in this case, many other actions, other than a waiver of ADEA-- Anthony M. Kennedy: That's, it seems to me, one of the points, is that this might very well be valid as to everything but the ADEA. Barbara G. Haynie: --And I believe that-- Anthony M. Kennedy: There's a lot of talk on void and voidable, but this covers so many claims that it seems to me that's something that may be more of a problem for the respondent than for you. Barbara G. Haynie: --I believe it would be void to the ADEA claims. I believe that-- David H. Souter: As to them, then, the employer can, on day eight, say, I'm not going to pay anything insofar as it might be attributable... let's assume, keep the example, that he broke down the various considerations and said, with respect to this particular claim I'm not going to pay anything because it's void, because it violates the statute. That would be legally proper, I take it, on your view. Barbara G. Haynie: --That's correct, Your Honor, that would be, and the plaintiff can go forward and pursue their age discrimination claim in court. Antonin Scalia: But in order to determine how much harm we're doing by saying these things are void from the outset I think we should be realistic and know that most of them do not assign a certain amount of money to the ADEA release and a certain amount of money to various other releases, and I doubt very much, when it's not broken out that way, whether you can say the contract is valid in part and invalid as to that one little item. I mean, this is a standard question of severability. I don't know how you can rip that contract apart, especially when the ADEA claim is a very major part of the consideration. Do you know any other contract that's picked apart like that where it's just partially valid and we're going to enforce all the rest of it? Barbara G. Haynie: Well, I think Congress has clearly spoken here that if the waiver drafted by the employer does not comply with the Older Worker Benefit Protection Act-- Antonin Scalia: Right. Barbara G. Haynie: --That waiver is nonenforceable-- Antonin Scalia: Therefore that portion of the contract is bad, and I would say the whole contract is bad. Barbara G. Haynie: --because I do believe the other portions of that waiver remain valid. If the employer does not break out the enumeration for each right to be waived, that's the argument to save the set-off for the remedial phase of the trial. Antonin Scalia: So all the employers who have these, have made these commitments can now simply stop paying money. Barbara G. Haynie: If they choose to stop paying money and have not enumerated out which moneys are going to be designated for which rights are being waived, then I believe the plaintiff has a simple right of breach of contract for all other rights that they had signed, if the money has stopped. Antonin Scalia: No, but a contract is... you can't pick apart a contract like that. If the contract's void, it's void. Barbara G. Haynie: Well, I-- Antonin Scalia: What do you mean, he's breached it? How much money is he supposed to pay, two-thirds of the full contract, or... I mean, how do you decide how much? Barbara G. Haynie: --I-- Antonin Scalia: The full amount? Barbara G. Haynie: --I agree, Your Honor, I believe that's one of the practical problems of this case, and that's why the tender back at the very beginning of a case to bar plaintiff to going into court is very prac... impractical. Antonin Scalia: What I am worried about is, you are destroying cause... you are destroying entitlements to these payments on the part of all older workers who have been terminated, including the majority of them who do not have any ADEA claims. I'm not sure you're doing them a favor. You're saying if the employer is confident enough that this worker doesn't have an ADEA claim he can just say, I'm sorry, we made a mistake. Barbara G. Haynie: Well, I believe that's what Congress has established-- Sandra Day O'Connor: Well, Ms. Haynie, we aren't sure about that, because Congress did not expressly say such an agreement that fails to comply with these requirements is void, as they have done in some other legislation. They don't say that, so at common law I suppose an agreement where the employer was guilty of some kind of fraud, duress, or coercion would be voidable, wouldn't it? Barbara G. Haynie: --That's correct. Sandra Day O'Connor: Voidable at the option of the person defrauded. Maybe this contract is voidable, not void. Congress didn't say, one way or another. Barbara G. Haynie: I believe the phrase, may not waive, is tantamount to announce, or proclaiming void any waivers which do not comply with the Older Worker Benefit Protection Act for those rights secured under the ADEA. Stephen G. Breyer: But why? Why would Congress wanted to have done that, because what you're being told, I think, from Justice Scalia and others, is let's imagine... let's imagine that a... that we have 100,000 workers who are quitting, and each of them has a contract, and they all promise not to bring claims, and each of them is paid [dollars] 5,000 for that promise. All right. Now, very few of them will have real ADEA claims. Very few. But suppose they're all like this, that they didn't comply with the rule exactly. Now, on your theory one day every employer is going to wake up to the fact that he hasn't bought a single thing for his [dollars] 5,000, and somebody might go around and collect the lawsuits and sue everybody and get the money back, so you'd be taking from 100,000 or 90 of the 100,000, [dollars] 5,000 each have to go right back. On the other hand, if you're wrong, all that happens is when somebody has a good claim they have to put up a little bit of money up front, whatever the proportionate amount of the ADEA part is, which might be [dollars] 500, and the lawyer could front it for him. So why would Congress want the result that you want, which would seem to put at risk hundreds of thousands of workers to have to give back the money who would have no claim... the employer would sue them... and at the same time to protect some lawyer from not having to put up a very little money up front. Now, I'm putting it strongly, but it's exactly that practical consideration that I'm very disturbed about in terms of your position. Barbara G. Haynie: Your Honor, with regard to the practical-- Stephen G. Breyer: It's not practical, it's legal, and what I'm asking is, why would Congress have wanted that result? Barbara G. Haynie: --Congress was very clear in enacting this statute to protect the rights of older workers when negotiating with employers when they're forced out of the work place. They are not arm-length negotiators. Congress put in very specific requirements an employer must meet so that an employee knows they are giving up a valuable right in exchange for that consideration. If they're given adequate considera... or information, and there is some specter of discrimination, then the employer can go... the employee can go back to the employer and negotiate for a greater severance or say, no, I'm not going to sign this. Without that knowledge, and without the time to consider it in a coercion case, then the employee is really left with no option but to take the money. Stephen G. Breyer: We're not talking about the same thing. What I'm talking about is, I agree with you the contract is no good. I agree with you the employee can sue. I agree with you that that provision in the contract promising not to sue is worthless. It's no good. The question involved is whether, before he brings the lawsuit, he has to give back a proportionate share of the money that he's been paid for his promise not to sue. I would imagine if they're paying five or [dollars] 6,000 for such a promise he'd have to give [dollars] 500 back, or... and the lawyer could put it up front. Barbara G. Haynie: Well-- Stephen G. Breyer: So what is the big problem about... that you're worried about? Barbara G. Haynie: --The problem is twofold, Your Honor. First, the monetary amount could be greater. The employee expends the money looking... for living expenses while looking for other employment. The second problem is, who is to decide what the proportionate share will be? That's going to have to be decided by a trier of fact, a judicial tribunal. That means you're in court already. David H. Souter: Well, can a proportionate share be determined? How do we determine the proportionate share? Barbara G. Haynie: The proportionate share can be determined at the end of the litigation, when a trial judge has taken into-- Sandra Day O'Connor: Well, I thought courts have routinely said they are unable to make that kind of a determination. I mean, they can't do that. Barbara G. Haynie: --Well, if you-- Sandra Day O'Connor: You get a... you either have to give it all back or none, as I see it. I don't see how that could possibly be made. Barbara G. Haynie: --If you require the plaintiff to tender back all the money received, then it is the employer who receives the windfall there, because the employee has waived many other rights under that waiver. The employer can raise the defense. Anthony M. Kennedy: But if you say the contract is void, then what you're doing is saying that the ADEA tail wags the State law dog with respect to all releases. You are saying that all State law releases, State claim releases are, I take it, void because the contract is not severable. Barbara G. Haynie: No, I don't believe that, Your Honor. I don't believe that. I believe Congress spoke directly and specifically to those rights secured under the ADEA. Ruth Bader Ginsburg: Ms. Haynie, suppose-- --Ms. Haynie, did... maybe I misunderstood your argument, but I thought your position was, may not waive is... leaves employer and employee without any authority, without any power to do anything with respect to the ADEA claim. That being so, you construe this contract as though what may not be done wasn't done, so that the only thing that would be covered would be the non-ADEA claims. Maybe you're not making that argument. Barbara G. Haynie: No, I am making that argument, Your Honor, that again the statute speaks specifically to ADEA claims, and those are the... that is the waiver that is void. That is the waiver that is nonenforceable against the plaintiff who signs it. All other waivers of claims can be possibly enforceable against the plaintiff, unless the plaintiff can show that it was not an involuntary waiver. William H. Rehnquist: What if it was just an ADEA claim here, so that we didn't have the problem of breaking out a partial amount, and the... would you say that the employee did not have to tender it back? Barbara G. Haynie: That's correct, Your Honor. If the waiver does not comply with the statute it is an ineffective waiver. It is a void waiver. The plaintiff can go forward with the lawsuit, and if there is some-- William H. Rehnquist: The plaintiff just gets to keep it, then? Barbara G. Haynie: --Well, there's a concern with regard to equity amongst the parties. William H. Rehnquist: Well, there's a considerable concern. Barbara G. Haynie: It can come at the remedial phase of the trial-- William H. Rehnquist: Well, but-- Barbara G. Haynie: --with either an offset-- William H. Rehnquist: --Well, supposing the plaintiff loses at the trial. Barbara G. Haynie: --I believe that part of the incentive in complying with the statute is a loss of that money, the severance pay, if you do not draft a valid waiver under the Older Worker Benefits Act. William H. Rehnquist: You mean-- --That's totally contrary to any concept of the law of contracts. Barbara G. Haynie: Well, this is... we're not dealing with the law of contracts. William H. Rehnquist: Well, you may be dealing with the law of contracts except as Congress has otherwise provided. You're arguing for a very expansive construction of a particular language of Congress. Barbara G. Haynie: I believe, Your Honor, that it's warranted in this case. The legislative history is replete and is quite full with Congress' intent. William H. Rehnquist: We don't ordinarily get into legislative history. Barbara G. Haynie: And I understand, Your Honor, but Congress' intent to occupy this entire area. In fact, the respondent has conceded that in enacting this statute there is as Federal statutory standard for knowing and voluntary. It is all-encompassing. There is no room for judicial common law development here. David H. Souter: No, but you don't have to have judicial common law development with respect to the protections of this statute, I suppose, in order to recognize that if on a void contract there is a total failure of consideration the employer at least would have the right to bring action for the return of the consideration that he has furnished, and do you deny that he would have such an action? Barbara G. Haynie: Your Honor, to require the tender back would be to engraft on the statute-- David H. Souter: I'm not talking about tender-backs. I'm simply saying, let's assume that your conclusion is correct, and we recognize it. The employer says... and by the way, we're operating here on the hypothesis that it's only the age claim that's involved. The employer says, I got nothing. There has been a total failure of consideration. I want my money back. The employer can sue for it, can't he? He may have a tough time collecting it. You've pointed out, and I'm sure you're right, that in most of these cases the money has been spent, but the... we don't have to deny the employer the cause of action to get the consider... to get his consideration back in order to enforce this act, do we? Barbara G. Haynie: --Well, Your Honor, there may be some State claims in restitution or unjust enrichment that the employer could bring. David H. Souter: That's what I'm talking about. Barbara G. Haynie: Certainly. David H. Souter: You're not denying that, are you? Barbara G. Haynie: No, certainly I'm not denying that. David H. Souter: Okay. Barbara G. Haynie: And to try to place the-- David H. Souter: And you're not denying, in fact I think you suggest it, that if your client should win, quite properly if the employer has brought his claim there could be a set-off against the recovery. Barbara G. Haynie: --That's correct, Your Honor. Sandra Day O'Connor: Ms. Haynie, could I-- --And State law might operate as well to say that it's not severable, that you can't decide how much goes to ADEA and how much consideration-- --Yes, right. --went to these other claims. That's possible, too, isn't it? Barbara G. Haynie: It's possible, Your Honor, but I believe the trial court will be in the best position, after all the evidence is taken in-- Antonin Scalia: Well-- Barbara G. Haynie: --to assess the values of this claim. Antonin Scalia: --is that right? Ms. Haynie, suppose I sell you five tickets on horses in a horse race, okay. One of them wins. The other four don't, okay. Do you think that it's fair if the contract should be rescinded as to only one of those tickets, one of the losing ones, that you should get back 20 percent of your money? Barbara G. Haynie: Well, Your Honor-- Antonin Scalia: I mean, that is what is called an aleatory contract, a contract that depends on future events to some extent, as does any waiver of rights. You don't know whether the person has claims that he will sue on or not. When he does have one, is it fair to say, well, that claim was one-fifth of the whole contract, we'll give you one-fifth of your money back? You can't do that. The one ticket for the winning horse is what the whole thing was about. Barbara G. Haynie: --I believe that is what the trial court is going to be charged with doing. If you attempt to put the parties back into the places they were before the invalid waiver was offered to the employee, you must then give Ms. Oubre her lost wages, you must put her in a position again of making the decision as to whether she wants to stay with the company or leave the company, and you also must provide all the information required by the act, which the respondent has not done to date in this case. David H. Souter: Let me ask you a factual question. we've all been making the same assumption here, but let me just question the assumption. Is there any way of knowing, in the run-of-the-mill situation in which there is a release and the object, the obvious principal purpose of the release is the age claim, whether in those cases there tends to be a, in fact, others unrelated claims? I mean, for example, in this case, was she an employee at-will, so... or was she subject to some kind of a cause requirement so that she would have had a lost wage claim? Because if most of these releases in the real world are simply releases of nothing but the age claim, then this problem that's being raised would loom smaller than it might otherwise be. How do we... is there any way for us to know? Barbara G. Haynie: Well, I could tell you factually for this situation she was an at-will employee, and certainly these waivers contain... I've never seen a waiver that just contains an ADEA waiver. David H. Souter: Right. I'm sure that's right. Barbara G. Haynie: They contain numerous other waivers with regard to Worker's Compensation. David H. Souter: --be crazy not to, but in fact, do you-- Barbara G. Haynie: All other waivers. David H. Souter: --Is there any way for us to know whether it's really covering anything else in most cases? Barbara G. Haynie: I believe that the language of the waiver-- David H. Souter: Oh, I know what the language of the waiver says, but I mean, in fact, are there any real claims... is there any way for us to know whether there are in fact any substantial claims in most of these cases, other than the age claim? Barbara G. Haynie: --Well, if the plaintiff brings the suit, obviously, or files her claim against... files her claim with the EEOC, or, you know, the State regulatory agency-- Ruth Bader Ginsburg: This would waive title VII claims, too, I suppose. This waiver, if I remember correctly, waived any and all claims. It didn't mention any specific ones. Barbara G. Haynie: --That's correct, Your Honor. Ruth Bader Ginsburg: But apart from State law claims and title VII claims raised with sex discrimination, would there be anything else that might be included in that? Barbara G. Haynie: Well, there's Workers' Compensation claims. There could be any other causes of action that may have come up. William H. Rehnquist: Thank you, Ms. Haynie. Ms. Brinkmann. Beth S. Brinkmann: Mr. Chief Justice, and may it please the Court: To respond to the concerns that the Court has raised, we would agree that the congressional scheme that has been established here addresses these concerns in that Congress gave the courts broad equitable authority, and the Court recognized that in McKennon, that that equitable authority is something that the district courts in ADEA cases exercised to take into account concerns of employers. That is consistent with the common law trend, also. As respondent pointed out in its brief, the common law tender-back was not required in equity, generally. It was only for settlement releases, and in those cases those were... the cases we've seen are ones that only had one topic of the release, so by suing you were undoing the release. But in cases like this, this is a waiver that violates a statute. At common law, that was one of the major bases for not enforcing a contract. Sandra Day O'Connor: Well, is it void or voidable? At common law, it would have been voidable for fraud or coercion or duress, and this is a substitute for that. This is a statutory expression of conditions that have to be there to avoid any kind of coercion or fraud, isn't it? Beth S. Brinkmann: We believe-- Sandra Day O'Connor: So why isn't it voidable at the instance of the employee? Beth S. Brinkmann: --Your Honor, we do believe it goes beyond that, the requires provision of information, a lot more protection than the common law. Whether-- Anthony M. Kennedy: Well, is it void? Beth S. Brinkmann: --We believe that the waiver of the ADEA claim is void, Your Honor. At common law what they would have done with something like that, they would have applied the practice of divisibility. When there was an illegal contract for gambling, or something that violated an antitrust statute, they would look and see if that statute was divisible. If it was not divisible, often illegal contracts parties were left as they were. There were some exceptions to that. Anthony M. Kennedy: What is it... is it divisible in most cases here, do you think? Beth S. Brinkmann: I think it may very well be. I mean, part of the thing that is even more complicated, Your Honor, much more consideration was given for the [dollars] 6,000 than an ADEA waiver. Petitioner resigned from her job, in addition to waiving other claims, so there's a lot of equity, and that's exactly what courts of equities would look at, and that's why that decision was made at the remedy phase of the proceeding, where the court could take into account those equitable concerns, and we-- Antonin Scalia: Ms. Brinkmann, if the void waiver leaves the parties where they were, then doesn't someone who is asserting that the waiver violates the statute by bringing a lawsuit, doesn't that person have to return... in order to be consistent in the pleading, doesn't the person have to return whatever money that person has acquired under the contract? Beth S. Brinkmann: --Your Honor, we-- Antonin Scalia: You say it's void. Beth S. Brinkmann: --No. We believe that Congress made clear in this statute that waivers were void if they did not comply with these requirements. Antonin Scalia: Right. Beth S. Brinkmann: And that means that that waiver violates the statute. Antonin Scalia: Right. Beth S. Brinkmann: So it's an illegal waiver. Antonin Scalia: Right. Therefore, if you assert that that has happened, you should return the money when you bring the lawsuit. Beth S. Brinkmann: No, Your Honor. Antonin Scalia: Otherwise you're being inconsistent with your theory. Beth S. Brinkmann: At common law a tender-back was just not that... all... Farnsworth, Dobbs, and all of your discussions make clear that tender-back was not that-- Antonin Scalia: I don't... I don't even care about the common law. I just care about someone who comes in and asserts that this contract is void, but wants to keep the money the person has under the contract, or at least use it to hire the lawyer to bring the lawsuit. Beth S. Brinkmann: --The problem-- Antonin Scalia: And then if you lose you keep the money, but if you win, oh, I'll cough up the money, but I'll get more. Beth S. Brinkmann: --The problem is the statute, Your Honor. It's Congress. Antonin Scalia: The Congress... the statute says nothing about this. Beth S. Brinkmann: No, but-- William H. Rehnquist: The statute says nothing about it. Beth S. Brinkmann: --But you are creat... you would be creating another condition precedent to bringing suit, and Congress was very clear about what was required in that event, and it-- William H. Rehnquist: Where was that clarity manifested? Beth S. Brinkmann: --We believe in-- William H. Rehnquist: What section of the statute? Beth S. Brinkmann: --In 626, Your Honor. It's enfolding respondent's brief in the appendix. (f)(1) makes quite clear Congress expressly said an individual may not waive any right or claim-- William H. Rehnquist: We know that, but you're saying that Congress made expressly clear that no tender back would be required. Where is that? Beth S. Brinkmann: --Well, Your Honor, we believe that-- William H. Rehnquist: I thought you said Congress made expressly clear. Beth S. Brinkmann: --Yes. We believe, when you look at the... for example, (f)(3), where Congress foresaw that there would be disputes among parties about the validity of these waivers, Congress specifically said the burden would be on the employer, or the person asserting the validity of the waiver. In this case it would be-- William H. Rehnquist: What does that have to do about tender back? Beth S. Brinkmann: --Because tender back, Your Honor, was to put up the money to counter the presumption of the validity of the contract, and here it's to the contrary. Congress has supplanted that, and I think it's important to-- William H. Rehnquist: That certainly is not an express provision about tender back, is it? Beth S. Brinkmann: --No, but Your Honor, in case-- William H. Rehnquist: I thought you said it was. Beth S. Brinkmann: --No, because I think that the tender back clearly conflicts with the purposes and the construct, the mechanism which Congress created. To impose-- David H. Souter: Ms. Brinkmann, may I ask you to address a specific point there? I thought one of the strongest, if not the strongest argument for the position that you and the petitioner take is that if you require a tender back, the prohibition in the statute is a dead letter, because in fact you're dealing with people who are not going to have the money to tender back, not because they went to the race track because they used it to pay the rent and buy the food. Is there anything we can look at to find out whether that... that seems to have an intuitive appeal to it. Is... has it gotten anything more than an intuitive appeal? Are there statistics anywhere, or is there anything in the record to the effect that that is so? Beth S. Brinkmann: --Certainly, Your Honor. In the first section of the ADEA, 621, Congress made a specific find or example that older workers are much less likely to retain and regain employment once they're terminated, so it's a specific class. The legislative history also concerns information about that. Also, even where courts have applied a tender-back requirement as Judge Posner did in his opinion for the Seventh Circuit in a title VII case, he recognized that where there was a situation in which living expenses would preclude the bringing of the suit, that would not be permitted as a matter of equity. He also pointed out that, you know, perhaps an offer would be sufficient, would be offset at the remedial phase. David H. Souter: In other words, I will... I offer to pay you back if I get the money from which I can do it. Beth S. Brinkmann: That's an offset remedy, and I just have to urge the Court to realize that to adopt the court of appeals approach would be to put the workers exactly back where they were before enactment of the statute. Sandra Day O'Connor: Well, are you saying that we have to enact as a matter of Federal common law some rule about tender-back, or do we look to State law to see what the normal contract situation would be? Beth S. Brinkmann: No, Your Honor. We believe that Congress has spoken, has established this very specific scheme-- Sandra Day O'Connor: Well, we... suppose we don't find an express provision in the statute governing tender-back. Do we look to the State law where the contract was created? Beth S. Brinkmann: --No, Your Honor. Sandra Day O'Connor: Or do we try to create some Federal legal principle to cover this? Beth S. Brinkmann: No, Your Honor. We believe Congress created that because to impose tender-back would be nullify the statute-- Anthony M. Kennedy: Well, where do you get the offset authority? Beth S. Brinkmann: --The equitable authority of the court. That's clear, and this Court has, you know, agreed with that in McKennon. Anthony M. Kennedy: Why does the court have equitable authority at the end of the case but not the beginning? Beth S. Brinkmann: Congress gave it remedial authority in 626(b)... or... yes, 626(b) of the act, and made clear all the remedies that the court could give, and it's important to realize that at this point if this worker has to make a choice of whether to have the severance pay or a waiver, that worker is exactly where they were before passage of the act. Stephen G. Breyer: I don't understand that. Am I missing a... I mean, I only have one question, really, for this side of the case, and I couldn't find the answer in any brief, and it seemed so obvious I must be missing something. That is, I absolutely take in your point that if the worker has to front the money sometimes they won't have it, and maybe their lawyer wouldn't give it to them. I see that as a problem. I don't think it makes the worker back at stage zero, but it could be a problem. But if we agree with you, everyone's been pointing out that in all the millions of retirements contracts in the United States, every one that doesn't comply with all this is void, and why won't, at some day, some clever person work out that he could go from employer to employer, buy up tens of thousands of suits, and all the people who don't have ADEA claims will have to give back several thousand dollars to their employer? I mean, it's the people who don't have the claim who vastly outnumber the ones who do, who would be suddenly left high and dry, on your theory, at the mercy of whether an employer would just decide to sue him for the money back. Beth S. Brinkmann: Your Honor-- Stephen G. Breyer: Now, that seems to me an obvious point, but no one mentions it, and therefore I must be missing something, so I want you to tell me what I'm missing. Beth S. Brinkmann: --I think Your Honor is pointing out the fact that it's unclear whether a worker could even avoid this waiver if they wanted to enforce-- Stephen G. Breyer: No. I'm talking about workers who don't... they're happy. There are millions of them. They have their contracts and they have [dollars] 6,000 to boot, and they don't have a dream of a claim, and those workers, on your theory, it seems to me, if the provision in the contract is void, are at the mercy of any lawyer working for an employer who would ask for the money back. Beth S. Brinkmann: --Again, Your Honor, we don't believe so. It's an illegal contract that is not enforceable even at the common law-- Stephen G. Breyer: If it's not enforceable, why... it's the fourth time I've said the exact... I must be not be saying it well. Suppose it's not enforceable. It's then void. There is no such provision. Each worker is there with [dollars] 4,000 that he got. Why can't the employer just sue him to get the [dollars] 4,000 back? He was unjustly enriched. Beth S. Brinkmann: --Your Honor, may I answer? Stephen G. Breyer: Yes. Beth S. Brinkmann: At common law there could... we don't want to preclude that there would never be an unjust enrichment situation. Perhaps it was some egregious unjust enrichment, but at common law those would have been exceptions to the principle that illegal contracts were against public policy and the parties were left as they were. William H. Rehnquist: Thank you, Ms. Brinkmann. Beth S. Brinkmann: Thank you, Your Honor. William H. Rehnquist: Mr. Phillips, we'll hear from you. Carter G. Phillips: Thank you, Mr. Chief Justice, and may it please the Court: It seems to me that the bulk of the discussion that's gone on today suggests as strongly as anything that I could propose to you why it is that we would do far better to leave the common law in place, providing us with a set of guideposts that can be applied on a regular basis and on a case-by-case basis, and recognize that section 626(f) is a very pointed-- John Paul Stevens: Mr. Phillips, let me just raise a question that... you know somebody's got to ask you a question about this. I agree with everything in your brief about the common law, the equities, the fairness, but the statute never says anything about void or voidable, but the statute does say, an individual may not waive this claim unless the waiver complies with the statute, and in this case the waiver did not comply with the statute. If they do not come up with the money to pay you in advance, is it not true you claim you would have a defense to the suit which would be a waiver? Carter G. Phillips: --If they do not pay it... no. No, no. It's not the waiver argument. What we're saying is that they've forfeited their rights as a matter of common law by their failure to comply with an independent State law duty to tender back the consideration. It doesn't revive the waiver. John Paul Stevens: What is your defense to the suit? Is it not the document that she signed? Carter G. Phillips: No. The... it's not. It is the failure to tender back, and the failure to pay the consideration. John Paul Stevens: Why should she have to... what in the statute compels her to tender anything back? Carter G. Phillips: Nothing in the statute compels her to tender it back. It is a bedrock principle of the common law and contract law. John Paul Stevens: You say she has not... you say there's just no waiver issue at all, then. Carter G. Phillips: I've lost the waiver issue, Your Honor. That's right. She is perfectly available to come forward into court and bring her claim. We do not fear, and I don't think any of the employers in these cases fear having these age discrimination cases go forward if that's what they want to do, but what we are concerned about, and what the common law protects, is our right to say, look, you have to put the money in. That's the consideration you have to pay as a condition of coming in. That is a wholly independent legal requirement that's been embedded in the common law for 200 years. John Paul Stevens: But if she had never signed a contract she wouldn't have to do that. If she'd never signed the waiver she would not have to do that. Carter G. Phillips: If we had given her money in return-- John Paul Stevens: Say she signed no document whatsoever, and you just said to her, we think you've been a wonderful employee, we don't think you're going to sue us, here's a lot of money. Would she have to give that back? Carter G. Phillips: --Of course she'd have to give that back. The point is, is if you want to get-- John Paul Stevens: To bring an ADEA suit? Why? If she never signed a release she wouldn't have to give anything back, would she? Carter G. Phillips: --As I understand the State common law-- John Paul Stevens: Would you... I'm asking you, would you have a defense to this case if she had not signed a release? Carter G. Phillips: --If she had not signed the release. No. Ultimately we-- John Paul Stevens: So the heart of your defense is the fact she signed a document that she has not rescinded. Carter G. Phillips: --No, but that's not... no. No, Justice Stevens. The heart of my defense is that the common law recognizes an independent obligation, apart from whether the release is waived or not waived, that you must as a condition of coming to court pay back moneys that have been paid to you as a part-- John Paul Stevens: If you want to avoid a release. That's what... the payback is in order to make something that is voidable... keep it alive. Carter G. Phillips: --You can construe it that way, but that's not the way the common law views it. Common law imposes it as an independent-- John Paul Stevens: I agree with you on the common law entirely. My question is, how can you get around the statutory language that says she may not waive unless you comply with the statute, and you're saying she did waive? Carter G. Phillips: --I will go back to the Court's opinion in United States v. Olano, which draws a clear distinction between waiver, which is the knowing and voluntary relinquishment of a known right and the implications of that, and it's a narrow concept, and a forfeiture of your rights which arises because you don't fulfill your independent common law duties, and that's what we have here, is an independent common law duty to put forward the consideration. John Paul Stevens: But that duty would not arise unless she'd signed a waiver. Carter G. Phillips: That-- Antonin Scalia: Mr. Phillips, your argument does not assume that the waiver is valid. Carter G. Phillips: --No. Antonin Scalia: It just assumes that the waiver was signed. Carter G. Phillips: Correct. Antonin Scalia: Isn't that quite different? Carter G. Phillips: Yes. You're right. Antonin Scalia: It's essential to your case that she signed a piece of paper. It is not essential to your case that that waiver be valid. Carter G. Phillips: That's correct. Indeed-- David H. Souter: But it-- Carter G. Phillips: --Indeed, we readily concede that it's an invalid waiver. It's just not void. David H. Souter: --It's essential to your case that she signed the piece of paper, and that the piece of paper has the effect that Justice Stevens has been positing in his question. The signature is not a mere incidental fact of history. It has an operative effect. Carter G. Phillips: I understand that, Justice... Your Honor, but the bottom line here, the problem with that is, is how far are you going to take statutory language to do damage to the common law, and basically what this Court-- David H. Souter: Or you might pose the question, how far are you going to allow a common law process in effect to thwart the statute, and if, in fact, we are correct in the intuitive assumption that has been suggested here, that in most of these cases in which this is going to be a serious question the worker is simply not going to be in a position to make the tender, then, in fact, on your theory the statute is a dead letter. Carter G. Phillips: --Well, let's step back for a second, because that is... there is no support anywhere, empirical, that I know of, that that's true. I mean, the principle of tender-back has been available for 200 years. There's not a shred of evidence anywhere-- David H. Souter: Yes, but the statute hasn't been. I mean, we're in this position because we've got a fairly unequivocal-looking statute, and the fact that the common law may have operated without the hindrance of statute for 200 years leaves us, I think, exactly where Justice Stevens is. Carter G. Phillips: --Well, no, but there have been principles by which one can void or declare unenforceable contracts for 200 years, and there has been a tender-back requirement that applies to that. Sandra Day O'Connor: But the tender-back-- --Well, what was the common law, though, if it was void? Was it the situation that the parties might be left where the law found them at the time it was voided? Carter G. Phillips: Yes, that is my general understanding. Sandra Day O'Connor: So there might not be a tender-back requirement. Carter G. Phillips: Right, if it... if-- Sandra Day O'Connor: If it were totally void. Carter G. Phillips: --That's correct, if it's totally void. On the other hand, there is not a shred of evidence that Congress intended to declare these totally void, for the reasons I think Justice Breyer's agrument describes-- Sandra Day O'Connor: But your argument depends upon our determining that the waiver is voidable. Carter G. Phillips: --That's correct, Your Honor. If it's voidable-- Sandra Day O'Connor: And if, in fact, it's void, we're faced with something else. Carter G. Phillips: --That's correct. Antonin Scalia: Why-- --Again-- Carter G. Phillips: I agree with that, because-- Anthony M. Kennedy: --In response to Justice Stevens' point that I still think we'd better get straight, if we're the trial court, you don't say that the suit cannot proceed because the money was not paid back. You say the suit was not... cannot proceed because (a) the money was not paid back, and (b) that allows you to plead the waiver. Carter G. Phillips: --That's correct. Anthony M. Kennedy: But the statute says the individual can't waive. Carter G. Phillips: But the point of the ultimate... the significance in terms of how the law operates, and it's true in Louisiana as it is in every other State, that is, if... you know, the fundamental principle is, you pay back as a condition. It is true that I... they... I have both components of it, but the part that precludes you from going forward and has precluded plaintiffs from going forward for 200 years is the failure to tender back the consideration. Antonin Scalia: Mr. Phillips-- --But not under Federal statutes like the FELA. Carter G. Phillips: Well, the FELA is exactly on point in my favor on this, Your Honor, because there the language of section 55 says as plainly as possible any contract or device to limit the liability of an employer is void, and it says it in so many words. John Paul Stevens: But that's significant in this case for another reason. This waiver is void only insofar as it waives FE... ADEA claims. It doesn't purport to make the entire document void. It just says it cannot operate as a waiver of this particular cause of action. So it's void pro tanto. Carter G. Phillips: Well, that goes back to Justice Scalia's question about severability. William H. Rehnquist: Your point is that the FELA language about void does not find a counterpart in the ADEA. Carter G. Phillips: Exactly. Congress had a model it could follow in this context. It had not only a statute that describes the matter as void, it also had a decision of this Court that enforced that statute in a way that eliminated the tender-back requirement, and Congress didn't follow that model here. John Paul Stevens: But there's a very good reason. It did not want to create the specter that Justice Breyer's example creates of creating everything void. It just said it's void insofar as it affects this particular claim. Carter G. Phillips: But it doesn't-- John Paul Stevens: It didn't say void. Carter G. Phillips: --It doesn't say that either. John Paul Stevens: It says, it shall not operate as a waiver of this narrow claim. Carter G. Phillips: Right. It seems to me Congress knows how to-- John Paul Stevens: But you can't give effect to that language, as I understand your position, and still say she has to tender back. Carter G. Phillips: --But Your Honor, if the position of the common law would have set aside the contract for reasons of coercion or duress or fraud or any of those other reasons, it's still, under those circumstances, no more than voidable, and so it would seem-- Ruth Bader Ginsburg: We have an example, Mr. Phillips of State law... of a State law that says may not waive, do you agree that that's... the essence of this case is for us to construe what those words mean, may not waive, and I take that to be an instruction to the employer as well as to the employee, so may I ask you to respond to the question that I put to Ms. Haynie? That is, one way to look at what Congress did, these words, may not waive, is to say, well, that's a condition, that whatever else this contract does, it can't do that. The employer doesn't have the power to put it in, the employee doesn't have the power to agree to it, so the contract... the employer knowing that full well, by the way... the contract then must be construed to waive the host of other claims that are waivable, and it's enforceable to the extent that it doesn't include the one thing that Congress says thou shalt not. So it's perfectly good to waive title VII, to waive a slew of other claims. Why isn't that the most sensible reading of the may-not-waive language? Carter G. Phillips: --Because the language has to be... I mean, you can look at may-not-waive on its own, but the truth is, it's a part of a provision that is designed to modify a very discrete element of the common law. It eliminates the requirement and the burden on the employee to come forward and prove fraud, duress, or the other conditions that would justify setting aside a release. Congress said, we're not going to put employees to that burden. We are going to eliminate that obligation. We're going to lower the burden that otherwise would exist. But beyond that, Congress didn't say, and in addition to that we mean to eliminate through the language, waiver, all other forfeitures of rights. Ruth Bader Ginsburg: No, just may not waive this one claim. Carter G. Phillips: But this one claim is-- Ruth Bader Ginsburg: And you think they can waive... they can waive it? Carter G. Phillips: --No, of course not. I'm not saying... they're not waiving by failing to tender back. That's not a waiver. That is, as this Court said in Olano, a forfeiture, just as she's not waiving if she fails to satisfy a statute of limitations or other restrictions on the ability to go forward. The fact that she doesn't do that doesn't trigger 626 as a set of conditions on that forfeiture, even though we might colloquially describe that as a waiver. That's not what Congress meant in 626. Antonin Scalia: Mr. Phillips-- Carter G. Phillips: The context is very narrow and specific. Antonin Scalia: --Mr. Phillips, I am surprised at your concession that if this contract is void the employee can keep all the money that he received. You say that that's the common law rule? I know that contracts that are void for reasons of public policy-- Carter G. Phillips: Right. Antonin Scalia: --If I hire you to murder someone and give you money, I can't get my money back, or-- Carter G. Phillips: That's what I thought the question-- Antonin Scalia: --if I pay you to fix prices or something like that. Carter G. Phillips: --Right. Antonin Scalia: But where a contract is void because the deal between the people is not... for example, void for want of consideration. I give you money, and you've made an illusory promise in exchange. Can I get... that's a void con-- Carter G. Phillips: No-- Antonin Scalia: --Can I not get my money back? Carter G. Phillips: --No, I was using void in the much more stringent term. Antonin Scalia: Well, I-- Carter G. Phillips: Which is the one I think that the question invited, was-- Antonin Scalia: --Well, let me put it to you squarely. Do you... are you concerned about the things that Justice Breyer is concerned about? Carter G. Phillips: --Of course. I think those are fundamental reasons why you would not interpret this language-- Antonin Scalia: Then you can't say that a void contract leaves everybody where they are. It depends on the basis for the voidness. Carter G. Phillips: --No, you're absolutely right. All I was answering was that as a matter of the... there are common law rules in which a particular finding of void leaves you without any ability-- Antonin Scalia: Not every void-- Carter G. Phillips: --No, you're right. David H. Souter: --And this is not one of those, so in this case I take it your position... is it your position in this case that if this Court holds that the entire waiver is void, that any employer can sue to get the entire... in effect can sue to rescind the contract? Carter G. Phillips: I would assume that that follows quite naturally. David H. Souter: All right. Now-- Carter G. Phillips: And frankly I haven't heard word one from the other side to counter that. David H. Souter: --My question is... and I don't know the answer to this. I wish I'd thought of it before argument, but my question, then, is this. If I can remember back to first-year contracts I thought rescission was an equitable remedy. Wouldn't the court, if I'm right, simply say to the employer, no, you can't get the entire consideration back because they waived a lot of... if this is true, you know, they waived other things besides the age claim, so I'll give you part of it back. I will come up... in effect, I'm going to do an intellectual... an equitable slice here. Is that possible? Carter G. Phillips: No, that... no, and I don't know who taught you first-year contracts, but my understanding-- [Laughter] David H. Souter: He was very good. The pupil wasn't, but the teacher was okay. [Laughter] Carter G. Phillips: But my understanding of first year contracts is that if you come forward you have to bring back the entire consideration, and that is clearly the law-- Stephen G. Breyer: Wait... wait. Can I just go right into that, because my professor was Jack Dawson, who was a fabulous first-year-- [Laughter] Any failing is one of my own memory. But the... my belief... I thought of this, is, there is no contract. We don't have to rescind it. There's a contract, but the provision at issue is void... it's not there. Forget the word void. Carter G. Phillips: --I would say voidable. Stephen G. Breyer: It's invalid. Carter G. Phillips: Invalid, un-- Stephen G. Breyer: It's gone. Pretend it isn't there. Carter G. Phillips: --Correct. Stephen G. Breyer: At that point, we have a human being called a worker who has some money that the employer paid him, and I would have guessed, because I don't remember the course that well, that he is entitled, the employer, to get back the money to the extent that the employee has been unjustly enriched, and I would think that he has been unjustly enriched only to the extent that he received money for a promise not to sue which is invalid, i.e., only in respect to the ADEA claim. Carter G. Phillips: He-- Stephen G. Breyer: And therefore, what happens all the time in unjust enrichment, we have difficult questions to look into, and therefore he wouldn't get back [dollars] 6,000 here. He would get back a proportionate share. No. The employee would have to give... why not? Carter G. Phillips: --Well, I mean, that is a rule that could have been adopted, but it is not the rule that was adopted-- Stephen G. Breyer: Where? Carter G. Phillips: --and I think the reason is is because these are difficult-- Stephen G. Breyer: Which rule wasn't adopted where? Carter G. Phillips: --The tender-back requirement requires you to tender back the entirety of the consideration. If you-- Stephen G. Breyer: Entirety of consideration for what? Carter G. Phillips: --For the severance that you signed. David H. Souter: Well, but severance only if the-- --But that's on the assumption that it's voidable, and the assumption of the question is that it's void. Carter G. Phillips: Well... no, we didn't... no, that's not true, Your Honor. David H. Souter: I'd-- Carter G. Phillips: The assumption was that it is unenforceable. Stephen G. Breyer: --All right, I'll take it... I'll go to voidable, and-- Carter G. Phillips: Right. [Laughter] So if I'm right about the assumption that it's voidable, and I think I was right about that, then the common law rule... because voidable's one that arises all the time. You get it in fraud and coercion, et cetera. It may apply to a part of the agreement, it may apply to all of the agreement. The rule of tender-back, as I understand it, and again I may not have had the greatest first-year law professor, either, but as I understood the rule is, you have to tender back the entirety of the consideration. Stephen G. Breyer: --The entirety of the consideration for? Carter G. Phillips: For the underlying dispute between the parties. Stephen G. Breyer: For that portion-- Carter G. Phillips: No, I don't think it is. Stephen G. Breyer: --In other words, if he was paid [dollars] 10 million as part of a golden parachute, and the entire... and just in that golden parachute contract, which is 48 pages long, there's only one line talking about a promise not to sue, he has to give back the whole [dollars] 4 million, or [dollars] 10 million? Carter G. Phillips: It seems like an unjust result, but as I understand the basic hornbook rule... I'm not saying there couldn't be exceptions that would exist, but if you're looking for the hornbook rule, and the rule as it exists in Louisiana, at least in cases that don't pose that question, it's pretty consistently that you bring back the entirety of the consideration, and let's be-- Antonin Scalia: Mr. Phillips, I used to teach first-year contract-- [Laughter] Carter G. Phillips: --I must say I'm happy I-- Antonin Scalia: He was not my teacher. [Laughter] And I don't know what the rule is generally about returning the whole thing or not, but I'm sure that where a contract contains several items, and the value all of those items depends upon future contingencies, you cannot await for... wait for one of those contingencies to occur, such as the bringing of a lawsuit, the discovery of a claim, and then say, well, you take back all the rest. Give me... you know, I'll give you back only the money I paid for the four horses that didn't win. Carter G. Phillips: --That's correct. Antonin Scalia: And the one horse that did win, I only paid 20 percent of the whole thing for that ticket. I am sure that a court would not allow that. I'm not sure you have to go as far as the general rule you're pressing on the court. Carter G. Phillips: No, and I don't mean to press that rule, and I ought to step back, because it seems to me what this tells us is you ought to look to the common law, and you ought to see how the States apply these principles rather than-- Antonin Scalia: I'm interested in that. Now, what are you asking... I'm not sure how much difference it makes in this case, but just as a matter of curiosity, I wasn't clear from your brief, are you asking us to look to the law of a particular State here? Carter G. Phillips: --No, although that might be a suitable vehicle for deciding this case, but as it happens the law in Louisiana is exactly the Federal common law, law rule, and so it doesn't make any difference. In terms of the basic principle, is there a tender-back rule-- Antonin Scalia: It's nice to know what we're doing. I mean-- --May I-- --Well, you don't think that Congress was enacting this law in the back... with the backdrop of State common law-- Carter G. Phillips: --Oh, absolutely. Sandra Day O'Connor: --to several questions-- Carter G. Phillips: Absolutely. Sandra Day O'Connor: --that it didn't cover in the statute? Carter G. Phillips: Absolutely it did, but the real question is, if you-- Sandra Day O'Connor: Well, do you think... are we really dealing here with whether we should construct some principle of Federal law to fill in a gap? Carter G. Phillips: --No. Sandra Day O'Connor: Is that what we're talking about? Carter G. Phillips: No. What we do have is a Federal question to decide where you look to the law, and my instinctive reaction is that you ought to look to the principles of State law and borrow those principles. In this particular case, however, it makes no difference, because Louisiana, like the law of every other... all 50 States, and if there were a Federal common law rule what would be the Federal common law rule-- Anthony M. Kennedy: May I ask-- --And you say that under the Federal common law... we have two cases. Case one, there's a release that says ADEA release, but it doesn't comply with the statute. Carter G. Phillips: --Right. Anthony M. Kennedy: The other case is a case like this in which, let us say, there might have been some substantial State law claims that were released as well as the ADEA claim. It also is void. You say the two cases are exactly the same. Carter G. Phillips: Yes. I think they should... well, they're not the same in... with respect to being able to waive the rights, sure. That... the statute takes care of that. But with respect to the obligation to come forward and satisfy the tender-back obligation as an independent, legal obligation that the State common law and, frankly, Federal common law applies, yes, those are exactly the same. John Paul Stevens: Mr. Phillips, can I ask you another question? I also took contracts in law school by the way. [Laughter] Supposing one reads the statute noting that it doesn't use the word void or voidable, they're simply saying that when you have a release which purports to release 19 different claims, and if one of those claims is an ADEA claim the release shall not be enforceable insofar as it purports to release that claim, because that would be a waiver... they don't even talk about void or voidable... why wouldn't that be a reasonable reading of this statute? Carter G. Phillips: Well, that doesn't answer the question, though. I mean, it's a perfectly reasonable answer. John Paul Stevens: What question doesn't it answer? Carter G. Phillips: It doesn't answer the question whether you have an obligation to tender back as a precondition-- John Paul Stevens: It says it shall not be enforceable, period, regardless of whether you're able or willing or not to tender back. Doesn't... isn't it perfectly clear what the mean... and isn't that a fair reading of the plain language of this statute? Carter G. Phillips: --No, because that gives a meaning to the word waiver that is much broader than that term is entitled to carry. John Paul Stevens: The meaning is, it shall not be enforceable as to that narrow claim. Carter G. Phillips: That's correct. John Paul Stevens: Yes. Carter G. Phillips: But it doesn't mean-- John Paul Stevens: And that's much broader than the statutory language that says you may not waive that claim. Carter G. Phillips: --But all that says is... and again, I think it's inappropriate to read that just as, may not waive. I think you have to read it against the backdrop of all of those conditions that are imposed, because all of the conditions that are imposed in determining whether a waiver is voluntary and knowing are all conditions that would go to the question of coercion, duress, and all of the other-- John Paul Stevens: Which, they put the employer on notice that if they want this to cut off the ADEA claim they must comply with these provisions, which your client didn't comply with. Carter G. Phillips: --That's correct. John Paul Stevens: Therefore, you have a perfectly valid document as to everything except the ADEA claim. Carter G. Phillips: Right. John Paul Stevens: So I don't understand why that doesn't fit the plain language of the statute. Carter G. Phillips: Because what fits the plain language, Justice Stevens, is, in the ordinary case she has an age discrimination claim. She's not happy with the release she signed. She's got [dollars] 6,000. It is her obligation, in order to get into court in the first instance, to show fraud, coercion, duress, or some other justification for setting aside the agreement. Congress stepped in... and this is an important right. It seems to be lost sight of in this context. Congress stepped in and modified that directly, saying, first of all, you don't have to satisfy any of those requirements that ordinarily entitle a contract to be respected. We're going to drop the barrier significantly, and second, we're going to impose upon the employer an ongoing obligation to prove that this was knowing and voluntary, a burden of proof that otherwise doesn't exist. By doing that... and if we don't satisfy those requirements, she is free to go into court against those common law doctrines that would clearly prevent her from going into court, and that's what Congress had in mind. John Paul Stevens: It's the last part that's not in the statute, that you're bringing in against those common law doctrines. You've just acknowledged that this modified the common law by saying you don't have those thresholds, you have a statutory threshold-- Carter G. Phillips: But I-- John Paul Stevens: --which your client did not comply with. Carter G. Phillips: --But... and I understand that, but then I go back to the Court's opinion in United States v. Texas, where it says, when Congress sits down and tries to modify the common law, we do not presume that Congress means to undo any broader than Congress states expressly in the language of the statute itself. Therefore, it's perfectly sensible to me under United States v. Texas to say 626(f) would get her into court if there are no other legal impediments to going into court, but it doesn't go that extra step and offer her an opportunity to avoid a forfeiture, a forfeiture of her right that arises as an independent common law doctrine. Ruth Bader Ginsburg: But if the common law in a State were not the unreasonable position that a may-not-waive provision leaves both sides powerless, so the contract is construed, as Justice Stevens suggested, to cover everything else that could be covered to dispose of anything the parties could dispose of, but just as though it weren't there, the thing that they can't dispose of, so the common law, let's, say, in New York or New Jersey was not as you described it to be in Louisiana, could we then say that for these kinds of claims the Age Discrimination Act is going to mean one thing in one State, another thing in another State, or that there will be the Federal common law so that you'd have the same rule in all the States? Carter G. Phillips: I think the farthest you can go with Federal common law is to deal with precisely how you analyze the precise waiver, because that comes from the statute, and if you have interstices within the application of 626(f), it seems to me those you would clearly fill in by reference to-- Sandra Day O'Connor: Well now, in Hogue, which you say doesn't directly apply here because in FELA Congress said it's going to be void, but nonetheless at the end of the day in Hogue the Court said we're going to require an offset at the end of the day. If the plaintiff recovers something under the FELA claim we'll offset whatever the employer already had paid. Now, what about such a provision? I guess the Court was crafting some principle of Federal law there. Carter G. Phillips: --Well, it seemed clearly to be crafting a principle of Federal law, and I'm not sure the approach the Court followed there would necessarily be the course they would follow here. Sandra Day O'Connor: Maybe it should do that here-- Carter G. Phillips: No. Sandra Day O'Connor: --and does that partially meet your concern? Carter G. Phillips: Well, obviously, as between having an opportunity to get some money back at the end of the day or not, undoubtedly my client would prefer that alternative, but the truth is, what we seek to have vindicated here is the common law rule, recognized in all 50 States and as a matter of Federal common law, that you must come forward with the consideration at the outset of the litigation. That-- Antonin Scalia: Mr. Phillips, to come back to Justice Ginsburg's question, what if there were different rules in Louisiana and New York, would a suit in New York come out differently? Carter G. Phillips: --If we're talking-- Antonin Scalia: If New York did not-- Carter G. Phillips: --If we're talking about no tender back requirement? Antonin Scalia: --No... well, a proportionate tenderback. We'll guess at some proportion. Carter G. Phillips: Yeah, my instincts are to say there ought to be different rules in those cases, that Congress-- Antonin Scalia: For different States. Carter G. Phillips: --Yes, because Congress would have looked to the State-- Antonin Scalia: What if New York had only adopted that rule for this statute, for an ADEA case, could it... could New York say, in ADEA cases, given the nature of this statute and what-not, we're going to adopt that rule, although in all other cases in New York we won't do it? Carter G. Phillips: --I mean, they... well... can they adopt that rule, that question is yes. Would that be preempted, the answer to that is probably no. The question is, would a Federal court be obliged to borrow that kind of a direct intrusion into the manipulation, or whether it would feel more comfortable saying that interferes with a Federal policy in a way that would require us to set it aside. That seems to me a tough question to answer in the abstract, but those are the legal principles that I think would apply-- Antonin Scalia: I think maybe we'd get into a lot of difficult questions if we say this is governed by State-by-State law. I-- Carter G. Phillips: --Well, but that's true in lots of Federal statutes, Your Honor, and at least with respect to 626 and the important elements of protection of Federal law that are embodied in there, I'm not saying you look to State-by-State law there. It seems to me clear the interstices of that provision, because it's designed to oust common law, you have to come in with Federal rules to do that. David H. Souter: --Could this-- Carter G. Phillips: But when you get out of that mold, then it seems to me you almost certainly in general look to State law, because that really will tell you the answer for most day-to-day primary activities-- David H. Souter: --Mr Phillips-- Carter G. Phillips: --and that's my personal preference. David H. Souter: --Could we solve the problem this way, by saying that the tender-back requirement can be looked at as essentially a remedial condition. We're not going to give a remedy when the person keeps 100 percent of what, in fact, he is claiming inoperative, and therefore we're going to leave the question of what has to be, in effect, tendered and ultimately paid back to the remedy stage. At the remedy stage, the Federal court does have fairly broad powers to craft a remedy without any violation of Erie, and therefore solve both the problem of state variation and the tender-back problem by saying it's going to be a remedial issue here. What's wrong with that? Carter G. Phillips: What's wrong with that is, that's not the scheme Congress adopted. William H. Rehnquist: Well, it's also, what if the plaintiff loses the suit? Carter G. Phillips: That's the other side of it. You may never get anything back. But the bottom line is that the tender-back rule is not a remedial rule. It is a rule that serves the ends of justice and fairness, but it does so substantively. It is a fundamental principle of contract law, it creates an independently recognized right, it is enforceable independently, and it is that right which she forfeited and which justifies the dismissal of her claim, and why the judgment of the Fifth Circuit should be affirmed. If there are no other questions I'll yield back my time. William H. Rehnquist: Thank you, Mr. Phillips. The case is submitted.

John G. Roberts, Jr.: We'll hear argument first this morning in Case 08-240, Mac's Shell Service v. Shell Oil Products, and the consolidated case. Mr. Lamken. Jeffrey A. Lamken: Thank you, Mr. Chief Justice, and may it please the Court: Congress enacted the PMPA to regulate two specific, but important, actions: Franchisors' termination of the franchise prior to the conclusion of the franchise term and the franchisors' non-renewal of the franchise relationship at the end of the agreement's term. The statute responded to complaints about franchisors exercising broad contractual rights to terminate the franchise relationship that was not addressed by -- for trivial violations or at will, that was not previously addressed by State law. But Congress left all other aspects of the franchise relationship to State law. Because the term "terminate", at the very least, requires an end, we and the United States agree that the First Circuit erred in upholding a so-called constructive termination, where the dealers continued to receive each element of the statutory franchise -- that is the premises, the trademark, and fuel-- Antonin Scalia: Mr. Lamken, am I wrong that you don't really object to the recognition of "constructive termination", if that phrase is used the way it is used elsewhere in contract law? Jeffrey A. Lamken: --We don't believe that in contract law constructive termination exists or in the analogous State franchise statutes that existed at the time that the Congress enacted the PMPA. Antonin Scalia: Gee, I thought -- I thought that if you had a lease and the landlord fails to provide heat, that you can move out and he will be deemed to have constructively evicted you. Jeffrey A. Lamken: That's right. The term "constructive eviction" we would -- we believe does exist, along with "constructive discharge". But the precise terms that Congress used here were U.C.C., in particular, and from State franchise statutes. We-- Ruth Bader Ginsburg: But that -- on that point, the government differs with you. The government says, as Justice Scalia suggested, there can be such a thing as constructive termination, and you must terminate. Jeffrey A. Lamken: --Yes. It's not so much that we differ; it's that our fallback position is the same as the government's, but they do not endorse our primary position, which is that there is no such thing as constructive termination. We believe it would be a mistake to recognize constructive termination in this context for three reasons: The first is the one I already mentioned, is that, in the most analogous context that existed at the time Congress acted, State franchise statutes that used terms like "terminate", "non-renew", "cancel", the terms that Congress used, there was -- the notion of constructive termination was frankly unheard of. Even today, under those statutes it is not a well-accepted concept, having been rejected by approximately half the States to have considered it. John G. Roberts, Jr.: Well, but all -- under one view, all the dealer is doing is mitigating damages. In other words, the deal is off. He's in effect been terminated. You're saying, well then, he has to pack up and leave. He can stay and still reduce the damages you are going to have to pay. Jeffrey A. Lamken: On the contrary, Your Honor. It's not so much -- there isn't a mitigation of damages, any more than an employee claiming constructive discharge, for example, would be mitigating damages by staying in her job. The settled rule, even when constructive claims are recognized, is that an employee claiming-- John G. Roberts, Jr.: Well, but there-- Jeffrey A. Lamken: --constructive discharge must move out, must quit the job, and the tenant claiming constructive eviction must leave the job. That is the nature, even where constructive discharge and constructive termination -- constructive eviction claims, are recognized. That is the settled rule. If you have something else, for example, there's a breach of contract, you can claim your breach of contract, and you can sue for damages while continuing to operate. But if you're going to claim that it wasn't a mere breach of contract, but in fact it was a constructive termination, that you've lost all the rights to continue to operate -- you may not get fuel, you may not get-- John G. Roberts, Jr.: --Well, you've lost the rights to operate at a particular level. In other words, if they say -- I don't know how the deal works, but, you know, you've got to charge $10 a gallon or, you know, you've got to close the convenient mart or whatever, you have lost the right to operate at that. The terms of the lease under which you were operating have been effectively terminated. That doesn't mean you can't still make money, and it doesn't mean you have to give that up, but-- Jeffrey A. Lamken: --Well-- John G. Roberts, Jr.: --but the deal has been terminated. Jeffrey A. Lamken: --I think, Mr. Chief Justice, you have confused breach with termination. The failure to give the rights on the terms provided in the lease or the agreement would be a breach of contract. But termination in contract law has long been understood to be something entirely different, which is the absolute refusal to provide the elements such that it's obvious to any observer that there is -- these elements will not be resumed. Corbin on Contracts, for example, describes termination as occurring "when either party, pursuant to a power created by agreement or law, puts an end to the contract. " "extinguishing future obligations of both parties to the agreement. " John G. Roberts, Jr.: What did Williston say about it? Contract-- Jeffrey A. Lamken: Pardon. John G. Roberts, Jr.: --What does Williston say about it? Jeffrey A. Lamken: Williston didn't actually address that. Corbin addresses it because he talks about the U.C.C., and the U.C.C. in turn says: "On termination, all obligations"-- Anthony M. Kennedy: Is -- is leaving the premises the sine quo non of a termination? Jeffrey A. Lamken: --It's the sine qua non of any termination under this statute, we would believe, if you recognize constructive termination. Anthony M. Kennedy: But aren't there -- aren't there some operators that own their own premises? Jeffrey A. Lamken: That's right. That's why it would have to be a determination of one of the three franchise elements. The way the statute's written, each of the different-- Anthony M. Kennedy: So only one of the three would suffice in your view? Jeffrey A. Lamken: --That's right. Each of these separate elements is treated as a franchise, and you can have the termination of any one of the three, and that is a termination of the franchise-- Anthony M. Kennedy: Just-- Jeffrey A. Lamken: --defined within the agreement. Anthony M. Kennedy: --Just testing your view, suppose there are two franchisees, and in each case the oil company reduces the amount they're paying for the gas. One franchisee can't afford it, leaves, quits -- termination. The other franchisee has a considerable amount of savings, and he protests, but he stays in business. Different result? Jeffrey A. Lamken: Well, in our view the result would be the same in both. Neither of those would be a termination, because-- Anthony M. Kennedy: No, no. In my first, he ceases to operate and he moves out of the premises. Jeffrey A. Lamken: --Right. In our view it has to be the franchisor that terminates, not the franchisee. But if one accepts the construct of the constructive termination, those would be different results, because, at the very least, termination requires an end to one of the franchise elements. And the individual who sues, having not -- having -- still receiving all the franchise elements, hasn't been terminated in any sense of the word. But the key thing is he actually has a breach of contract action. Raising the price unreasonably on an open price term has long, uniformly, comprehensively been addressed by State law, like U.C.C. 2-305. So the answer always is you can sue for breach of contract. And Congress wasn't worried about the fact there might be breaches of contract that ordinary contract remedies don't sufficiently remedy. Congress's concern was the exercise of contractually broad rights to terminate and non-renew the relationship. And-- Anthony M. Kennedy: If the government comes up here, as I think they will in a few minutes, and tells us that there is such a thing as constructive termination, do you know what hypothetical they give us to illustrate how that would work? I mean, it's their argument, but I'm curious. I will be curious to know how you would respond to that. Jeffrey A. Lamken: --Well-- Anthony M. Kennedy: In other words, there is a small universe of cases in which there is a constructive termination without leaving the premises, without severing the fuel, et cetera. Jeffrey A. Lamken: --I don't-- Anthony M. Kennedy: I just don't know what they're going to -- how you would respond to that? Jeffrey A. Lamken: --Yes. I think the government doesn't think that constructive termination extends to cases where you continue to receive all three franchise elements. They would believe that constructive termination requires at least one of those three elements to end, just as it does-- Ruth Bader Ginsburg: Your position is that the franchisor has to be the one to terminate? Jeffrey A. Lamken: --That's our position, yes. The franchisor has to be the one that exercises the termination. The notion of constructive termination, where the franchisee effectively abandons the premises in response to conditions it thought intolerable, that that is a constructive termination, and it was not a concept that existed under the most analogous statutes under the contract law from which the terms "termination", "non-renewal"-- Ruth Bader Ginsburg: So that the franchisor can do outrageous things -- triple the rent, double the price of the fuel -- and you would say, even so, there's -- that doesn't count as a termination because the franchisor hasn't terminated? Jeffrey A. Lamken: --That's right, and precisely because all those things were comprehensively and uniformly addressed by contract law, uniform contract law. The-- Anthony M. Kennedy: But then you'd just have a magic words test. Jeffrey A. Lamken: --No, it does not reduce -- I mean, because we -- we agree that there can be a termination by deed as well as by words. For example, the outright refusal to provide the fuel, provide fuel at all, would be a termination. You don't have to say we are hereby rescinding all of your rights under the contract. At some point, it becomes obvious, clear to any observer. Antonin Scalia: Yes, but what happens after that? Don't you take the position that the station owner then has to refuse all other elements of the contract, right? Jeffrey A. Lamken: If -- no, our position would be that where the station owner abandons in response, that would not be an actual termination. The government would take the view that that's a constructive termination. Antonin Scalia: Now, wait, wait-- Jeffrey A. Lamken: And the problem this gets you-- Antonin Scalia: --I thought you said there is a termination by the company if it fails to provide one of the three basic elements, right? Jeffrey A. Lamken: --Yes, that is correct, Justice Scalia. Antonin Scalia: That is a termination? Jeffrey A. Lamken: That is. Antonin Scalia: What response has to be made by the station owner? Anything? Jeffrey A. Lamken: Well-- Antonin Scalia: He can continue to take the other two elements? Jeffrey A. Lamken: --Well, it's particularly -- I mean, since the franchise is described as having three elements-- Antonin Scalia: Yes or no? Jeffrey A. Lamken: --He can continue taking the other two elements. Antonin Scalia: And there has still been a termination? Jeffrey A. Lamken: Well, there has been a termination of the franchise, which is defined as having three -- effectively three separate franchise agreements. Each of the different elements is treated like it's a different contract or a different agreement. So if you terminate one, there has been a termination of the franchise, because the franchise is defined to encompass all three elements. You've got to get-- Samuel A. Alito, Jr.: Well, what is the government's-- Antonin Scalia: Whoa, whoa, whoa, whoa, whoa. This is all one contract, isn't it? You are saying-- Jeffrey A. Lamken: --No-- Antonin Scalia: --You're saying you can terminate a third of the contract? Jeffrey A. Lamken: --Yes. Oftentimes these are in separate contracts, and in this case there are actually two contracts as opposed to three. And, yes, the way the statute's-- Antonin Scalia: And they are not contingent on each other, so that at any time the company could terminate one of them and stick the station owner with the other two? Jeffrey A. Lamken: --Well, one could imagine a situation where the trademark is withdrawn, but you can continue to be a lessee of the premises and market the fuel as an unbranded-- Antonin Scalia: Not continues to be. You must continue to be. Jeffrey A. Lamken: --Yes. But the contract could be written that way, Your Honor. Antonin Scalia: That sounds like a very strange way to write the contract. Jeffrey A. Lamken: Well, the way Congress wrote the statute was to define the franchise-- Antonin Scalia: I'm not talking about writing the statute. I'm talking about writing the contract. Jeffrey A. Lamken: --Well-- Antonin Scalia: Do you really think that that's how those contracts should be interpreted? Jeffrey A. Lamken: --Your Honor, sometimes they are, for very good reasons, written as independent contracts and sometimes they will be dependent contracts, depending on the nature of the relationship between the parties. Samuel A. Alito, Jr.: --Well, what is -- what is the difference between your understanding of an implicit termination, which is what I take it you have just been describing, and a constructive termination? Jeffrey A. Lamken: I think an implicit termination is one that's objectively viewed as ending the nature of the relationship of the parties. The contract's over. You no longer have the right. Fuel will not be coming. You may not use our trademark, or you may no longer use our premises. A constructive termination, as I understand the concept, could be something -- and this is the difficulty with the concept -- something like charging too much, an excessive price, which is a breach of contract, which would prevent a reasonable franchisee from continuing to accept that element. Samuel A. Alito, Jr.: So if the franchisor completely refuses to supply gas, that's an implicit termination? Jeffrey A. Lamken: That's as good as-- Samuel A. Alito, Jr.: But if he charges $1,000 a gallon, that's not a termination? Jeffrey A. Lamken: --Right. That's correct. And the difficulty is -- that would be a breach of contract remediable under State law. And the difficulty is, the moment you move this into the issue of price, suddenly the issue of price -- how much the franchisor can charge is a question of Federal law, in a statute that just talks about termination and non-renewal. John G. Roberts, Jr.: Well, you -- you put forth this dichotomy between breach of contract and constructive termination. I don't know why something can't be both. Jeffrey A. Lamken: Oh, in fact, in order to be constructive termination, something would have to be a breach of contract. I think the government would concede that. It has to be wrongful. For example, insisting on your ordinary contractual rights cannot be a constructive termination. It must also be a breach of contract, which is precisely why it doesn't add very much to -- it's unlikely that Congress intended to incorporate it, because those things that already breached the contract were already addressed by State law. There was no-- Ruth Bader Ginsburg: And could you, Mr. Lamken, straighten out what happened in the district court? Because I take it there was an award for breach of contract as well as one for termination and they were in an identical amount. So what happened to the breach of contract? Jeffrey A. Lamken: --Right. Ruth Bader Ginsburg: The award? Jeffrey A. Lamken: The actual damages here -- the amounts were overlapping. And so everything that they will recover, the amounts of compensation recovered for termination, are covered by the breach of contract claim. The difference between the two is about $1.4 million worth of attorney's fees and expert costs that are covered by the PMPA, but would not be provided under contract law. Ruth Bader Ginsburg: That's a rather significant difference. Antonin Scalia: What does the company have to do in your view to effect a genuine termination and not a constructive termination? Jeffrey A. Lamken: It may do -- one, issue the notice that's required, say that they are terminating, that this is -- in the words of contract, we are extinguishing the future operations; or they can engage in conduct which an objectively reasonable observer would have to understand gives that exact same message. Antonin Scalia: Why isn't that constructive termination? Jeffrey A. Lamken: No, it's-- Antonin Scalia: I mean, the conduct is you stopped sending me the gas you are supposed to send me. Jeffrey A. Lamken: --It's an actual termination. And the problem is, once you get into -- you get into constructive termination, you get the question of: Well, is it a constructive termination to raise the price by 1 percent or, as the case entirely involves market-- Antonin Scalia: Well, I don't understand what your number two consists of unless it consists of an act that the other side would call constructive -- or the government would call constructive termination. Jeffrey A. Lamken: --I think sometimes there is an unclear line between what some people call an implicit or informal actual termination-- Antonin Scalia: Yes. Jeffrey A. Lamken: --and what other people would call a constructive termination. Antonin Scalia: I think there's always an unclear line between those two. Jeffrey A. Lamken: But I don't think -- in the highly unusual case of $1,000 per gallon or things like that, that might be the case. But in the ordinary cases you see a 1 percent increase in gas prices in highly volatile petroleum markets. For example, in this case, where Shell raised its prices considerably but was still charging less than Exxon and Chevron, as the joint appendix 225 and 237 made clear, that's what you end up with as claims for constructive termination, if you recognize constructive termination. But Congress was worried about actual terminations, the exercise of contractual rights, broad contractual rights, to terminate that were formerly not regulated, not breaches of contract that were already regulated by -- comprehensively, by State law. If I may reserve the remainder of my time for rebuttal. Thank you. John G. Roberts, Jr.: Thank you, counsel. Mr. O'Neil. David O'Neil: Thank you, Mr. Chief Justice, and may it please the Court: The government agrees with Shell that, because there was no termination or non-renewal in any meaningful sense of the word, the dealers failed to state a claim under the PMPA. But, Justice Ginsburg, you are correct: The government parts company with Shell about what the term -- word "termination", does cover. Shell would limit the-- Sonia Sotomayor: When would you -- when would you measure your constructive termination? At what point would the statute of limitations begin to run or stop under your definition? David O'Neil: --When the franchisee is actually forced to end one of the statutory elements of the franchise in response to the franchisor's conduct. And that's the same test that would be applied in the constructive discharge or constructive eviction context. Sonia Sotomayor: So you -- you would say that the franchisee in this situation would have had to say: I can't pay the increased amount of rent without the subsidy; I'm going to stop. David O'Neil: That's correct. Sonia Sotomayor: I'm going to leave the premises. David O'Neil: That's correct. And that is the same rule that -- that would apply to any other-- Sonia Sotomayor: And what about the statutory right for a preliminary injunction? When would that right kick in, in this situation? David O'Neil: --It-- Sonia Sotomayor: Because the preliminary injunction stops the change of a contract price -- of a contract term, obviously, or it continues it. So when -- at what point would-- David O'Neil: --If a franchisee is faced with franchisor conduct that will leave the franchisee with no alternative but to abandon a statutory element, then the franchisee in that situation can go in and say that he is in the equivalent position to someone who has received a piece of paper saying: You are hereby terminated. And we would say that for purposes of seeking preliminary injunctive relief, that the franchisee can claim that he has been terminated for those purposes. Sonia Sotomayor: --And for -- if for whatever reason the judge says no at the preliminary injunction stage, that's the end of it; the franchisee just has to leave the premises? David O'Neil: Well, a judge would only deny a preliminary injunction if either there were no serious question going to the merits on the termination question or if the balance of hardships did not tip in the franchisee's favor. And then the franchisee would be in a very difficult position to claim that it was in some kind of catch-22, because by definition the judge would have found that the franchisor is in a worse condition by having to continue the relationship. Antonin Scalia: Well, the franchisor stops delivering gas. There are three -- three different obligations under the contract. What does the franchisee have to do to show that he has accepted it as a termination? Why does he have to leave the premises? That's another contract, is -- is what the-- David O'Neil: Justice Scalia, we -- we agree with Shell on this. The statute defines "franchise" by three elements: The supply of fuel, the use of the leased premises, and the use of the trademark. So someone who is still on a gas station premises that had the Shell sign above them but that had no fuel would not be operating a gas station franchise, and that would be a termination even if the franchisee did not actually pick up and leave the premises. So we would call that a termination. Samuel A. Alito, Jr.: If the conduct on the part of the franchisor is raising the price of gas, how does the factfinder determine whether it's sufficient to justify a constructive termination? And assume that the franchisee leaves -- the price of gas is raised, and this particular franchisee says: I can't operate if gas is sold to me at that price. What's the standard for determining whether there was a constructive termination? David O'Neil: The test is, first of all, whether the franchisor's conduct was wrongful -- in other words, in violation of the agreement between the parties; and whether a reasonable franchisee in those circumstances would have no alternative but to do what that franchisee did and to abandon the premises. Samuel A. Alito, Jr.: But what's a reasonable franchisee in that situation? Presumably some have a small profit margin; some have a bigger profit margin. Some could operate if the price of gas is raised; some could not. How is that to be determined? David O'Neil: Well, it's the same kind of question that juries ask all the time -- juries answer all the time in constructive discharge and constructive eviction cases. Indeed, we think it may be easier to answer that question in this context, because constructive discharge and constructive eviction will often turn on intangible psychological factors like the level of indignity that an employee would suffer before leaving his job. Gas station franchises are operated for -- to make money, and if it would be impossible for a franchisee to do that, then a reasonable franchisee in those circumstances would have no choice but to-- Samuel A. Alito, Jr.: You are putting a jury in sort of the situation of a -- of a rate regulator, aren't you, if you do that? David O'Neil: --No. Samuel A. Alito, Jr.: Was it a reasonable rate? David O'Neil: No. The question is whether it would be so intolerable -- not whether the rate is fair, but whether it would be so intolerable that a reasonable franchisee, a rational franchisee who is economically motivated, would have any alternative but to abandon it. And if the franchisee could continue in business, then it is not a constructive termination. The franchisee might have a claim for breach of contract, but as long as -- as long as it would not be a fitting response to actually abandon the premises, then that is not a constructive termination. Antonin Scalia: --Up -- up to that point, which supposedly a jury can find, the tipping point where a reasonable franchisee would abandon -- up until then, he has a contract claim, right? And then at that magical point, the contract claim is converted into a claim under the statute? David O'Neil: When-- Antonin Scalia: Why isn't the contract claim alone enough? David O'Neil: --Well, Justice Scalia, the whole point of the PMPA was that State law remedies were inadequate in that narrow context where the franchisee's very existence was threatened. Antonin Scalia: "In the context of termination" is what the statute says. David O'Neil: Yes, and under well-established background principles of the law that Congress was drawing on when it enacted the PMPA, termination was not limited solely to explicit termination. Samuel A. Alito, Jr.: Well, what are these-- Antonin Scalia: What background principles were they? I don't know about constructive termination. There was constructive discharge and constructive eviction. But-- David O'Neil: The relationship here is in essence one of landlord and tenant. And so it was natural for Congress to draw on that body of law, as well as the body of law governing the termination of other kinds of relationships like employment, for the meaning of the -- of PMPA. Ruth Bader Ginsburg: Mr. O'Neil, I thought that there were some cases, landlord-tenant cases, where the tenant is not required to leave the premises because, as awful as the situation is, the tenant has no place to go. David O'Neil: Justice Ginsburg, I am not aware of those cases, and I think the general rule is the one that -- that is -- is broadly stated in the cases, which is that if the franchisee -- excuse me, if the tenant wants to claim constructive eviction, they need to leave the premises. That is a bedrock principle of the law, that in order to claim constructive eviction, you actually have to leave. Stephen G. Breyer: So what happens -- in other words, suppose the landlord here really wants the guy to clear out, so he puts thumbtacks on the ground and horrible-smelling things all over. And then the franchisee leaves, but the franchisor says: Hey, I didn't want you to leave; that's your problem. I mean, that's constructive eviction or constructive termination? David O'Neil: That's exactly right, Justice Breyer. Stephen G. Breyer: Now suppose it's the same situation, but this person, the franchisee, being quite indefatigable and daring, finds a way of sneaking through the barbed wire that has been put up. And there's one pump they forgot, and there's a car that comes up, and he serves that person. Now is it constructive eviction? David O'Neil: No, and that's where-- Stephen G. Breyer: No? David O'Neil: --That's where an objective standard is important, because we don't look to the particularly clever-- Stephen G. Breyer: Objective? You'd say any sensible person would clear out immediately. There are lions and tigers roaming the gas station. [Laughter] David O'Neil: --That's exactly right, and that's why-- Stephen G. Breyer: And suppose he doesn't, though, that he doesn't clear out because he's not sensible, and he just desperately needs the money. David O'Neil: --If the franchisee does not leave, then he does not state a claim for constructive termination. And that is how the law operates in every other area in which this doctrine applies. So if a civil rights plaintiff claims discrimination on the basis of race or gender, she cannot stay in her job and at the same time claim that she was fired. I mean that's-- Antonin Scalia: --What do you do about the claim of -- of the -- the Petitioners that only one of the three contracts has been terminated? David O'Neil: --Well, as I said-- Antonin Scalia: The other two continue -- continue in effect? David O'Neil: --As I said, if one of the three elements of the -- of the statutory franchise has been terminated, then that is a termination under the Act. And that's how the Act defines franchise. It defines it by all three elements of the franchise, and so if one of them is terminated, that is a termination. John Paul Stevens: May I ask you -- we often talk about price adjustments as causing the disputes between the franchisee and the franchisor. To what extent in these sets of contracts is the right of the franchisor to adjust the price controlled by terms of the contract? David O'Neil: In general, these are open -- open-term price contracts, so that in these -- in these leases, for example, Shell had the right to set the price of fuel using a formula that it formulated in its discretion. John Paul Stevens: But is the formula required by the contract, or it's just its own discretion to use the formula? David O'Neil: It's just in its discretion to use the formula. John Paul Stevens: I see. David O'Neil: It's an open price term. But U.C.C. 2305 would imply in most contracts a -- a requirement that, where there is an open price term, there can't be unreasonable increases in the -- in the price. John G. Roberts, Jr.: Thank you, counsel. David O'Neil: Thank you, Mr. Chief Justice. John G. Roberts, Jr.: Mr. Farraher. John F Farraher Jr: Thank you, Mr. Chief Justice, and may it please the Court: In this case, the jury determined that Shell and Motiva engaged in conduct designed -- prohibited by the PMPA when they raised rent to force dealers out of business and convert their stations to direct operations. Nevertheless, Shell and Motiva argue that conduct designed to force the dealers out of business is insufficient to invoke statutory protection because the dealers were not deprived of any of the statutory elements of the franchise, and they remained in business for some period following the rental increase. If accepted, the practical effect of Shell and Motiva's position will allow franchisors to circumvent the PMPA and terminate franchises at any time, at any reason, by simply increasing the burden on their operations. Samuel A. Alito, Jr.: Now, these Petitioners remained in -- in business, is -- that's right? John F Farraher Jr: Your Honor-- Samuel A. Alito, Jr.: Did they make money during this period? John F Farraher Jr: --Your Honor, some of the Petitioners-- Samuel A. Alito, Jr.: All but one remained in business, isn't that correct? John F Farraher Jr: --Some of the Petitioners remained in business, certainly, post-elimination of the subsidy. The amount of time varied from person to person. Stephen G. Breyer: But if they do something reasonably designed -- a reasonable person would clear out, then why not clear out? John F Farraher Jr: Well, Your Honor, we have to take this in context. This is a -- these are small business owners who have invested their livelihoods in operating these franchises. They are trying to keep the business operational against perhaps all odds and perhaps-- Stephen G. Breyer: So what's the test? John F Farraher Jr: --Pardon me, Your Honor. Stephen G. Breyer: What's the test? Because if you say we are going to give an action to a person who didn't clear out, although the franchisor was trying to get him to clear out, you are then going to convert into a Federal action every single breach of contract or serious breach of contract that there is, which is the precise opposite of what Congress wanted when it passed this statute. So, what is your test as to we know that your case is the lions and tigers case? John F Farraher Jr: Justice Breyer, I believe that you hit on two points: First off, what is the test sufficient to invoke a constructive termination? And then, secondly, a point that the panel has addressed is whether or not abandonment of the franchise is required by the statute. Stephen G. Breyer: I wouldn't put it that way. I'd say constructive termination means you didn't terminate. Okay? That's what "constructive" means. It means you didn't do it. But sometimes a franchisor could act in such a way that the law should treat it as if he really did. All right? I can imagine a test for that. But we have the second problem here, is that even if the conduct was designed -- it's equal to terminating it -- this individual didn't leave. John F Farraher Jr: Well, Your Honor-- Stephen G. Breyer: So he was still there running the business. That's the part I would like to test for. John F Farraher Jr: --The test, Your Honor -- first off, with respect to whether the conduct is sufficient to force a termination, we believe the First Circuit's standard of materiality, which is effective to end one of the components of the statutorily defined franchise, is sufficient. With respect to the second part of your question, which is why didn't these dealers leave the station, and-- Stephen G. Breyer: No. I want to know your test for deciding -- even though the first part is met, how you apply it when the person didn't leave? I understand a person who left. He left. John F Farraher Jr: --Right. Stephen G. Breyer: The franchisor says: I didn't tell him to leave. And then you go look to see if the franchisor's conduct was so bad, it was the same as if you told him to leave. I've got that part. The part I don't have is what happens if he doesn't leave? Because one thing we know, the conduct wasn't so bad that this person left, because he didn't leave. That's that second part that's bothering me. John F Farraher Jr: And Your Honor, I'm not sure there's a test for that, but certainly the statute doesn't contemplate that the dealer would have to leave. For example, the injunctive remedy in the statute would allow a dealer to come in-- Stephen G. Breyer: I need -- the injunctive remedies in the State court? John F Farraher Jr: --They are different, Your Honor. Stephen G. Breyer: Yes, all right. But the reason I need a test is because the other side is saying: I know what the test is; the test is he has to leave. John F Farraher Jr: But that-- Stephen G. Breyer: So if you -- if you can show me some cases or a test or something where he didn't have to leave, even though the franchisor's conduct was so bad that a reasonable person would have left, then I'm on to something and I know where to go. John F Farraher Jr: --Your Honor -- and the point is that I don't think the franchisee need necessarily leave as contemplated by the statute. Anthony M. Kennedy: But Justice Breyer asked you for a test. Maybe this would help you. If you are the trial judge, how do you instruct the jury to determine when there has been a constructive termination? You have to have an instruction. John F Farraher Jr: And that-- Anthony M. Kennedy: I'm quite frankly amazed that you say you don't have a test. John F Farraher Jr: --Well-- Anthony M. Kennedy: You're coming up here and telling us that there's such a thing as a constructive termination, I mean -- but then you don't have a test for it? John F Farraher Jr: --We do have a test, Your Honor, and the test is whether or not the conduct has effectively eliminated an essential component of one of the three elements of the franchise. In this case, the First Circuit used a materiality standard that said that the lease was effectively ended. And in the context of the statute, the franchise as defined by the three elements, what the judge asked the jury to determine was, was the agreement that Shell entered into with these franchisees, with the essential component being the subsidy, was that effectively eliminated-- Samuel A. Alito, Jr.: What does that mean, "effectively eliminated"? The -- the First Circuit said, if "the breach of the lease was such a material change that it effectively ended the lease, even though the plaintiffs continued to operate the business. " --I have no idea what that means. What does it mean to effectively end the lease even though the lease continues? John F Farraher Jr: --Yes, Your Honor, Justice Alito. The statute contemplates a distinction in the relationship between a franchise, which is a set of contracts, and a franchise relationship. A franchise relationship continues after the expiration of the -- of the franchise. In this case here what the judge was charging the jury was -- what the question was, was the breach of the lease so material that it effectively ended the -- the agreement that Shell had entered into with its dealers, regardless of the fact that there was some relationship that continued with the parties afterwards? In other words-- Samuel A. Alito, Jr.: I know, but could you put that in somewhat more concrete terms, or can you not get any more specific than to say the lease is effectively ended? John F Farraher Jr: --We -- we think that that certainly was a sufficient standard. The circuit courts that have decided the issue have arguably employed a lower standard. They have talked about a breach of one of the franchise agreements being sufficient. But certainly we believe the First Circuit set an appropriate standard here with the materiality being-- Ruth Bader Ginsburg: Is there -- is there any area of the law, other than this one, if you are right, in which a termination includes a non-termination; that is, where a constructive termination includes situations where the operation continues? John F Farraher Jr: --Your Honor, certainly in our -- in our briefs we have referred to cases where constructive evictions in some settings will allow a tenant to stay in a premises. Certainly, the -- the majority of the cases decided in the discharge context or an eviction setting do require what you have suggested, which is an end in that the person leaves their employment or leaves their-- Anthony M. Kennedy: I may be incorrect. I -- I thought your friends for the Petitioners said there is no case in which there's a constructive eviction but where the lessee remains on the premises. Maybe I misheard. What is -- what is your principal case where the lessee remains on the premises, but there is a constructive eviction? John F Farraher Jr: --Justice Kennedy, on page 38 of the main brief in the footnote, we've cited two cases in New Jersey that allow for that proposition. Certainly, conceding that the majority of the courts have held that an -- the tenant leaving the premise in a constructive eviction setting is a necessary prerequisite to the claim. But we also recognize that-- Sonia Sotomayor: Can we -- can -- perhaps to bring this to more practical terms, you can walk through with me. I'm going to assume that if a franchisor changes a rent term and the franchisee refuses to pay, wouldn't the franchisor at some point give a notice of termination? What franchisor is going to sit through months and months and years of waiting for payment before kicking someone out? Is it -- is that rationally going to happen in any situation? John F Farraher Jr: --Your Honor, I would -- I would concede that in all likelihood, a franchisor would take some affirmative conduct, whether that be through a notice of termination or other step. But, yes, that would happen. Sonia Sotomayor: Or -- or, so that in almost all situations, at least with respect to the leased premises, in a breach of the leased premises, the termination would be -- would have to happen. John F Farraher Jr: Well-- Sonia Sotomayor: So why do we need to make a constructive eviction theory when, on a practical basis, there always in this situation has to be a notice of termination, at least with respect to the premises part? John F Farraher Jr: --Well, Your Honor, I -- I respectfully disagree. And I think the government and Shell would both concede that written notification, although required by the statute, is not necessarily always going to be given. Sonia Sotomayor: I know. But at some point the franchisor is going to have to take over the premises, either by trying to evict the person or locking them out. No -- no rational franchisor is going to raise rent, not have the franchisee pay, and fail to terminate the agreement. John F Farraher Jr: That -- that may be true, Your Honor. But in this case here what Shell's position is that they can -- they can -- and -- and put such intolerable conduct at issue, for example, raising the rent by several hundred percent, and that doesn't constitute a termination in any respect, even if -- even if the dealer were to leave. They argue that they must affirmatively withhold one of the statutory elements of the franchise from the dealer. Sonia Sotomayor: But the franchisee could always just stop paying the rent. He doesn't have to leave the premises. John F Farraher Jr: That's right, Your Honor. And again -- again the statute doesn't contemplate -- and -- and we have to, again, go back to the statute to recognize what the word "termination" means in the context of the Petroleum Marketing Practices Act. Certainly, Shell envisions that it means that there must be an end to the relationship. The Solicitor would concede, I believe, that the dealer could remain on the premises if there was such sufficient conduct to force them out of business that a reasonable person would think they have no ability to continue in business. But then the Solicitor imposes a condition that that franchisee must seek an injunction in order to have a claim under the Act. Our position is that the injunction is a form of a relief to protect the franchisee, to maintain the status quo. But the existence of a claim under the statute does not depend upon whether or not the franchisee seeks the injunction. Ruth Bader Ginsburg: And you didn't -- you didn't -- well, you sought an injunction, but Judge Zobel thought it was -- it came much too late. John F Farraher Jr: Your Honor, this -- this case has had a -- a long history to it. The case was initially filed as In the matter of Tsanikilides in the U.S. district court and assigned to Judge Zobel. Our prior counsel did seek an injunction. It's not clear on the record why that injunction was withdrawn at the time that the Tsanikilides case was dismissed. But then when the Marcoux or the Mac's Shell case was re-filed, it's correct that the dealers did not initially move for injunctive relief. And I think there were two reasons for that. Number one, it was always contemplated with Judge Zobel that this matter would proceed on an expedited basis, that discovery would lead to trial within a very short period of time. And, number two, even though there is a relaxed standard for injunctive relief, it was not clear that the dealers would be able to sufficiently meet their burden of proof to demonstrate to the court that an injunction should be issued. Again, we are dealing here in a practical effect of asking an oil company on a national basis to be enjoined from implementing this change in rent that they had brought about. Ruth Bader Ginsburg: Can you explain to me -- the question I brought up before -- what was the difference of the elements between the recovery that the jury gave for constructive termination and for breach of contract? John F Farraher Jr: The damages awarded were precisely the same, and the judge instructed the jury that, in fact, there would be no double recovery for the -- for the dealers here, that they would only recover once. The breach of contract was pled as an alternative theory. And the difference being that under the PMPA the dealers were also awarded their attorneys' fees and expert witness fees as well, which was a -- a number north of a million dollars. Stephen G. Breyer: The problem that -- that I see here is that if in fact you are right, that the -- the franchisor -- he breached the contract in your view. Did that breach rise to a termination? Did it rise to that level? Now, it's simply a question, since he breached the contract, of what court you are going to sue in, in your view. If this isn't a termination, you sue in State court; if it is a termination, you sue in Federal court. So, why -- why wouldn't we say, well, let him sue in State court, because if the person stays on the premises, everything becomes blurred. If you require him to leave the premises, then it's clear. If you were to let him stay on the premises and also argue it's a termination, we are going to have people coming into Federal court because they think there are more damages or something, I guess, or whatever reason. There will be a whole lot of unclear cases. So it's better to have a clear line. John F Farraher Jr: Well, Your Honor, again, the -- the reason that the dealers are coming to Federal court is because Congress enacted a statute to protect them-- Stephen G. Breyer: You are going to say they have a right to, but the other side thinks they don't. So it doesn't answer my question to just refer to the fact that you have a right to. My question is a practical question: What's the harm of sticking to the clear line that is normally there in other cases, in this case not depriving your client of a remedy at all? John F Farraher Jr: --Well, Your Honor-- Stephen G. Breyer: Just saying he goes to State court to get it. John F Farraher Jr: --I disagree with the Court that the client is not being deprived of a remedy. The remedy available in the statute in one part is injunctive relief. And while the dealers did not avail themselves of that in this particular case, the lesser standard and the lack of a need to show irreparable harm protects the franchisee under a Federal cause of action as distinguished from a contractual-based cause of action. John G. Roberts, Jr.: It's a million dollars, right? That's the difference. You get attorneys' fees and expert fees in the Federal action, and presumably you don't in the State action. John F Farraher Jr: We -- we -- we do in this case, Mr. Chief Justice. But in a case where a dealer comes to the court for relief and they have available to them the injunctive remedy, which does not require the irreparable harm component be demonstrated, it keeps the dealer in business. Certainly Congress intended to protect franchisees. They intended for competition in the marketplace to continue. And-- John G. Roberts, Jr.: Well, you have the option, right? If you accept the idea that there's a constructive termination under your view, even if you don't leave, I guess you have the option to stay in business or to leave at any time. John F Farraher Jr: --They certainly do, Your Honor. And -- and what happened here, obviously, is that the oil company imposed such onerous conditions that they expected dealers would leave. And, in fact, in Massachusetts within the time period of the elimination -- the formation of Motiva, within a 5-year period thereafter, the numbers dropped almost by 50 percent. Stephen G. Breyer: Well, you have a choice, you know. So, here's your choice, dealer: Stay there and sue in State court, and by the way, if they are charging you too much money under the contract and you are really hurting doing -- putting lions and tigers, whatever they are doing, go get an injunction in State court. See? They have injunctions in State courts. That exists. John F Farraher Jr: They certainly do. Stephen G. Breyer: Or, you have the other choice. Move out. John F Farraher Jr: Your Honor-- Stephen G. Breyer: Then if you move out, you can sue under Federal law, and you will get all these other things like the extra million dollars or something. So, move out and get the extra money, or stay there and sue under State court. Why is that a bad choice? John F Farraher Jr: --It's -- it's a bad choice, Your Honor, because it puts the dealer in a position of having to determine whether they should abandon their lives' works in order to benefit from a -- from a Federal cause of action. It's a bad idea because in the oil company's view, we don't get to make that choice, even despite their bad conduct unless they affirmatively stop providing us with one of the -- one of the statutory elements of the franchise. Antonin Scalia: Of course, your -- your approach puts -- puts the company -- the oil company in a very strange position. It doesn't know whether it has a contract or not. It -- the contract is terminated if your client says it's terminated. If he doesn't say it's terminated, it's not terminated. I mean, a very weird contract where you -- you're subject to the whim of the other party as to whether the contract continues or not. John F Farraher Jr: Your Honor, I think in the -- with -- again, with the injunctive relief available, a court could in the initial stages without the aid of discovery determine whether -- what the parties' obligations are during the course of the litigation. Here the dealers continued to pay the exorbitant rents that were being charged. So I would argue that the oil company was at no point in time harmed by virtue of the claim and then the proceedings that ensued. Antonin Scalia: Well, I don't know. They -- you know, if they knew that they were pulling out and -- and were claiming a termination, they might have been looking for somebody else to take over the franchise. John F Farraher Jr: Well, Your Honor, I think, as a practical matter, that would not have happened during the pendency of the litigation. So, again, to the extent that the -- an injunction had been sought, it would have helped to preserve the status quo, and in this case, again, here, the oil company was not in any way, shape, or form harmed by the dealers' pursuit of their claim because they continued to pay their rent, for those that remained in business, and those that went out of business obviously stopped. Your Honors, if I may turn to the other claim, which is also present in this case here, the claim of the non-renewal, both the government and Shell have suggested that the statute imposes some sort of a mandatory mechanism requiring the franchisor to give notice and then the dealer seeking an injunction within 90 days in order -- in connection with the non-renewal claim. I think, as a practical matter, we need to start with the proposition of what the jury found here, and the jury found that, in this case, the oil company added new terms to the lease specifically for the purposes of converting the franchise-operated stations to direct operations. They wanted the dealers out of business, and they wanted to take over operations of their stations. Had the oil company issued a notice of non-renewal when the parties didn't reach agreement on the terms of the agreement and this case had proceeded to a trial, there is no question, but that the result would have been exactly the same as the result is here. So the question we are facing is whether or not this mechanism that they have advanced as being the -- the only way, the exclusive remedy to proceed is, in fact, such, and we would argue that, in fact, it is not. Both the government and the Solicitor have conceded already that, while the statute requires notice in the normal course, that, certainly, notice can be side-stepped, and that conduct can give rise to notice. The next question then would be whether or not the dealer must seek injunctive relief as a prerequisite to maintaining a claim, and we argue that there is nothing in the language of the statute suggesting that the injunction is mandatory. Stephen G. Breyer: The theory of it is to protect the dealer, and the dealer here is faced with a company that says, we are not going to renew your lease. And they are unreasonable, and the dealers think. The statute says: Fine, don't renew it, okay? And, here, we'll give you a really good deal, so you won't be hurt. If you really think he's wrong, go sue for an injunction. And, second, we are going to give you extra bonus damages and attorneys' fees and all that stuff. So we protected you a lot. Now, why should there be a third thing that the statute says nothing about, which nobody's ever heard of? You just stay there, and you say: I'm going to just do business every day, just like nothing happened, and I write the words under protest. I mean, why would Congress have gone to all that trouble if that's all you have to do? John F Farraher Jr: Well, certainly, Your Honor, the language of the statute itself, while the -- while Congress provides for injunctive relief, which would be applicable equally to non-renewal claims as it would to termination claims, and while the statute speaks to notice, again, applicable to both, there is absolutely nothing in the statutory language that says this is a mandatory exhaustion of remedies. You must seek an injunction-- Stephen G. Breyer: No, but there is a purpose, and the purpose is that this system at least brings a judge in to see if that dealer really does have enough of a claim to get this relaxed injunction. But your system leaves it 100 percent up to that dealer. It could be heard of that dealer really doesn't have a good claim, and all he does is write the words "under protest". John F Farraher Jr: --Well, Your Honor-- Stephen G. Breyer: But you don't have a judge in it, at that stage, under your interpretation. John F Farraher Jr: --We think that our case, certainly, is distinguishable from the other two circuits that have addressed the issue. In our case, our dealers filed a lawsuit before they were presented with the leases for signature. They told the oil company that they were signing under protest, with a reservation of all their rights. It was the oil company that presented the leases to them on a take-it-or-leave-it basis. They said, there will be no negotiation of these terms, and you must sign, and if you don't sign, we are going to issue a notice of non-renewal. And then that pins the continuation of the dealers' business on the hopes that, even with a relaxed standard, a trial court is going to issue an injunction. And I certainly don't think that the statute or the Congress intended for the dealers to risk their businesses on the likelihood of getting the injunctive relief-- Sonia Sotomayor: Counsel, can I ask you, have you accepted the majority's reasoning in the Dersch case, the Seventh Circuit case, with respect to 2805(f)? You haven't raised that argument in your brief, so obviously, you have accepted their view that 2805(f) doesn't apply to the right to preserve your claims of improper-- John F Farraher Jr: --I'm sorry, Your Honor. Are you -- are you asking whether we accept the proposition that the -- the waiver of rights-- Sonia Sotomayor: --The Seventh Circuit said there's no implied right of action under 2805(f). John F Farraher Jr: --The Seventh Circuit, if I understand the case correctly, Your Honor, says that there's no implied cause of action under 2805(f) standing alone, that if a franchisor is insisting upon a term that includes a waiver, as in connection with non-renewal, then the Dersch decision in the Seventh Circuit would say that that might be actionable under 2802(b)(3) because they have introduced a term that is not agreed upon and is designed for the purposes of forcing the dealers out of business. I don't know that we have taken an opinion, whether or not there's an independent or implied cause of action standing alone under 2805(f). Sonia Sotomayor: Well, I would have thought your strongest argument would have been that, if we have a statutory right not to waive any of our Federal or State rights, if there has been a non-renewal on reasonable terms, there has been a breach of that obligation under the statute, then you had a right to be renewed under reasonable terms, and if they are giving you unreasonable terms -- "unreasonable" being defined within the statutory constraints -- they impose conditions that were imposed in bad faith to drive you out; those are the two conditions -- then you had a right to sue for that, non-renewal, because you had a right to renew on reasonable terms. John F Farraher Jr: Your Honor, I appreciate the -- the argument, and, certainly, I -- I think it is supportive of the dealers' claims in this case. Sonia Sotomayor: Well, but why didn't you make the argument in your briefs? That's why I was asking you whether you agreed with the Seventh Circuit's reasoning, and that's why you didn't raise it or -- what am I missing, that's making that argument not-- John F Farraher Jr: I think it-- Sonia Sotomayor: --one that you relied upon? John F Farraher Jr: --Your Honor, I can't answer, in hindsight, why we didn't raise it in the brief, but I do hear the position that you are advocating and think it is supportive of the -- of the dealers' position here. If there are no additional questions-- Anthony M. Kennedy: Well, just getting back to the constructive eviction, I took a quick look at the Marini and Ireland case that you cite, and I think the -- the Petitioner is correct. There, the tenant left part of the premises, and it was a constructive eviction as to that part. And it's a 1970 case. I just don't think you have many cases to help you in the constructive eviction area. It's kind of like the Holmes -- Sherlock, not Oliver Wendell-- [Laughter] --that says the dog doesn't bark. I mean, there is this huge body of landlord/tenant law, and you have just a few cases, and one of them, at least, doesn't appear to support you. John F Farraher Jr: --Your Honor, I -- I guess the -- the best response I have to that proposition is that we are not dealing in a traditional landlord/tenant context here. We are dealing under a statutory scheme that Congress enacted to protect franchisees, and we need to look within the meaning of the statute as to what termination means. I would also say that, in the landlord/tenant context, while the, perhaps, outdated notion of a constructive eviction would require the tenant to leave, cases seem to suggest, in a more modern sense, that the relationship between the landlord and the tenant is more of a contractual relationship in nature and, as such, allows for the traditional remedies available under contract law, in turning -- including self-help and rescission, et cetera. If there are no further questions, thank you very much. John G. Roberts, Jr.: Thank you, counsel. Mr. Lamken, you have 5 minutes remaining. Jeffrey A. Lamken: Thank you. I believe the debate in this case comes down to about three issues: The first is what is the relevant background principle we think Congress was looking to when it used the words "terminate", "non-renew", and "cancel" in the statute. We think the most analogous background principles they would have been looking to were contract law and the State franchise statutes that existed at the time Congress acted. I-- John Paul Stevens: But, Mr. Lamken, isn't it true that the statute, as a whole, expressed Congress's feeling that the common law rules were really not sufficient because, under the common law, of course, they could just non-renew because they wanted to take over the franchise themselves. And under the statute, that is not permissible. So there's a major change that's created by the statute, which suggests, to me, that maybe they didn't want to adopt all the preexisting common law. Jeffrey A. Lamken: --Right. There was a deficiency in the common law, but it was limited to one point, and that was termination and non-renewal. It wasn't that breaches of contract -- and as the government has explained, a breach of contract here is a precondition to a constructive termination claim -- were insufficiently remedied by State law. That was not the issue before Congress. The issue before Congress was that there was a contractual right to terminate at will or for trivial reasons or to non-renew for no reason or bad reasons even, and that is what Congress regulated, was terminations and non-renewals, in that sense, not breaches of contract that turned out to be really bad. The second thing is that because there was a comprehensive State remedy, there is particularly little reason to read this statute, this narrow statute, expansively, particularly given that this is an expressly preemptive -- a potentially conflict preemption statute, which could have the effect of displacing State law. When you're looking at a statute that's narrowly looking at termination or non-renewal, you would not ordinarily expand those terms to include really bad breaches of contract, because that has the potential to displace State statutory and potentially State common law under the preemption clause. And, finally, the last piece that comes up is the problem of evasion. The issue becomes sort of, well, people can just get around this statute if there is no constructive termination cause of action. And the answer to that is: There is no problem with evasion, because everything that's covered by constructive termination has to be a breach of contract. State law has this comprehensively covered. Increasing the price terms on an open price term? U.C.C. 2-305, under which plaintiff's recovered here, has that covered. So the -- extending the Federal statute really adds very little. And the second point is that even under the PMPA today, constructive termination has been rejected -- every -- except in the narrow area of assignments, under the theory that an assignment followed by a breach is somehow a constructive termination, a theory which I don't think we or the government thinks makes any sense. But that's where it exists. And yet there's no record outside the area of assignment of these grand evasions by boosting up all the prices in violation of the contract. And the risk of expanding constructive termination here is it projects Federal law into deciding whether or not it's going to prohibit particular price terms, particular conditions, particular things dealing with the rent and the premises, something that Congress stayed away from and left to the States. What Congress regulated here were the narrow issues of termination and non-renewal, not the substantive content of the franchise relationship. If there are no questions, we ask that the judgment with respect to termination be reversed and the judgment with respect to non-renewal be affirmed. Thank you. John G. Roberts, Jr.: Thank you, counsel. So the case is submitted.

John G. Roberts, Jr.: We'll hear argument first this morning in Case 06-1249, Wyeth v. Levine. Mr. Waxman. Seth P. Waxman: Mr. Chief Justice, and may it please the Court: This case concerns conflict pre-emption under the Supremacy Clause, and the conflict presented here is stark. Repeatedly over the years, the FDA approved Phenergan injection as safe and effective under all the conditions and methods of use described in the labeling, including what is referred to as IV push> ["] injection. Yet a State jury, evaluating the same risk that the FDA had considered, determined that the precise labeling that FDA had required Wyeth to use in fact rendered Phenergan "unreasonably dangerous". That-- Anthony M. Kennedy: Just at the outset, I'll just make one comment. You argue that it's impossible for Wyeth to comply with the State law and at the same time the Federal label. As a textual matter, as a logical matter, I just -- I don't understand that. I think I could design a label that's completely consistent and that meets the requirements that the Respondents wish to urge. Now, if you want to say that any alteration of the label violates Federal law, that's something else. But as a textual matter, as a logical matter, as a semantic matter, I don't agree with it. Seth P. Waxman: --Well, let me make sure, because I do think we do agree, and I want to make sure that I'm understood, Justice Kennedy. I think what you've articulated is the test which is, is it possible for a regulated party to comply at the same time with both Federal law and State law? In other words, could they use, as they were required by Federal law to do, to use the precise label that in approving the application in 1998 the FDA required Wyeth to use, and also use the label that the Vermont jury determined should be used, and that was stated in the complaint and in the opening and the closing a statement that you may not, should not use IV administration or IV push, in other words that you should contra -- the label should contra-indicate something-- Ruth Bader Ginsburg: Mr. Waxman-- Seth P. Waxman: --that-- Ruth Bader Ginsburg: --It didn't say -- it didn't say IV across the board. It said IV push is the claim, and that was -- as I understand this, the FDA was aware of the IV use and a certain risk. But did it ever, ever discreetly consider IV push versus IV administered the usual way by a drip bag? Seth P. Waxman: --Yes it did, Justice Ginsburg, and I want to cite you to the portions of the record that demonstrate that it did. But before I do so, I just want to underscore a point that I think is clear from both our brief and the Solicitor General's brief, which is that isn't the test of preemption in any event. The question is what did the labeling say and upon what information was the labeling decision made. But as to your particular question, there are -- first of all, there was testimony in the record from multiple parties, including experts from both sides, that the FDA was aware of all of the forms of administration and the risk, including IV push. Their experts simply disagreed with the judgment that the labeling requires. But most saliently, the labeling in this case, which is reproduced, in sort of microscopic size unfortunately, on the last two pages of the petitioner appendix and the last two pages of the joint appendix, have four separate reference that, as we explained in footnote 11 of our reply brief, only apply to IV push. There is a reference to the use of the Tubex system. That is a direct IV push system. There is a reference to rigid plungers and small-bore needles. Again nothing to do with drip. There is a reference to a maximum rate of administration. Drip is gravity. The testimony in the case was that an instruction that a particular rate of administration not be exceeded only referred to IV push. And finally, there are cautions on the label about how the ordinary aspiration of blood to see if its bright or dark, which is only done in the context of a needle that is being used to push something into a vein, is not reliable in the context of this case because Phenergan discolors arterial blood immediately. So the labeling plainly comprehended and warned about the specific risks of IV push administration, and that's not all. There is an advisory -- an advisory committee in 1976 was asked to look at precisely the risk of arterial exposure to Phenergan injection or any other irritant drug that is administered intravenously and it made specific recommendations, including recommendations that go directly to IV push. Samuel A. Alito, Jr.: How could the -- how could the FDA concluded that IV push was safe and effective when on the benefit side of this you don't have a life-saving drug, you have a drug that relieves nausea, and on the risk side you have the risk of gangrene? Seth P. Waxman: I mean, there was testimony -- Justice Alito, I can go over the testimony, but there is -- there was testimony in this very case about those very circumstances in which direct IV injection is indicated. And there is also test -- there is also evidence in the FDA record, including if you look at the 1987 correspondence that the FDA sent to Wyeth in the context of talking about what warnings had to be provided. The FDA provided Wyeth 20 citations to 20 medical journals that addressed this problem, and in footnote 13 of our reply brief we've cited the ones that specifically address the circumstances in which IV push administration is an important tool. The point here is, I think, that-- Ruth Bader Ginsburg: But that doesn't answer the question of was it -- the risk of gangrene and amputation is there. No matter what benefit there was, how could the benefit outweigh that substantial risk? Seth P. Waxman: --Justice Ginsburg, this is labeling that is directed at medical professionals. It is labeling that is directed at physicians, who have to be able to determine what method, what pharmaceutical and what method of administration to use, given the constellation of risks and benefits that a particular patient-- Anthony M. Kennedy: The FDA was never concerned with risks versus benefit? Seth P. Waxman: --The FDA -- well, the FDA certainly is. And the issue, Justice Kennedy, here is the FDA has to decide what information to provide to clinicians so that they can make judgments about what to use. And it -- what it did here is it provided ample, lavish warnings about the risk of intra-arterial injection and exposure of an irritant drug like Phenergan to arterial blood. It provided in the labeling to the physicians a cascading hierarchy of methods of administration. It said intramuscular injection is the preferred method. It then said with respect to intravenous injection that it is, as with any irritant drug, it is usually preferable to inject it into an IV infusion set that is known to be running properly, in other words where a line has already been established into the vein and the IV push occurs into the line that's already established. All that information was available to physicians and the FDA has to understand and does understand that in labeling to allow medical professionals to make their judgments, taking options away from physicians is not always better. It may not -- it may not even often be better. What the FDA has to decide in terms of telling physicians what's on the table and what's off the table and in terms of what's on the table what the relevant risks are is, is this ever -- would this ever be medically warranted? The testimony in this case and in the administrative record was yes, there are circumstances-- John G. Roberts, Jr.: I'd like you to address the distinction between the medical device area and the drug area because in the medical device area, of course, you have an express pre-emption clause, while here in contrast you don't. Seth P. Waxman: --Yes. I mean, I think, Mr. Chief Justice, you've identified the respect in which this is different than the medical device area. But for the salient purposes, I think the Riegel case directly points the Court to the nature of the determination that the FDA makes with respect to class 3 drugs. It goes through the same preclearance process. As we pointed out in our brief and as I think Justice Scalia's opinion in Riegel points out, the balancing time-intensive, data-intensive inquiry for medical devices was patterned after what is done for drugs, and it reflects a balancing of risks and benefits of the particular drug in light of the conditions and methods of administration prescribed in the labeling. John G. Roberts, Jr.: If that's true you would have expected the Federal Drug Act to have a similar express pre-emption provision. And one reason perhaps that it didn't is that when the Drug Act was passed you had an established background of State actions; when the Medical Device Act was passed you didn't. Seth P. Waxman: Well, let me address both the established background of State actions and then the pre-emption clause difference, if I may. The Respondent and her amici have identified 97 cases going back 150 years in which tort actions have been brought with respect to pharmaceuticals. Very few of those cases -- and they are recent -- are implicated by the rule that the Vermont Supreme Court applied in this case, which is where a fully informed FDA, informed of all the information that Wyeth had, approved a labeling standard, but a court looking at the same evidence can reach a different conclusion about what is on the label. The most -- those cases I believe all post-date Cipollone. Many of them postdate Geier. And by my count, there are fewer than 20 such cases out of all of the cases that have been decided and those issues -- that issue had never come up and never could have come up when Congress enacted the 1938 Act, because it was only the 1938 Act that established a drug-specific, preclearance regime, and really in 1962, in which the FDA was required not just to evaluate safety in terms of licensing the distribution of the drug, but to balance safety against effectiveness. And so the -- the constellation of common law cases -- I mean, let me just say we are -- we are not seeking here a rule of field preemption. We are not seeking to preclude tort remedies for conduct that violates Federal law. What we are saying here is -- and this goes, I think, finally to your point about the express pre-emption clause -- the presence of expressed pre-emption clauses or the absence, the presence of a savings clause or the absence, does not and cannot affect the operation of conflict pre-emption under the Federal Constitution. Now, members of this Court are concerned about applying a broad, vague, or free-wheeling analysis of implied conflict pre-emption, but this case is heartland. A jury was asked to look at the same information and conclude that the precise language that the FDA just didn't allow, the FDA required Wyeth to use, rendered that drug unreasonably unsafe. David H. Souter: Well, it required it because that is what the FDA had approved as a label. But as -- excuse me -- as I understand it, the -- the company, Wyeth, could have gone back to the FDA at any time and said, either based on experience or just our rethinking of the data that we have, we think the label ought to be changed to say IV push> ["]. Wyeth could have done that at any time, and it simply didn't do it. And the -- the reason I raise this is because it could have done it at any time, where, going back to Justice Kennedy's first question, where is the conflict? Seth P. Waxman: The liability in this case was not predicated on the fact that Wyeth didn't go to the -- remember, the FDA had approved this label two years before Miss Levine was injured. In approving the label, it rejected stronger proposed language that Wyeth had presented. There was nothing that was -- Wyeth was-- David H. Souter: But as I understand it, Wyeth's argument is not this argument. Wyeth is not saying the reason there is a conflict here is that we tried to give the kind of warning that the Vermont jury, in effect, says we should have given and the FDA didn't allow us to do it, so that, in fact, there is a conflict between a specific rejection by the FDA of the Vermont rule and the rule that the Vermont jury applied. Seth P. Waxman: --Right. David H. Souter: As I understand it, Wyeth's argument is: Whatever is on the label, in fact, is the standard of conflict. It doesn't matter whether we tried or could have tried or didn't try. You simply look at the label and you look at what the Vermont jury did; and if there is a -- if there is a difference between them, there is a conflict. Am I right about your argument? Seth P. Waxman: Yes, you are right. We -- we have both an impossibility form of conflict because, in the absence of any new information or new analyses of old information, we could not make the change in advance of getting approval. And we also have an -- an objects-and-purposes form of conflict pre-emption because the Vermont jury decided on the same information that the labeling that the FDA had approved and required was unreasonably unsafe. And we cannot have a world in which the very day after an intensive process -- the FDA says you may distribute this drug, but you must use this specific language -- either, A, manufacturers can just run in and change the label and ask for permission down the road; or, B, that a State jury -- let's take the easier case -- a State legislature or 50 State legislatures can decide: Because you could have gone back and asked, we can impose an obligation on you that you must have done so or must have changed the labeling. That just is inconsistent with-- David H. Souter: Well, is it -- is it strict liability or negligence? In other words, are they saying you must have done so, or are they saying because you could have done so and didn't you did not conform to the standard of care? Seth P. Waxman: --Either a negligence theory or a strict-liability theory would be pre-empted. May I reserve the balance of my time. John G. Roberts, Jr.: Thank you, counsel. Mr. Kneedler. Edwin S. Kneedler: Mr. Chief Justice, and may it please the Court: The State law duties on which Respondent's tort claims are based are pre-empted because they conflict with the FDA's determination that Phenergan injection is safe and effective under the conditions of use recommended or suggested in the labeling. Ruth Bader Ginsburg: Mr. Kneedler, at the outset, would you clarify something that is central, I think, to this case? Some of the briefs tell us that this represents a change of policy on the part of the FDA, that in fact the FDA once approved and said torts were -- tort suits were a helpful adjunct to the FDA's own efforts to protect consumers. They helped because they prodded manufacturers to -- to disclose risks that were either unknown or under-evaluated. Was that once the FDA's policy; and, if so, when did it change? Edwin S. Kneedler: The -- the FDA, to my knowledge, has never taken the position that -- that, as a general matter, a manufacturer may change a label without -- without the existence of new information that justifies a revision. The Respondents and the amici relied primarily on some snippets of rule-making proceedings and things like that in which FDA has referred to the existence of tort remedies. But we are not arguing for the proposition that tort remedies are -- are pre-empted as a general matter. Antonin Scalia: But when -- when would there be a tort remedy? What -- what situation would you envision? Edwin S. Kneedler: As Mr. Waxman mentioned, if -- if the State standard was the same as the Federal standard, there wouldn't be any conflict. And, for example, if -- and not to mention the fact if there was adulteration of -- of the product or if the -- if the product in the box was not the same-- Antonin Scalia: What if they found out about new information which would, if properly considered, alter what the labeling ought to be? Would there be a tort remedy for the failure to bring that new information to the attention of-- Edwin S. Kneedler: --Well, the position we are arguing for here would not cover that situation, but -- but there could be a further situation of pre-emption, if I could just explain why. I think-- Antonin Scalia: --You mean if you failed to provide the FDA the new information that you think negates the provisions on the -- on the label, you still couldn't be sued? Edwin S. Kneedler: --No. If you -- if you failed to provide it altogether, there would not be a -- a pre-emption defense if there were -- if your failure-to-warn claim was based on the new information that you didn't furnish. I was -- I was going to identify the situation where -- and this has come up in the antidepressant drug situation, for example, where there is evolving information. There has been a rule-making petition, in fact several over the years, to the FDA to change the labeling to warn against -- to warn about the possibility of suicidal ideation. And FDA has rejected that even though it's -- it's new information arising after the drug was approved. If the information is brought to the FDA's attention and FDA rejects the proposed change, then you would you have conflict pre-emption again. But if the information was never brought to the FDA's attention in the first place, then -- then there would -- it would be not inconsistent with Federal law to have a tort suit based on that. If it's -- if it's been proposed and rejected, then you're back with a conflict. Antonin Scalia: What if -- what if you brought it to the FDA's attention and the FDA just hasn't acted on it? You would be authorized to change the label on your own. Edwin S. Kneedler: You would be authorized, but if FDA then rejects -- rejects the labeling-- Antonin Scalia: I understand, but in the interim, you could -- could you be subject to a State tort suit for not changing the label when -- when you had the power to do so? Edwin S. Kneedler: --I -- if -- if FDA has taken no action at all, then I think you -- you could be. I this it's very likely that FDA would have acted by the -- by the time that -- I mean, I suppose there could be a window in there before it was approved. Ruth Bader Ginsburg: But why is that -- why is that likely, considering the huge number of drugs? I mean, one figure said that there are 11,000 drugs that have this approval. Is the FDA really monitoring every one of those to see if there is some new information that should change the label? Edwin S. Kneedler: If I could make two points about that: The first is, as I said, we are not arguing that there is pre-emption in a situation where there is new information that is not brought to FDA's attention. But the second point is that in the 2007 amendments to the Act, Congress recognized the difficulties with this and gave FDA important new enforcement tools and resources to go after the problem of things that arise after a drug is improved -- approved, that has given FDA the authority to direct a change in the label, which it did not have before. It has given the FDA the authority to order new clinical studies, and it has ordered FDA to set up a data system where it will get electronic notification of -- of adverse events. I -- I should point out in the -- in the one year since these amendments were passed, FDA has, I -- I think, in 21 instances ordered clinical trials. In four instances it has ordered a revision of labeling. It has hired 430 new employees in the Center for Drug Evaluation and Research to address the post-marketing situation. Stephen G. Breyer: Why isn't -- why isn't the fact that some certain number of people are getting gangrene, why isn't that new information? Edwin S. Kneedler: The risk -- the way FDA -- and this is set forth in the changes being affected regulation amendment that was-- Stephen G. Breyer: That was all passed long after the events here took place, I think. Edwin S. Kneedler: --But -- but-- Stephen G. Breyer: So at the time, you read the regulation, I think a person would think that he was free drug manufacturer if he learned something new to strengthen -- strengthens the contraindication, put it in. Edwin S. Kneedler: --As FDA explained in 2008, when it promulgated this regulation, it's been FDA's long-standing interpretation that only new information would justify a change. Stephen G. Breyer: Why wouldn't that be new? Edwin S. Kneedler: New information means new information about a risk that is greater in severity or frequency. If you have-- Stephen G. Breyer: If you get a certain number of cases. Edwin S. Kneedler: --There is no claim -- there is no claim here that either of those -- in the record in this case, that either of those was true. Stephen G. Breyer: That's because nobody brought up this new information point. So if nobody brought up the new information point at the trial and if the burden is on the manufacturer to show that it's pre-empted, isn't that the manufacturer's fault, because if you simply read the regulation, you wouldn't find any of all this complicated stuff about certain kinds of new information. Edwin S. Kneedler: That's a legal question not a factual one. And it was argued to the Vermont-- Stephen G. Breyer: Yes it's a legal question. Edwin S. Kneedler: --It was argued to the Vermont Supreme Court, and I don't think -- I don't think that Respondent -- Respondent has noted that it wasn't raised, but I don't think it's argued that it's waived. And I think for the Court to fully address this situation, I think it would be good to take into account FDA's -- certainly going forward that is the regulatory regime-- Stephen G. Breyer: But we are not making an advisory opinion. We are deciding this case. And this case here you say new information of a certain kind would be okay, nobody argued it. You read the reg, and it doesn't seem to make all these distinctions end of case. Since the manufacturer has the burden of going into this, which apparently it didn't do. So, now we have decided this case, and we go on to the next one. Edwin S. Kneedler: --Okay. If I could make just one further-- Stephen G. Breyer: What's your response to that? Edwin S. Kneedler: --If I could make one further point about that. And that is the -- this act sets up a prior approval situation. In other words, Congress wanted the FDA to look at the drug in advance, balance -- against benefits as this Court said in Rutherford, and -- Brown & Williamson, strike a balance and approve it. It would be fundamentally inconsistent with a prior approval system to have a regime in which the very next day State law could require the manufacturer to change the very labeling that FDA has struck a balance-- Anthony M. Kennedy: I don't understand what we're talking about here. The new information was not brought up by either side-- Edwin S. Kneedler: --Right. Anthony M. Kennedy: --showing increased frequency or increased severity? Edwin S. Kneedler: That's correct. Anthony M. Kennedy: Right? And supposedly, it was burden of the drug company to show-- Edwin S. Kneedler: No. The drug company says it's pre-empted, and the only escape hatch from the preemption is new information. Anthony M. Kennedy: --You agree with -- you agree with Mr. Waxman that the FDA specifically addressed the risks and benefits of IV push as opposed to the risks of arterial exposures? Edwin S. Kneedler: It specifically addressed in the labeling that the FDA approved, and I think that's all that needs to be looked at in -- it's just as in Riegle, where the preemption turns on that device, in that case, and the labeling that was presented. Here the preemption turns on the labeling and the drug that was presented. And FDA regulations prohibit the change unless there is new information. If I could make one other point about Riegle. Riegle does contain an FDA -- an expressed preemption provision. But the reason why this Court found preemption in Riegle under that provision is very instructive here, because as Mr. Waxman pointed out, the premarket approval process in the two situations are essentially the same. And what you had on the one hand was Federal action having the force of law like under the file rate doctrine or some administrative determination having the force of law approving a license or -- or a drug, a legal prohibition against changing that without new information. And on the state side, you have a rule of law under the common law of torts imposing a different obligation. Those are squarely termed-- Anthony M. Kennedy: You're talking about changing but you can supplement without changing the label. Edwin S. Kneedler: --No -- no, you cannot. Any -- any change in the wording of -- of the label is a change that requires FDA approval unless it is-- Antonin Scalia: You can supplement only when there is new information? Edwin S. Kneedler: --When there is new information and even then, it has to be in the form of a new drug -- a supplemental drug application to the agency. John G. Roberts, Jr.: Thank you, Mr. Kneedler. Mr. Frederick. David C. Frederick: Thank you, Mr. Chief Justice. I'd like to start with regulation 201.80, which is set forth in an addendum to our brief at 19-A. The second sentence of which reads: "The labeling shall be revised -- this is after an applicant, a sponsor has obtained approval of the drug label --. " it shall be revised to include a warning as soon as there is reasonable evidence of an association of a serious risk with a drug. A causal relationship need not have been proved. "The testimony at trial established that Wyeth knew or should have known from at least the '70s that there was a significant issue concerning IV push risks. " "And, Justice Alito, in answer to your question-- " Antonin Scalia: Excuse me. Those -- those risks were set forth on the labeling approved by the FDA. Surely that sentence means it shall be revised to include a warning as soon, as soon as there is reasonable evidence of an association of a serious hazard that the FDA has not considered. And that is not already addressed on the labeling. I mean to read it as -- as opening up stuff that's already been considered by the FDA would -- would -- would make a -- a mush out of it. David C. Frederick: --FDA never considered any comparative risks of IV push versus IV drip. The evidence on this was clear. Wyeth had a-- John G. Roberts, Jr.: What about the various portions of the label in the record that Mr. Waxman addressed and Mr. Kneedler, representing the FDA, said they specifically considered IV push risks? David C. Frederick: --What the evidence showed was that FDA certainly was aware that there are different forms of intravenous administration of drugs, but it never considered that the risk of IV push so greatly increased the risks of a catastrophic injury-- John G. Roberts, Jr.: Well, they have to. When they determine that it's safe to use it under those circumstances that necessarily includes a consideration of the risk. People can say it's safe for you to walk down the sidewalk. That doesn't mean there is no risk that you get hit by lightning or something else. It just means in evaluating them together, they determine that it's worth the candle in particular cases where a physician determines that that's the indicated method. David C. Frederick: --Mr. Chief Justice, here there was no way FDA could have made this determination because the risks of IV push are so catastrophic compared to the benefit which the testimony at trial showed-- Antonin Scalia: Well, you're just contradicting the labeling. The fact is they could not have approved that label unless they made that determination. Now, if you're telling me the FDA acted irresponsible -- irresponsibly, then sue the FDA. David C. Frederick: --No. Antonin Scalia: But the labeling made it very clear that the preferred method of administering this medicine was -- was -- was muscular and -- and that there were serious risks involved in -- in the IV push. Moreover, your client didn't follow the labeling or your client's physician didn't follow the labeling prescription for IV push, did he? David C. Frederick: The testimony at trial showed that the doctor acted with a standard of care that was not negligent, and that was based on expert testimony. Antonin Scalia: No. Wait, wait. He administered a -- a level of the drug that was vastly in excess of -- of -- of what the labeling said could safely be used for IV push. David C. Frederick: And the testimony at trial showed that that had no bearing on her injury, because-- Antonin Scalia: Had no bearing. Are you serious? David C. Frederick: --Yes. It did. The testimony at trial from Dr. Green disputed that point. Both courts below rejected that notion. But the idea that a label is set in stone for all time misunderstands the way the process works. When FDA approves a drug with a drug label, it does so on the basis of small clinical trials with very few, sometimes as few as a thousand or a couple of thousand people. And when the drug is marketed and goes to lots and lots of people that are not healthy, that are in different conditions, new problems arise. That's why the general -- the GAO found that over 51 percent of drugs have adverse drug events not known. Antonin Scalia: You established that there were new problems? I mean, if there were new problems, then -- then they could have simply supplemented the labeling. But did you establish that there were problems that had not been considered already by the FDA? I mean, the labeling says, you know, that this is dangerous to use -- use IV push. It made it very clear that it's dangerous. David C. Frederick: That was not our burden and that was not how the testimony came in at trial. But as the amicus brief by Dr. Budhwani, et al. at pages 54 establishes had Wyeth been a reasonably prudent manufacturer over the years, it would have known that the risks of IV push so far outweigh any bearing negligible benefits, that it would have offered a stronger instruction, it would have moved to revise its label either with FDA approval or-- Antonin Scalia: It proposed a more restrictive label to the FDA, didn't it? And the FDA said, no, you use this label. In other words, it's -- what you're saying was not its call. It was the call of the FDA. David C. Frederick: --Footnote one of the Vermont Supreme Court's opinion disputes that point, because it says the label was different. And if you compare what was submitted to FDA versus what FDA looked at, there was no reference to IV push risks creating the risk of catastrophic harm versus negligible benefits, Justice Scalia. John G. Roberts, Jr.: I thought your -- I thought your theory was that this type of administration of the drug should not be allowed. The label should not say here are the risks, here are the benefits. You -- your jury theory was you cannot suggest in the labeling that physicians should have this available. David C. Frederick: Well, as the jury was instructed, Mr. Chief Justice, and the evidence came in at trial, it was -- it was somewhat larger than that in the sense that a State failure to warn claim doesn't prescribe particular wording. It simply says that the existing wording is inadequate. And if the case comes to this Court-- John G. Roberts, Jr.: Well, it simply says that if you go ahead with the label like this, you don't have to pay $10 million whenever it goes wrong. That's having the effect, as our case has established, imposing a limitation on the label. David C. Frederick: --But the label itself is not set in stone, Mr. Chief Justice. Manufacturers change their labels all the time as new drug risks come in. And the regulations provide that the manufacturer is responsible not only for the label, but for monitoring post-market information. John G. Roberts, Jr.: So your case depends upon us determining that the risk at issue here that was presented to the jury was a new risk that the FDA did not consider? David C. Frederick: No. It's not dependent on that at all, Mr. Chief Justice. It is dependent on a finding that the manufacturer had a duty of due care and it didn't live up to that. Antonin Scalia: What if it referred to new drug risks, then, in your preceding sentence, where you are saying manufacturers change it all the time as new drug risks become apparent? David C. Frederick: The testimony-- Antonin Scalia: What you mean is whether or not new drug risks become apparent, they have to change, right? David C. Frederick: --The question is what does the manufacturer know and when did this manufacturer know it? And here, the testimony at trial showed that an antinausea drug called Vistrol -- this is at page 79 of the joint appendix -- caused amputations in two cases. Pfizer voluntarily removed IV push injection for that drug. This was information in Wyeth's files; Wyeth knew this from the 1970s; and yet it did nothing to change the Phenergan label. John G. Roberts, Jr.: Suppose-- David H. Souter: With respect to the obligation in this case, may I go back to an earlier question that Justice Scalia asked you? And I -- I -- if you responded to this particular point, I didn't get it. He said that he understood that Wyeth had in fact asked the FDA to modify the label, at least to strengthen the warning against IV push, and that request was -- was denied, so that in fact that -- that created the conflict. What is your response to -- to the factual basis for that -- for that comment? David C. Frederick: Well, the FDA itself said in the Solicitor General's brief at page 25 that it was deemed to be a nonsubstantive change. These were changes that were being made-- David H. Souter: Well, regardless of what their, their semantic label was, was there a request at least to -- to beef up the warning against using IV push? And if so, did the -- did the FDA reject it and say no, you can't do that. David C. Frederick: --It was a different label and it was a different strength of warning, but it didn't have to do with the relative risks and benefits of IV push versus IV drip. David H. Souter: What would it-- David C. Frederick: That was the crucial point. David H. Souter: --What would it have said? David C. Frederick: This is set out at footnote of the Vermont Supreme Court opinion, which is set out in the joint -- in the petition appendix at pages 4a to 5a, and it goes on for two pages. But essentially what the -- what the comparison was was talking about the preferability of injecting it through the tubing of an intravenous infusion set that is known to be functioning satisfactorily, which would suggest to most medical practitioners and was it the case in the trial testimony given by Dr. Green below, that that would suggest an IV drip, not IV push. When FDA then rejected it for -- for nonsubstantive reasons, it went back to the prior verbiage which is set out at 5a, which simply says if you put this drug in an artery the concentration can be such that it will -- it will cause harm. But our point is that these kinds of risks come to light frequently with drugs that are on the market and the need to revise these labels is the duty of the manufacturer. Section 314-- David H. Souter: But you -- you also, to be clear on it, as I understand it, you do not accept the position that the FDA puts forward, that the obligation depends upon the accrual of new information. David C. Frederick: --Well, how you-- David H. Souter: Any information, new or old, as I understand it, on your argument raises this obligation to -- to act. David C. Frederick: --I think that the dispute is -- is what constitutes new information, because we don't take issue with the notion that new information can be new analysis of prior submitted data; and what the amicus brief by Dr. Budhwani et al. Points out is that there was a lot of unpublished information about the harms of Phenergan that was known to Wyeth or should have been known to Wyeth in the '80s and '90s that would have justified a change under the CEE regulations. Samuel A. Alito, Jr.: Well, suppose the record showed that the FDA clearly considered whether IV push should be contraindicated and concluded it should not be and prescribed the label that now appears on the drug; and then, as some of the other arguments have referenced, the very day after the FDA made that ruling, Ms. Levine was injured. Would you still -- would she still have a claim in your view, a non-pre-empted claim? David C. Frederick: That be pre-empted. And the reason it would be pre-empted is because the FDA would have considered and rejected on the basis of the same information or similar information the very duty that underlies the State claim. Samuel A. Alito, Jr.: So your argument is -- is predicated on the existence of new information. If there was no new information, then the claim is pre-empted? David C. Frederick: No, it's -- well, it is not -- I think there are two things to keep analytically clear. One is can the manufacturer come forward with a label change on the basis of -- of information that is assessing the risk or reassessing the risks, and under the -- under the regulations it's absolutely clear it can do that before FDA has approved it. It is subject to FDA disapproval. Antonin Scalia: And -- and is entitled to amend the labeling automatically. David C. Frederick: That's correct. Antonin Scalia: I envision a -- a scheme under which manufacturers who are worried about jury liability of -- of the magnitude that occurred in this case saying, gee, why should we take chances? And every time there is a jury verdict on some -- on some other -- some other ground not -- not prohibited by the label, they just add that to the label; and they submit it to -- to the FDA and the -- and until -- unless and until the FDA conducts an investigation and disapproves that label, that labeling change occurs. How many -- how many -- you mentioned a number of -- of times that -- that label alterations are -- are proposed. I mean, this is going to be a massive operation for the FDA. David C. Frederick: Justice Scalia, that would promote public safety, because it puts into the hands of doctors the information that enables them to make individualized risk determinations. Antonin Scalia: It would not promote public safety if you believe that the name of this game is balancing benefits and costs. David C. Frederick: And Congress said-- Antonin Scalia: And if you are simply eliminating certain drugs which people who -- who have real desperate need for could -- could be benefited by, you're not benefiting the public. David C. Frederick: --No, and in fact that's contrary to the policy determination Congress made. In the misbranding provision, which is Section 352(f), it calls -- that the label is misbranded unless its labeling bears adequate directions for use and such adequate warnings against use in those pathological conditions or by children where its use may be dangerous to health or against unsafe dosage or methods or duration of administration or application. Antonin Scalia: And that applies even if it's approved by the FDA? David C. Frederick: Yes. It's misbranded. And in the 1979-- Antonin Scalia: You're saying FDA approval doesn't -- doesn't give you any protection at all? David C. Frederick: --It -- it provides you a basis for marketing your -- your product. Antonin Scalia: But -- but -- but the marketing may be a misbranding? David C. Frederick: In -- the FDA itself said so in 1979 in 44 Federal Register, which we cite in our brief, that even an original label may be misbranded if the drug manufacturer subsequently learns that it was not adequate for the safe use of the drug. Antonin Scalia: Well then, gee, then all of the qualifications you were making earlier about whether it's new information or a new assessment, that's irrelevant. David C. Frederick: No, it's-- Antonin Scalia: You're saying whenever it's unsafe, whatever the FDA has approved, you have a lawsuit. David C. Frederick: --No. What I'm saying is that the information developed after the original label is approved, and it is not a floor and a ceiling-- Antonin Scalia: There -- there was nothing about new information in what you just said. You said it's misbranded if it's not safe, new information or not. David C. Frederick: --And that's-- Antonin Scalia: Is that -- is that -- is that your position? David C. Frederick: --Our position is that the duty is on the manufacturer to make a safe label, and if the label is-- David H. Souter: But getting to Justice Scalia's point, as I understand your answer to an earlier question, on the day that the FDA approves the label, if there is no further information indicating danger, then any liability that is based upon what the -- the kind of information that the FDA knew would be pre-empted. The only time -- you're saying pre-emption does not occur when there is -- forget the word FDA was told, whether it's 1,000 years old or discovered yesterday; and if there is liability predicated on further information beyond what the FDA was told, then there is not pre-emption. Is that a fair statement of your position? David C. Frederick: --That's fair, but let me just make clear that our test would require the FDA to consider and reject the specific basis on which the State law-- Antonin Scalia: If that's a fair statement then you have to retract your -- your earlier assertion that whenever it's not safe it's misbranded. I mean-- David C. Frederick: --I'm not going to retract that, Justice Scalia. Antonin Scalia: --which is it? Whenever it's not safe, it's misbranded, or what you just responded to Justice Souter? David C. Frederick: The basis -- the basis of the FDA's approval is on the basis of limited information, which Congress has said for public safety reasons -- we are not doing a balancing here; we are doing this for public safety -- And if the label is not adequate for public safety it is a misbranded drug. David H. Souter: Okay, but if -- if the so-called misbranding is determined to be misbranding, based upon information which was given to the FDA, as I understand your position, you would admit that there was pre-emption. David C. Frederick: I -- I think there is pre-emption, but that does not mean-- David H. Souter: Okay. So there-- David C. Frederick: --Maybe there is no-- David H. Souter: --In other words, there is that one exception at least to the broad statement that you gave in answer to Justice Scalia? David C. Frederick: --Let me try to untangle it this way. The fact that there is pre-emption and you cannot bring as State law failure-to-warn claim doesn't mean that the drug isn't misbranded under the Federal standard the FDA-- David H. Souter: But the -- but the misbranding is of no consequence to liability. David C. Frederick: --Well, if-- David H. Souter: In other words, I think you're saying if there -- if there would be pre-emption it may be misbranded, but there cannot be any recovery in a State tort suit. David C. Frederick: --That's correct. The -- the point-- David H. Souter: Okay. So misbranding under those circumstances is a purely theoretical concept. David C. Frederick: --In that very hypothetical, yes. David H. Souter: Okay. David C. Frederick: But the point is that the failure is that the failure-to-warn claim tracks the misbranding provision; and if you look at the jury instructions in this case, the wording is very close to the wording of the misbranding provision in terms of the adequacy of the warning that must be provided. John Paul Stevens: Mr. Frederick-- David C. Frederick: All State law is doing is providing a remedy that is absent from Federal law. John Paul Stevens: --Mr. Frederick, I'd like to put the misbranding point to one side and just concentrate on pre-emption. And I understood you to agree with Justice Alito that there is a hypothetical case in which there would be pre-emption, and would you tell me what particular fact distinguishes your case from his hypothetical? David C. Frederick: The fact is there was no consideration and rejection of a stronger IV push warning. There was no consideration by the FDA of IV push as a means of administration distinct from other intravenous forms that would lead to a different kind of risk-benefit balancing. So with the -- in the case where there would be pre-emption, FDA would be asked, we -- we want to put a stronger warning as against this -- FDA says: We don't think there is scientific evidence. Do not put that warning on the label. John G. Roberts, Jr.: --So now, your friends on the other side said there was specific consideration of IV push as opposed to simply arterial exposure, and that that is laid forth in the labeling. So, as I understood your answer to be, all we have to do is simply look at the record, and if we think the FDA considered specifically IV push risks as opposed to general arterial exposure, then you lose, and if we determine that they did not, then they lose. David C. Frederick: And the Vermont Supreme Court was quite emphatic about this, Mr. Chief Justice. John G. Roberts, Jr.: Well, I don't know if the Vermont Supreme Court was emphatic about it. I mean, the record is either -- addresses the FDA -- I'm more interested in what the FDA was emphatic about, and they either address IV push separately or they don't. David C. Frederick: And you search in the joint appendix in vain for communications between Wyeth and FDA communicating about the particular risks of IV push. Ruth Bader Ginsburg: What -- can you turn to the references that Mr. Waxman and Mr. Kneedler made? They said oh, yes, IV push was considered discretely from IV drip bags. David C. Frederick: I will acknowledge that the references in some instances suggest IV push. There is no doubt that the FDA knew that IV push was a method of intravenous administration, but our point is a starker one, and that is that the FDA never was put to the test of deciding comparative risks and benefits of IV push versus IV drip. And it's that point that is crucial, because the catastrophic risks of IV push are so dramatic, no reasonable person could have made a safety determination to allow this drug with its risks when there are corresponding benefits that create exactly the same kind of treatment of care for the patient. David H. Souter: Well, is your argument that they couldn't have considered these comparative risks, because if they had, they would have come out differently; because they didn't come out differently, we have to infer that they didn't consider it? David C. Frederick: It's two things: One, they didn't consider it and that's clearly-- David H. Souter: No, I-- David C. Frederick: --Second,-- David H. Souter: --Apart from your analysis that they couldn't have or they would have come out differently, how did we know that they didn't consider it? David C. Frederick: --There are communications that went back and forth between the company. These are set out in the joint appendix. They make no reference to IV push risks as distinct from-- David H. Souter: And do these -- when you say "communications", do you mean starting with the original application for approval of the label? David C. Frederick: --The original application actually is not known. It wasn't in Wyeth's files. This drug was approved in 1955. We don't know where the original label was, Justice Souter. David H. Souter: So, you are saying all the correspondence that we do know about, that is extant, fails to mention comparative risk. David C. Frederick: That's correct. And-- Antonin Scalia: But the label doesn't. I mean, the label ask discusses the high risk from IV push and sets forth particular cautions for that -- for that specific means of administration. David C. Frederick: --It does not, Justice Scalia. The label says -- it's talking about intravenous administration. It does not distinguish between IV drip and IV push. And Dr. Matthew testified at trial that, based on the label, he would not have been able to make a treatment determination to distinguish between the two, and that had he had that information, he clearly would have given this drug to Diana Levine through the intravenous drip method. The label simply didn't-- Anthony M. Kennedy: If we conclude that new information is the criterion for deciding this case, if we reject the argument that misbranding at the outset allows State law to supplement the duty, but that if there's new information, then the label has to be changed -- if it that's the line we draw, can this verdict be sustained? David C. Frederick: --Yes, I think it can be sustained on the basis of-- Anthony M. Kennedy: And the Vermont court's opinion? David C. Frederick: --I don't think that the Vermont Supreme Court's opinion totally, because it does go into the area that you're talking about, Justice Kennedy, but if I could refer the Court to trial record testimony, which is set out in the joint appendix and more elaborately in the trial record itself, which makes clear that Wyeth knew or should have known about these comparative risks. It should have had a basis for changing its label or proposing to FDA a different label, and that would be sufficient to satisfy the Federal standards as well as the State duty of due care. And we think the judgment on that basis could be sustained. John Paul Stevens: May I ask this: When did the duty on the part of Wyeth to have a different label arise, in your view? David C. Frederick: I think it probably arose in the early '70s when a -- when there was a published -- or there was an incident-- John Paul Stevens: Did it arise before or after submitting the original drug application? David C. Frederick: --A strong argument can be made that it would have been before the 1970s application when they were reformatting. These are old drugs. We don't have evidence from the 1950s that would have suggested that the original label determination in 1955 would have caused a difference but certainly by the 1970s when -- when Wyeth was reformatting this as an old drug to comply with new standards, it should have known and it certainly should have known by the 1990s when several amputations had occurred from IV push Phenergan, which were in Wyeth's files. The people who analyzed these records, you know, were emphatic that Wyeth knew or should have known by the 1990s. And that was clear by the testimony of experts that -- that showed the comparison between Vistrol and Phenergan and on the basis of the IV push injuries that had occurred that were nonpublished. They appeared to have been reported to FDA, but Wyeth never took the trouble to do the synthesis, to connect the dots between these very terrible tragedies that had occurred from its drug, to bring about a labeling change or a modification that would have saved lives. And that is a failure on the part of the manufacturer not to comply with its standards of due care and with the regulations which require health risk information to be the basis of modifications to the labeling. John Paul Stevens: Does that boil down to a claim that there was new information that was available between the original approval and the time of the lawsuit? David C. Frederick: Well, by 1955 or do you mean in 1998 and 2000? John Paul Stevens: Either one. But is your theory really a theory based on new information or new judgment about old information? David C. Frederick: It would be on the basis, I think, of both. I think we would be able to establish that there was a justification on the basis of information before the reformatted labeling took place, and that was testimony by Dr. Green at trial on the basis of Vistrol, the other amputation that had occurred with Phenergan in 1965. And the -- the important point here is that on the basis of new information, if you are going to conclude that there is a standard that has to be met, I would urge you to consider two things: One is that the burden of showing absence of new information is going to fall on the manufacturer because it is asserting a pre-emption defense, but the way pre-emption gets argued in the courts, it is done oftentimes before discovery is permitted. So, if there is information in the drug manufacturer's files that would be relevant to a determination of the breach of duty by the drug manufacturer, if you decide pre-emption has to be done before discovery can be done, there would be no way to get that information. Anthony M. Kennedy: Well, to put the burden on the manufacturer seems to me inconsistent with what 10 States have said, that there is a rebuttable presumption and inconsistent also with the instructions the jury received in this case, that you can consider the FDA label. So, I think, to me, what you say there is not borne out by what happened in this case or by those other States'-- David C. Frederick: Well, let me -- let me address that question because your question goes to the regulatory compliance defense and that is not a pre-emption defense. It is a defense based on State law that the manufacturer in fact was not negligent because it complied with the applicable regulations. In that -- under that scenario, Justice Kennedy, the plaintiff is going to be able to obtain discovery and make arguments to the trial court about whether or not that compliance negated or did not negate negligence. But pre-emption is a Federal defense that would be asserted typically at the outset of the lawsuit before information is obtained. And notably, before 2000, FDA did not have subpoena power of drug manufacturers. It did not have the power to force labeling changes. It didn't even have the power to force drug manufacturers to make post-marketing studies. Stephen G. Breyer: The -- the part I'm trying to figure out is this: Suppose it was before trial. I don't care, before or after. The plaintiff comes in with a claim. All right. Manufacturer: That's pre-empted. The claim is that you should have told the FDA and added something to your label. Manufacturer: That's preempted. Plaintiff: Well, you haven't read this reg here. The reg here which has been in existence since 1965 says that we can go and add something. I mean you can go and add something to show a contra indication, and that's the end of it. Now, in fact, 30 years later, I guess, without the horrible things happening that Justice Scalia mentioned, or maybe they did -- I don't know. But 30 years later the FDA makes another mention of new information. I take it that's in 1982. That's the first time that happened. Now, if I'm right about that, what happens when no one says a word about that? Of course, if the manufacturer had said something about that, then maybe the plaintiff would have said: And it was new. It was new, but the manufacturer doesn't say a word. Are you following what I'm saying? David C. Frederick: I'm not totally, Justice Breyer, I confess, but let me try to address it this way. Stephen G. Breyer: I mean, I'm wondering still what happens. I believe what happened here is that in the argument in the lower courts, in the trial court, nobody said anything about the FDA's claim that the information necessary to just go ahead and change the label had to be new. Am I right about that? David C. Frederick: You are absolutely right about that. Stephen G. Breyer: So what I'm trying to figure out -- and I don't know if "burden of proof" is the right word -- where nobody says a word about it, who wins? If they had said a word about it, you need new information, maybe the manufacturer -- the plaintiff could have shown that the manufacturer had new information. David C. Frederick: I think the duty is always going to be on the manufacturer, Justice Breyer. The regulations at 314.80(b) establish that the -- that the manufacturer has the responsibility to do postmarketing analysis and post-marketing surveys to determine the continuing safety of its drugs. If the manufacturer doesn't do that, it isn't complying with the Federal regulations which have an ongoing duty on them. And so in the case where there is silence, I would respectfully submit the manufacturer is not complying with its regulatory duty to ensure that there is current information about all of the side-effect risks of its drugs. Thank you. John G. Roberts, Jr.: Thank you, counsel. Mr. Waxman, you have three minutes remaining. Seth P. Waxman: Thank you, Mr. Chief Justice. I want to make -- I do want to go to -- make a preliminary point about all the talk about misbranding here. The statute has two criminal prohibitions. One is misbranding, which is the original 1906 reactive penalty. If the FDA subsequently finds that something is false or misleading, it CAN come after you for misbranding. But this case involves the criminal prohibition against distributing drugs for which there is not an approved, effective application. And that's what's at stake here. Now, the notion that there was any -- any misunderstanding in the trial court about whether there was new information or whether there was -- there were incidents that the FDA didn't know about, or it didn't evaluate the risk, is just flat wrong. The plaintiff tried this -- the plaintiff's experts said the FDA knew about this risk. Wyeth knew about this risk for decades. That is what is so wrong. That is why he stood up and said the FDA doesn't decide this question. You decide this question. And there was never, ever a suggestion in the record in this case, nor could there have been, that Wyeth ever failed to bring every single adverse-event report to the FDA's attention, every analysis that it did to the FDA's attention. And what the record does show is that after -- between the time of the 1955 approval of the new-drug application and the 1998 rejection of the SDNA, the Supplemental New -- SNDA, the Supplemental New Drug Application, that did have more extensive, stronger warnings in this case, Wyeth filed five -- and these are all in the joint appendix -- five supplemental, new-drug applications, each one asking for more language, more warnings, about direct IV injection. It's not called "push". It's IV injection versus drip, which is a gravity method. And, in fact, Mr. Frederick says: Well, you know, in this case there could have been stronger warnings, and that -- and this case wasn't really about -- the jury wasn't really asked to -- it didn't really say that the label had to contra indicate something that the FDA labeling required. That is exactly the opposite of what the trial lawyer told the jury at opening and at closing. What he said is this was unreasonably unsafe because it didn't say: Do not use by intravenous administration. With respect to whether or not the warning -- the last SNDA which we submitted, which was in 1987 and is reprinted in the joint appendix -- not only is it an original, but there is a typewritten version that actually has the text in the type size that one can actually read. At the summary-judgment stage that the pre-emption issue was decided -- may I finish my answer? John G. Roberts, Jr.: Sure. Seth P. Waxman: Summary judgment was decided at the -- pre-emption was decided at summary judgment before trial. So there was no evidence about what was new or wasn't new. In Ms. Levine's motion for summary judgment, she uses the word "new" information about labeling change. And, with respect to the proposed 1987 language, the '88 change that we asked for, she said -- and I'm reading from page 24 of her motion for summary judgment -- "In 1988, Wyeth drafted changes to the warning which advised that the use of a free-flowing IV would ensure adequate dilution and reduce the risk of arterial injectia. " "Although not strong enough, this improved the labeling instruction; if followed, would have prevented the inadvertent administration of Phenergan into an artery for the reasons described. " John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

William H. Rehnquist: We'll hear argument next in Number 88-2109, Kansas and Missouri v. UtiliCorp United, Inc.-- Mr. Greenan. Thomas J. Greenan: Mr. Chief Justice, and may it please the Court: The principal question before the Court this morning is whether or not the rule that has been set forth in Hanover Shoe v. United Shoe Machinery, and in Illinois Brick v. Illinois, that gives the claim for overcharges in an antitrust case to the direct purchaser is entirely without exception. In this instance we are talking about an antitrust case involving the sale of natural gas by regulated utilities from the wellheads in Wyoming to residential consumers in the states of Kansas and Missouri. We have a situation where formal cost-plus pricing is the rule. We have an extensive system of Federal and state regulation that requires a 100 percent pass-on of any increase or decrease in the cost of natural gas from the wellhead to the burner tip. We have in place a contract in the form of a purchased-gas adjustment mechanism, which provides that that pass-on shall be complete and that it shall be immediate. William H. Rehnquist: Mr. Greenan, you say the 100 percent pass-on is required from the wellhead to the burner. You're saying, then, I take it, the utility corp... utility commission in the state must require that a utility pass on all of the cost? Thomas J. Greenan: Yes, Your Honor. The purchased-gas adjustment mechanism is set forth at Tab 3 of the Addendum to the Joint Brief that was filed in the Tenth Circuit, and it does... it is... does mandate that it shall be passed on. William H. Rehnquist: And is that a Federal rule? Thomas J. Greenan: That is a state rule. It is also contained in the purchased-gas adjustment mechanism promulgated by the Federal Energy Regulatory Commission, yes, Your Honor. William H. Rehnquist: Well, if it were just a state rule, I suppose some states might have it and some states might not. Thomas J. Greenan: No. In this instance the... the interstate pipeline is regulated by the Federal Energy Regulatory Commission. Their purchased-gas adjustment mechanism requires a pass through. In this particular instance the states of Kansas and Missouri are... the local utility distributors are regulated by their state commissions, and there are purchased-gas adjustment mechanisms on the state level that have that same requirement. William H. Rehnquist: So what you are speaking then is... from wellhead to burner, is true of residential consumers in Kansas and Missouri? Thomas J. Greenan: I believe that it is established in the brief of the amicus, the State of Illinois, Your Honor, that those are present in 40 states. William H. Rehnquist: 40 states-- Thomas J. Greenan: 40 states. William H. Rehnquist: --by virtue of the rulings of public utility commissions? Thomas J. Greenan: That is correct, Your Honor. One particular item of interest in this case is that the states are proceeding parens patriae pursuant to 15 U.S.C. 15(c), and in that instance that they are representing residential consumers who are natural persons in their non-business capacity. These residential consumers, the record is clear, do not have the ability to switch to alternative fuels, at least in the short term. They have in place their heating plants, their natural gas furnaces. And in order for them to make a switch to an alternative type of fuel it would be necessary to change to some other type of heating and to go through-- Sandra Day O'Connor: Well, I guess they could just turn the register down and be a little colder in the winter and a little hotter in the summer. Thomas J. Greenan: --Certainly. Sandra Day O'Connor: And might affect the total usage. Thomas J. Greenan: That is correct, Your Honor. In fact, I think we have to concede that that in fact has happened. Sandra Day O'Connor: So this isn't a fixed quantity contract. Thomas J. Greenan: It is not a fixed quantity contract. Sandra Day O'Connor: And the language, at least in Illinois Brick, referred to a fixed quantity pass through. Thomas J. Greenan: That is correct. The reference in Illinois Brick was to cost plus a fixed quantity. The reference-- Sandra Day O'Connor: So you propose that... that the Court find an additional exception in-- Thomas J. Greenan: --No, I think, Your Honor, it is the same exception. What... the way the Court described it in Illinois Brick was that it was a situation where it would be easy to demonstrate that the direct purchaser had not absorbed any part of the overcharge, but that it had been passed on. And in that instance the regulation that we have in place here operates exactly as does a cost-plus fixed quantity contract. Sandra Day O'Connor: --Do you think we could be assured that the residential consumers would have the same incentive to sue that the Court found was important in Illinois Brick for the... in this case, direct purchasers, the utilities? Thomas J. Greenan: I think yes. One of the concerns of Illinois Brick was that there be vigorous enforcement of the antitrust laws. In this situation we have the attorneys general asking permission to proceed parens patriae on behalf of the residential consumers, so I don't think that that is a concern. We have chief law enforcement officers-- Sandra Day O'Connor: But there would be a general concern by the Court if we are to articulate a general rule. Is there any empirical indication that these indirect purchasers-- Thomas J. Greenan: --I think there is, Your Honor. Sandra Day O'Connor: --would vigorously pursue? Thomas J. Greenan: Let's put them side by side with the utility. What we have to understand is that in the regulated industry the utility is not really making a profit on buying and selling natural gas. It is not a product that it receives, marks up and passes on. Rather, it carries it through from the point of origin to the consumer. As the... testimony of Mr. David Black, who was the senior vice president and general counsel for one of the utilities says, we merely perform a transportation service. We take title to the gas for the few hours that it requires for us to get it from the wellhead to the burner tip, and then we charge them penny for penny, dollar for dollar, whatever the cost is to us, and that is shown forth on their bill. Now, if that is the situation, the utility then does not earn a profit on the sale of natural gas. A utility makes its money by a guaranteed rate of return on its invested capital. It is allowed to earn so much to return that investment, and so much by way of a return on the investment. Antonin Scalia: Yes, but that... but that return, as I understand it, unless these rate-making bodies operate quite differently from what I am familiar with, that rate is established now for next year. Thomas J. Greenan: That is correct. Antonin Scalia: Isn't that right? So next year, if I end up selling more gas than the state really expected me to sell, I keep the difference. Right? Thomas J. Greenan: That is correct. Antonin Scalia: I mean, the effect of regulatory lag is that if I sell more gas I get the... now, the state will get back at me the next time we have a rate making, right, and they will cut it back down. But I get a profit on the basis of selling more gas than the state expected me to sell. And I lose money by selling less gas than the state expected me to sell. Thomas J. Greenan: In the short run, that is true, Justice-- Antonin Scalia: Well, but life is in the short run. We are just talking annual profits here. Thomas J. Greenan: --That... that situation is unaffected by the facts of this case. The point that I was making was in answer to Justice O'Connor's question as to what was the incentive here. And Your Honor I think just pointed it out well. In the rate-making case, the rates are established based upon what level of sales is necessary in order to achieve that guaranteed rate of return. And as you have observed, if the utility sells more gas than it had expected, it keeps that. If it sells less gas than that it does not achieve its rate of return. So what does it do? It goes back to the utility commission and it files a new rate case, and it says that our historic sales are now below what we had before. We need a higher percentage-- Antonin Scalia: In the future. Thomas J. Greenan: --In order to get the rate of return. Antonin Scalia: In the future. But it has lost the money for the past if... if its volume of sales has gone down because its rates have been higher. Thomas J. Greenan: Exactly. And that is what Judge Posner, in the Panhandle Eastern case, said was a lost profits damage that was for sales that were not made, has nothing to do with the overcharge for the sales that were made and were passed on. Antonin Scalia: Oh, I... I agree with that. Thomas J. Greenan: Okay. Antonin Scalia: But it does not demonstrate... you answered Justice O'Connor by saying that the Illinois Brick theory was if you can be sure that the intermediate purchaser has not been harmed it's... it's okay to apply Illinois Brick. But we can't be sure that the intermediate purchaser here has not been harmed, can we? Thomas J. Greenan: I don't believe that Illinois Brick says that you can be sure that the intermediate purchaser not be harmed. What Illinois Brick does say is that we do not want to get involved in the questions as to output determinations and price determinations that exist in the real world, as distinguished from the economist's model. We are not going to get involved in the interplay of supply and demand forces as to what affect prices. But Illinois Brick itself said if it can be easily demonstrated that the overcharge... that the direct purchaser did not absorb the overcharge, then it might be that there would be an allowance of a recovery by the indirect purchaser. And that was reaffirmed by the Court recently in the observations that were made in California v. ARC America. Antonin Scalia: But he does absorb some of the... of the overcharge, does he not, if he loses sales by reason of the overcharge? If he is selling a product that not as many people buy, and therefore he loses some of the profit he would otherwise have made. Thomas J. Greenan: He loses some of the profit. He does not pay any of the overcharge. And that is the point, I think, the real point of distinction. We are looking at several things with Illinois Brick. We want vigorous enforcement of the antitrust laws. We also want to see, if it is possible, that the people who were injured are compensated. In this particular instance there is no difficulty in demonstrating from wellhead to burner tip that that overcharge went down the line and was paid by the people at the end of the line. Now, if the utility lost profits because of a decline in sales, then that is a claim which the utility has and which the utility can make. This Court has never been concerned with whether there were multiple parties in antitrust litigation. This Court has never said that we are going to only allow claims for overcharges, or that we are only going to allow claims for lost profits. Going back to Bigelow and Storey Parchment, all of the seminal cases on damages, the Court has recognized that there can be claims for lost profits, that there can be claims for decrease in... or increase in the amount of operating costs, that there can be claims for loss of investments, and all of these are separate and distinct claims. In this particular instance, Justice Scalia, the proof will not change one iota by giving the claim to the residential consumer. The utility will still have to make its claims and make its proof with regard to those lost sales. Byron R. White: So you say that you can concede easily that the... both the utility and the consumer has been hurt, but at least you know for sure, because the law requires the pass-on, exactly how much the consumer has been hurt. Thomas J. Greenan: That is correct. Byron R. White: Now, you wouldn't... you wouldn't... would you be making the same argument if the law did not require the pass-on? Thomas J. Greenan: No, Your Honor, I-- Byron R. White: Because then you really would get into a real bog, wouldn't you? Thomas J. Greenan: --Yes. We... we in no way, Your Honor, are... are trying to deviate from what the Court's reasoning was in Illinois Brick. We have here a mandated pass-on where, in the words of the Court, it's easy to prove that the direct purchaser did not absorb the overcharge. And in that instance Illinois Brick, and indeed in the various cases that the Court has referred to Illinois Brick since then, recognized that this might be an appropriate situation. Byron R. White: Your opposition suggests that if the utility recovers, makes the entire recovery, that it would have to pass on to the consumer the windfall. Thomas J. Greenan: UtiliCorp concedes that, Your Honor. The government says that they can't concede. Byron R. White: I know. I know, but I would suppose... do you agree that they would have to? Thomas J. Greenan: I think that is a question that is up to the various regulatory bodies. Byron R. White: But if it is, then there would be the problem right there of separating out the two injuries. Thomas J. Greenan: If... if... that would be a problem on the administrative level if-- Byron R. White: Well, it wouldn't be any problem at all if you know precisely how much was passed on. Thomas J. Greenan: --We... and we do know, of course, precisely how much is passed on. The... the question of what the regulatory agencies are going to do when that is before them is one that we can only speculate on. The government chose to speculate on it in its brief-- Byron R. White: But if they would... but if... even assuming that they would do that, why then, then the assumption is that you can identify easily how much was passed on. Thomas J. Greenan: --Certainly. Certainly. You can identify easily how much was passed on in this instance without a doubt. Sandra Day O'Connor: I guess you can read it off the utility bills to the-- Thomas J. Greenan: You can read it off the utility bills. You can read it-- Sandra Day O'Connor: --residential consumer. Thomas J. Greenan: --Right. There are forms, referred to as Form 2s, that are filed with the Federal Energy Regulatory Commission that shows how much the pipeline passed on. There are filings that are made by the local utility districts of the various state regulators... regulators that show the volumes to each class of customer and the prices to each class of customer. Now, one major problem that we have here in this question of vigorous enforcement is that the utilities who brought this litigation do not represent all of the consumers who purchase natural gas that was involved in this alleged illegal price fix. We have a significant number of consumers, some 50,000, maybe as much as 20 percent of the gas consumers in eastern Kansas, who purchased from utilities other than the ones that chose to bring these lawsuits. Sandra Day O'Connor: Well, we have no indication here that the states would have brought the lawsuit on their own. Didn't they come in after the fact-- Thomas J. Greenan: Three months later. Sandra Day O'Connor: --after the utilities had filed the suit, and kind of piggybacked on their suit? Thomas J. Greenan: I would say piggybacking is not correct, Your Honor. We filed three months after the first case was filed. The first case was filed in April of 1985. The state case was filed in July of 1985, I believe. UtiliCorp, the utility that is here before the Court, filed their case in 1985, dismissed it in 1986, for what reason only they can tell us-- William H. Rehnquist: Voluntary dismissal? Thomas J. Greenan: --Voluntary dismissal. And then asked and received permission to file again in October of 1987, very shortly before these motions for summary judgment were brought. Now, the defendants in the litigation claim that their claims, the claims of UtiliCorp, are time barred. And indeed it appears that they do have very significant statute of limitations problems. So relying upon the utilities here means, first of all, that there are any number of consumers that are not represented by the utilities. And secondly, if it is the utility UtiliCorp that has this claim, rather than the attorneys general as parens patriae, those claims may well be time barred. William H. Rehnquist: As to the consumers in eastern Kansas that you are... were they served by a utility which would have had a claim, but the utility-- Thomas J. Greenan: Yes. William H. Rehnquist: --simply didn't bring a lawsuit? Thomas J. Greenan: Yes, Your Honor. It's Union Natural Gas, and I believe it is at Tab 2 or 3 of the Addendum to our Joint Brief. Antonin Scalia: Well, if everybody else ends up winning these cases, I assume that the regulating authority could make that utility pay dearly for not... for not having brought a suit, and simply say you'll... you'll not be allowed to charge as much next time around, in order that the consumers whose money you have frittered away can be made whole. Thomas J. Greenan: But why? But why would the-- Antonin Scalia: But why? It would be considered not sound business practices. You have been running a sloppy operation, not bringing suits for money that you're entitled to. Thomas J. Greenan: --But why, Your Honor, should I, the utility, bring this suit when you are going to make me disgorge, if that is the situation? Why should I... why should I bring this suit if in fact it is going to go back to the... to the end-user? After all, we just perform a transportation service. We just bring this stuff down-- John Paul Stevens: May I interrupt there? Is it clear that treble damages will all go to the end-users if they prevail? Has that ever been decided by-- Thomas J. Greenan: --It has never been decided. John Paul Stevens: --So how can-- Thomas J. Greenan: The government says... the government says we don't concede that a regulator would make them give up the double and triple damages. I suggest to the Court then in... in an instance where they have had a pass through dollar for dollar, where they have the guaranteed rate of return so that they can come back to have their rates adjusted within a short period of time, that it is highly unlikely that any regulators are going to let them keep that, because it will be a total windfall that should have gone to the people that paid for the natural gas. But we don't know. It's... it's up to the regulators. John Paul Stevens: --Well, it seems to me it's an unresolved question, what happens to the two-thirds profit in treble damage litigation. Thomas J. Greenan: That is correct. Antonin Scalia: Mr. Greenan, what does the state do with the money? You sue as parens patriae, do you get it back to the actual people who were overcharged, or does it go into the general state funds? What... what happens to it? Thomas J. Greenan: Well, those two alternatives exist under 15 U.S.C. 15(d), I believe, Your Honor... or 15(a). Antonin Scalia: Either one. Thomas J. Greenan: Either one. Either that it goes back to the people, or that it goes into the state general fund for the benefit of everyone. In this-- Antonin Scalia: Which wouldn't necessarily be rate payers. Thomas J. Greenan: --Would not necessarily be rate payers. Antonin Scalia: And anybody that has moved out of the state since these overcharges were made, they are just out of luck, I guess, if they have moved to New Jersey? Thomas J. Greenan: Probably, if they have moved to New Jersey. But the most likely thing-- [Laughter] Rather than some other state. But the most likely thing in this instance is that because these people who do now still live within Kansas or Missouri and purchase natural gas within those states are known and can be identified, that the recovery, whatever it may be, can be returned to them, either in the form of dollars or in the form of reduced charges for natural gas purchased down the line. Sandra Day O'Connor: Do we know, does the record disclose what would happen to the recovery, if any, if the states were allowed to proceed? Thomas J. Greenan: All the record shows, Your Honor, is what the authority is under the parens patriae statutes. Sandra Day O'Connor: Which could be either, keep it or not. Thomas J. Greenan: Could be either. Yes, could be either, Your Honor. I am just saying that the most likely, because of the easiness with which to identify them. And I believe that that is up to the Court. Antonin Scalia: What happens to the commercial purchasers, Mr. Greenan? You say that this is just residential purchasers. What about the overcharges made that were passed through to commercial purchasers? How... what happens to that if you win this case? Thomas J. Greenan: If we win this case, Your Honor, that belongs to the utilities, because the commercial purchasers are neither natural persons in the ordinary sense, and they are businesses which doesn't allow parens patriae recovery. But also-- Antonin Scalia: Could they bring suits on their own, not relying on the state's parens patriae? Thomas J. Greenan: --They could, Your Honor, they could, but I think they would be faced with Judge Posner's reading, Judge Posner's reasoning as to why he would only allow it to the residential consumers. And that is because in the commercial and industrial area there is a significant number of users that have the ability to switch to alternative fuels, that have the capacity by flicking a switch to go from oil to gas, let's say, or from electricity to gas. And that ability creates the interplay of supply and demand which does not exist at the residential level, and which was the reason why Judge Posner said I would not allow it for-- Antonin Scalia: What if I am an individual commercial purchaser that doesn't have that capacity? Why shouldn't I be able to sue? Thomas J. Greenan: --I see no reason to distinguish, Your Honor. Antonin Scalia: I don't either. Thomas J. Greenan: I see no reason to distinguish. In that instance it is easy to demonstrate that the utility did not absorb the overcharge. John Paul Stevens: But even in the residential consumer, as Justice O'Connor pointed out, there are some people who turn the thermostat down and have to buy an extra sweater. Thomas J. Greenan: That's right. John Paul Stevens: And there is no way they can recover for that sweater. Thomas J. Greenan: There is no way that they can recover for that sweater, right. But the cost of new insulation, the cost of putting in storm windows, all of the things that has followed this tremendous increase in the price of fuel, there is no way to recover for those. All we are talking about is the overcharge. All we are talking about is can we trace that overcharge and know exactly where it went. If we can, and we can, then it is easy to demonstrate. Byron R. White: But the problem isn't all that easy, because you don't know what the [inaudible] is. Until you have a lawsuit. Thomas J. Greenan: Until we have a lawsuit, right. But that... that doesn't change-- Byron R. White: You don't know how much the price went up. Thomas J. Greenan: --No, but that is true in any case, Your Honor. That is-- Byron R. White: That may be, but who's going to... who's going to take on that job of proving the conspiracy and the result on competition? Thomas J. Greenan: --In this particular instance it is the attorneys general acting parens patriae in the actions that they have brought. We have to prove what the allegedly illegal price was at the... at the wellhead, and we have to prove what the but-for price would be if they had been competing. But that remains unchanged. Whether... that problem of proof exists whether UtiliCorp has to do it or whether the state has to do it. The amount of the overcharge in every instance, in every instance, is going to be one that is litigated and proved, unless somebody comes in and says we overcharged them X... X amount of money. Byron R. White: And as you... you say that a group of consumers could bring the same suit you could, and they would not be barred by Illinois Brick? Thomas J. Greenan: As long as it's easy to demonstrate, Your Honor, it's easy to demonstrate that that overcharge did not rest with the first purchaser. Byron R. White: Well, what do you mean that it was required by law to pass it on? Thomas J. Greenan: The Federal... the purchased-gas adjustment mechanisms which are in force on the Federal and state level require this pass-on. And they are mandatory. Byron R. White: Because they have to... to set their rate they have to tell-- Thomas J. Greenan: It has nothing to do with rates. It's... it's an immediate... I am glad that you've mentioned this, Your Honor, because it is entirely different from rates. Every time the cost of natural gas goes up by one-tenth of one cent per mcf, that is one mil-- Byron R. White: --Yes. Thomas J. Greenan: --the purchased-gas adjustment mechanism goes into effect. The utility raises... is... the pipeline raises its price to the local utility. The local utility raises its price to the burner tip users. Byron R. White: And you have identified the statutory requirement in your-- Thomas J. Greenan: We have, at tab 3, Your Honor, set forth the purchased-gas adjustment mechanism. Byron R. White: --Okay. Thomas J. Greenan: And more than that, it is immediate in this sense, that the local utility district reports to the pipeline each month, after it has received the gas and delivered it, what its volumes have been that it delivered to each of its class of customers. And it is then, and only then, that it is billed for that gas by the pipeline, after it has made delivery. So it is... it acts immediately that the local utility is billed and it bills... it bills the end-user. John Paul Stevens: Does the mechanism also work for price decreases? Thomas J. Greenan: Yes. The purchased-gas adjustment mechanism works both ways, Your Honor. Any increase or decrease in the price of natural gas, in the level of one mil per mcf in the purchased-gas adjustment mechanism. William H. Rehnquist: That is just Federal, what you are referring to there? Thomas J. Greenan: Yes, Your Honor. Your Honor, I would like to reserve my remaining time for rebuttal, except to point out that there is the other issue that was raised on the briefs, with regard to 15 U.S.C. Section 4(c), and I would like to rely on what was said in the briefs in connection with that. William H. Rehnquist: Very well, Mr. Greenan. Mr. Finch. Floyd R. Finch, Jr.: Chief Justice Rehnquist, and may it please the Court: I must disagree with Mr. Greenan about a number of issues, first about what the issue of Federal antitrust policy is before the Court today. The issue as we see it is whether this Court will continue to consolidate antitrust damage claims in an injured direct purchaser, or whether it will cloud the clear direct purchaser rule of Illinois Brick by creating a regulated utility exception. There is no need, we submit, in this case to change the direct purchaser rule, which has been clear since 1968 at least, because in this case we have over 85 percent of the antitrust damages being pursued by KPL, which has over 75 percent of the damage claims, by UtiliCorp, with about 5 percent, and by the other municipal utilities which are represented, properly so, we contend-- Sandra Day O'Connor: Well, it does seem to be pretty much a windfall to the utilities, when 100 percent of it is passed on to the customers. Floyd R. Finch, Jr.: --Well, Justice O'Connor, if I may, it's not true that 100 percent is passed on to the customers. It simply isn't true, and that's one point-- Sandra Day O'Connor: Well, what if it were? Floyd R. Finch, Jr.: --If it were, then, I submit that this is the perfect case not to make an exception, because you would have a utility regulatory commission that can force those overcharges to be passed on to the people who actually paid them. Byron R. White: So you can identify them? Floyd R. Finch, Jr.: They can be identified-- Byron R. White: Which is completely different from the Illinois Brick type of case. Floyd R. Finch, Jr.: --It is different, but I must point out that there is no precise identification. I must disagree with Mr. Greenan on that score. Sandra Day O'Connor: Why can't you read it off the utility bills? The increase. Floyd R. Finch, Jr.: Because the utility bills do not reflect all of the overcharge, Justice O'Connor. First, UtiliCorp uses natural gas itself. It is a direct purchaser. It uses it to heat its facilities, and it uses it in peaking units where it generates electricity. Byron R. White: Well, it may be that 100 percent of the damages aren't passed on, but you know to the... you know the extent to which the consumer has been damaged. Floyd R. Finch, Jr.: We know that the consumers ultimately paid a majority... by the consumers, I mean all consumers. Byron R. White: You know that the... that because the price to the utility went up, that the price to the consumer went up also, to some extent. Floyd R. Finch, Jr.: Yes, Justice White, we do know that. Byron R. White: And you know precisely how much. Floyd R. Finch, Jr.: Well, we-- Byron R. White: Once you find out what the... what the price would have been. Floyd R. Finch, Jr.: --At the close of discovery in the summer of 1989 our experts were finally able to determine the amount of the overcharge. The suit was filed in 1984, and it took approximately five years for that determination to be made. Byron R. White: But you made it. Floyd R. Finch, Jr.: Yes. Indeed it was made. But one thing that hasn't been made, Justice White, is a determination, an actual factual determination that 100 percent of the overcharge was passed on to all of the customers. That was assumed in the Tenth Circuit opinion. The district court did not find that, and there has never been a finding on that in this case. In fact, I would submit that there... that not 100 percent of the overcharges were passed on, but some lesser number. There are, for example, line losses, in that when you have pipes running all over the countryside, gas leaks out. And it doesn't get billed to consumers. UtiliCorp pays for the natural gas when it... at the wellhead when it purchases gas. Byron R. White: Well, I take it you know, you determined after five years that if it hadn't been for this conspiracy the price would have been lower. Floyd R. Finch, Jr.: Yes, sir. Byron R. White: And so let's assume that it would have been a dollar lower per whatever kind of a unit you are talking about. Now, you say that a hundred... that it is not clear in this record that 100 percent of that dollar was passed on to the consumer? Floyd R. Finch, Jr.: That is right. Byron R. White: But you do know how much of it was. Floyd R. Finch, Jr.: Well, it could be determined, Justice White. It has not been determined in this case. Byron R. White: Well, I know, but wouldn't it be easy to do? Floyd R. Finch, Jr.: Well, I submit it would not be easy. The purchased-gas adjustment clauses are based on estimates, and what happens is that on a particular day the supplier announces that in 30 days its price is going to go up to X amount per mcf, the word you're looking for, a thousand cubic feet. And the court... the company then estimates how much its gas cost per customer, per customer class will have to go up. But those are only estimates. And there has to be an additional procedure that is gone through later in the year where you try to true that up. And I will certainly agree that there is an effort to true it up, to make it the same. But it is not something that was determinable at the time this litigation was started. Byron R. White: Well, how would it ever be determinable later if you say that... let's assume you recover from the pipeline X million dollars, and you say that you know that some of it was passed on. And you say the utility commission could force you to pass on to the consumer part of your recovery. Floyd R. Finch, Jr.: Yes, Justice White, in fact-- Byron R. White: Well, wouldn't you have to then determine how much it was? Floyd R. Finch, Jr.: --Yes. There will have to be some sort of a determination made at that point, or at least a reasonable estimate. But I think the point is-- Sandra Day O'Connor: Well, then at the end of the year when the utility does make these final adjustments on the customers' bills, you can look at the bill and see how much the overcharge was. Floyd R. Finch, Jr.: --If you were to look at each individual customer [inaudible]-- Sandra Day O'Connor: Yes. That's possible to do. It's there. Floyd R. Finch, Jr.: --And then... but I guess my point is, Justice O'Connor, that there is a damage to UtiliCorp. It is an injured direct purchaser. Sandra Day O'Connor: Yes, but that is a separate question. Admittedly there is some damage, I suppose, to the utility corporation itself. And there are also damages, if you want to look at it that way, by the reduction in demand from the customers. Those could be established, I suppose, based on averages. Floyd R. Finch, Jr.: The plaintiffs in this case have never suggested that residential customers, and indeed industrial and commercial customers, were not damaged to some extent by defendant's action. That is why I go back to my original point, the question is of antitrust policy. Do you want to continue, as in Illinois Brick, concentrating the damage recovery in one party, so that that party will have the greatest incentive to sue, so that you will minimize the complexities that we have been talking about here. Anthony M. Kennedy: Is there anything in the record to give us an idea of the percentage of these... of the total damages that were absorbed by the utility directly? When you talk about some of the gas being lost in the pipeline, and the fact that you have to heat your own facilities. I am thinking de minimis, but is there some way you can give me an estimate of what percentage of the damages were absorbed by the utility itself? Floyd R. Finch, Jr.: Justice Kennedy, there is nothing in the record from which that could be determined. It was assumed by the trial court, and there could have been discovery on it. I can give you an idea that you are correct that it would be a relatively small number, that most of the overcharges were then passed on to the customers. But you get into a problem of allocation. Remember, we are talking about a preliminary question here of, not quite standing, but antitrust injury. And the way we got into this was at the very beginning of the case we filed a motion for summary judgment against not the states, but against the defendants on the pass-on defense. Because the defendants were saying you don't have a right to recover anything in this case. And so, instead of having us litigate the issue of allocation which you have raised, and try to determine well, UtiliCorp has got 2 percent of the total overcharges, whatever that number may be, the district court quite properly concluded, under the doctrine of Illinois Brick, that there should just be... an antitrust damage claim should be concentrated in the direct purchaser. Antonin Scalia: Mr. Finch-- Floyd R. Finch, Jr.: Yes, Justice Scalia? Antonin Scalia: --You say that it is likely to have been minimal, the amount of the overcharge that was passed on. Is it likely to have been minimal the damage suffered by the utilities, which would include the amount of the overcharge that wasn't passed on plus other damages, such as their loss of additional sales that might have been made because of the commercial users who are convertible and switch to some other fuel, and... and the residential users, if one could ever figure that out, who put on sweaters? Floyd R. Finch, Jr.: Justice Scalia, that is a substantial number. In the case of KPL it is over $15 million, according to the experts. In the case of UtiliCorp it is over $4 million of lost margin damages. Now, that does not include whatever additional damages the utility suffered by paying more for gas that they did not resell to consumers. But it is a substantial number. And though the states make much of our incentive to bring this case, in fact it was KPL, the first direct purchaser, who brought the lawsuit in 1984. And it wasn't until several months later that the states of Missouri and Kansas did join in the suit. Antonin Scalia: What is in it for you if you have to pass it on to the consumers? Floyd R. Finch, Jr.: Treble damages and protecting our market, Justice Scalia. Because, as you point out, if you are a residential home owner, for example, and you put more insulation in your attic, we are not going to be able to sell you as much gas in the future. It's not just an immediate downturn because we have been able to sell you gas in the past and we'll get that back, because we have lost market for the long term. And that is particularly also true for the commercial and industrial customers. If a home owner goes out and installs a wood burning fireplace in his house and starts burning a lot of wood, that is demand loss to us. That is a loss to our margin permanently. Now, Mr. Greenan suggested that we could go back to the utility commissions and try to get some of this margin back. But in fact UtiliCorp, particularly the Missouri public service division, did not have a rate case between 1983 and 1988, the major portion of the damage period. And we do believe that the company suffered substantial damages, and it was certainly enough to cause us to bring this suit. Sandra Day O'Connor: Well, Mr. Finch, even if we agreed with the states that in this... under these circumstances the residential consumer should be entitled to recover the pass-through, the utility still would have suffered substantial damage, according to you, and still would have an incentive to be in this suit. Floyd R. Finch, Jr.: Yes, they would. And I guess the question is what incentive is enough, and what level of complexity and what level of expense is enough. Mr. Greenan pointed out that UtiliCorp dropped out of the case for a while. I wasn't privy to that decision; I don't know why it was made. But I suggest that part of the reason may well have been the concern that you just raised, Justice O'Connor, that when you don't know how much of it you are going to be allowed to recover, and when you know there is going to be tremendous expense right up front in the litigation, litigating about whether you can even be involved in the case, that is a tremendous disincentive that this Court frowned upon in Illinois Brick, and should continue to frown upon, we submit. The question that Justice Scalia raised about who recovers for the industrial and commercial customers should be a significant one on the Court's mind, for, after all, there is some inconsistency here in the states' position. They say well, when it comes to residential customers, we or the consumers themselves, can sue. But when it comes to industrial and commercial customers, then the utilities can sue. As Justice Posner suggested, because perhaps the utilities ate some of the overcharges, didn't pass along all the overcharges. But the fact is that the industrial and commercial customers of these two parties, UtiliCorp and KPL, have not sued, probably, I would submit, in reliance upon Illinois Brick and the fact that they would be entitled under the utility regulatory scheme to get back a large part of their damages. So we have a question of equity and justice here for those customers whose claims would now be barred by the statute of limitations. William H. Rehnquist: Does the parens patriae amendment to the antitrust laws, Mr. Finch, bar a claim by individual consumers? Floyd R. Finch, Jr.: It does not, as I read it, Justice Rehnquist, bar a claim by individual consumers, but the states, when they file their lawsuit, are supposed to have given individual consumers notice so they could opt out. In fact that has never been done in this case, even though the states filed their claims back in 1985 and 1986. So we don't know, if there was such a notice given, how many consumers might well choose to opt out and pursue their own litigation. Anthony M. Kennedy: You say they are supposed to give notice. Under the statute? Floyd R. Finch, Jr.: Yes, sir. I want to point out, if you... if the Court would like to discuss the argument that Section 4(c) allows the state attorneys general to bring this case, that it was not raised in the court below. It was not presented in the certiorari petition before this Court. Moreover, I would suggest the Court has already rejected that argument in footnote 14 of Illinois Brick. Indeed it would be an odd statutory construction, if Section 4(c) is based on Section 4, to have a rule like in Illinois Brick, that an indirect purchaser cannot sue under Section 4, but under Section 4(c) a state may sue on behalf of that indirect purchaser. And indeed, the statute doesn't make any sense that way, for if you allow a consumer to opt out under Section 4(c), but you don't give him the right to sue under Section 4, it's just internally inconsistent. Apparently there was the assumption of some congressman in 1976 that Illinois Brick might have come out the other way. But I think the states have recognized, by their efforts to go back to Congress and get Illinois Brick changed, that in fact Congress did not authorize in Section 4(c) parens patriae suits on behalf of indirect purchasers. Surely the proof that Congress has not acted shows there is no strong sentiment in Congress for changing the direct purchaser rule that this court enunciated in Illinois Brick. In this case, I contend that the purposes of the antitrust laws is... are best served by concentrating the recovery in the direct purchaser, instead of splintering the recovery among industrial customers, commercial customers, the state attorney generals or any consumers who may bring their own cases. The incentive should be maximized, so the deterrent will be maximized. I point out that one of the concerns in Illinois Brick was that the direct purchaser should have the best knowledge, and that is... does appear to be what happened in this case, in that the Kansas Power and Light Company, the direct purchaser, did the investigation and filed the antitrust suit, and the states, and for that matter UtiliCorp, piggybacked in on KPL's work product. I point out that this is a case in which the utilities have gotten it right. They have sued for treble damages to protect their market, and to some extent, I suppose, out of a sense of public service duty that a public service commission has. But if this Court were to take away 50 to 95 percent of this recovery, I would ask how much of an enthusiastic plaintiff will a utility be the next time around, the next time there's an antitrust case. I would submit that the ruling of the Tenth Circuit should be upheld. William H. Rehnquist: Thank you, Mr. Finch. Mr. Robbins. Lawrence S. Robbins: Thank you, Mr. Chief Justice, and may it please the Court: With respect, I believe Mr. Greenan has misformulated the question before the Court. The rule of Illinois Brick is not that the direct purchaser is the proper party to sue unless it is easy to demonstrate that there has been no absorption of the overcharge. The rule in Illinois Brick is as follows, that with a cost-plus contract the purchaser is insulated from any decrease in its sales as a result of attempting to pass on the overcharge, because its customer is committed to buying a fixed quantity, regardless of price. Even if it were the case that the regulatory framework in which this case comes before the Court solved the problem of apportionment, that would only be the tip of the iceberg. Illinois Brick is not simply about the apportionment of overcharges. Instead, Illinois Brick and Hanover Shoe stem from a longer tradition in which this Court has uniformly held that an injured direct purchaser is entitled to sue for the entire overcharge, regardless of whether and to what extent that direct purchaser passes on the overcharge to its customers. It is that tradition that Hanover Shoe and Illinois Brick dealt with when it adverted to the possibility that there might be a cost-plus exception. Now, one thing is perfectly clear. If there is a cost-plus exception, it does not cover this case, because, as Petitioners freely concede, the direct purchaser in this case was injured. It suffered the loss of profits as a result of having to pass on an overcharge, to whatever extent it did, to its customers. And so, what is clear beyond, I think, contradiction, is that if there is to be an exception to cover this case, it will be a new exception, an exception that departs from the tradition that has always held that an injured direct purchaser, injured in any form, injured by the overcharge or injured by lost profits, and lost profits are not contravened in this case, is entitled to sue for the entire overcharge. Speaker: And keep it. Lawrence S. Robbins: And keep it. Now, it seems to me, Justice White, and this returns also to the question Justice O'Connor raised before: is this a windfall. Well, in one sense I suppose it is a windfall, but it was a windfall that this Court recognized and anticipated the possibility of in Illinois Brick, recognizing that it may well be the case that some indirect purchasers who suffered an injury may not be compensated. But that was anticipated for a reason, anticipated because the Court concluded, as it had in Hanover Shoe, that locating and maximizing the incentive in the direct purchaser is the best policy for the antitrust laws, seeking the maximum deterrence at the most efficient price. Sandra Day O'Connor: Of course, the language of Section 4 of the Clayton Act doesn't make the distinction the Court has made in Hanover Shoe and Illinois Brick. This is just a Court-created doctrine. Lawrence S. Robbins: The language, to be sure, Justice O'Connor, is quite sweeping. Sandra Day O'Connor: It is. Lawrence S. Robbins: But that was equally true, I might suggest, in Associated General Contractors, where the Court took that issue on directly and said that there are a variety of limiting principles that have always been used to constrain what would otherwise be the sweeping embrace of Section 4. Sandra Day O'Connor: But I guess the real question is whether, in a case like this, the fundamental concerns that motivated the Court in Illinois Brick would be met by permitting the residential consumers to sue. Lawrence S. Robbins: I think-- Sandra Day O'Connor: You can separate out the damages that they suffered by the... by the pass-through of the overcharges. It is possible to do that in this kind of case. Lawrence S. Robbins: --I think the answer is yes, it's possible. It is not, however, easy. It will be possible after litigation about the very issues that concerned the Court in Illinois Brick. In the first place, it will not be easy to decide even the question of apportionment that is supposedly solved by the regulatory frame work. And, by the way, that is the only policy that is solved at all. So if it doesn't even solve that problem free of litigation, it hasn't done very much. And I would suggest that the-- Sandra Day O'Connor: How difficult is it to look at the utility bills after the fact and say that's how much the residential consumers had to pay that they shouldn't have paid? Lawrence S. Robbins: --Well, it is not hard to say that, but it won't be correct. And it may not be correct for two reasons. First of all, you are going to have litigation about whether the regulation in fact requires the utility to pass it on. These parties are in dispute about that very question. The... the PJA clauses throughout the states may be different. They may be hard to read. And you are going to have litigation about whether it is even required. You will then have litigation about whether it has been complied with. What looks like a dollar-for-dollar pass-through may be nothing more than the postponement of the rate increase that would have come about anyway, a concern which this Court expressly identified in Hanover Shoe. What looks like a pass-through may be an increase for other reasons. But even if they had solved the apportionment problem, and they haven't... they haven't solved it with the ease that Hanover Shoe requires, you then have a variety of other problems that they haven't come close to solving, and indeed in some respects have made worse. The complication of litigation. It is not going to go away, it is going to come back fourfold. It's going to come back because you are going to increase the number of litigants in court. You are going to increase the kinds of damages they are seeking. The indirect purchasers will seek the overcharge. The direct purchasers will sue either for the lost profits and, as Petitioners have conceded this morning, some portion of the overcharge for unrepresented customers that the state's parens patriae can't... can't represent. Lost profits are very hard to calculate, because they require you to prove the overcharge, and then calculate the effect of the overcharge on the demand curve, how inelastic or elastic is the demand, the very thing this Court wanted to get away from in Illinois Brick. As a consequence of the proliferation of parties and the complication of the damage theories, you will do a couple of other things. You'll reduce the incentives on direct purchasers-- William H. Rehnquist: But won't those same difficulties stand in the way of the utilities' recovering lost profits? Lawrence S. Robbins: --Well, in our view, Mr. Chief Justice, if the direct purchasers are in that lawsuit alone they may attempt to seek both kinds of damages. But as a practical matter, because the overcharge will always be greater than, or at worst equal to, the lost profits, they will tend in the aggregate to seek only the overcharge. And as a result, the more complicated inquiry for lost profits will in the main wash away. There will also not be competing claims for the same total recovery, a concern that this Court articulated in ARC America. You will not have two or more categories of plaintiffs suing over a common Federal pot under Section 4. And that competing claim, and the proliferation of theories and parties that will inevitably ensue, and only gets worse under Petitioners' theory, is what is going to ultimately dilute the intended incentive on the direct purchasers to sue. What is more, finally, I think, if you open the door the crack that they seek this morning, there will be many more exceptions brought to your doorstep. If today it's 100 percent regulation, tomorrow it will be a 95 percent regulation, because in theory there is no greater reason why the 95 percent pass-through plaintiffs shouldn't be in court as well. And it is precisely that concern, I suggest, that caused this Court to hesitate to even say whether there is any cost-plus exception at all. In each of the Court's cases the suggestion has been that there might be such an exception. And I think that hesitation makes a good deal of sense, because in a case in which it's not required to reach that result, it ought not to be reached. Byron R. White: Do you think the 4(c) issue is here properly? Lawrence S. Robbins: No. I think it is not here. It was not in the question presented, it was not resolved below, and it is not for this Court to decide. Byron R. White: And you don't have any view on it anyway, or do you? Lawrence S. Robbins: Well, we think that this Court resolved the question and resolved it correctly in footnote 14 of Illinois Brick. And we think that the same answer on that... on... on the merits, if appropriate, should apply here. John Paul Stevens: Of course, if we don't decide that question the case doesn't mean very much, does it? Lawrence S. Robbins: I am sorry, Justice? John Paul Stevens: If we do not decide the 4(c) issue, there is not much to this lawsuit, as far as for long-run precedential purposes. Lawrence S. Robbins: Well, there is still the claim, which we think is mistaken, that Section 4 and the suggested cost-plus exception is sufficient to cover this case even if 4(c) isn't recurred to. John Paul Stevens: I understand, but if we leave out in the... if we rule the way you recommend that we rule, and don't decide the 4(c) question, you are going to have this same problem come up again in the next lawsuit. Lawrence S. Robbins: It may, with a party that has chosen to rely on 4(c), and at that time I suspect our answer will be the same as to the 4(c) question. But that's not here, and I think for good reason. Now, it may be that in the end Petitioners' clients bore some or most of the overcharge. And it may also be that the regulatory framework alleviates to some extent some, but hardly all, of the concerns in Illinois Brick. But this Court has anticipated such possibilities and has refused to carve out an exception for particular markets. It has discouraged that venture at every turn. There is every reason to do so this morning. William H. Rehnquist: Thank you, Mr. Robbins. Mr. Greenan, do you have rebuttal? You have four minutes remaining. Thomas J. Greenan: I do, Your Honor. I think it should be clear that the fact-specific arguments that UtiliCorp has made are not before this Court. This action is here based upon summary judgment motions brought by UtiliCorp which were decided before discovery was well underway. The court below assumed that there was a perfect and provable 100 percent pass-on, and that is the facts that are before the Court today. Justice O'Connor, I agree that you can look at the utility customer's bill and determine what amount they had been charged for what amount of gas. Fortunately, in the parens patriae situation that is not necessary, because the statute clearly provides that the attorneys general may aggregate those claims to make them easily provable so that individual consumers do not have to come in and prove that. That procedural device was specifically spelled out. When the government says that clearly the court was relying upon a rule without deviation that the direct purchaser recover, it ignores Hanover Shoe, it ignores Illinois Brick, it ignores the discussions that this Court has had with regard to this rule since then. Note 12 in Illinois Brick, referring to the pass-on defense which the Court recognized in Hanover Shoe, said that they recognize that because the preexisting cost-plus contract makes the normally complicated task of demonstrating that the overcharge had not been absorbed... excuse me, makes easy the normally complicated task of demonstrating that the overcharge had not been absorbed by the direct purchaser. That is the law of Illinois Brick. That is what we are talking about here. This particular situation is one that the Court has always recognized, that the... would exist. With regard to whether or not the 4(c) question is here, Your Honor, we have to admit that it was not argued below. But I think that Justice Stevens has... has put his finger on it, that the... that the complaints were brought pursuant to 4(c). Only 4(c) permits-- Byron R. White: xxx the answer to 4(c), I suppose, is that if... is that the consumer under Illinois Brick hasn't suffered any injury. Thomas J. Greenan: --The answer to 4(c)... under Illinois Brick, I don't believe the Court specifically addressed that, Your Honor. Under Illinois Brick what the Court said is that you can-- Byron R. White: Well, what does... what does 4(c) authorize? Thomas J. Greenan: --I think if one looks at the legislative history with regard to the bills that were passed, that it was clearly the intent of Congress that 4(c) allow the attorneys general to proceed parens patriae on behalf of consumers, indirect as well as direct. Byron R. White: Well, they can... they can attempt to recover the damages that the indirect purchasers couldn't recover themselves. But if the indirect purchasers can't recover any damages, what good is parens patriae action? Thomas J. Greenan: Well, Your Honor, I believe that the clear intent of 4(c) is demonstrated by the legislative history that is set forth, particularly in the brief of the amicus, the National Council of... or National League of State Legislatures, demonstrates that Congress intended that 4(c) provided a separate cause of action for the attorneys general to proceed on behalf of consumers-- Byron R. White: To recover what? Thomas J. Greenan: --To recover damages under the antitrust laws, both indirect and direct. Byron R. White: Well, you have to say both indirect and direct, but that isn't what it says. Thomas J. Greenan: It does not say that in so many terms, no, Your Honor. We have to look to the legislative history. I think that the cases of this Court clearly demonstrate that the United States is in error when it says that the Court has always assumed only the direct purchaser. In the very next term after Hanover Shoe, this Court examined a question in Perkins v. Standard Oil and followed a claim down through several levels in a chain of distribution to allow Perkins to have standing to proceed with that claim in that action. Here, as the Court recently said in the ARC America case, if it is easy to prove the extent to which the overcharge has been passed on to the indirect purchaser, then this Court... the phrasing in that was might allow an exception. We believe that this Court should recognize that this exception is within the language set forth in Illinois Brick, and that an affirmance of Illinois Brick would require-- William H. Rehnquist: Thank you, Mr. Greenan. The case is submitted.

Earl Warren: Number 77, Moog Industries, Incorporated, Petitioner, versus Federal Trade Commission. Mr. Frank. Malcolm I. Frank: May it please the Court. This is the case on review from the Eighth Circuit to review the refusal of an order in a motion requested by the petitioner for the Court to exercise its equitable jurisdiction to stay in order to cease and desist issued by the Federal Trade Commission. That's the sole issue in this case. In 1949, the Federal Trade Commission filed a complaint against the petitioner alleging that it had discriminated in prices along it's purchasers in violation of Section 2 (a) of the Robinson-Patman Act. That discrimination consisted of offering volume discounts to all of its customers. That discount being in the form of an annual discount based on the volume of purchases, 2000 to 3000, 3000 to 4000, 4000 to 6000 and so on. It's set out in the record, each amount being a larger discount. The record shows that that discount in some form or other, that volume discount is more or less standard practice in the Automotive Replacement Parts Industry. The Automotive Replacement Parts Industry consists of many different things. In the case of Moog Industries for the sake of convenience, they have leaf springs, chassis part, coil actions and piston rings. They have three classifications. Several thousand parts intervene the lowest various classifications adoptable to cars going back as far as 1937, the various types of car. There's no question that these volume discounts were offered to all their customers. There is no question that it is standard practice in the industry to offer those discounts. The record shows that by testimony as we have referred to it in our brief in various places. In addition to that, there are exhibits attached to the record which show contracts for volume discounts, McQUay Norris, Regal Tool and Manufacturing, Thompson Products as typical contract showing those exhibits. Speaker: Is this proof before the Commission? Malcolm I. Frank: All before the Commission. William O. Douglas: But we must assume there was a violation here. We don't have a question of the merits. Malcolm I. Frank: The merits of this case and not before the Court. William O. Douglas: So we assume there's a violation. Malcolm I. Frank: The Circuit Court of Appeals sue Justice Whittaker on the Eighth Circuit at that time, affirmed the decision of the Federal Trade Commission that there had been a violation. And in addition to that, notwithstanding the fact that the Commission has not sought an enforcement of the order, when they affirmed the decision, they ordered the petitioner to file its certificate of compliance within 60 days after the receipt of the order by the Federal Trade Commission. When that order was entered, we filed our motion to state that order and for the Court to exercise its equitable jurisdiction and hold it in the bench until our competitors in that industry were subjected to like orders. Otherwise, we would be placed at a severe competitive disadvantage. William O. Douglas: Were those competitors have been preceded against by the Commission at that time? Malcolm I. Frank: Out of the 18 or 20 that are named in the record, Justice Douglas. I think two of them were being preceded against at that time. In the nine years since this litigation has started, the Federal Trade Commission, according to its brief, has filed 14 to a proceedings against members of the Automotive Replacement Parts Industry. Out of those 14 complaints, only three of them are competitors of petitioner. William O. Douglas: Would it take another nine years to get it presented in this case? Malcolm I. Frank: It might take longer than that Justice Douglas. Hugo L. Black: 18 (Inaudible) Malcolm I. Frank: Well, we named in the record there some 18 or 20 of them named. Hugo L. Black: That has taken nine years (Inaudible) Malcolm I. Frank: So far, there has been nine years of litigation as I construe this record from what the Federal Trade Commission brief says to proceed in nine cases. To date, they have filed nine cases but all together -- now, wait a minute, I'm wrong on that. They have filed 14 cases but all of them have not proceeded to a conclusion. For instance one against our largest competitor Thompson Products which had been going on for several years has not been brought to a decision to an initial decision by the hearing commissioner. There is no question in the record documentarily and from testimony that its standard practice in the industry. And the question arises what is the jurisdiction of the appellate court in a motion of that sort. It is my understanding, Your Honors that a motion of that sort is more or less ancillary to the proceeding for this reason. The Federal Trade Commission is not a judicial body, these (Inaudible) states. Therefore, it has no equitable jurisdiction. It can't decide questions of equity. So let us start first (Voice Overlap) to the jurisdiction of an appellate court by looking at what the statute says. Felix Frankfurter: May I ask you whether that means, has no equity jurisdiction?Does that mean that the Commission would itself be powerless to enter or to qualify a order of finding illegality with such a qualification? Malcolm I. Frank: Well, Justice Frankfurter that is a good question and I'll say this in reply. A little bit further in my argument if I -- my time last that long. In the cosmetics industry, the Commission did do something just like that. They file eight or nine proceedings, one of them being against Elizabeth Arden. And while Elizabeth Arden was going on, they entered into agreement with the rest of the boys in the other cases to hold it up and not proceed with them and not make the -- the decree final against there -- Elizabeth Arden -- against the rest of them until Elizabeth Arden has been brought to a final conclusion. It is in their words, they used their discretion may I say that. I don't say that they have no discretion but they don't have due equitable jurisdiction. The Court has held that they are not a judicial body but they can use their discretion. I do know that they have filed -- Felix Frankfurter: If they hold up in the Elizabeth Arden case, that's not a bad target I suppose. If they hold up the enforcement of the order against Elizabeth Arden until they get through with the others? Malcolm I. Frank: Yes, sir. They entered to a solemn agreement to do that. William O. Douglas: But those were the companion cases. Malcolm I. Frank: Sir? William O. Douglas: Those were companion cases. Malcolm I. Frank: No, there were against other concerns. William O. Douglas: Yes, but I mean they were pending at the time. Malcolm I. Frank: I don't know whether they were all pending at the same time or not. William O. Douglas: But they were eight or nine and one was on appeal and they decided they hold (Inaudible). Malcolm I. Frank: They may have been all pending at the time. I don't know whether they were filed simultaneously or not Justice Douglas. But I do know that they entered into that agreement because of the -- so that one would not be competitively injured. They entered -- they would all be entered so that it would be effective at the same time. William O. Douglas: But this like -- here in this Court, we sometimes hold the case because other cases are about to require -- Malcolm I. Frank: It's been done before. It was done in the Chrysler case. It was done in the Ford Motor case, the Justice Department has recognized. They entered into an agreement with Ford Motor Company and they entered in -- that they wouldn't hold that against them for -- any longer than it took to complete the General Motors case and if they weren't successful in the General Motors case the order in the Ford Motor case wouldn't be effective. William O. Douglas: I don't believe they would wait at nine years so. Malcolm I. Frank: Sir? William O. Douglas: I don't think that they would wait nine years. Felix Frankfurter: There are two different questions at least to my mind. One, if the -- if the Federal Trade Commission has empower, has not the power, I'm not talking about -- of course you're having that equity jurisdiction in any sense because they're not at court. I don't know all that talking is next to nothing and got equity jurisdiction because they haven't got any jurisdiction in a judicial sense. But if the Federal Trade Commission itself has no power which would surprise me and I'm subject to correction (Inaudible), if they haven't got power to stay an order after they find illegality, an order out of fairness to treat competitors in the same condition, the same way. And there's one question whether the Court has power to qualify an order which the Commission itself has no power. Malcolm I. Frank: That's what I was -- Felix Frankfurter: If the Commission -- if the Commission has power but doesn't exercise it, that raises a totally different question what the discretionary authority of the Court is to hit into or qualify a discretion exercise in a particular way by the Commission. Malcolm I. Frank: Precisely. Felix Frankfurter: And those are very different questions. Malcolm I. Frank: That's exactly what I was getting into Justice Frankfurter. Let's see what the statute says about that power. Section 21 of the Act, it appears -- I've set it out on page 11 on my brief. Upon the filing of the application and transcript, the Court shall cause notice to be served on the person and so forth and shall have power to make or enter on the pleading testimony and proceeding set forth in such transcript a decree affirming, modifying or setting aside the order of the Commission under the Board. Now that phrase, that latter phrase appears three times in that section and in the last place and you will find it on page 12, the jurisdiction of the United States Court of Appeals to enforce, set aside or modified orders of the Commission board shall be exclusive. Now -- Earl Warren: But can the -- can the Court modify or set aside the order of that commission or any other for some reason that hasn't been raised before the Commission itself? Now, as I understand it, in this case, you did not raise that issue. You never ask the Commission to -- to withhold its order until it had gone through the same procedure with the rest of the -- of the industry. But here, you -- you ask the Court to modify or -- or set aside an order of the -- of the Commission on a point that was never raised before the Commission. Malcolm I. Frank: That is true because, Mr. Chief Justice, the Federal Trade Commission don't have equitable jurisdiction. Earl Warren: Well, doesn't it have -- I thought you said a little while ago as -- as it may exercise this discretion, as a matter of discretion to withhold such -- such an order until such time this is acted and the rest of the industry. Did I misunderstand you on that? Malcolm I. Frank: Oh, no. Oh no. It certainly did. Now, whether it has power to exercise that discretion, it's a very serious question in my mind and that's what I was getting to when I said a moment ago that the statute says that the jurisdiction of the United States to set aside or modify orders of the Commission is exclusive. Felix Frankfurter: Was your doubt so fast it is that you felt inhibited from asking the Commission to -- to exercise that power? Malcolm I. Frank: Mr. Justice Frankfurter, I wasn't in the case at that time. Felix Frankfurter: All right. Well, the counsel then. Do you think anybody -- I -- I approved highly, the lawyer is not raising foolish points but since they have that power it wasn't raised, if it was raised. Malcolm I. Frank: Well, it was -- Felix Frankfurter: Can I ask you this? I ought to know but I don't. Some statute (Inaudible) say specifically, some of this regulatory statute say specifically you can't raise a point before the Court that wasn't raised before the agency that's a little of the federal power of the Federal Trade Commission Act. Malcolm I. Frank: Yes, this one does not. Felix Frankfurter: This one does not? Malcolm I. Frank: I contend this. Felix Frankfurter: I'm not saying that it isn't -- that impliedly that is a legal point. I just want to know whether the statute tells that specifically. Malcolm I. Frank: I contend that not alone does the Court have the -- the appellate jurisdiction to do this but it has original jurisdiction. Felix Frankfurter: Yes, but that doesn't take care of the Chief Justice's point - question, namely, whether a -- a question raise above before the Commission. Malcolm I. Frank: Well, now -- Felix Frankfurter: But not raised -- Malcolm I. Frank: Here is the way we treated that Mr. Chief Justice. The rules of the Federal Trade Commission provide for a Trade Conference Practice, Trade Practice Conference that is one of the duties delegated to it by Congress. In 1954, April 1954, your petitioner together with other manufacturers as one group petitioned the Federal Trade Commission to hold a -- call a trade practice conference among these manufacturers to correct the very abuses for which they were filing these complaints against mostly smaller companies like ours. Ours is a small company compared to the big ones in the industry. That application has laid there since 1954 and has never been acted upon. In addition to that, that same year, a month or two later, some 200 wholesalers in the industry filed a similar application for a Trade Practice Conference to correct and to go into this very same abuses that the Federal Trade Commission is complaining about because they were receiving discounts and for being liable. They wanted to get it correctly. The Federal Trade Commission has done nothing in that respect. A year later -- a year later, this doesn't appear in the record but it's correct and I'm sure the Federal Trade Commission counsel will not deny it. In December of 1955, Mr. Cassedy, a counsel in this case, wrote to the Chairman of the Commission, calling his attention to the fact that this Trade Practice Conference had been requested by these manufacturers as one group and the wholesaler is another group and that no action had been taken on it and requested and prayed that call this Trade Practice Conference. Earl Warren: Do you offer -- offer that as an excuse or a reason, let us say, for you're not applying to the Commission to withhold its order until it had gone through the procedure (Voice Overlap) -- Malcolm I. Frank: That's -- that's one of the reasons Mr. Chief Justice and while you say this maybe a play on words. I don't consider it a play on words. Our agencies are either judicial and in the sense they're semi-judicial but they don't have equity jurisdiction. Whether or not the Federal Trade Commission, when they entered into an agreement with the attorney's, for these cosmetics people to hold up any action until final decree was entered in the Elizabeth Arden cases so that they can all work together and then work under the same rules recognizing the competitive disadvantage. It is a serious question in my mind whether they have that right. Here's what they did in the lumber industry, in the Algoma case. Earl Warren: Well, I thought Justice Douglas pointed out that there was a distinction in that Arden case from this one. I thought he pointed out that in that case, they have tried these cases in the -- that were being -- being held awaiting the disposition of one -- of one case. Malcolm I. Frank: My recollection is all the cases had not been tried. Elizabeth Arden was the first one tried. Earl Warren: Yes. Malcolm I. Frank: And the others were being proceeded and Elizabeth Arden was being appealed. Earl Warren: Yes. Malcolm I. Frank: And on the final appeal, the agreement was again entered into that it would not be enforced against Elizabeth Arden until a final decree had been entered in the last of the eight cosmetic cases. Felix Frankfurter: Mr. Arden, I beg your pardon. Mr. Frank, lawyers can try two lawsuits at the same time if he's skillful enough. So I can see that you don't have to choose between two positions, but do you take either or both namely that the power -- that the Trade Commission has not the power to stay it's order and that relief for that must be had from the Court or you say alternatively, if it has the power and doesn't exercise it. It's such an abusive discretion that the Court can rectify that abuse. Malcolm I. Frank: I would say -- Felix Frankfurter: Or you take some other position still? Malcolm I. Frank: May I put it this way, sir. I would say that the Federal Trade Commission has power to make effective the date of an order anytime that it see fit it chooses. There is no question about that. They can have the power to relate a decree effective a year from next Tuesday if they want to or eight years from the next Tuesday if they want to. But I say that when a record shows as this one shows even though a request is not made, there is no waiver of the right. There is no waiver of the right. Unquestionably, not alone has the Court of Appeals, the exclusive jurisdiction to modify, affirm or set aside a Federal Trade Commission order. It is my opinion Your Honors that the Constitution of the United States gives the Court a reasonable equitable jurisdiction in any case presented to it at any time. Chief Justice Marshall said so in Osborn against United States Bank, decided by this Court many, many years ago. In Old Colony Trust Company against Commission of Internal Revenue, that was a case where the question was referred to this Court referring to a decision of the Board of Tax Appeals and referred to Article 3 of the Constitution. Article 3 of the Constitution as you know says that the judicial power extends the whole cases in law and equity arising under the Constitution and the laws of the United States. Felix Frankfurter: Well, then it's your position that to enforce an order to stay, to cease and desist a violation of the Federal Trade Commission Act against a particular business would be so inequitable if the same order conceded is -- the same order violated by competitors of the petitioner and not also ordered to be stay just to be ceased and desisted, so inequitable to the Court of Appeals to which -- which has the reviewing power of such an order or as an exercise of its inherent or granted equity powers grant such a stay, is that your position? Malcolm I. Frank: That is the position especially where the record shows that this is a standard practice in the industry. We are in effect, Your Honors, made legal guinea pigs. We're a little concerned in a two and a half billion dollar industry. Our volume in 1952 was a little under 5,000,000. We're a drop in the bucket in the big industry like this. We can't compete with other concerns. We lose customers weekly and daily to our competitors who are still offering volume discounts who have not been proceeded against. When they go and say “Well, we can give you a cheaper price.” Earl Warren: Mr. Frank do you have -- do you have any authorities in this field which -- which hold that the Court of Appeals can modify an order of the Federal Trade Commission on a point that was not raised or could not -- or could not have been raised or that was not raised before the Commission itself? Malcolm I. Frank: I know of no case on that point offhand Mr. Justice, but I do know this, that this Court held in Old Colony Trust Company against Commissioner of Internal Revenue that on the petitioner finding of an executive or administrative tribunal, it was not important whether the proceeding was originally began by administrative or executive determination if when it came to the Court and that's the Court of Appeals. If -- when it came to the Court, it call for the exercise of the judicial power of the Court upon which jurisdiction was conferred by the law. And then in that same case, this Court said, at page 723, judge, the Court further held that the jurisdiction and that cause was like that of Circuit Courts of Appeal in review of orders of the Federal Trade Commission and cited in support the Eastman Kodak case and the Silver against the Federal Trade Commission case. Now, Courts of Appeals in the Second Circuit have done it. Courts of Appeals in the Seventh Circuit have done it. Courts of Appeals in the Sixth Circuit have done it and Court of Appeals in my own Eighth Circuit did it, notwithstanding Justice Whittaker's overruling of it. They did it in the Chamber of Commerce case that's cited in the brief. Now, whether it's a question -- Earl Warren: Do you know -- Malcolm I. Frank: -- we ought to raise it first down there or whether we ought to raise it originally in here in the Old Colony case, it's says it has the original jurisdiction in the Court. Earl Warren: Do you know -- do you know Mr. Frank if in those cases that you have just cited, the -- the petitioner did or did not request the Commission to withhold its order. I don't know myself. Malcolm I. Frank: No, the only one that I know of where the Commission was asked to withhold its order was in the Niehoff case which is to be argued right after mine. Earl Warren: Yes. Malcolm I. Frank: In the other cases, I don't think it was raised. Felix Frankfurter: Mr. Frank, may I ask you one more question. Malcolm I. Frank: Yes, sir. Felix Frankfurter: Suppose the request -- a request for a stay of the enforcement of an order against competitor one until competitors -- the rest of them dealt with, were made before the Commission. And suppose the Commission considered it and after hearing arguments pro and con, decided against such a stay. But it's considered and gave reason for denying. I can think of administrative process and so on and so on, would that be a different -- would that present a different case than where as in the Niehoff case, a request is made and denied. Malcolm I. Frank: I think so. Felix Frankfurter: Would that make any difference? Malcolm I. Frank: Very much so. I'll -- Felix Frankfurter: But if it makes different -- Malcolm I. Frank: I'll tell you why. Felix Frankfurter: All right. Malcolm I. Frank: In my opinion, this Federal Trade Commission can't make a finding of fact on something on which it has no jurisdiction. Felix Frankfurter: Well, but you just -- Malcolm I. Frank: It would have to make a finding of fact and the -- the Government's brief says that there's no finding of fact made on it. They can't make a finding of fact on something that's beyond their jurisdiction. Felix Frankfurter: But I -- I -- pardon me because I thought you agree that the Commission could state an order of invalidity, didn't you say that? Malcolm I. Frank: I said that but Your Honor said they made findings of fact and state that there are reasons for it. There's a distinction between the two. If the Federal Trade Commission had come out totally and said “We're going to make this order effective when we get the balance of the industry in line.” That's one thing. But if the Federal Trade Commission come out and says “For the reason that so and so and for the reason that so and so, we don't consider this evidence sufficient and makes findings of fact.” I say they haven't got jurisdiction to make those findings of fact. Felix Frankfurter: Well, then they must always grant a stay if there are competitors in the field according to your argument. Malcolm I. Frank: No, sir. Felix Frankfurter: But if not then -- Malcolm I. Frank: Not unless the record justifies that it is a standard practice throughout the industry. I don't mean that it should be done indiscriminately. Here, it's standard practice in the industry. There's no denial of that fact that there are rebates and discounts on piston rings and replacement parts in one form or another throughout the industry. It's just the same as years ago when you walk and -- when my daddy used to walk into the drugstore and bought a cigar and he could buy one for 10 cents or he could buy three for a quarter. That's the cost. It was quantity. Or when I can remember very well, a relative of mine was in business and when he bought thread from the Spool Cotton Company. The more thread you bought in a year, the bigger credit bonus you got at the end of the year. Quantity discounts are in grand in the industry of commerce in almost any line that you want to talk about. And it's awful hard, it's awful hard to just uproot it and say to this one and this one you can't do it anymore while it takes years to get the rest of that industry in line. In the meantime, we've lost customers. The Federal Trade Commission says “Well, you've got a remedy, you can sue them.” Well, of course we can sue them but that don't get us our customers back and money damages wouldn't replace the lost of those customers that are gone from us. There's just one more thing if I may indulge. The attorney general with reference to price, the attorney general's committee to investigate the antitrust back said in one paragraph and it's referred to in the brief and it's very important to me and I think to you is that competition where it's keen and a reduction in price in order to meet a rival's price if it's forbidden, forbidden is reductio ad absurdum. That's it. Thank you very much and I would like very much to have this Court not tell the Trade Commission what to do in it's discretion but to stay this order until the Federal Trade Commission can either exercise its discretion in calling a trade conference or bring these cases against our competitors to a conclusion. Thank you very much. Earl Warren: Mr. Kintner. Earl W. Kintner: May it please the Court. Counsel has made reference to the cosmetics case, the fact that the Federal Trade Commission entered into an understanding that the Court's decision in the Elizabeth Arden case would bind the parties with respect to other pending proceedings which were at various stages of the administrative process. The Commission exercised it's discretion as in its law enforcement capacity in entering into this understanding. It did subsequently dismissed six -- those six pending cases and attempted -- and did have a Trade Practice Conference to suggest rules of conduct for the parties and it is a fact that after the Trade Practice Conference and after they'd all signed the pledge card, the Commission found it necessary to institute an industry wide investigation of the cosmetics industry. It issued complaints against three of those against whom it had dismissed the cases and the other three had signed the pledge cards. This illustrates graphically, I think, the fact that these voluntary procedures of the Commission indeed of any law enforcement agency are no better than scraps of paper unless they are backed up by firm enforcement of the laws. It is true that there was an application for a Trade Practice Conference in 1954 with respect to certain segments of this industry. It is also true since we've gone beyond the record that the Department of Justice subjected to the holding of that Trade Practice Conference because it then had under investigation certain segments of the industry and it was not -- and it is not the department's policy nor that of the Commission to settle by Trade Practice Conferences, matters which are in litigation or where substantial amount of investigative authority has been exercised and substantial amounts of the public's money spent to investigate the practice or where there is real controversy with respect to the legality or illegality of the practices in question. It is true that there was another application in 1957, but these cases were then in litigation. The Commission had filed 16 price discrimination complaints in this particular industry, the Automotive Replacement Parts Industry. Felix Frankfurter: The Commission -- I'm sorry, the Commission had done what? Earl W. Kintner: Had filed 16 companion cases or two-way cases in this industry. Felix Frankfurter: Could -- could such -- such an inquiry or could such complaints be considered in a single proceeding to where the I.C.C.often brings before it the vast inquiry? Earl W. Kintner: In my judgment sir, it would be utterly impossible because in price discrimination cases, each respondent has certain defenses, the cost defense, the defense of good -- of meeting competition; the question indeed in the first instance of whether he is engaged in Interstate Commerce. And finally, the all important question which makes these cases so complicated and so lengthy in many instances, the question of whether or not there has been the requisite injury to competition or the tendency to -- toward monopoly required by the statute. Felix Frankfurter: You impliedly by that answer did not deny the suggestion or the claim that in fact there was uniform trade practice here which governed all those in it. You deny that. Earl W. Kintner: To the extent that there were certain pricing practices being engaged in by certain segments of the industry. Counsel is right. But it is not necessarily true that all of these pricing practices of all members of the industry were violative of the law. Felix Frankfurter: No, but as to those -- as to practices that were uniformly though not all the practices that you might look into, but as to practices where there was uniformity in the industry, does the Commission or the Commission enable to bring the whole industry before it and order -- one fell order to outlaw in such a uniform practice. Earl W. Kintner: The Commission has not found it possible Mr. Justice Frankfurter to do this. If it were able, it would have exercised its administrative discretion to do so. Felix Frankfurter: Tell me why as to the admission that you've made. I mean the statement you made a minute ago. There were certain practices that were uniformed. What is the -- what are the administrative pampering that this does that prevent those practices from being dealt with in -- in a comprehensive, in an all industry comprehending order? Earl W. Kintner: The fact that each respondent has a cost justification defense under the statute available to him. The cost of one respondent may not be the cost of another. Each respondent under the statute has a possible defense of good faith meeting of the competition. And in this industry, there were seven -- there were approximately 75 lines of products, each product in many instances broken down into sub lines with literally thousands of parts within some particular line. Felix Frankfurter: Or what -- on what basis did you say that Mr. Frank's statement was true as to some practices? Earl W. Kintner: Only to the extent that some of his competitors, we believe, because we've issued 16 complaints in this industry, do use annual volume discounts either rebating in -- at the end of the year in cash or in merchandise. Felix Frankfurter: Does the establishment of that uniform practice require individualized, complicated inquiry as to each business? Earl W. Kintner: We certainly do not think so, Your Honor. Felix Frankfurter: So that -- there you could have a single -- I'm not saying that makes a difference. I'm just trying to find out what the administrative problems are which may make a difference in what courts do or allowed to do. Earl W. Kintner: The problem might graphically be expressed by -- by this example that A and B compete with C in this industry, but C competes with D and E. There would be a never ending succession of competitors, one of it competes with another and then with two others in such a proceeding. The case -- the proceeding would never end. There would never be an order issued, an effective order by the Commission. And as to the practices of each of these competitors, there would come into play the defenses of the Act and above all the question of whether or not each pricing practice of each have the requisite adverse effects as required by the statute upon the competition. Felix Frankfurter: But are you saying -- are you saying -- this is what I gathered from what you've said that although it may appear on a surface, on a façade view that there is a uniform practice in an industry concerning so many -- anywhere from two or more many competitors, although it may appear there is a single uniformed industry wide practice. As a matter of fact, that apparently single uniformed practice is so individualized that you cannot do it otherwise in case by case. Is that what you're saying? Earl W. Kintner: Yes, sir. Now, there had been instances, notably, the lead pigment industry and the cement industry where the -- the factors in the industry were tied together in a price fixing conspiracy or combination where their practices were uniform. There, the Commission has exercised its discretion in issuing a price discrimination count with respect to the -- the conspiracy portion of the complaint and has cleaned up the industry in the one proceeding. But this is not the case in the Automotive Replacement Parts Industry. Speaker: Are there any -- are there any of instances where you failed to file a complaint against the -- what might be fairly called as the Moog -- any of Moog's competitors. Have you proceeded against the whole industry -- Earl W. Kintner: We have -- Speaker: -- for this class of -- for this class of violation? Earl W. Kintner: As we have collected evidence and as it has appeared to the Commission that the statute may be violated. The Commission has proceeded to issue its complaint and has proceeded to hold its administrative hearings as speedily as possible. Speaker: What did you find happens when you litigate one of these cases? You've got talk of consent decrees coming in or do you have to litigate them all? Earl W. Kintner: Interestingly enough Mr. Justice Harlan, one of respond -- of petitioners, principal competitor's sealed power has signed a consent settlement with the Federal Trade Commission. Speaker: The same scope that the non-consent decree here (Voice Overlap) -- Earl W. Kintner: Yes, sir. Speaker: -- the story that you presented? Earl W. Kintner: Yes, sir. We -- we expect and can only expect when the Commission issues complaints against individuals in an industry charged with violating the law that once the principles or practices therein involved have been litigated and passed upon by the courts that others in the industry similarly situated will fall into line. If they do not of course, the Commission must proceed to investigate as the practices of competitors are called to its attention and to issue complaints and hold hearings within the limits of his -- of its budget. For example, here, during a nine year period, 25% of the price discrimination complaints issued by the Federal Trade Commission, during that nine-year period have been issued in this particular industry. The Commission has moved vigorously to stand proud, practices which it believes are unlawful in the industry. Felix Frankfurter: Did the -- did the proceeding which resulted in the order in the Moog case, in this case, start by some private complaint or on the Commission's initiation? Earl W. Kintner: Now that is a very interesting question and requires some background detail at this point. The Commission's attention was invited to the fact that the jobbers who are the customers or petitioner here and others similarly situated were that certain jobbers were receiving better prices than others because those jobbers belong to buying groups. The buying groups were able to secure from petitioner and others far better prices than the individual members were able to secure in their own negotiations. Members of the buying groups bought individually. They individually ordered. Shipments were made individually, but they were billed through the buying group, a mere book keeping device in our view to avoid the law. The situation is graphically illustrated by the Dallas situation. There were six customers, our petitioner. Four of them belong to jobbing groups and secured discounts of 12% to 15%. Two did not belong. One jobber didn't get any discount. The other jobber who was the largest one in the area got 7.29% discount. And I invite the Court's attention to the fact that the record indicates that this industry, the jobbing end of it, operates on a 4% or less net profit basis, so that the discount that the largest jobber was not receiving simply because he didn't belong to this bookkeeping transaction. It's terribly important to him in his survival as an independent businessman and it was because the Commission found that these buying groups, these bookkeeping devices were pervading the industry that it moved against the manufacturers who were according the prices to the buying groups. Felix Frankfurter: We'll not take that thing -- could the whole -- all those who are pursuing that practice could they not be brought into a single proceeding? Earl W. Kintner: We don't think so, Your Honor. First place, we don't believe that all of the manufacturers in the industry are engaged in the same pricing practice. Felix Frankfurter: Those who did -- those who did. I'm trying to -- I'm drawing the legal (Voice Overlap) -- Earl W. Kintner: As to those who -- Felix Frankfurter: -- get understanding of what the administrative does and why does it and what it has to do and what it does not have to do for effective administration. Earl W. Kintner: As to those in the industry who are engaged in according annual, volume, discount, rebates based upon cumulative purchases during the year as to those. Each in a proceeding would have here a separate defense that his price is valid because he is simply according a differential based upon the cost of doing business or that he accords this price differential based upon the fact that he's meeting the competition of a competitor in a certain area. Felix Frankfurter: Well, I don't understand from what you said that any of that would be irrelevant to a situation where as a matter of bookkeeping, a fellow gets the discount because he belongs to a buying group and the other fellow who doesn't stands out against the buying group doesn't get the discount. What is that -- what kind of a defense the difference in cost be if that's the reason of the differential? Earl W. Kintner: We have proceeded against the buying groups. We have some 10 complaints pending against the buying groups or receiving the -- the unlawful price discriminations. They in turn of course have their defenses. But as to each of these respondents, they would have each their various defenses and then there would be the question of whether or not individually they were entering competition and each would have varying lines of competitors. They sell different products in this industry and each has a variety of competitors, some common and some not common one or the other. Felix Frankfurter: Mr.-- may I ask you this Mr. Kintner. Apart from the Elizabeth Arden case, does the Commission sometimes stay its order to cease and desist? And if so, on what ground does it stay if -- if they are capable of generalization? Earl W. Kintner: The Commission uses its administrative discretion in practically and I believe all orders that it issues to require compliance within 60 days of a forthwith order and the courts have sustained scores of such orders and have made it a part of the Court's judgment that compliance shall be had within 60 days. Once an order of the Commission has been issued in a case of this character and has been affirmed by Court of Appeals, there comes the arduous process of securing compliance with that order. First, there is the 60-day waiting period during which respondent may adjust its business and must at least convince the Commission of its good faith and effort to comply with the order. The division of compliance which is lodged in my office has authority on its own motion and without reference to the Federal Trade Commission to grant an additional 60 days during which respondent may use good faith in attempting to adjust his business practices. And then after all that and assuming that respondent has not satisfied the Commission that it's using good faith and attempting to comply with the order, after all that, the Commission then enters into the second stage of the proceeding. It goes to a Court of Appeals and phrase an enforcement of the order. And even that doesn't end the procedure. The Commission must detect a third violation and must go again to the Court of Appeals and enforce the order to the Court's contempt power. Felix Frankfurter: That's all worked out administratively. I mean that -- the process which you've just outlined has been evolved -- Earl W. Kintner: It is. It has -- Felix Frankfurter: -- with the help of the Commission. Earl W. Kintner: -- it has been evolved following this Court's decision in the Ruberoid case, 343 U.S. 470 at page 476 where this Court held that such procedures so far as the second and third stage, were required by the statute. Speaker: (Inaudible) Earl W. Kintner: In -- the instance here, the two cases have -- have been in gestation nine years, two and a half of those before the Court's -- Speaker: (Inaudible) Earl W. Kintner: I don't think it's entirely typical, but the Commission finds that next to the price fixing industry wide price fixing cases that these two-way cases under the Robinson-Patman law are very difficult and lengthy if respondent wishes to try out all of the defenses available to it and all of the issues which may properly be examined under the law. We must rely upon establishing precedent and then bringing the rest of the industry into compliance. Speaker: (Inaudible) Earl W. Kintner: That -- I would go further than that and say that the case would never end. The possibilities for litigation are such that half the antitrust part would be gainfully employed for half a century. That is the result which the Commission devoutly does not seek part.

Warren E. Burger: We'll hear arguments next in number 73-1233, National Labor Relations Board against Sears, Roebuck. Mr. Friedman, I think you may proceed whenever you're ready. Daniel M. Friedman: Mr. Chief Justice, may it please the Court. The question in this case here on the writ certiorari to the Court of the Appeals for the District of Columbia Circuit is whether the Freedom of Information Act requires the disclosure of certain documents generated by the General Counsel of the National Labor Relations Board so-called Advice and Appeals Memoranda which relate to the prosecution of unfair labor practices before the Board by the General Counsel. And order to put the issue in context, I would like at the outset to describe briefly the procedures that are followed within the General Counsel's office in the deciding whether or not to prosecute an unfair labor practice charge before the Board. As this Court is aware, the National Labor Relations Board itself has no authority to bring an unfair labor practice charge. It can only act in response to a charge that has been filed with it. If a charge is filed and any person can file a charge, then the General Counsel if he wishes to may prosecute the charge but only in response to someone else bringing a matter to the attention of the Board formally, may the Board issue an unfair labor practice complaint. Now, the General Counsel of the Board, who is a presidential appointee, serves two functions in connection with the having of cases before the Board. First, he is the one when a complaint has been issued who prosecutes the case before the Board, but secondly he has final authority to determine whether or not a complaint should be issued. That is, if after examining the case, the General Counsel decides not to issue a complaint that is the end of that case as far as the Board is concerned. Potter Stewart: And it's wholly unreviewable, is it not? Daniel M. Friedman: Wholly unreviewable held by a number of courts to that effect. Now, the General Counsel in turn has delegated to the Board's Regional Directors of whom there are some 30th, the authority initially took process unfair labor process charges. When a charge is filed with one of the Regional Directors he investigates that he ordinarily will interrogate witnesses, look at documents and so on. And after he has completed his investigation, there are three possible things he may do. First, he may conclude that there is nothing here that warrants the issuance of a complaint and he decides not to issue a complaint. Secondly, he may conclude on the basis of his investigation that there's enough here to warrant the issuance of a complaint and he issues the complaint. Or third, he may submit the merit to the General Counsel's Office in Washington for advice on whether or not he should issue a complaint. The General Counsel has put out instructions to the Regional Directors that they are to refer two categories of cases to Washington for advice. One, case that present novel or complex problems or two, cases that involve certain issues which the General Counsel has specified should be submitted to him in Washington in order to assure a uniform prosecutorial policy with respect to these cases. Now, when the General Counsel receives from the Regional Director a request for advice, the matter submitted to something called the Office of Appeals in the General Counsel's Office where the case is thoroughly and carefully reviewed by a number of people. And this review process culminates in something called an “Advice Memorandum”, in which the General Counsel sometimes act himself more frequently acting through the man in charge of the Office of Advice, advices the Regional Director on whether or not he should issue a complaint. This Advice Memoranda, the General Counsel gives the reasons for his decision, discusses the evidence of the case, analyzes Board precedents and if the advice is that a complaint should issue generally gives the theory upon which he believes the case should proceed. Now, although the representative examples that are included in the record of Advice Memoranda contain nothing making any reference to the possibility of settlements. The report -- the two reports in this record presented by the Practice and Procedure Committee of the Labor Law Section of the American Bar Association on which Sears relies very heavily. And in one of those reports, set forth at page 71 of the appendix, the Committee which represents of course the experts in this field both on the labor and the management side, recognizes that not infrequently, this Advice Memoranda will refer to settlement possibilities. It's in the middle of page 71 and the statement is, “the response to the region will sometimes include specifics with respect to the kind of settlement or other action and will set forth the theories upon which such cause of action is based.” And I stressed that because the ultimate question in the case is what these things are. Are they just a statement of legal position or do they involve something more. They basically reflect to the strategy, the litigation strategy of the General Counsel has recommended be followed. And we think the fact that they refer to settlement negotiations and suggest a basis upon settlement, to us is very clear evidence of that. Now, if the Regional Director should decide not to issue a complaint either because of the advice he has received from the General Counsel or because his own investigation indicates that a complaint is not appropriate, then the charging party has the right to appeal that determination to the General Counsel. The matter is then similarly reviewed except by different office by something called the Office of Appeals. If the Office of Appeals upholds the Regional Director's determination, it so advises him and the parties that there are rather brief statement giving the reasons for his decision. If however, the Regional Counsel is reversed and the General Counsel concludes that a complaint should issue, they then prepare something called an Appeals Memoranda. And the Appeals Memoranda is similar to the Advice Memoranda and that it too describes the case suggest theories, gives the reasoning of the General Counsel. Now, it's these two categories -- Potter Stewart: And the Appeals Memorandum is sent back to the Regional? Daniel M. Friedman: To the Regional Director. Potter Stewart: And to nobody else? Daniel M. Friedman: To nobody else, that's what they -- these are the two things they want to see. Potter Stewart: Yes, I know that. Daniel M. Friedman: This is -- now this is an internal document in which the General Counsel explains to the Regional Director why he thinks the case should go forward. Suggest the legal theories of the case, discusses the evidence, may again refer to settlement negotiations and will discuss the applicable board and court precedents. And I'd like to just make one other point of here, because the claim is that somehow, these Appeals Memoranda represent the law of the General Counsel. They are not the law of the General Counsel, the General Counsel makes no law, all he does is applies the law as the Board and courts have developed it. He is the prosecuting arm, the prosecuting arm of the Board in handling of this unfair labor practice during -- Potter Stewart: There is an appeal only in the event the Regional Director decides not to. Daniel M. Friedman: That is correct. Potter Stewart: And how -- what are the mechanics to that appeal? I did not know about that appeal before. Daniel M. Friedman: Oh! The mechanics of that appeal are that the charging party who -- Potter Stewart: First of all the Regional Director, I suppose, has to advise the charging party -- Daniel M. Friedman: He advises -- Potter Stewart: Or if he decided not to. Daniel M. Friedman: He advises the charging party. There are some examples of that giving the reasons why he has decided not to issue a complaint. Advising the charging party, I believe, that's within 10 days that he may appeal to the General Counsel. Potter Stewart: And then how is that appeal -- Daniel M. Friedman: That is a written piece of paper that is sent to the General Counsel indicating why the charging party believes that a complaint should issue in this case. If the charging party wishes to he may have the opportunity to argue orally before the General Counsel's Office in Washington. Potter Stewart: But it's just -- it's an ex parte appeal, the potential chargee is not defined. Daniel M. Friedman: No, no. Potential -- no. The potential chargee is not a party, although, the potential chargee may have the opportunity if he wishes to be heard also. This is a relatively infrequent thing. Potter Stewart: He is -- William H. Rehnquist: Not simultaneous? Daniel M. Friedman: No, no. There's no -- there's nothing comparable to the argument before this Court. Potter Stewart: Right. Daniel M. Friedman: It's heard ex parte by each side. Potter Stewart: How does the charging -- potential chargee know about it? Daniel M. Friedman: Oh! He is given notice of the appeal by the -- when, I believe when the general -- when the charging party files a notice of appeal. This notice is given to the chargee because -- Potter Stewart: Is that first notice he gets? Daniel M. Friedman: Of the appeal. But no, when it charges filed initially -- Potter Stewart: With the General Counsel -- with the -- Daniel M. Friedman: With the Regional Director, he informs the party charged? Potter Stewart: Who is he? Daniel M. Friedman: The Regional Director. Well, let me. Under the Board's regulations, the charging party has a response ability to serve a copy of the charge upon the person charged. Potter Stewart: The chargee. Daniel M. Friedman: So he is put on notice and normally in this situation, not normally but frequently, the Board or the Regional Director's representatives may interrogate the and go on and talk to the charged party to see what his side of the case is. Potter Stewart: Now. Daniel M. Friedman: Because you get one side from the charging party, the charged party may have a wholly different point of view. Potter Stewart: Then the Regional Director, if and only if he decides with or without having sought it by Washington not to file a complaint -- Daniel M. Friedman: Yes. Potter Stewart: Then and then only is there an appeal. Daniel M. Friedman: That's correct. Potter Stewart: And it's preliminarily an ex parte appeal. Daniel M. Friedman: Yes. Potter Stewart: Later, there may be or is an opportunity by the potential chargee to be heard also in Washington. Daniel M. Friedman: Yes. Potter Stewart: And is all -- and it's done on the papers but sometimes also on an oral hearing. Daniel M. Friedman: Sometimes on an oral hearing with extensive review of the case in the Office of Appeals because that is assigned to a lawyer who studies it than a group of people study the case. It's very extensively considered. Potter Stewart: And how long it processes this? Daniel M. Friedman: Oh, it might be -- Potter Stewart: In any given case? Daniel M. Friedman: A week or two weeks. Very -- I suppose depending on whether it's going to be a hearing. What may sometimes happen occasionally when the case gets to the General Counsel's Office, it may be sent directly the General Counsel himself may consider. And let me say that this is exactly, if I may come to this right now. This is exactly what happened in this case. In this case, what happened in this case -- Potter Stewart: Well, just before you finish. I want to get this procedure. Daniel M. Friedman: Alright, let me try it. Potter Stewart: Because I didn't know anything about that until I read these briefs in this case. Then if the General Counsel's Office upholds the decision of the Regional Director not to -- Daniel M. Friedman: Issue a choice. Potter Stewart: File a complaint then what? Daniel M. Friedman: Then a notice to that effect is sent to the charging party and to the Regional Director and that's the end of it. Potter Stewart: That's the end of it and there's no memo and there's nothing -- Daniel M. Friedman: There's no -- there's no -- Potter Stewart: There are no papers there in that kind of situation that are involve in this case. Daniel M. Friedman: That's correct. Potter Stewart: Because there are none. Daniel M. Friedman: There are none other than the letter which is a public document because sent to the parties. Potter Stewart: Just a notice? Daniel M. Friedman: Yes. There's no -- Potter Stewart: So, it's only in the event that the tentative decision or the decision of the Regional Director is reversed. Daniel M. Friedman: That is correct. Potter Stewart: That papers are produced that is -- Daniel M. Friedman: That's right. Potter Stewart: Among others of this lawsuit. Daniel M. Friedman: That's right. When in effect the General Counsel has made the decision to authorize the prosecution of the case, now the Mink case, that's -- what is involved in this lawsuit. Potter Stewart: And it is under the statute, his ultimate non-reviewable decision that is of the General Counsel. Daniel M. Friedman: That is -- Potter Stewart: It is just something that this is just delegated as a matter within the bureaucracy this portion of it to the Regional Director, right? Daniel M. Friedman: The General Counsel has -- Potter Stewart: Has a statutory -- Daniel M. Friedman: Authority and he is -- Potter Stewart: Authority -- Daniel M. Friedman: Delegated to the Regional Director. Potter Stewart: To decide whether or not to file a complaint if -- Daniel M. Friedman: That is right. Potter Stewart: The charge has been filed. Daniel M. Friedman: That is right and he is delegated to the Regional Director the initial processes in this complaint. Potter Stewart: Part of this decision. Daniel M. Friedman: That is correct. Potter Stewart: Thank you very much. Warren E. Burger: Is he -- the General Counsel has a tenure of office that's fixed by statute -- Daniel M. Friedman: Four years Mr. Chief Justice. So, quite -- Warren E. Burger: So he can only be removed for cause, is that not so? Daniel M. Friedman: I believe so, yes. Let me just come back if I may if one more thing to talk -- describe a little bit about these Appeals Memoranda and the Advice Memoranda here. All that they really decide, all that the General Counsel is deciding when he either recommends in the Advice Memorandum when he authorizes a complaint or in the -- at the Appeals Stage and the Appeals Memorandum when he tells them to go ahead and file it, is that this is a matter that ones presentation to the Board. He is not deciding that there is a violation and that is shown rather explicitly. In this record, there are at least three examples in the Advice and Appeals Memoranda and also in two letters sent to counsel for charging parties in which it explicitly stated that, this is a matter that warrants passing on by the Board. Let me just refer the Court to two of these and then I'll cite the others at page 191 as Advice -- an Advice Memorandum which ends up that authorization of complaint was warranted to place the issues of the case before the Board. And then at page 206, which is an Appeal Memorandum in the second full paragraph under reasons for actions it said. “Issues were raised with respect to various issues which warranted Board determination on the basis of record testimony.” Another example of that is at page 211 of the record and then at page 32 and 199 of the record, letters sent by the General Counsel to counsel for the charging parties. Now, let me come to the facts of this case very briefly. In this case, Sears filed -- Sears, Roebuck the respondent filed with the Regional Director a charge against a union alleging that the union had refused to bargain. That alleged refusal of the bargain whether there was a refusal to bargain turned upon whether Sears had properly withdrawn from a multi-employer unit prior to the time that bargaining began. This is a matter of some dispute within the Board. There's a lot of Board precedents on this, a lot of litigation on this as to just when an employer or a union may withdraw from multi-unit bargaining. The Regional Director referred this case to the General Counsel for advice. The next thing that we know by the record is that the Regional Director advised Sears that he was not filing a complaint on the case. Sears then appealed this to the General Counsel and the General Counsel reversed and advised Sears that a complaint would be filed stating and as again, coming back to what I said a minute ago that this case raised issues warranting Board determination. That's at page 32 of the appendix and then the Board, the Regional Director subsequently issued a complaint. Now, prior to the time that Sears appealed from the Regional Director's refusal to issue a complaint to the General Counsel. It requested the General Counsel to furnish it under the Freedom of Information Act with three things. First, the Advice Memorandum that the General Counsel had submitted to the Regional Director advising it not to issue a complaint in this case. Secondly, all Advice and Appeals Memoranda relating to the same subject that is the timeliness of employer withdrawal from multi-employer bargaining units. All of those Appeals and Advice Memoranda rendered within the past five years. And third, an index or a digest to the Advice and Appeals Memoranda, what it stated was it needed this information in order to successfully prosecute its appeal to the General Counsel. The General Counsel refused to furnish these memoranda under the Freedom of Information Act relying on exemptions 5 and 7 of the Act which is that I will discuss shortly, and also saying that these memos were not a final disposition of the case but were merely guides to the Regional Directors on how to prosecute the case. Sears then filed this action in the District of Columbia District Court to obtain this information. While the case was pending before the District Court, the General Counsel of the Labor Board announced that as a matter of discretion and not because it was required by the Freedom of Information Act, that he was going to make available to the public copies of all of the Appeals and Advice Memoranda in so-called close cases. That is cases where the Board proceeding had been completed. He stated that he was doing this in order to provide the public and the Labor Board with further information as to how this office was functioning. Both sides in this case moved for summary judgment. The District Court granted Sears motion and entered a rather broad order set forth at pages 9 to 10 of the record which directed the Board's General Counsel to provide all Advice and Appeals Memoranda. Sears had broadened its claim in its complaint so we were directed to produce all Advice and Appeals Memoranda for the past five years including anything incorporated by reference and those things, that is if for example as we read the order, if the order directed them to produce an Appeals Memorandum and the Appeals Memorandum said for reasons stated in the Regional Director's Memorandum, we conclude we will not -- it was not to authorize complaint in this case, that would have to be produced. They also -- it also said that where it used some vague language such as in the circumstances of this case, the General Counsel have to explicate that and explain exactly what was meant. Now, let me say that this kind of thing in the circumstances of this case as set forth and the reasons given in the Appeals Memoranda or the advices of the -- the request for advice from the Regional Director. This is just some kind of shorthanded phrases within in the informal administrative procedure that is followed. What is done in this situation is the parties the General Counsel is dealing with the people in the Regional Director's Office and the region they are familiar with these things. William H. Rehnquist: Are you saying that the District Court required the General Counsel to prepare material that wasn't in existence in order to -- Daniel M. Friedman: It may. It may Mr. Justice because when they -- what he said was, that defendants produce explanatory material including existing documents. Potter Stewart: What page is this? Daniel M. Friedman: Page 10 (a) of the petition for certiorari where the District Court's opinion defend its produced explanatory material including existing documents and those instances were Advice or Appeals Memoranda rely upon the circumstances of the case or some other vague and imprecise reference without delineating what those circumstances are except where they can demonstrate that these documents are exempt under the Act which seems to us just leaves the thing very far-reaching. William H. Rehnquist: When they say including existing documents, the inference is perhaps that more than existing document. Daniel M. Friedman: It may well be. For example, if some of the basis for the action of the General Counsel's Office was in discussions -- in formal discussions are telephone conversations, they had with the people in the Regional Office would sometimes happens. I assume they would have to unless they could show that these was exempt they would have to make this available. They might have to reduce to writings some of the things if they had some notes. They might have to make this into a formal memorandum. The Court of Appeals summarily affirmed on the basis of the decision of the District Court and also cited its opinion in the Grumman case, which is another freedom of information case to be argued immediately after this case. Now in the Freedom of Information Act, what Congress has done is to provide three different categories of information that are subject to production. First is one category which has to be published in the Federal Register. Then there's another category consisting of three components which has to be produced and indexed. Finally, there is a third category of identifiable records which just have to be produced. But then the Act goes on in subsection (b) and list nine specific categories to which it says the Act does not apply. Our submission to this Court is that three of those exemptions cover this material. And if we are right in that, if we are right on any one of those, if any one of those exemptions covers this material, that of course is the end of the case. You never have to reach the argument upon which Sears relies so heavily that these documents are comprehended within the three subcategories which are required to be published and indexed. And so I will addressed primarily and perhaps exclusively depending how the time runs the reasons why we think the exemptions cover this and we have discussed the other issues fully in our brief. Our principal reliance and our reliance in the lower court was on exemption number 5 which was before this Court two terms ago in the Mink case which provides for interagency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency. There's no question that these are intra-agency memoranda. This provision of the Act, I might add, is on page 14 (a) of our petition for certiorari and also will be found at page 56 of our brief on the merit. Byron R. White: Well, I take it. I take it then that the Government doesn't contest the assertion that the General Counsel is an agency. Daniel M. Friedman: We conceded that. We conceded that in the District Court Mr. Justice -- Byron R. White: Still do? Daniel M. Friedman: We -- if I may say, we don't concede it but we don't contest it. Byron R. White: So, we treat the General Counsel separately from the Board for purposes of this case. Daniel M. Friedman: For this purposes of this case, although if we didn't raise anything because we conceded in the District Court. I think an argument could be made that he isn't, but we're not making that here. Byron R. White: So, is your argument just simply on the exemptions rather than on the earlier part of the Act. Daniel M. Friedman: No. We argued first the exemptions and then we argued the earlier part of it. The distinction between them is, if we lose on the exemptions under subparagraph 3, all we're required to do is to produce them. On the other hand, if they come within any of the three subcategories of the earlier part of the Act which we don't think apply were required not only to produce them but also to index them. So that our reliance is first, we say we don't have to produce them because they're exempt. Secondly, we say if we do have to produce them, if we do have to produce them, they're not under subparagraph 2 which are the three categories but under subparagraph 3 with respect to which there is no indexing required. But we -- Byron R. White: Mr. Friedman, I gather any question whether the General Counsel is an agency would have been resolved in any of this by the amendment of 1974? Daniel M. Friedman: It may or may not have been. But we're not, I want to make clear, we're not charging -- contesting that in this. Byron R. White: They keep going. Any establishment in the Executive Branch of the Government that have -- Daniel M. Friedman: Well, that there some legislative history suggesting that perhaps Congress did not intend to deal with subcategories. Byron R. White: Well, let's -- suppose none of the exemptions apply, under what category specified in the early part of the Act would these memoranda -- would Advice or Appeals Memoranda fall? Daniel M. Friedman: Well, it would certainly be identifiable records under page -- on page 55 of our brief subparagraph 3. Potter Stewart: At 522. Daniel M. Friedman: At 522 (a) (3), they'd be identifiable records. It's also contended that they are final opinions and this is on page -- subparagraph 2 at page 54 final opinions made in the adjudication of cases, statements of policy and interpret -- Byron R. White: And do you -- do you say that they are not? Daniel M. Friedman: We say they are not any of those three. That's right. Byron R. White: Any of those three? Potter Stewart: But you can see that they are identifiable records? Daniel M. Friedman: Yes. Yes, we do. Byron R. White: But -- and you say they're not opinions? I suppose you must mean that the General Counsel has no claimed opinions because he doesn't adjudicate? Daniel M. Friedman: That's correct. He doesn't run the final opinions because he doesn't adjudicate. These are not interpretations which the General Counsel has adopted. This isn't -- Byron R. White: Why isn't there a rejection of a complaint and adjudication? Daniel M. Friedman: Well, because we think that as used in the Freedom of Information Act, what Congress was referring to was a determination of the legal issue. And the General Counsel has not determined the legal issue when he refuses to issue a complaint. Byron R. White: Was it an adjudication under the Administrative Procedure Act? Daniel M. Friedman: It might be. We would -- it might be but we would contest it and -- Byron R. White: Well, is it or isn't it? You don't think an adjudication -- you don't think the word adjudication in the Freedom of Information Act should have the meaning and has the -- Daniel M. Friedman: I think, I think it has. I think in determining whether if something is an adjudication under the Freedom of Information Act. You have to look at the purposes of that statute. Byron R. White: So your answer is, no it doesn't have the meaning that it does? Daniel M. Friedman: I -- I would say not in all cases. And we also think finally that these are not administrative instructions to staff because the legislative history shows that administrative instructions -- that administrative instructions was put in there that specific modifying word was put in there to make it clear that this dealt with administrative matters and not instructions relating to law enforcement or litigation. Let me just come to what the Court said in Mink about exemption 5. What the Court said in Mink in exemption 5 was that, “their Congress incorporated the special and subtle rule that confidential intra-agency advisory opinions are not privileged from inspection and that the question in each case is whether production of the contested documents would be injurious to the consultative functions of Government that the privilege of nondisclosure protects.” It also said that, “Congress in this exemption was intended to permit discovery of purely factual matters appearing in Government documents that could be separated out from the nonfactual.” Now, we think that these documents, we think of the essence of Government consultative functions. This is the way within the General Counsel's Office advice is set out to the field on whether to prosecutor case, how to prosecute a case, what theory is to be followed. The documents -- these are not documents in which you can separate out the factual from the nonfactual. They are intertwined. They are inextricably intertwined because of theory of the case is tied with the facts. Indeed, when the people in the General Counsel's Office marshaled the facts, explained the facts, that itself is the essence of a lawyer's job. He looks at the facts, decides how to present the facts in a way that will be most effective. It's really either is or is certainly analogous to the lawyers work product which traditionally is not available in discovery. And indeed, I think it's very revealing at page 131 of the record in this case, that Sears itself apparently recognized that these documents are being sought for something more than just information. They wanted them as they've said in order to help prepare to litigate this case, first to take the appeal and then to litigate it before the Board. At page 131, a letter in which Sears requested the General Counsel to extend the time for its hearings stated, “that we need this material to prepare witnesses prior to the Board hearing.” Well, any lawyer would be delighted if he could have access to the material in his opponent's files showing how his opponent was going to try the case, what its strategy was, how he feel the evidence, how we would marshal it. That we submit is precisely the kind of information that Congress intended to protect against disclosure in exemption 5 of the Freedom of Information Act. Warren E. Burger: Thank you, Mr. Friedman. Mr. Smetana. Byron R. White: I suppose you agree Mr. Friedman that the statute is not a very well drawn statute? Daniel M. Friedman: Well, it's a [Laughter Attempt] unfortunately, it's a difficult subject. There have been recent amendments attempting to clarify but there are none of the recent amendments deals with exemption 5, I may say Mr. Justice. It's a difficult think and I think basically, you got to look at the purpose of Congress in these amendments. That this Congress recognized that there was a strong public interest in making things public but also that Government couldn't operate in a fishbowl and that in certain instances, it was important to preserve the confidentiality of Government material. Gerald C. Smetana: Mr. Chief Justice and may it please the Court. I think in beginning, I would like to spend some time in responding to Mr. Friedman's arguments. But perhaps, I ought first to give the Court just a basic outline of what our position is. And that is, it is our position as opposed to the position of the Solicitor General that if the documents in question fall within 2 (a) (b) or (c) of the Freedom and are required to be disclosed as either final opinions in adjudication statements of policy or administrative instructions affecting staff? Then, you never reach the exemptions because they are -- the exemptions in so far as the kinds of documents involved here are mutually exclusive for the reason that Your Honor, if in fact, these are declarations of substantive law and obviously, I have to develop that whole point, and if this is an agency which has been conceded. And these are the declarations of this agency then it would be contrary to the very basic principles of the Freedom of Information Act to permit an agency simply by passing documents back and forth to create the very kind of secret law which the Freedom of Information Act was designed to avoid. Warren E. Burger: Do you think that the Freedom of Information Act could reach the communications between the division of the Department of Justice or the Labor Board and the Solicitor General's Office? Gerald C. Smetana: Your Honor, in answer to that question. I must confess to begin that in terms of the specifics of all of the various agencies that might or might not be affected by a decision here, I cannot speak for it. But I can answer it in this fashion, that the record does reflect what types of documents are involved here. And the kinds of documents which you admitted, the documents -- the procedure that we follow here was before the Mink case that we agreed upon representative samples of the kinds of documents after 12 weeks of going through the documents in the General Counsel's Office and the Advice Memos when in fact documents that he gave us and the Appeals Memos were documents that we found. These very documents however, do not deal with the kinds of information that Mr. Friedman speaks of. Perhaps, except in rare occasion. They do not speak of trial tactics. They do not speak of settlements. They do not -- they do one thing. They informed the public or the parties as this presently the case as to what the law is. Now, I would submit and ask you a question Your Honor, if the Justice Department as a prosecutorial agency were to inform people as to what the law is. In other words, only the basis of their proceeding, not the how, not the witnesses, not how they are going to try the case, that's what's involved here. And maybe, that in the nature of Justice Department, other agency proceedings, the instructions or the trial tactics or the names of witnesses, or the facts may be so intertwined that for that reason, those agencies documents may not have to be produced and may fall under one of the exemptions. But in this case, where the documents are pure and pristine, questions of law and where the district court judge quite correctly and affirmed by the Court of Appeals struck and said that settlements, discussions, names of witnesses or anything else that's exempt can be eliminated from the documents. And they can in the nature of this documents then I submit that we don't have a problem in terms of the very kinds of fears that Mr. Friedman quite properly sets forth. William H. Rehnquist: What if United States Attorney say in the District Court of Missouri, writes back to the criminal division of Justice Department and gives them a set of facts and wants to know whether you go ahead and maintain a prosecution? And the criminal division replies, well, the Eighth Circuit the way its constituted now isn't up to go for this kind of a case, we think maybe the Seventh Circuit might be better so the way the law stands in those two Circuits wait for one to come up in the Seventh Circuit. Gerald C. Smetana: I would submit that those are the very types of consultative functions that would be exempt under exemption of b (5). William H. Rehnquist: Even though their discussion strictly of legal points. Gerald C. Smetana: Well, because the very nature of the hypothetical you gave me Your Honor is one that deals with instructions which are not involved in this case. This case would be a situation where the Attorney General or the U.S. Attorney would not in Washington however would not give any instructions with respect to how to try the case, which Circuit is better but only as to what his view of the law is. And with respect to anything else, that would remain confidential and not be subject to disclosure. Potter Stewart: I understood your position was just generally on the law that if a document falls under the definition of 552 (a) (b) or (c), then it is producible, you don't even get to the exception. Gerald C. Smetana: That's correct. Only because and I wouldn't say that's true. Potter Stewart: Well, and yet -- well, let me just follow that up. If you say that's correct then of course it's when -- my brother Rehnquist's examples seem to me gave you in his hypothetical a document that probably would fall under either (b) or (c), and yet you conceded that the exception would be applicable. Gerald C. Smetana: For this reason, Your Honor, I think we read (a) (b) and (c) as being -- as referring to that portion of a document that is the final opinion or the substantive law. The Justice -- Mr. Justice Rehnquist example I would submit that if those portions were included in a document that also talked about what the law was, then those portions of the document would not be (a) (b) or (c). They would merely by identifiable, as Mr. Friedman says under 3 and then they would be exempt under one of the exemptions (b) (5). Potter Stewart: Is that what the law is available to you as it is to the criminal division if you're only talking about published opinions of Courts of Appeals. Gerald C. Smetana: What we are talking about here Your Honor as opposed to published opinions, are the secret law if you will of the General Counsel of the National Labor Relations Board. Potter Stewart: Right. Gerald C. Smetana: And I call Your Honor's attention in that regard particularly to the quarterly report of the General Counsel. Now, the General Counsel and this is on page 150 of the appendix. Now, the General -- and it goes on and on. Now, every quarter and that was four times a year, he selects certain cases, advice and appeals decisions, that he believes that would be helpful if the public knew how he was proceeding. It's interesting to note that those cases cited in the appendix are cases in -- which are open cases, cases in which he is proceeding. In fact, they go to the very point Mr. Justice Rehnquist made. He has been able through the device of publication, although selective publication, those cases that each uses are simply limiting the announcements as what the law is. And it's also significant that the General Counsel has been called -- I mean he has the unreviewable discretion to proceed or not to proceed and this Court is only too familiar with the complexities of the labor law. And in those -- in exercising those decisions, he essentially shapes the law, because by not proceeding, he makes as much law as he does by proceeding. Now, Mr. Friedman called your attention to the fact that -- Byron R. White: Well, if he proceeds, it got to be made to the Board, I take it. Gerald C. Smetana: Well, but it is a separate agency. I call Your Honor -- Byron R. White: I didn't -- that isn't what I asked you. The law was going to be -- would be made in a -- where complaint is filed. The law is going to be made by the Board. Gerald C. Smetana: Yes, there's no question. Byron R. White: By the Board, not by the counsel. Gerald C. Smetana: No question. In that situation, the law is ultimately made. However, if he was in error -- Byron R. White: Well, that's really say when he turns down, something you say makes the law but he may reasons for turning them down, no doubt he does. Do you call those reasons law? Gerald C. Smetana: That's correct. But I would submit, Your Honor, even when the decision is to proceed he makes law because in the nature of the way this agency operates, more than 90% of the cases are settled. And so that, even after he decides to proceed, the case will be settled based on the theory at which the General Counsel has proceeded, it never gets to the Board. Some cases -- some settlements are reviewed by the Board but most of them are informal in nature and are not reviewed by the Board. And I also would like to call Your Honors attention, Mr. Friedman made a statement that when there's a decision to proceed after this appeals process he talked about, there is never a memo. Now, it's admitted that there is rarely a memo. But I think a very good case in point is the appendix that is to the chamber's amicus brief in this case. That is about a 20-page opinion of the General Counsel. On a case where he is dismissed on appeal and -- William O. Douglas: Do you think it's a -- do you think the General Counsel's review or adjudicated? Gerald C. Smetana: Yes, Your Honor. There are adjudications for the very reasons stated in your opinion this morning in the ITT case. The -- this is -- they are first of all decisions made not within an agency as the 10 (k) proceeding was in that situation but this is the agency. And more importantly, on page 15 of the slip opinion in that -- Byron R. White: Well, they ought to be reviewable then I take it. Gerald C. Smetana: Well, that's not the before this Court today. I would think they would be and -- but that's not my personal view and not the view of anyone else. Warren E. Burger: But that is unreviewable did they not? Gerald C. Smetana: The statute makes them unreviewable however there was a statement in Mr. Justice Douglas' dissent in the Lockridge case that indicates this Court has never pass upon that and there are decision of the DC Circuit and other circuits that indicate, that they might be reviewable on an abusive discretion basis. William H. Rehnquist: Well, if there are adjudications under the ABA you don't need the Freedom of Information Act to require that are made public. The ABA requires findings of fact, conclusions of law. Gerald C. Smetana: Well, Your Honor the fact is that they haven't been and in fact we are one of the very few people who've gotten here and to make them public. I'm a member of that ABA Committee that's been working for 10 years that Mr. Friedman spoke about, they're trying to get these matters produced and it's the position of the ABA that they are public and are the law and we haven't been successful. Byron R. White: For you to win under 2 (a), you have to arrive at the conclusion that these are adjudication? Gerald C. Smetana: No, Your Honor I do not. Under 2 (a) alone, yes I do. Byron R. White: That's what I say, under -- Gerald C. Smetana: Yes. Byron R. White: 2 (a), you must say there are adjudication. Gerald C. Smetana: That's right. That's correct. Warren E. Burger: We'll resume at that point in an hour. Gerald C. Smetana: Thank you. Warren E. Burger: Mr. Smetana, you may proceed. Gerald C. Smetana: Mr. Chief Justice, may it please the Court. If I, in resuming I think it might be most effective and efficient if we can go right into the heart of the argument that respondent wishes to present to the Court. And that is, as I outlined at the outset that it is our contention that the documents here involved are the law of the general counsel under Section a (2). And I think, I want to consider the three areas and the first is, is it a final opinion under 2 (a)? With respect and of course the area in dispute is whether it is in the final opinion in the adjudication of the case. Potter Stewart: You're talking about both the Advice Memorandum and the Appeals Memorandum, you're lumping them together? Gerald C. Smetana: Yes, Your Honor. I think, in that regard, perhaps I ought just to say in passing that while they -- Mr. Friedman accurately described, they have a different genesis. So far as there effect. They are equal, they have an equal effect. For example, in the situation, well perhaps the best example I can use is the paper -- the Appeals Memorandum attached to the Chamber's brief which I briefly refer to as to the appendix to the amicus brief. That memorandum was prepared, it took the General Counsel probably the best part of the year of consultations, briefs, from the various parties, there are perhaps six of eight cases involving the particular question under a (e) of the Act, a very complex area which Your Honors have before you in the Connell case. And as a matter of interest to the Court, to show the significance that the unions in the Connell case placed upon us that's 73-1256, Connell Construction versus Plumbers and Steamfitters Local 100. They attached the identical memorandum to their -- as appendix to their brief to support their position. Now, I'm not going to talk about whether there's merit to that part at all. But I think it's significant in the Connell case, that Connell appendix also contains the Advice -- the Appeals Letter. And then there is the Appeals Memorandum which is essentially the document in the chambers brief in the Bonner case. Now, the -- prior to this Appeals Memorandum, however, these cases were submitted for advice. So, there was, we've never seen that Advice Memorandum. It was a very secret document and the parties had to argue in the dark as to what the position of the General Counsel was. In fact, in the very Connell case, the Fifth Circuit at which is before you in that case. The Fifth Circuit was critical of the General Counsel for not acting. Now, he has it within his prerogative and unreviewable discretion whether to proceed or not. But the fact remains that until this memorandum was published and this General Counsel in his grace had decided to make it available to the bar. The bar had no way of knowing for 10 years or thereabouts why the General Counsel refused to give this question to the Board. And in this instance, he of course gave it to the Board. Now, in an advice situation, the Advice Memorandum is every good as final Your Honor as the Appeals Memorandum if the party chooses not to appeal because that it the law whether or not the party chooses to appeal, in the underlying Sears case. For example, we presented all argument I did myself to the Office of the General Counsel, and it was because of that oral and the first time around it was no avail. The Advice Memorandum was against us and we never did see exactly what was in that we have seen it recently because the case is now closed. But we never did see the Advice Memorandum. As a result when we filed the appeal, we were arguing in the dark. Now, the General Counsel attempted to give us some more information as this process went forward in this case again as a matter of grace and I think the appendix reflects the letter of the Regional Director which is exhibit page 21 where the Regional Director after we made the demand for the Advice Memorandum the first time, indicating that we're proceeding with respect to the Freedom Information Act. The first paragraph of that letter states, “This letter sets forth with greater particularity my reason for refusing to issue complaint in the above caption case, and is sent pursuant to the teletype of July 21, 1971 from acting General Counsel Goslee to you.” I think that's very significant that letter for number of reasons. First of all, it shows that the Director is an essence a minister -- acting in a ministerial capacity and Judge Corcoran below quite correctly made that finding based on the facts of these case and these facts are not unique. The records include the operations of the General Counsel which is his statement to the House Committee in 1961 which continue to be so and includes the lengthy ABA reports. I think also this underlying case, and again this page 21 of the appendix points out the fact that the General Counsel on three occasions changed his theory. Now, he is permitted to do that. We ultimately won because he issued a complaint in our favor. But in no time did we really know what his theory was the first time, had it no time then we really know what his theory finally was when he was going to proceed. So, it was very difficult to act and it certainly would be very difficult for the other side if they were in disagreement with the basis of his action. And yet, if we had chosen not to file the appeal or party chooses not to appeal, that is final. It's final not only as to that party. But moreover, it's final because the law of the advice, that is the law of General Counsel if its not appeal. And it's interesting to note that while parties are informed of an appeals decision, parties are not informed when the matter goes to advice. Now, I think sophisticated practitioners before the Board know to ask the right questions and if they do ask they tell you. But you might not ever know when you get a letter from a Regional Director that it was pursuant to an advice determination unless these advice determinations are made public. Now, I also -- in terms of how the procedure works while we're on the procedure, I would call the Court's attention to appendix, the appendix attached to the respondent's brief in the case here and particularly 3 (a) the second paragraph in that appendix -- Warren E. Burger: What page again? Gerald C. Smetana: At page 3 (a) of the respondent's appendix Your Honor. Warren E. Burger: Yes. Gerald C. Smetana: And this is from the admitted statement as to how the office works by the General Counsel to the House of Congress. It says in the second paragraph, secondly, the Advice Branch does not ordinarily review the Regional Director's factual determination and conclusions. It does not interfere with the investigatory duties of the Regional Director. But rather it concerns itself with the interpretations and applications of legal principles. And going on, Your Honors to page 4, the top of the following page, there are four consultative functions that take place and I talked about advice but it's been ceded that the judge found and this Operations Memorandum, it's been ceded that the appeals function essentially the same way except that's on appeal rather than on advice. And there are four steps before this final decision is rendered by the General Counsel. Step one on page 4 (a), the reviewing attorney researched his all cases in point and ascertains the applicability of prior advice determinations. And I should add that while the General Counsel in the quarterly report in which is published at page 150 of the regular appendix, in one of the cases specifically cites to a prior quarterly report to a prior decision in a prior quarterly report. I can't find it this moment, Your Honor but it is there. The second thing that happens in this procedure is having reviewed the case, it is then submitted for further consideration to an advice agenda and then it goes on to explain all the people that are at the agenda. And this is essentially a conference where the legal issues are better drawn. Then it goes on to say depending upon the complexity of the case, cases may be submitted to the agenda orally or by written memorandum. I should add at the time of this agenda takes place, the oral argument of counsel would have been presented not face to face but separately. The legal positions of the region were presented and the submission of the parties to the case would have been presented. Then the agenda decision, there's a decision rendered. The decision is submitted to the General Counsel and then finally the second paragraph on 4 (a), the General Counsel's final determination is communicated to the Regional Office by a way of memorandum from advice and that's a memorandum we're talking about and the record reflects. There is no instance nor instance in this record where Regional Directors ever not followed that advice. That advice obviously is a euphemism in the circumstances. Now, in terms of why these are final opinions and Justice Stewart -- Mr. Justice Stewart the same is true of appeals and the way it works. We say, it essentially -- Lewis F. Powell, Jr.: Would you tell me again, how the record shows that an Advice Memo is always followed? Gerald C. Smetana: How it shows it's always followed. Lewis F. Powell, Jr.: I take it that's your position here. Gerald C. Smetana: Yes, I think it is shown in a number of ways. First of all, it was essentially conceded that this is a stipulated record and it was there -- it was the Government's burden and there is no instance in this record where they produce any evidence to show that it was not followed -- into the advice decision was not followed and moreover, the General Counsel has conceded in his brief on page 6. And it was also conceded earlier in the open court that rarely, if ever, does a Regional Director disregard an advice decision. And I think if you think of the nature of this whole process, the General Counsel indicates it requires, I don't want to spend all the time going through it, but the words are that it's required that certain things be submitted. And there are instructions that return from Washington, it is for the purpose of the General Counsel administering his 41 regions so that a uniform -- William O. Douglas: Is that page 6 Mr. Smetana? Gerald C. Smetana: Of the petitioner's brief. William O. Douglas: The brown covered -- Gerald C. Smetana: Government brief. It's gray, I'm sorry. William O. Douglas: Yes. Thank you. Gerald C. Smetana: Now, let me -- if I may come back to the Section 2 (a) and why it's a final opinion. It's first of all I think it's been conceded as a separated agency and an agency under the APA not just under the Freedom Information Act. And interestingly of course, that Mr. Friedman tries to suggest perhaps there might be some difference in the definition of adjudication of the Freedom of Information Act but of course it's all one Act. The APA is a part of the Freedom of Information Act and the APA defines adjudication to mean agency process in the formulation of an order. And an order to mean in whole or in part, any part of the final disposition of an agency, I'm turning to Your Honors' decision with respect to the ITT case at page 15 of the slip opinion. Your Honors state, when Congress define order in terms of a final disposition, it required that final disposition to have some determinate consequence for the part to the proceeding. That's no question at the consequences grave here. The party to the proceeding either gets the remedy that he seeks or he does not. William H. Rehnquist: Well, but you're reading 2 (a) as if there was a final opinion within the meaning of 2 (a) in every single instance of adjudication under the Administrative Procedure Act. I certainly don't read 2 (a) that way. Gerald C. Smetana: Well, Your Honor, I must say first of all it is we -- our argument is that it is an agency and this agency has the responsibility for making best decisions with respect to the development of the law and this is how it speaks. Only through this -- in this fashion, when this agency decides not to proceed, that is the law of the land there is nothing -- no individual in this country can bring a suit to change that life the General Counsel in his wisdom decides not to proceed. And decisions not to proceed are every bit as much the law his decision to proceed and this memorandum simply explicate that. William H. Rehnquist: Does this -- does this sound to you as if it were addressed to this type of prosecutorial decision final opinions including concurring and dissenting opinions? You don't get that get kind of a thing out of a prosecutor's office. Gerald C. Smetana: Well, you do in the nature -- you do in the nature of this agency. It may be Your Honor in the Justice Department it's different. The nature of this agency having worked with the agency, there -- when the document comes into from the field, there's a majority opinion frequently a dissenting opinion. There it is said there's a lot of due process and justice within the agency is just not publicized. And there are dissenting opinions, now I'm not sure they are dissenting opinions in the adjudication of this but that of course, that's not critical. But I would say Your Honor that we don't only rely on 2 (a). We say that in the alternative, even if its not 2 (a) it's clearly, it's clearly 2 (b) and then -- and 2 (b) is either statements of policy specifically adopted by an agency. And the General Counsel in his quarterly report at page 150 of the appendix specifically publishes that adopted policy and he states at the opening -- at the opening of that report in my judgment, this publication produces a better informed labor bar. Now, presumably he thought publication would help not to interfere with law enforcement. These are open cases. If the concern of Your Honor were there and that he may have been wrong in his wisdom, but if you look at the very documents in issue here Your Honor, I think you will find that these documents do not interfere with law enforcement. I think that is certainly one of the critical policy questions. If you take for example a sample of an Appeals Memorandum a part from the one I had refer to as on page 81 of the appendix, very short memorandum. It cites the name of the case. It cites the disposition. It doesn't give any special information as action, appeal denied, reasons for action. In view of the attached amendment to the ITU negation plan, further proceedings would not effectuate the policies of the Act. So that's the end of it. Now, one of the issues in this case a collateral issue perhaps is where is that attached amendment? Now, the -- Judge Corcoran I think quite properly said the word specifically referred to, we should see it because we were trying to decide how we could present our case and if this matters are final and -- or if they are agency opinions, we are entitled to the entire opinion and here this document is appended and specifically identified and we submit therefore it ought to be produced subject to the General Counsel showing why it might fall with one of the exceptions. If it does, for some reason the document is not final, it's a negotiation that might be something else. We turn the page on at page 83 and there we have an Advice Memorandum. Unfortunately, this record doesn't -- indicate the headings. But that is an Advice Memorandum and if you look through it, it says at the very -- in the very first page this was submitted for advice because it is a novel question of law concerning a union's withdrawal from multi-union, multi-employer bargain. That was the very issue in the underlying Sears case. We needed to know this rational. This was based on these kinds of rational that we were able to proceed. And just so Your Honors are clear with respect this appendix just as a matter of housekeeping starting at page 185 to the end, those -- sorry. William H. Rehnquist: MR. Smetana, this memorandum you're talking about on pages 83, 84, 85 of the appendix. A good part of it just the General Counsel's interpretation of the Board's decisions. I mean, presumably, a series has its own legal department they can interpret the Board's decision, can't they. Gerald C. Smetana: No, Your Honor. Certainly, we can but there are no Board decisions. That's really the problem. The last decision of the Board here was probably 10 years ago. There's Retail Associates case. William H. Rehnquist: Well, take a look at the thing on page 83 through 85. I see one, two, three, four citations to the Board opinions in that memorandum. Gerald C. Smetana: Right. But Your Honor, the point is this is how he interprets them and he will decide to proceed or not to proceed. In this particular case, he decided not to proceed. As a matter of fact, until our case came along, the General Counsel just refused to proceed on re-litigating the issue of what constitutes withdrawal from multi-employer bargaining on it. And there was nothing you could do to get him to proceed in that fashion. Warren E. Burger: I forgot what term you used that you said you need to know or you almost implied that it was impaired for you to know. Well, of course all lawyers know it's fairly interesting to know what the other fellow is thinking on the other side but that doesn't mean you got -- Gerald C. Smetana: No, -- Warren E. Burger: This statute contemplates that you should know his thought processes any more than people can find out the thought processes or reasons why certiorari is denied in this Court sometimes. Gerald C. Smetana: I think the test Your Honor is that there's no question this is the law of this agency, that's how he proceeds. And I think the test has been said by the Hawk's Court, the Sixth Circuit as to whether or not it will promote or impede law enforcement. And there's nothing in these documents that in our view, will impede the enforcement of the law. In fact, the General Counsel himself believes they promote the enforcement of the law. Now, let me turn very briefly if I may to the exemptions and why we're not covered. I have already said that the exemptions are mutually exclusive because if in these final substantive opinions of an agency then for the agency simply if able to pass them between itself intra-agency would create the very body of secret law which is not desired. And Mr. Justice Bazelon of the DC Circuit in the Sterling Case which is cited in our brief essentially drew the distinction between formulations of policy and substantive declarations as to whether the exemption deployed. And we submit these are clearly substantive declarations of policy rather than the formulation of the policy. The formulation is what I described in going through the Advice and Appeals Memoranda. So far as b (7) is concerned, the Congress recently amended b (7) of the Act to specifically take out what's an issue here because they indicated and I'm reading from the new amendments of the Freedom Information Act b (7) investigatory records are exempt but only to the extent such records would interfere with law enforcement proceedings which is again the as the Hawk's test. And more importantly, in the Conference Report on page 12 describing that language the Congress says, “nor is this exemption intended to include records falling within the scope of subsection 52 (a) (2) which is (a) (b) (c) which is the very thing that we're talking about here.” Thank you, Your Honors. Warren E. Burger: I think your time is used up Mr. Friedman. Thank you gentlemen. The case is submitted.

William H. Rehnquist: We will hear arguments first this morning in No. 86-475, David C. Frazier v. Frederick J.R. Heebe, et al.-- Mr. Hitchcock, you may proceed whenever you're ready. k-- Cornish F. Hitchcock: Thank you, Mr. Chief Justice, and may it please the Court: This case presents important questions about the practice of law and the administration of justice in our Federal district courts. At issue is a rule of the United States District Court for the Eastern District of Louisiana which requires members of that court's bar to live or have an office in the State of Louisiana. In order to focus on the precise nature of the dispute, it's useful to identify what this rule requires. Under the rule, members of the Eastern District bar must be located in the Eastern District, the Middle District or the Western District of Louisiana. And in order to see how the rule operates vis-a-vis the petitioner, it may be useful to consult the map that we prepared in our opening brief as an appendix at page 6A. Mr. Frazier's application was denied because he lives and practices in Pascagoula, Mississippi, which is approximately 110 miles from New Orleans. By contrast, a lawyer located in Lake Charles, Louisiana, which is 200 miles from New Orleans, may be admitted to the Eastern District bar, and a lawyer located in Shreveport, Louisiana, 300 miles from New Orleans, may also be admitted to the Eastern District bar. Indeed, lawyers from Lake Charles or Shreveport may serve as local counsel for lawyers such as Mr. Frazier in practicing in New Orleans, even though they're twice the distance from the courthouse. In our brief, we have advanced several reasons why we believe this rule is invalid, but it boils down to essentially one complaint. As the Court of Appeals recognized, this rule is both overinclusive as well as underinclusive. And however it may be analyzed, we submit that it does not advance the goals of lawyer competence and availability for hearings that are attributed to it. In our view, this Court's decision in Supreme Court of New Hampshire v. Piper provides the proper analytical framework for deciding the case. And in mentioning Piper, I want to focus exactly on what we are arguing and are not arguing. We recognize that Piper was decided under the privileges and immunities clause of Article IV, which is a direct limitation on state action and not on federal action; and we are not making a claim for relief under Article IV. What we are saying is that this rule is a violation of the due process clause of the Fifth Amendment. And in urging the Court to so hold, we are asking the Court to employ the analysis that was used in Piper in the context of analyzing this rule, just as the Court has incorporated equal protection analysis as a component of Fifth Amendment due process. There are several reasons why we believe such analysis is appropriate here. The rule in the Eastern District of Louisiana, with its exclusion of lawyers from out of the state-- Speaker: Excuse me, Mr. Hitchcock, before you go any further, that's a little difficult to do, because the privileges and immunities analysis prevents discrimination between citizens from different states, rights, on the basis of statehood. But the Federal Government does that all the time, and the Constitution specifically says when it is that the government can't discriminate between the states, in certain types of taxation for example. But the government very often provides particular benefits or takes particular action which just affects one state and not others. So how can you possibly apply the state discrimination concept of the privileges and immunities clause to the due process clause? Cornish F. Hitchcock: --The distinction in this case, as opposed to traditional cases where Congress passes a law, or national body engages in linedrawing of that nature, is, we have here a rule that was adopted by a local unit of the Federal Government that is exercising delegated authority, not-- Speaker: Why would you treat that differently from something enacted by Congress? I mean, supposing the regional director of the EPA in San Francisco adopts a particular rule. Now, it may have problems with parochialism, but nonetheless, we treat is an exercise of delegated authority from the United States. Cornish F. Hitchcock: --It is an exercise of delegated authority. But when the line is drawn, for example, if the EPA regional officer said that only people in California could practice before us or something of that nature, when the linedrawing by a local entity is on the basis of state lines, there are problems that have been raised... that are raised by that of the sort that are implicated by the privileges and immunities clause. And to that extent... it's one thing if national body had adopted restrictions of this nature, saying... making that kind of decision and that kind of linedrawing. But it's another thing for a local unit of government, in... local unit of the Federal Government, in consultation with local lawyers in this case, to try to be exercising that kind of discretion. Speaker: Well, do you agree that if Conress had adopted this, you would have no claim? Cornish F. Hitchcock: If Congress had passed this rule, we would not be arguing that it should be analyzed under privileges and immunities analysis. There would be equal protection arguments that would be made, but the problem here that we think should trigger the type of privileges and immunities analysis is the fact that it's a local unit of the government, using delegated authority, and that it has an exclusionary effect that the court has recognized raised problems requiring heightened consideration if it were enacted in a state court system. Speaker: I don't know what you mean by a local unit of government. I mean, that has some meaning applied to a state where you have a state constitution th8at gives municipalities certain powers, whether the... whether the county or whether the state government desires it, willy-nilly. But... but in the Federal context, I don't know of any Federal local units. I know of certain representatives of the Federal Government that exist on a local level, but they're all governed entirely by the will of the entire Federal Government. That have no local autonomy, none of these units, as far as I know, including this Court. Cornish F. Hitchcock: Well, in this case, when I refer to the local unit, I'm referring to the United States district court, which has rulemaking authority. But unlike delegated authority in the context of agencies, there are possibilities of dealing with any such rules through the agency process. In this case, the court has some degree... the local district court has autonomy in this respect. It shares its rulemaking authority with this Court, but it tends to operate on parallel tracks. Speaker: But you're arguing at the same time that this Court... you're urging as one of your points in your brief that we should exercise our supervisory authority. Doesn't this necessarily mean that this is not a local unit? Cornish F. Hitchcock: Well, the rule is autonomous unless, of course, it comes before this Court. The rule, or the exclusion of nonresidence is final unless of course it comes before a higher body such as this Court which would also have the authority to regulate. But the point is, that when rules of this nature are adopted at a regional level or a local level, I mean the exclusion is against residents of other states. The Court has said, admittedly in the context of state discrimination, discrimination by state entities of government, that there are special problems. The Court has also said in the equal protection area... and we've cited several of the tax cases from recent terms of the Court... that there are similar problems when the court... when state governments pass legislation also that discriminate or have the effect of charging higher fees or imposing burdens on out-of-staters as well, under equal protection analysis, which would apply in the context of Federal action as well. But I think there are reasons, even if the Court should not proceed under the privileges and immunities clause analysis, for using a heightened form of scrutiny here. There is no reason why it is that Federal district courts should be able to adopt exclusionary rules of this sort when the Court said in Piper that they cannot be adopted in the context of a state court system; particularly when the reasons that are given for this type of exclusion are the same that the Court considered and rejected in the Piper case. The Court's decision in Hurd v. Hodge, which we cited, suggested that it... they said in that case, bad public policy, it wasn't constitutionally grounded, for Federal courts to be able to, in that case, enforce certain contracts that state courts couldn't; and it's bad public policy here to allow Federal district courts to adopt rules that could not be adopted in the state court system. State court judges, no less than Federal judges, are concerned with the competence of the lawyers who appear before them. They're concerned with the availability of having lawyers who can appear before them in cases. And there is no reason for saying that there are special problems in the Federal court system that are cured by having this type of restriction on lawyers. Speaker: Are you sure that it would be unlawful for a state to adopt the kind of rule the Federal court has here? This is not, as in Piper, a restriction against residents of other... or against citizens of other states practicing within the state; it's simply a requirement that there be an office within the state. Now are you sure that a state couldn't adopt that rule? Cornish F. Hitchcock: I believe so. I believe that the Court's decision in Piper and the reasoning in Piper is broad enough to include that. Justice White's concurring opinion in that case read the Court as reaching that far, because the same problems that you have with exclusions based on residence appear also with exclusions... or with an in-state office requirement. The in-state office requirement acts as a surrogate for a residence requirement. What it does is, it requires lawyers from out of the state who practice out of the state to open an additional office in Louisiana, which is not a burden imposed upon local lawyers. I mean, for Louisiana lawyers, an in-state office requirement is largely not much of a restriction and not much of a burden at all. The chances are, they probably have it. But for the court to require that out of state lawyers must have that office in addition, it places burdens on citizens of other states, which as a practical matter, are not imposed on local courts. That was the holding of the New York Court of Appeals in the Gordon case which we cited, where the same option was available for people applying to the state court bar. You could either take the New York State bar exam, you had to be either a resident of the State of New York to be admitted to the bar, or you had to practice in the state before you were admitted. And the court reasoned that the same type of problems that are posed by a residence requirement are posed by the requirement that you must have an office in the state, when that's not imposed... or it's not as burdensome as it is on-- Speaker: What do you suggest we substitute for it? If the state wants to preserve the kind of interest that it says is protected by the office requirement. Cornish F. Hitchcock: --You mean the district court? Speaker: Yes, 200-mile rule? 300-mile rule? What possible rule could there be? Cornish F. Hitchcock: Let me break that down into two parts, Justice Scalia. I think Piper reasoned that one's location or one's distance from the court is not a reason for disqualifying someone for being admitted to the bar. I think the Court answered that question in Piper when it said that there maybe some times, as a practical matter, when a lawyer cannot appear, when the lawyer is, as the Court put it, at a great distance from the court. In those cases, local counsel may be required. We submit that a rule which did have that kind of circular or circumferential approach, would be more closely based on the court's goal. If it were 100 miles, or 150 miles, or 200 miles, that's closer in terms of the goal attributed to it, which is assuring that lawyers are available. The vice with this particular rule, as we see it, is that it says, lawyers 300 miles west of New Orleans may be admitted to the bar and may practice without local counsel, but not lawyers who are only 100 miles to the east. We submit that it cannot be said that lawyers from 300 miles away are more likely to come over to New Orleans, but not lawyers that are only 100 miles to the east. And however the line may be drawn, 150 miles, 200 miles, it's probably likely to be more closely tailored to the goal than the current rule, which focuses on state lines, and excludes people who may be perfectly capable of practicing law. Speaker: Mr. Hitchcock, do you think this rule would be acceptable if it limited admission to lawyers who were admitted in... who had offices or resided in the Eastern District of Louisiana? Cornish F. Hitchcock: No, Justice Stevens. Part of the problem is that even it you were to limit it to the Eastern District of Louisiana, it's narrower, but in this case, it has some of the same problems. The Court of Appeals recognized in footnote six of its opinion that there are some lawyers in the Eastern District of Louisiana who are further away from New Orleans than Mr. Frazier. The geography of districts is such that in many instances you may have these anomalies. Let me give you a local example. Let us suppose, for example, that there were a rule of this sort in the Eastern District of Virginia, which covers approximately the eastern one-third of the state, and which has divisions that sit in Alexandria, in Richmond, and in Norfolk. And in-district office rule would mean that lawyers from Norfolk, Virginia, could come up and practice in Alexandria without restriction, whereas lawyers in the District of Columbia, which is only ten miles away, as opposed to 180 miles away, could not. Now, that's in a situation where you have multiple districts. You have other states where there's only one district. So an in-district rule, say in the district of Kansas, would let lawyers from Western Kansas come into Kansas City, Kansas, and practice in the district court there, but not lawyers across the street in Kansas City, Missouri. Speaker: If you require perfect tailoring, you can find some flaw in any rule that lays down any principle like that. But our equal protection clauses in this area have never required perfect tailoring. Cornish F. Hitchcock: What we're saying is, whatever kind of tailoring or rule may be adopted, the current rule does not satisfy. 300 miles in one direction, you're in; 100 miles in the other direction, you're not in, is not even close, we submit, even whatever anomalies may occur around the edges with a more closely tailored rule. Speaker: Doesn't the same rule have to apply to Texas, Alaska, and Rhode Island? Cornish F. Hitchcock: Yes... let me answer the question. Speaker: That's going to be a little tough? Cornish F. Hitchcock: I think what Piper recognized... I mean, you're right, Justice Marshall, but, again, I would break it down into two parts. I think Piper said that one cannot be excluded from a bar Just because one is in Texas or Alaska or another state. Piper also said that if lawyers are at a great distance, and if the court should determine that people more than 300 miles away are a great distance, then one could require Texas lawyers or Alaska lawyers to retain local counsel. We're not challenging that. What we're saying is that the linedrawing that has occurred here has created problems that... and does not advance the Court's goals in ensuring that lawyers are able to come down to New Orleans. Speaker: I've been to some states that require you to belong to the bar of the county that you filed a case in-- Cornish F. Hitchcock: I'm sorry? Speaker: --or to hire a lawyer who is a member of the bar of that county. Cornish F. Hitchcock: To practice in Federal court? Speaker: No, sir, in state... I said state courts. Aren't there states that have that rule? Cornish F. Hitchcock: I believe there are states where you are admitted by a particular county. I believe-- Speaker: And if you want to practice in the other country, you have to hire a local lawyer? Cornish F. Hitchcock: --Well, I'm not sure to what extent that would survive the Court's decision in Piper. I think that particular situation I think is addressed in the Court's decision in United Building Construction Trades Union v. the City of Camden, where certain jobs were reserved only for residents of Camden but not for people in other parts of New Jersey. I think there might be problems in that nature, after the Camden decision and after the Piper decision, with that kind of county-based rule. Speaker: xxx Louisiana? Cornish F. Hitchcock: In Louisiana? Speaker: Don't you have to belong to the parish to file a case in the parish? Cornish F. Hitchcock: I'm not aware of it. The rule here required membership in the state bar. I am not sure that there are restrictions in terms that if you are admitted... or if you are admitted in Orleans parish, that means you cannot practice over in Baton Rouge. I don't know the current requirement, but in this case, I don't think it's critical, because the rule says, you must have an office or reside somewhere in the State of Louisiana. It's not specific by parish; it's not specific by district. And that has caused the problems that we have attributed... that we have cited. Speaker: Mr. Hitchcock, there is some coincidence, is there not, between this rule of the district court, and the extent of the subpoena power of that court? Cornish F. Hitchcock: No, actually, the subpoena power extends further. Under 45(e) the subpoena power would extend, to appear at... for depositions or trial extends 100 miles into Mississippi. It was an argument that was stated in respondent's brief. And so it's not perfectly contiguous with the state boundaries. But I would point out again, the subpoena power raises issues that are somewhat different. I mean, in that situation people who are disadvantaged are in-state residents. People from Shreveport who are subpoenaed to appear at trial in New Orleans have to travel further that someone from Mississippi. Speaker: I understand. But it's 100 miles or within the state? Cornish F. Hitchcock: Or within the state, correct. Speaker: Now, that's not a perfectly, equitable match, as you're asking us to adopt for this rule. Cornish F. Hitchcock: It's a-- Speaker: Congress didn't think it necessary, you know, to draw concentric circles around each district court and say, the subpoena power is only within that area. It does... it does produce some inequities. But given that we have a state system, Congress says, the subpoena power runs anywhere within the state. Cornish F. Hitchcock: --I would turn that around, because I think the point actually helps us here. What Congress said by adopting a rule of that nature, is that we are designing a rule for the convenience of witnesses, and we will make a judgment that it is convenient for witnesses to come in from anywhere in the state; that if they're 300 miles they won't be inconvenienced; and well also extend that so that lawyers... or that witnesses from the other part of the state may be brought in, too. Speaker: What the district court is saying, we're making a judgment that it's convenient, and therefore possible, for lawyers to come here for quick hearings from anywhere within the state, just as Congress says it's convenient for any witness. I don't know why that doesn't parallel what Congress has done. Cornish F. Hitchcock: Well, what it parallels is the fact, again, Congress did let in people from out of state. This rule does not. And therein lies a distinction. Even if it's not perfectly symmetrical, there are people who are allowed in from Mississippi, or from other places, if that falls within the boundary. The problem with this case is that it is drawn strictly on state lines, and even under the availability, the argument that says, let's have lawyers who are available, that still lets in people from 300 miles away. It says, they're convenient enough, they can come down here; but not lawyers, people who are being brought in involuntarily, but not lawyers from Southern Mississippi who voluntarily want to practice. We say, we are willing, We want to build a regular practice in the Eastern District of Louisiana with all the burdens and responsibilities that entails, and we're willing to submit to that. But they are excluded. And the reasons about having lawyers available just cannot apply, we submit, in that context. Speaker: Well, would you settle for the same rule that applies to subpoenas? That is, you have to have an office within Louisiana or within 100 miles of the court? Cornish F. Hitchcock: Well, my client lives 110 miles away, so that poses certain problems here. Speaker: You can't do that. Cornish F. Hitchcock: But I think-- Speaker: 110 miles, would that make you happy? Cornish F. Hitchcock: --I could argue that would be perfectly constitutional. The problem is that, again, Rule 45 deals with different concerns, it deals with the convenience of witnesses who are coming in, not lawyers who are seeking to appear and build a regular practice, and who want to submit to whatever requirements, who insist that they are willing to come on over to New Orleans, to show up, and to do whatever is required. It's, we submit, apples and oranges. I want to deal with one of the other distinctions that was raised by the respondents, and that's the fact that this rule is a continuing requirement, rather than the rule in Piper which was just limited to, lawyers had to reside at the day that they were admitted. The problem is that that was only one of the defects, we submit that occurred in that particular case. And I don't, as I read the Court's opinion, making the rule in Piper more restrictive would not have addressed the questions there. The problem remains, even with a continuing requirement, that it is as overinclusive as it is underinclusive. It allows in lawyers from far away in New Orleans, even if they don't practice law as litigators. Even if they engage in a real estate practice, and don't ever appear in Federal court. While it excludes experienced litigators, such as the petitioner, who are also closer to the court. So the continuing requirement does not save it. We have argued the reasons why we believe that heightened scrutiny ought to be applied under the Court's decision in Piper. But even if the Court should decide not to adopt the reasoning in Piper here, we submit that the case can still be resolved under the Court's traditional equal protection analysis that's an element of the due process clause of the Fifth Amendment. Heightened scrutiny, we think, would be appropriate under the standards that are used for that analysis, the fundamental right or suspect class, or even the Intermediate level of scrutiny. In Piper, the Court declared that the right to practice law, or the opportunity to pursue one's career, was fundamental for purposes of Article IV, and I think the reasoning would apply here as well. But even if it didn't, the distinctions that are drawn about in-state residents are allowed to practice, but not out-of-state practices, if not suspect class, at least raise what the Court referred to as recurring constitutional difficulties, in cases such as Plyler and Cleburne Living Center. There are a number of cases where out of state residents are being excluded, even though there may be many valid reasons for allowing in-state residents, and even though the exclusion may not rationally or in other ways advance the goals that are attributed to it. Speaker: Mr. Hitchcock, do you think it would be all right If the Eastern District of Louisiana simply cut out the geography rule, but maintained its rule that every member of the bar there had to be admitted to the Louisiana bar? Cornish F. Hitchcock: That is not an issue here. Speaker: No, but I asked you what your opinion was about it. Cornish F. Hitchcock: Well, the Tenth Circuit after Piper raised the question as to whether that might be valid or not. I would say... under the privileges and immunities clause... I would say, however, that Louisiana might be one state, the only state or the best state, in which that kind of restriction could be upheld. To answer the question, I would have to look at what the arguments were advanced in favor of requiring that sort of a requirement-- Speaker: Well, what about one of them being that, well, a lot of the cases are going to involve elements of Louisiana law, diversity cases and that sort of thing. And we don't give a special bar exam. We want some evidence that you know the Louisiana law. Cornish F. Hitchcock: --It would depend on the evidence that was put in. As a practical matter, in Federal district courts, something like 70 to 75 percent of cases are Federal cases-- Speaker: But can you say that for the Eastern District of Louisiana? Cornish F. Hitchcock: --I'm not aware... I've seen the number generally in several... broken down by circuits. I'm not aware specifically in Louisiana. But I think that-- Speaker: Well, supposing that the general rule, general percentage were 75 percent, but in Louisiana it were only 40 percent. Do you think the Eastern District can pass a rule that governs it, even though it might not work in other districts? Cornish F. Hitchcock: --That would be a more substantial reason. But I would note, Mr. Chief Justice, the petitioner in this case is already a member of the Louisiana State bar, so the issue Is not implicated here. Speaker: xxx he can... he can try cases in the state court in New Orleans? Cornish F. Hitchcock: Absolutely, Justice White. And that is one of the problems here. Mr. Frazier can try cases on his own in the state courts in New Orleans. But if he files a case, and let's suppose the defendant tries to remove it to Federal district court, he can't represent his client any more on his own because he cannot be admitted to the Eastern District bar under this rule. He has to find a local counsel, or affiliate with another lawyer-- Speaker: Mr. Hitchcock, doesn't, the court of appeals have a study underway about rules in this respect? Cornish F. Hitchcock: --The Court of Appeals... the judicial council of the Fifth Circuit is reviewing the rules of the district courts for consistency. Speaker: With respect... and as part of their focus, on these rules permitting... restricting practice? Cornish F. Hitchcock: This may be one of them, yes. Speaker: May be? Do you know? Cornish F. Hitchcock: I don't know for certain. The Court of Appeals said at the end of its opinion that it was unwilling to get into the issue because the matter is under review. We're not aware-- Speaker: Well, so it is, so this very matter must be under review? Cornish F. Hitchcock: --It may be under review, perhaps counsel for respondents could answer it. But I would note Rule 83 was amended... was adopted by the Court nearly two years ago, and the rule has not been changed yet, and we're not aware of when any change would be imminent, and we're not aware of whether the change in the rule would affect petitioner or allow him to be admitted to the court. Speaker: Do you know how prevalent these kinds of restrictions are across the country? Cornish F. Hitchcock: Yes, the Court of Appeals noted that this type of rule is present in about 24 Federal districts across the country. Speaker: And in the others, what's the rule? Cornish F. Hitchcock: In a number of others, this rule puts the two together, where one must have an office or residence in the state. A number of the other districts, there are some such as Southern Mississippi which don't have these kinds of restrictions, interestingly enough. But in other districts, what they may have is two rules. Number one, one can be admitted to the bar if one meets the educational and practice requirements, without any restriction. Speaker: Of the state? Cornish F. Hitchcock: Of the state bar... a member of the state bar, or the bar of any other state. But they then add a restriction that says if any lawyer who enters an appearance in the case must be affiliated with local counsel. So in effect there are two rules, but it has the same practical effect as this particular rule. And if the Court should agree with us, we would hope that they would focus on that as-- Speaker: Well, how many districts have a rule that if you're a member of the state bar, you may practice in the Federal district court, even if you're a nonresident? Cornish F. Hitchcock: --I'm not aware of exactly how many allow-- Speaker: Are there some? Cornish F. Hitchcock: --Who allow you to practice in the district court if you're a member of the state bar? Speaker: Yes. Cornish F. Hitchcock: Yes, the Southern District of Mississippi, for example. Speaker: Is that all, do you know? Cornish F. Hitchcock: I don't know. I didn't, when I was surveying the rules I didn't focus on membership in state bar, and whether that was-- Speaker: Well, if all the district courts the country except the Southern District of Mississippi have either this rule that this court has here, or its equivalent, that's pretty telling about what local district courts think is good for their... a good rule for running their business. Cornish F. Hitchcock: --With respect to the admission to the state bar? I meant the Mr. Frazier is admitted to the Louisiana State bar. Speaker: Well, I know. But I take it that other courts that will either have this rule or impose a requirement that he associate with local counsel. Cornish F. Hitchcock: Other... well, other courts-- Speaker: All but the Southern District of Mississippi? Cornish F. Hitchcock: --I don't want to limit it to the Southern Mississippi. I have to confess, because Mr. Frazier is a member of the state bar in Louisiana, I didn't focus on how that requirement is applied. There are other districts, I believe in Texas as well, that require one to be either a member of the Texas bar or the bar of any other court. I could submit a summary of those requirements it it would be helpful to the Court. Speaker: Oh, that's all right. Cornish F. Hitchcock: But the point is, whatever educational or bar admission requirements one may impose, this type of rule deals with other questions. Whatever educational qualifications one may require or practice requirements that is not related to the question of whether one lives or practices in the state and therefore, one is competent practitioner or likely to be available. Mr. Frazier has met whatever educational qualifications and practice and bar admission qualifications that-- Speaker: May I ask you Mr. Hitchcock, I know that your client now is not a resident or have an office in Louisiana. When he was admitted to the Louisiana bar, was he required to be either a resident or have an office? Cornish F. Hitchcock: --No, when he was admitted-- Speaker: The Louisiana State bar just doesn't have any requirement of this kind at all? Cornish F. Hitchcock: --No, Louisiana did not have a residency requirement, and that was the case before Piper as well as after Piper. Speaker: Is it integrated? Cornish F. Hitchcock: I'm not certain. If the Court has no further questions at this point, we'd like to reserve the balance of the time. William H. Rehnquist: Thank you, Mr. Hitchcock. We will hear now from you, Mr. Boisfontaine. Curtis R. Boisfontaine: Mr. Chief Justice, and may it please the Court: May I quickly answer your question, Justice Marshall? The Louisiana bar is an Integrated bar; has been for some 35 years, integrated in both meanings of the word. You must belong to the bar association in order to practice. You must belong... you must be admitted to practice to belong to the bar association. And it has no color lines whatsoever. Before going into detail specifically, there's one... there's one point that I think needs repeating if not clarification. The Eastern District of Louisiana admits any licensed lawyer of the 50 states to practice before it. The issue here is not whether or not a lawyer may practice in the Eastern District. The issue is, under what method may he practice in the Eastern District? Take the unlicensed... the lawyer that is not licensed in Louisiana. Take the lawyer in Nome, Alaska. He may come to the Eastern District, seek and obtain admission pro hac vice, and obtain local counsel to assist him. Under one of the subparts of Rule 21, the... the necessity for local counsel may be waived, and the evidence in the record says that that is done from time to time upon showing of need. Now the lawyer who is licensed-- Speaker: Expand upon showing of need. What does that mean? Curtis R. Boisfontaine: --The rule itself, sir, provides... Rule 21.6, I believe... that if it does a hardship to the client, or if substantial compliance with the rules is assured, the waiver of local counsel Is given. And our evidence in the record, which is unrebutted, is to the effect that it is often waived. The pro hac vice is one method of practicing in that court. Two other methods exist. If you're a Louisiana lawyer and you live in the state, you may practice under general admission. Speaker: Even though you don't have a residency in the state? Curtis R. Boisfontaine: Yes, sir. Even if you... if you have an office in the state and you live in Mr. Frazier's city, you may still practice generally in that court. If you live in New Orleans and have your office in Pascagoula, Mississippi, you may practice generally in that court. So that there are options on general admission, and if you don't, fit the options, then you have liberally granted pro hac vice admission. We have no evidence of record where a lawyer has applied and has been turned down admission to practice before this court. Speaker: But may I ask this question? As I understand the holding in Leis v. Flynet a local court does not have to allow pro hac vice admissions if it doesn't want to; it's totally up to the discretion of the local judges. Supposing they change their rule on pro hac vice and just say, we decided we want to have the same requirement on pro hac vice. You've got to be... either have an office or be a resident. Would that change the constitutional or the supervisory power issues in anyway? Curtis R. Boisfontaine: I think there are some district courts that allow just such a restriction. Speaker: So you really... although you say it really isn't as severe as your opponent makes out, you don't really rely on the fact that there are these alternative methods? Your legal position is-- Curtis R. Boisfontaine: I think our position is-- Speaker: --the judges could just flatly exclude this man it they wanted to? Curtis R. Boisfontaine: --I believe Congress has told this Court that it can make necessary rules, and the evidence by the way of record, says these rules are necessary, to make sure that the speedy and efficient administration of justice in that court is carried out, in the eyes of those rulemakers from that court who have the obligation, both judicially and congressionally, to make such rules as are deemed appropriate and necessary. Speaker: Mr. Boisfontaine? Curtis R. Boisfontaine: Yes, sir. Speaker: You say that leave to practice pro hac vice is liberally granted. But would it be liberally granted to the same person who came back time and again? Curtis R. Boisfontaine: Yes, sir. That has been... that is a part of the record, specifically so because we assumed that the Fifth Circuit might be wondering that very fact. There is no restriction on the repetitiveness of pro hac vice admission. In fact, if a person practices there often enough, he will likely get waivers of the local counsel requirement upon simple request, once he demonstrates his own abilities to know the rule, to perform under the rules, to make himself present at all times needed. Speaker: May I ask how, in a case... say this man wanted to file a complaint on behalf of a client. What procedure does he follow to get permission to do so? Curtis R. Boisfontaine: He files in writing, through the mail, a motion to become enrolled pro hac vice. Speaker: But it doesn't have a number... not with reference to any particular case, he just says that-- Curtis R. Boisfontaine: Oh, you have to say for what purpose, yes. Speaker: --But it's just a letter saying-- Curtis R. Boisfontaine: It's a motion form-- Speaker: --Because he can't file a complaint with his name on it until he first has the pro hac vice permission, I guess. Curtis R. Boisfontaine: --I don't really know whether the cart and the horse, who comes first. There is a procedure to handle it-- Speaker: Well, he also has... he also has to be associated with local counsel. Curtis R. Boisfontaine: --But local counsel will often file the suit, and then file the motion asking permission far attorney X or Attorney Frazier-- Speaker: Well, isn't that how it's done all the time? Curtis R. Boisfontaine: --That's often how it's done. That's the way I've seen it done in the few cases we've got with local counsel. Speaker: Does the evidence indicate that the problem with... it's harder to comply with the rules of the Federal court than it is of the state courts? Because I guess he doesn't have to do this in the state courts, he just files his complaint. Curtis R. Boisfontaine: No. As a matter of fact, the Eastern District discovery rules are quite... are quite intense. They require a lot of face-to-face confrontational meetings. A lot of the pretrial activity is done personally and is prohibited by telephone or the mail. Some of the early scheduling conferences under the rules require the trial attorneys, or one of them, to be present with a magistrate, to go through the whole system. As you approach trial the routines and regimens of pretrial settlement require the attendance, under all circumstances, of the trial attorneys. There is a need for the personal touch, if you please if you satisfy the Eastern District rules. Speaker: But doesn't that... don't you suppose the lawyers know that in the area? Curtis R. Boisfontaine: The lawyers in the area know it. Speaker: If he is going to file a suit, he must presumably realize that he has that responsibility, assuming he's a professionally qualified person? Curtis R. Boisfontaine: Well, again, I'm not trying to answer you in the abstract, because our record contains evidence from accepted experts on the judicial administration in the Eastern District, and that evidence says that attorneys from away give the court more trouble than those who are logically, normally and frequently practicing there. Now, the minority opinion of the Fifth Circuit sort of scoffed at that evidence. Speaker: Just like those from Shreveport? Curtis R. Boisfontaine: Those from Shreveport that practice in the Eastern District usually come the night before and have dinner and are there the next morning. Speaker: Well, I suppose the ones... people from Mississippi could do the same thing. Curtis R. Boisfontaine: Mr. Frazler's local attorney did the same thing, I suppose. He was admitted pro hac vice to try this very case for Mr. Frazier. There's also this ominous comparison to Piper that we perceive in the applicant's brief. Piper is very different from Frazier, if I may use those names to designate those cases. First of all, we're talking about state law and Federal law. And that alone is a big distinction between the Piper Article IV problems and the Frazier case. In Piper we also have this option of not only living in the state but maintaining an office in the state; under either of which gives you automatic, general admission to the Eastern District of Louisiana. And more importantly, the continuing requirement of that eligibility puts the real teeth in the rule in Frazier, and at the same time demonstrates the absurdity of the rule in Piper. Mrs. Piper could have run over to New Hampshire, gotten an apartment or done whatever it was it would take to establish residency, gotten admitted to the court, and run right back 400 yards to her nice house and home. And it would have made no difference under the Piper rule, because once certified, once admitted, that was it; you could go to Nome, Alaska. In the rule under scrutiny here, the continuing need for office or residence is clearly proscribed. And it you have neither, then you must fall back to the other means of practicing before the court, on the pro hac vice side. The subpoena power of the state, of the court, is contiguous with the subpoena power granted in the state proceedings. Speaker: You know, you're talking about the absurdity in the other case. I take it there are cities in Mississippi that are closer that Pascagoula. Isn't Biloxi closer for example? Curtis R. Boisfontaine: Biloxi is closer, yes, sir. Speaker: I mean, there are some right across the river, aren't there? Curtis R. Boisfontaine: Gulfport is even closer. Speaker: Gulfport was the one I was trying to think of. Curtis R. Boisfontaine: Yes, sir, there are cities, there are cities in states that are shorter in distance than the location of Mr. Frazier's residence. Speaker: But I don't know why you say it was so absurd in the Piper case. I don't know why the lawyer in Gulfport would be any different than the lawyer in Piper. Curtis R. Boisfontaine: Well, my comment about the absurdity had to do with the fact that Piper did not have continuing residency or continuing office maintenance as a requirement. That was my comment about the absurdity in Piper, only that you could run over there, get admitted, and then for all time, not worry about it again; whereas the Frazier rule requires that you maintain either an officer or a residence. Speaker: In a town like Texarkana, you'd have to have offices on both sides of the street? Curtis R. Boisfontaine: That might solve a lot of problems. But it's Arkansas and Texas, and they'd still have to come to Louisiana pro hac vice. Speaker: No, I'm talking about if this was a Texas law, I like the Louisiana law, and you lived on one side of Main Street In Texarkana, you'd have to have an office of the other side of the same street? Curtis R. Boisfontaine: If that same rule... yes, sir, Justice Marshall, that would certainly be true. I submit you could live on one side and practice on the other, though, and solve those problems. No rule is safe from better rule writing. There is hardly anything that you can look at a second time and not find a better way of addressing, or a better way of expressing it, or perhaps a somewhat softer impact. But we're not here trying to write a rule. I think we are here trying to review and to see if this rule is constitutional. Is this rule appropriate? Now to look at that issue, as I see it you look first to the reason for the rule. Is it reasonable? Does it accomplish the purposes for which it's intended? And we say to you that it does. You then look and see if it is harshly discriminatory. No one is going... everyone is not going to be treated exactly alike. But some disparity in treatment Is permitted under the regimens and under rules. And we look at this rule and we ask ourselves, is this rule appropriate for the purposes for which it is performed? Does it unduly mistreat Mr. Frazier and other people similarly situated? And under the evidence of record, and under the reasons expressed for the rule, we say to you that the rule is the only appropriate way to maintain control over the attorneys that are practicing in the Eastern District of Louisiana. And the only way to do it in such a way as to minimally impose some disparity in how you practice there. It must be remembered that Mr. Frazier can get general admission anytime he wants if he opens an office or if he lives in Louisiana. The rule is there. How it affects a person depends on the person's motives and on the person's conduct. The rule is very objective. It says, any Louisiana lawyer who either lives or practices in Louisiana is generally admitted. That lets lawyers come to Louisiana, leave Louisiana, open offices, close offices. It is their conduct that affects the ultimate effect of the rule on them. We submit that the only way this could better be handled, perhaps, is not to have a rule at all. And I don't believe that that would be the proper carrying out of the Congressional and Judicial mandates on the Eastern District court in the exercise of their rights and obligations. Speaker: Mr. Boisfontaine, may I ask you as kind of a practical matter, what do they do? Do a lot of them Just have sort of like a corporation trust company, they have some office where they can go in and have the receptionist take phone calls for them? That will do it, I suppose, put the name on the door? Curtis R. Boisfontaine: I suppose. I think that maintaining an office would carry with It the obligation to maintain a lawful office, not just a sham-- Speaker: Well, but it wouldn't be a sham in the sense of-- Curtis R. Boisfontaine: --I know of no dropoffs. Speaker: --say one of the larger firms knew about this problem and said, we'll be glad to put your name on the door and take your phone calls and be sure your mail is forwarded? Curtis R. Boisfontaine: I suppose if our firm would have put Mr. Frazier of counsel, and give him telephone and address privileges, we would probably satisfy the rule. But then we would-be holding ourselves out as vouching for Mr. Frazier, and our firm would in effect be surrounding Mr. Frazier with our reputation and with our obligations to that court. Yes. To answer you more directly, yes. That would satisfy it. Speaker: Well, I'm not sure your firm would... say he had a client in the shipping business or something. And they said, well, you can use... we'll let our switchboard take your calls, and you can use this as an office for taking mail and so forth. And his client Just... and he just listed that office and phone number. Would that satisfy the rule? I don't know it wouldn't. Curtis R. Boisfontaine: If the court knew it, I don't believe it would. Speaker: Oh, it wouldn't? Curtis R. Boisfontaine: I don't believe it would. Speaker: There is a definition of the kind of office he has to maintain? Curtis R. Boisfontaine: I would not... the rule of course does not say, whether it be a fancy office or a small office or-- Speaker: Well, isn't the only purpose of the rule to be sure he gets notice and gets his mail? Curtis R. Boisfontaine: --The purpose of the rule is to make sure he gets notice, to make sure he gets his mall. Speaker: Well, why wouldn't it satisfy to have a client say you can-- Curtis R. Boisfontaine: I'm not saying that it wouldn't. I'm saying that I suspect that the court would require more than a drop, if you please. I don't know that it would. Speaker: --Why? What purpose does it serve, other than the drop purpose? Curtis R. Boisfontaine: Well, I think basically the purpose of having the rule, and having the office or the residence is, as you point out, to make sure that notices are timely received. And I suppose a drop would satisfy that. Speaker: I wonder if a mailbox might do it. If you kept a mailbox at general delivery. Curtis R. Boisfontaine: I don't think a mailbox is an office. Speaker: I see. But I would think as long as he had a client who was willing to put his name on the door, and a phone number that he could list in your lawyers' directory, I don't know why that wouldn't comply. Are you sure, Mr. Boisfontaine, the only purpose is to give him... to make sure that notice is received? Certified mail would do that. Curtis R. Boisfontaine: It's not just a question of assuring the court that mail is received. Speaker: I didn't think so. I thought the purpose was to make-- Curtis R. Boisfontaine: I think I stepped in that answer. There's more to it than that, sir. Speaker: --What is it? Curtis R. Boisfontaine: It's to assure the court that the attorneys are available. It's not just a question of getting there. It's a question of-- Speaker: Well, suppose you have one of these multistate law firms, you have them I'm sure in New Orleans as we do in other parts of the country, and you've got a New York partner up there, and he's going to try the case and so forth. Does he have an office there? He's never in New Orleans except for the purpose of this one case. Does he have to get pro hac vice admission? He's a member of the bar. This fellow moves to New York. Curtis R. Boisfontaine: --I don't believe we have multi-district firm. And I don't know the answer to your question. I think-- Speaker: But you're saying... you're suggesting that the rule requires a certain number of days a week in the office or something like that? Curtis R. Boisfontaine: --No, sir, the rule doesn't deal with firms, it deals with lawyers. It deals with a person. Now if this person were living and practicing in New York City, he obviously wouldn't qualify for general admission-- Speaker: Even if he became a partner of your firm? Curtis R. Boisfontaine: --Even if he were a partner of the firm, he is still Mr. Smith, and Mr. Smith lives and practices in New York City. As I would interpret it. Speaker: Let's assume a lawyer leases an office and has a secretary there, but he lives in Mississippi. And he may be able to get his mail, but he's still away, and he's not instantly available. You can... he's bound to get notice. His office will make sure that he gets notice. But he's still a long distance away. Curtis R. Boisfontaine: Justice White, I suppose it's in the interest of trying to be as liberal as possible that this alternative option is granted. If the Court really wanted to be restrictive, and wanted to have Its law-- Speaker: Well, what difference... what difference where he's got his office make if all he has in his office is somebody to notify him that he's got some mail or a phone call? Curtis R. Boisfontaine: --In my view, people do not frivolously undertake overhead of offices. If a person is going to maintain an office in the State of Louisiana, there is going to have to be a reason for it superior to an ability to generally practice in the Eastern District of Louisiana. Because that can be done with no overhead. That can be clone by simple motion for a pro hac vice admission. So the fact that the rule allows the general practice, once you have an office, presupposes good common sense on the part of the attorney. Speaker: It demonstrates a serious commitment to practice in that district, I take it, doesn't it? Curtis R. Boisfontaine: I would think that's true. And I think also the fact that you live there is more-- Speaker: A serious commitment to continuing practice In that district, as opposed to someone who just practices now and then and comes in pro hac vice? Curtis R. Boisfontaine: --I wish I had said it that way, Sir. Speaker: Counsel, what do you... I notice if you ever go up to Wilmington, Delaware, and lawyers... you see all these plaques on there, and that's all it is. Curtis R. Boisfontaine: Corporate headquarters, I suppose. Speaker: Would that be sufficient? Curtis R. Boisfontaine: Again, we're talking about whether it's a legitimate office of that particular person for that-- Speaker: 0 xxx. Curtis R. Boisfontaine: --If it's an office yes, sir, I suppose it would have to be if it's a legitimate office, if it demonstrates his intent to practice in the state. This could be a lot tougher, you know. This could say, if you're not... if you're not in Olney's Parish, you're not going to be generally admitted to this court. And a lot of districts have very restrictive admission rules. I think the Eastern District has compromised the liberality with the necessity of the administration of Justice in expanding it to the entire state or so say we. Now, let me touch one more time on this 100-mile range for Mr. Frazier, and in his case, I suppose we would make it a 111-mile range. That argument, to me, is an argument that would be made to the rulemaking authority at the time they're making a rule. It is an attempt to write the rule differently, to write the rule perhaps more restrictively in some respects, and less restrictively in others. Speaker: xxx if there is one-- Curtis R. Boisfontaine: There is a Judicial conference in effect in the Fifth Circuit. I don't know the precisity of the review of the admission rules. know that they are awaiting hearing from this Court, since they are very much aware of this writ. But the rule writing and the rule review is underway. I was not at the Fifth Circuit Judicial conference two weeks ago, but I understand that there was a great deal of discussion about admission rules and many other rules of the various district courts within the Fifth Circuit. Speaker: --Was the Fifth Circuit-- Curtis R. Boisfontaine: I can't give you a time or date by which any work would be completed. Speaker: --Were they thinking about requiring particular kind of a rule through the circuit? Curtis R. Boisfontaine: I understand they're considering, as I understand it, they're considering some uniformity, not requiring... not requiring total uniformity-- Speaker: Right. Curtis R. Boisfontaine: --but they're looking at the extremes of rules treating the same subject, with a view toward trying to bring the extremes more toward a center... a center line. I think that's the extent of the uniformity that they seek to achieve. If there are other questions? Otherwise, we submit. William H. Rehnquist: Thank you, Mr. Boisfontaine. Mr. Hitchcock, you have one minute remaining. Cornish F. Hitchcock: Thank you, Mr. Chief Justice. I wanted to follow up on the question of the office requirement, Justice Stevens' inquiry. It was addressed in the record. At page 151, Mrs. White, the clerk, said that a mailbox is not sufficient. At page 255, Judge Wicker testified that the office requirement requires only that there be someone to answer the telephone and communicate with the lawyer. And I would add again that that could be in New Orleans, or it could be in Lake Charles, or it could be in Shreveport, or it could be anywhere else. Mr. Frazier can affiliate with an office... somebody who has an office In Lake Charles, and he would satisfy the office requirement. But there's no reason to believe-- John Paul Stevens: Do you understand that to mean he would satisfy it if one of his client's were willing to put his name on the door and forward mail and phone calls to him? Cornish F. Hitchcock: --The statement was, and I will quote from the record, quote: This means where there is an address with a telephone number to me. Question: Somebody such as a secretary? Answer: Someone who would be able to communicate with that Individual If we attempted to reach them. That is the only answer. Speaker: So your answer is, yes, that would be adequate? Cornish F. Hitchcock: Yes. That is permitted. Speaker: So maybe he needs to get a New Orleans client. Cornish F. Hitchcock: Excuse me? Speaker: Maybe he needs to get a New Orleans client? You think it says that? I don't think it says that. Cornish F. Hitchcock: It says someone... you know, secretary with the office. And again, it doesn't say where, it doesn't say somebody who is committed to regularly practicing in the Eastern District. It could be somebody-- Speaker: That may well mean that you just can't hire an office and have a vacant office with nobody there to answer the phone. That's how I would have interpreted that. Cornish F. Hitchcock: --But it doesn't imply that there Is someone there who could go over to the courthouse for emergency hearings or something of that nature. William H. Rehnquist: Thank you, Mr. Hitchcock. The case is submitted.

Earl Warren: -- versus United States. Mr. Solicitor General, you may continue your argument. Archibald Cox: May it please the Court. When the Court rose yesterday, I was in the middle of discussing our principle proposition here, which is that this case has so many of the characteristics common to the other restraints in trade that have been held unlawful per se, that it should be placed in the same category. In the course of that discussion, I pointed out that in many of those other cases the Court had refused to inquire into the alleged justification that it made the restraint brief, because apparently, in each of those cases, the alleged justification was something which instead of being the main point of the transaction, flowed exclusively from the restraint of competition. So that an effort was being made to argue that in this instance, competition is a bad thing or this is bad competition as opposed to good competition. I want to make it plain that our case does not depend on asserting as an absolute generalization that the Court will never -- that no case can exist in which the Court will hear the justification, that competition is a bad thing. I know of no such case, but I'm not prepared to assert that none can possibly arise. The thrust of our argument here is simply by analogy that this case is so linked the other per se restraint, especially resale price fixing and territorial, horizontal territorial allocation, that it should be placed in the same category without attempting to espouse any broader generalization. Now, let us look a little more closely at the characterizing of these territorial restrictions that White imposes on its dealers and see whether they are not the same in principle and in those respects, as the other per se restraints. First, it is clear that these territorial restrictions do eliminate competition and not merely price competition, but all competition in the sale of White trucks. That is a, plainly a restraint of trade, it serves no independent business purpose other than that of restraining trade and it imposes a very important kind of restraint. We know ever since the writings of Professor Edward Chamberlin on Monopolistic Competition that one of the tendencies in an economy increasingly dominated by a few large manufacturers has been for each to try to differentiate its product, so that it obtains at least at the manufacturers, at the distributor level, some of the characteristics of the monopolistic market. Now, if we go on and eliminate all competition in the sale of a brand on down to the public, a very important form of competition, which has effects on the price structure and everything else, is being eliminated. So there could be no doubt here that these White contracts, territorial restriction do eliminate competition in an important form. The only justifications which appellant asserts to these contracts come under the heading competition among our dealers, it is a bad thing for them, and a bad thing for us and we ask the Court to conclude that it's bad thing therefore for the public. In order to demonstrate that, that is true, I would like to be sure to depart from the argument and take White's own brief. Dealing with this point, White says first on page 11, “in some instances it is competitively effective for a manufacturer to make certain that only one dealer is selling its good to residents of a particular area.” Then we go on and the reasons appear over on pages 12 and 13. The first reason toward the bottom of page 12, “White on the strength of this kind of contract has built up substantial goodwill in its organization of independent dealers and distributors because the contracts assure that White dealers will have resources to scour their territories, but hard to get sale since they will have the security of getting the easier large volume White customers in their area.” Well this it seems to me is simply an argument our dealers feel is goodwill, because we've assured them that they won't have to compete with each other. One could make the same argument that any price fixing, any resale price fixing, any horizontal allocation of territory, it's simply they don't like to compete and they love us because we don't make them compete or because we free them from competition. Then going on, one finds next, I'm up at end of the paragraph on page 13 -- beginning on page 13, that appellant criticizes the White dealer who jumps territorial boundaries at a strategic moment and snatches away the pre-sold customers, skipping on why is that subject to criticism? Individual dealers need the cream, that is easy to get sales, that they wouldn't get if there was another White dealer competing with them, and for two reasons, not only in order to be able to sell less lucrative accounts, but also in order to have the financial strength to maintain adequate service facilities. And at another point it is said that if the dealers don't compete with each other for the more lucrative accounts, then they will be able to compete more vigorously with General Motors and Ford. I think it's fair to say that the argument is that the dealers by making more money through the elimination of competition in the sale of White trucks with other White dealers, will appellant says be able to do two things, first to compete more vigorously with other truck manufacturers and second to be able to spend more money on their service department. Now this is the kind of decision which the Sherman Act intends to be made by a free market. It's not for the appellant or with deference for a court, to say that it is better for the economy to have less money go into competition in the sale of White trucks and to have more money go into building up service departments. The whole theory of our economy and the whole theory of the Sherman Act is that the consumer shall make the choice. He may go and try and get the best price or he may go to someone who charges a little higher price and therefore get better service on his truck in later years after he buys it, and similarly the theory is that it is -- should be left to the free play of the economy to determine whether we will have inter-brand competition or intra-brand competition or what combination of the two, rather than the private persons White agreements that are serving no other purpose should come in and say no we won't have intra-brand competition, we will concentrate on inter-brand competition. Now I should say in candid that there is one other argument that has been made, although I don't find it in the appellant's brief, in support of territorial restrictions by manufacturers on dealers, which it is said do not exist where the dealers combine simply at a horizontal level. The suggestion was made by my colleague Professor Turner at Harvard that this kind of territorial restriction has the advantage of ensuring that the dealer will concentrate intensively on a certain geographical area, that getting hungry as a horse does if you confine him to too small a pasture, they won't range widely seeking to get Timothy and Clover, but will be driven to eat some of the weeds, and the leaves, the round stubble which is to the advantage of the manufacturer. Even professor Turner himself concludes that, that justification is not sufficient to offset the very marked restrictions on competition that this kind of territorial agreement imposed. A second answer is that the kind of intensive cultivation of the territory that the manufacturer is interested in can be achieved without imposing these restraints on competition, and of course it's at this point that we made certain suggestions as to what White might do. Contrary to my brother's suggestion, we never said there are other ways of restraining trade that will do the same thing that are preferable form. We said there are ways of ensuring intensive cultivation that do not impose these same restraints on trade. One way is requiring of the dealer to put in a specified amount, not a percentage, a specified amount, please these are important here, a specified amount of salesman or money or effort measured in some other way in exploiting his particular assigned territory for which he is responsible. Another measure, which would come close to accomplishing -- accomplish much of this result is through the exclusive dealership, which we do not argue is per se unlawful, which we recognize is a question dependent on the facts of each particular case, but which does give the dealer a territory for which he is responsible. Arthur J. Goldberg: [Inaudible] Archibald Cox: Well, I think there is no difficulty here certainly, because in its reply brief, White it concedes that these are reasonable alternatives to accomplish every purpose except one. It says while the suggestions of the government are relevant to keeping unzealous dealers up to the mark. Speaker: What page? Archibald Cox: Page 16 of the reply brief, about half way down the main type. These suggestions scarcely touch the basic problem of how the dealers maybe kept in financial shape to fulfill the obligations. In other words, we must relieve them from competition, so that they will make more money, and then they will be in better shape to carry out the obligations that rest upon them. Now certainly this is an argument that has been rejected over and over and over again. The most precise rejection of it came in the Dr. Miles Medical Case back where the Court was speaking of course of resale price fixing, but the parallel between the argument that Mr. Gesell makes in the reply brief that we must give our White dealers, assure our White dealers more money, so that they may compete more effectively, is exactly the argument that was made by the Dr. Miles Medical Company and rejected by this Court. I would like to take a moment just to point it out. The Dr. Miles case, then Justice Hughes had said the bill asserts the importance of a standard retail price, and asserts generally that confusion and damage have resulted from sales less than the prices fixed, but the advantage of established retail price is primarily concerned with the dealers. The enlarged profits which would result from adherence to the established rates would go to them and not to the complainant. This of course is true here. It is true the inability of the favored dealers to realize these profits, on account of the described competition, that complainant works out its alleged injury, exactly the way the appellant seeks to work it out here. And then another sentence, if there be an advantage to the manufacturer in the maintenance of fixed retail prices, and we say there would be an advantage in the territorial restriction, the question remains whether it is one which he is entitled to secure by agreements restricting the freedom of trade on the part of dealers who own what they sell. As to this, the complainant can fare no better with its plan of identical contract, than could the dealers themselves if they formed a combination and endeavored to establish the same restriction, and thus to achieve the same result, by agreement with each other. If the immediate advantage they would thus obtain would not be sufficient to sustain such a direct agreement, the asserted ulterior benefit to the complainant cannot be regarded as sufficient to support its system. And then in the next paragraph the Court holds, “but agreements are combinations between dealers, having their sole purpose, the fixed prices are illegal per se” and we say, completing the analogy, that agreements amongst White's dealers to eliminate competition among themselves would under the decisions of this Court plainly be illegal per se. So that speaking more generally this argument that there are advantages through the elimination of a particular kind of competition is one that has been rejected not only in a very parallel context in the Dr. Miles case, because it was a similar argument that was rejected by Judge Rifkind in the National Lead case with respect to territorial allocations on horizontal territorial allocation. And we think, it is no different really than the arguments that have been made in support of all price fixing, are all eliminations of competition among distributors. Now, there is a second reason, why the Court has held many forms of avowed restriction on competition to be illegal per se, and that reason too we think is applicable to the present case. In the Northern Pacific case, Justice Black pointed out, that the principle of per se unreasonableness avoids the necessity for an incredibly complicated and prolonged economic investigation into the entire history of the industry involved, as well as related industries, in an effort to determine whether a particular restraint has been unreasonable, an inquiry so often fruitless when undertaken. Of course the point is in the latter part contrary to what my brother says, it is not the burden on the government approving its the case or the time or effort expended. The point is if one gets all done making the inquiry, he has virtually nothing but a very broad and virtually unanswerable question, on which experts may differ, but which to a very considerable extent is answered by the philosophy of the Sherman Act, that the allocation of resources should be determined by competition, that even if there are costs of competition in particular instances, in the long-run the gains greatly outweigh the cost. Now this is the very kind of inquiry that my brother asks the Court to embark on in the present case. Let me take just one of the many questions that would have to be asked as an illustration. Appellant argues that although the contract suppressed, indeed eliminated intra-brand competition, they will serve inter-brand competition by enabling White better to survive he says as a competitor of the giant non-custom truck manufacturers and that if White dealers can't be sheltered from competition among each other, there will be an inevitable exodus of buyers to the giant manufacturer. But who is to say that inter-brand competition is to be preferred to intra-brand competition? Is this a justiciable question or one that the Sherman Act itself anticipates and leaves competition alone. Who -- Arthur J. Goldberg: [Inaudible] Archibald Cox: I don't think the Court Mr. Justice -- I don't know of any case in which the Court has said that we sustain an agreement suppressing one form of competition, because that form of competition is bad for the economy or because that form of competition is inferior to some other form of competition. The case that comes closest, which I think Your Honors will agree is a special peculiar case is the Chicago Board of Trade case where it was held that the members of an exchange might agree that they wouldn't compete out of the exchange's powers, but apart from that, I don't know any case in which it was held that one form of competition could that be suppressed by agreement in order to strengthen other forms of competition. Look at the kinds of inquiry you get into. We've raised this question in our brief, the answer that the appellant made, well, when it comes to comparing intra-brand White competition with Ford -- with inter-brand competition with Ford, General Motors and the other, the question is hardly worth asking. Well I'm kind of obstinate and [Inaudible] and I thought I'd begin exploring the question just a little bit. The first thing I found was that this firm in a market with giant competitors has net sales of $333 million a year. One quarter of $1 billion. It's one of the 200 largest companies in the country. Then I looked a little further, rather excited by interest, I found that 87% or 88% of White sales are in the standard weight classification, 26,000 pounds to 33,000 pounds or 33,000 pounds and over. Arthur J. Goldberg: [Inaudible] Archibald Cox: One in the -- it's not in the record and I don't argue that these are -- Potter Stewart: That's just the point of Mr. Gesell's argument. It's not in the record. Neither side was permitted to put in evidence. Archibald Cox: My -- the only point of my argument is not to make the answer turn on this. The point of my argument is to show that this is often, without question who is to decide and how is the Court to decide that intra-brand competition is inferior to inter-brand competition, is a meaningful question, that there are many, many cases in which intra-brand competition is very useful and I use this case as an illustration, particularly since Mr. Gesell speaks so often of about competition with these giant competitors and the danger that White, an independent firm, would leave, lose out to the giant competitors. Now in these categories, White sells more trucks than Ford. It sells more trucks than General Motors. In fact it sells almost as many trucks as Ford and General Motors put together. White and International Harvester, the only larger manufacturer of trucks in these categories control more than 50% of the market. Now I'm quite sincere when I say I don't mean that these are facts which enter -- should enter into the decision of the case, in the sense that it would be different if White's position in the market were different. I do think that they are parting a repetition if I may say so to some of the arguments made in the brief, and also that they do illustrate the seriousness of our argument that intra-brand competition is an important thing, and of our arguments that this is not the kind of enquiry on which a court should embark because for one thing it's a virtually hopelessly prolonged inquiry, for another it's a kind of inquiry that the courts have regularly refused to embark on, ever since the Pottery's case where the argument was then made there Mr. Justice Goldberg, that eliminating price competition would be desirable and that other forms of competition would be better and then it's coming back to the argument was eliminating certain forms of price competition and putting ceilings on the price would make for a healthier competition on all, that was rejected. It was rejected in Dr. Miles case. It was rejected in the tie-in clause case, the allocation of territory case. It's exactly the same argument, that it seems to us that appellant is making here. Now there is a third reason for classifying vertical contracts allocating territory among distributors as per se violations of the Sherman Act. Horizontal allocations have frequently been held to be unlawful per se, and I suggest that no practical administrable distinction between the two can be drawn, but surely the form alone isn't to be regarded as decisive. If that were the case the dealers could get together, invite or put pressure on the manufacturer to stamp his name on and then we would have the very same kind of restraint which the law forbids. The participation of the manufacturer, and the fact that promises run to him seems to me to offer very little protection. He may be glad to help out the dealers because he wants the goodwill that follows, we are told from ensuring that they won't have compete for the easy to get sales nor can I see any other workable form of distinction between the two, and this seems to me an additional important bit for classifying this case along with the other per se restraints in trade. Now I turn to a quite different argument made by the appellant. Appellant says well these are ancillary restraints and under the historical doctrine of the common law, a restraint that is ancillary is permissible if reasonable. The promises that White exacts from its dealers not to compete with each other, we submit are not ancillary restraints as that term was used in the class of common law cases and the argument that such governance are ancillary has been repeatedly rejected by this Court. The term ancillary restraint, properly understood, was simply a phrase for describing a restricted covenant that was an integral part of some larger commercial transaction to the consummation of which the so called ancillary restraint was subordinate and fairly essential. The prime example of course is the sale of a business. A man could not sell his business readily unless he could give the buyer assurance that he wasn't going to himself retain all the goodwill. A sale of a retail laundry business with roots is the primer illustration. The covenant not to compete with the person to whom the business is sold was virtually a definition of what was sold. It was -- I am conveying the goodwill, I'm not retaining the goodwill, and it was a measure for making good on that undertaking. Justice Holmes stated this very plainly in the Cincinnati Packet case on which appellants rely so much in their reply brief. It would accomplish no public purpose he said, but would simply provide a loophole of escape to persons inclined to elude performance of their undertakings if the sale of a business, the temporary withdrawal of the seller necessary to give the sale effect were to be declared illegal. Now there's another group of cases, which I think are really the converse of the sale of the business. Those are the cases where there is the sale of something like a steamship or some other capital asset on which a business is founded and what the vendor wants to sell and the purchaser wants to buy is the asset and not the business. And in such cases, and I think the policy of the law in order to encourage such transaction has permitted the seller to take a covenant from the buyer that the buyer wouldn't use the steamship or perhaps some part of the business or the store or place of business in competition with the seller. There too the covenant is almost a part of the definition of the subject sold. I'm selling you the ship, not my goodwill and steamship business. We think that those cases are plainly distinguishable from this case on two grounds, both well sustained by authority. The first is, that this is not a sale of some part of a business or of some asset on which the business is founded. It's the recurring sale of chavels that takes place over and over again, and either is manufactured or sold out of stock and are sold for resale. There is nothing novel about this distinction. The Court made the every same point and held it to be determinative in the Dr. Miles Medicine against Park. Indeed the Dr. Miles case squarely holds that promises to limit competition in the resale of manufactured products are not within the doctrine of ancillary restraint. You'll recall both from the case and perhaps from what I said earlier, that in that case the manufacturer of a proprietary medicine, upon agreeing with wholesalers and retailers to distribute it, exacted from the covenants, not total covenants not to compete with each other as here, but covenants not to depart from certain fixed resale prices. Counsel attempted to defend these promises by calling the restraint on competition ancillary, just as appellant does here. The Court rejected the argument saying that the case is not analogous to that of a sale of goodwill or of interest in the business or the grant of a right to use a process of manufacturing. The complainant has not parted with any interest in its business or instrumentalities of production. It has conferred no right by virtue of which purchases of its product may compete with it. It retains complete control of the business in which it is engaged, manufacturing what it pleases and fixing such prices for its own sales as it may desire. Now there's a second critical distinction between the ancillary restraint case and this case, which also is old and well established. The ancillary restraints which were sustained, all involve promises running from the buyer of a business or of a steamship to the seller or from the seller to the buyer, as distinguished from promises attempting to eliminate, I shouldn't have said promises running that way, all these promises run that way, they were promises running from one to the other, promising that the one would not compete with the other. The buyer would not compete with the seller or the seller would not compete with the buyer. Here of course the effort is to get promises from buyers not to compete with each other. Now this point again is to stand by authority. Judge Lurton later Mr. Justice Lurton in a parallel case involving the sale of drugs drew this very distinction. His opinion was expressly approved by this Court in the Dr. Miles Medicine case. There he pointed out that while a covenant, ancillary covenant might be permissible where restraint was no greater than necessary to enable the vendor to receive the value of his goodwill or to secure to the buyer the enjoyment of his purchase or to prevent the use of property to the prejudice of the seller. Here dealing with the resale pricing fixing case, the only competition which the contracts tend to suppress is competition between those who buy his goods to sell again, and this he said was important. A little later he returned to the point and emphasized no instance has been called to our attention where the main and principle if not only result is to protect buyers against the competition of each other and as I say that opinion was sustained in the Dr. Miles Medical case. Potter Stewart: One aspect of his case, we have the promise not to – of the buyer not to compete with the seller. Archibald Cox: That's the one, yes, that, what I've said thus far. I'd be glad to answer your question, but I just want to make it clear, what I've said this far and most of my argument is directed to the territorial restraint, but the other aspect we think is squarely answered by the Bausch & Lomb case and by the McKesson & Robbins case. Appellant attempts to distinguish the Dr. Miles case by saying, oh well that involved resale price fixing. The argument I submit misses the whole point the ancillaryness of a covenant if I may use that malapropism, is not dependent upon the character of the restraints of trade. It depends on the character of the transaction, but nothing that was said by Justice Hughes in this part, in answering the arguments that those covenants were ancillary, is inapplicable to the case here, nothing said by Justice Lurton in the case approved by this Court, isn't equally applicable to the argument here. The point is that promises given by buyers not to compete with each other on the sale of channels for resale, are not ancillary in any sense of the word. Nor has this Court drawn a distinction between covenants against departing from set resale prices and other kinds of restrictive covenants by a distributor to the manufacturer of goods. In the Ethyl Gasoline case, you'll remember, the vendor of a patented fluid licensed both refiners of gasoline and wholesalers. And then he attempted to require the refiners to promise that they would sell only to wholesalers who had licenses and the Court struck down those agreements. In the Bausch & Lomb case, the Court squarely held that a seller of lenses for eyeglasses violated the Sherman Act by exacting promises from its distributors, its wholesale distributors that they would sell only to retailers approved by the manufacturers. Those deals with restraints that it might it be claimed were ancillary, one as Justice Stewart just suggested, is a kind of restraint involved here, but the Court has rejected the argument time and time again. Now, in the five minutes remaining, I would like to say just a word about the precedents. First, we think in principle, that the combination of the cases holding that horizontal agreements are unlawful per se, plus the Dr. Miles and Bausch & Lomb case, I'm almost compelled, almost compelled, I'm mindful of Justice Holmes saying to the [Inaudible], the conclusion that the Court below was right. The cases in the lower court that are squarely in point are few in number. The Volkswagen case that my brother mentioned yesterday, a District Court opinion in New Jersey does squarely sustain it. There is an Eighth Circuit case in 125 Federal many years ago, dealing with the sale of cement, which perhaps sustains it, although it does not appear in the case as I read it, that this was more than one distributorship for one year in the State of Texas, rather than a planned spread all over the country. Now the other cases that he cites dealt with single sales, the one case by the government apparently war commodities were surplus, and the other of damaged goods. The government's position is supported by a charge delivered by Judge Mack in Lowe Motor Supplies Company against Weed Chain Tire Chain Company back in 1915 or 1916 and of course the Judge in the Court below sustained our view. Potter Stewart: Just in this government's case, was there a surplus commodity, did government promise not to compete? Archibald Cox: This was a case cited in Mr. Gesell's brief, where the government under a statute authorizing such condition, sold certain goods on the condition that they not be resold in the United States. I take it was much like the kind of restraint -- I guess it is a restraint, that on the sale of warships as sometimes been imposed. They were not to be destroyed. They were not to be sold for scrap for certain time. It was apparently a case of that kind, in any event it was a single sale, and seems to me very distinguishable on that ground. Now, the secondary authorities are divided, but I think that the impression that we're given of them by the appellant is really quite extraordinary. Appellant, after calling attention to the fact that we rely on Dr. Miles and Bausch & Lomb, says that, it is worth noting that up to the time of the decision in this case, no opinion of any court nor any secondary authority had embraced that argument in the half century that had been available. Well, I found in addition to the decision of Judge Mack, a paper written by former Judge Rifkind, which is cited in the appellant's brief, where he says if an agreement among manufacturers which allocates territory is illegal, it is hard to see why a contractual scheme among the manufacturer and his two distributors is not equally open to attack, and he cites in the footnotes, see Dr. Miles Medical. So, it seems to me that he was relying on this very argument. Later in his paper, Judge Rifkind squarely expresses the opinion that he would think that it would be held that such a set of promises would be held unlawful as in violation of the Sherman Act, although he distinguishes the exclusive license as I have attempted to do here. In a footnote it is suggested that among the commentators is the learned incumbent, assistant Attorney General, one of government counsel herein. Well knowing the [Inaudible] of those who've written in academic life and they are then called upon to represent the government, I fear that I might find that Judge Levinger had indeed said something inconsistent with our position. But I find what he says at the pages cited, is on principle the strongest argument would appear to be against permitting, either a horizontal or a vertical combination to agree upon territorial divisions of the market. So we think that our case is well sustained by authority as well as by principle. I mentioned the other authorities, the consent decrees over the last ten years or so, and that the common law cases that are described as a torrent of authority by our brother, my brother indeed upon examination you will find are few in number and wholly distinguishable. Earl Warren: Mr. Gesell. Gerhard A. Gesell: May it please the Court. I would like at the outset in replying to the Solicitor General, to make perfectly clear certain business facts which we are in controversy about here, both of us talking without any record before us. And at the opening of his remarks he suggested that when I said that there are a large number of small businessmen dependent upon territorially limited distributorships, that I was talking about exclusive distributorships and not about territorially limited distributorships of the kind we have here. Well I was talking just about that and I was talking about the ads that appear in the current Wall Street Journal telling people, small businessmen who are concerned with vending machines, food products, health equipment, that they have protected exclusive territories that they can chose, that they have protected areas for automatic fire protection or the ad that appears in the middle of The New Yorker today and in the middle of the Sports Illustrated for Hatteras Yachts says, dealers are carefully selected and their territory is protected. We are dealing with a common inherent practice here which the Commerce Department and other agencies of government have endorsed and encouraged and on which many, many small businessmen all over this country are depended upon for their livelihood and in respect of which and reliance on which they like the White dealers have made substantial capital investment and stake their all in an effort to make a living. Now we heard today about the mammoth White Motor Company. The entry of Ford and General Motors into the large truck field is of recent origin, and what would this Court say if the record were to show, as I believe it would show, were we to go on trial, that as these large integrated organizations have entered into the big truck field, White's business is diminishing, that as they've chosen some certain categories and types of trucks to merchandise, White's business has gone down. That as they sent their engineers into their own branch offices to offer competition to White, White is suffering. We don't know those facts, but that's the kind of record we'd have here, if we had our day in court. Now I would like to discuss next, the suggestion that this is just like any other horizontal arrangement, just like any horizontal arrangement. In the first place we have no findings to that effect. In the second place we have no decision to that effect, but let me point this out. The Solicitor General says that we can tell our dealers to confine their showrooms to a particular territory, that we can tell our dealers that they can put so much money into their territory and they must put so much energy and effort into their territories as not percentage wise I gather it has to be dollar wise, wouldn't he be here saying to you however, that if the dealers so agreed to such arrangement that that was equally illegal. Could these dealers get together and agree they would all keep their showrooms away from each other. Could they get together and all agree to a primary responsibility doctrine into which they would say let's not compete but let's keep all our money in a given territory or most of our money or most of our sales effort. He is caught with the proposition that he recognizes that when a man sells his goods, his primary interest is competing with others, not destroying himself by his own competition. And he suggests other ways which if they were agree to among dealers would be equally restrictive. The argument presented this morning to the court has been premised on the assumption not in the record that the primary purpose and objective of White Motor Company was to prevent competition between its dealers. I say that is not a fact. I say it is not proven and it would not be so shown on trial. The purpose of White is to compete with the other brands. The purpose of White is to be successful in a tough changing competitive business and the limitations or restraints or whatever you wish to call them are merely ancillary to that affirmative purpose and when White said that if you destroy these arrangements will lose our dealers and competition will lessen, the District Court said, that is immaterial. An argument was advanced this morning, an argument was advanced this morning that we had prohibited price competition and that therefore this case was like Dr. Miles. I don't understand that argument, because that isn't what this record shows. Every dealer is free to choose what price he wants to charge for a White truck. He is not like the Dr. Miles situation for having resale price maintenance imposed upon him. He not only cannot compete with others who sell Dr. Miles prescription, but he cannot change his price to meet the competition of others. The White dealers are completely free within their territory to charge what price they will, to offer what service they can. And their position therefore is not the rigid position that a Dr. Miles resale price maintenance type situation creates whatsoever. Each of these dealers has price flexibility and price ability to compete. I would like if I may to discuss another aspect of the Solicitor General's argument. He urges on you that only where there has been a sale of a capital item, of capital goods has the ancillary restraint doctrine been accepted by this Court. Now I think that is patently not the case on any fair reading of the line of authorities starting with Addison Pipe. Price has been singled out as of special consequence because of its historical position in Common Law and because of the fact that price control and monopoly are inherently the same thing and the discussion of the court at the time of Standard Oil, the discussion of the Court and later in Print and Pottery, the discussion of the Court throughout the development of this Fall has set prices in a special different category and we recognize the rule of reasons as it applies in respect of other restraints, other than price. And when the Solicitor General says, let's take this and throw it in with all of the other practices that have held per se illegal, what are those practices? What is that great host of per se violation that this Court has established? There is no per se rule as the tie-in contract. Mr. Justice Black made clear in his opinion that under certain set of facts in the North Pacific Case the tie-in contract there failed, but not all tie-in contracts, not under all circumstances. What is it is the requirements contract? We don't have any per se rule as to them. I know of no per se rule in the field of general restraint, putting aside the pack of questions for a moment, other than price. So, when he says that put this in the area, what is he talking about? And, then I ask the Court to, and I hope it listens carefully to the exceptions that are suggested here. In answer yesterday to Mr. Justice Goldberg, the statement was, well this might not apply in the case of a new company entering into a market. We'd have to suggest that maybe if somebody was coming with a new automobile let's say and it wanted to penetrate against these big companies but maybe it would be all right to let them do this. It was also suggested that if White was failing, it might be all right for it to do it, but the rule we have here that you're asked to affirm has no such qualification. And, if you affirm this judgment below, even the exceptions of the Solicitor General talks about are not available to any litigant here. And then I want to ask you as a practical matter, what is the difference between a new company entering a business and an old independent established company subsisting in the business, in the face of encroaching and every increasing competition? What is the legal difference? What is the social difference? What is the practical difference? I'd say there isn't there, and I would say the questions has to be explored by this Court that you must look at the circumstances under which this business has been developed, why these territorial arrangements are necessary or not necessary, what their effect is on competition overall? We have no dealer testimony. We know nothing about these dealers, but I suggest that they would testify that they aren't going to make an investment of $150,000 looking towards business a year of around $250,000 unless they have some assurance that when they construct the service facilities and the showrooms and take the other training and other experiences necessary and to get into a position where they can participate in the custom construction of these trucks that they have some chance to develop a specified area themselves. Now, it was suggested that this is an ordinary common variety kind of a case of everyday sale of goods out of stock. I never understood why United States printed this mass of contract that makes up the bulk of this record. But, if you look at them, you'll see that the dealers there in most instances carry White's name. You will see that under the contract they're allowed to use White's name for the duration of the contract. I have told you that they participate with White in the engineering and custom building of these models to meet particular customer's needs. This is analogous, I'd say, to the very type of situation which was presented by the Solicitor General. Goodwill is involved. The dealers by their contract are participating with White in the development of its business. It was suggested that a decision of this Court in Bausch and Lomb threw out restrictions of the kind we have here. I would emphasize that that decision and we've discussed it in great detail in our opposition with a motion to affirm had to do with the restrictions which the Court found were ancillary to and in assistance of a price fixing scheme. And of course if these arrangements were to have been held by the district court or were to be presented here as ancillary to and part of a price fixing scheme their status in a decree would be quite different, but it is conceded here and it was so held by the judge below that these limitations and restrictions must be viewed fully independent of price and the Solicitor General offers to you the opportunity to hold, that absent any price problem of any character, you are going to strike down in this and all other industries these types of limitations. Consider what would be involved? The man who wishes to sell his goods only through certain types of department stores, he couldn't do that any longer. The man who wishes to sell his goods only through certain types of drug stores, he couldn't do that any longer. The man who wishes to promote his business by selecting individuals in areas couldn't do that any longer unless those people were willing to take on that obligation knowing that they would have absolutely no protection from either the sellers' own competition or the competition of others to whom he sells. The whole structure of American business is not, has not developed along those lines. It is traditional that a person who is selling his goods is a man who is seeking not to kill himself by his own competition with himself but is seeking to compete with others. And consider what is presented to White? If this system goes down what is White's alternative? It is not his primary responsibility proposition which has been suggested by the Solicitor General because to begin with that was not permitted by the order below. White might, if it could raise the money, go into this business itself. It could establish branch offices everywhere, as some of the bigger companies are tending to do. If their port could sell entirely through its own branch offices and we certainly are in the day where one would say that White had to say that its branch offices would compete interstate. So that all of white's energies could be devoted to inter-brand competition and what would be the result? The dealers, the small fellows, the little businessmen who are participating with White in this venture would be out of business. And I say a rule that does that not only as to White, but does that to every other type of distribution in this country over a whole host of products is not a sensible rule and that you should have before you, in approaching these problems, not only the White case tried with the evidence before you, but other cases tried with the evidence before you until your experience and your knowledge of these distribution practices was sufficient to enable you to know the effects of what you are doing. Because certainly this is not a case such as was handed down yesterday by this court where there is some exquisite statutory directive with which you are concerned with interpreting. We've got in the nature of a constitutional provision here. We have no requirement on the Court of this character and it would seem to me that the Court should not write it into the statute as they knew statutory provision without the economic experience and the case experience which is the proper way to decide it. Look what's happened in Colgate? There has been a gradual development of the Colgate doctrine on a case-by-case method. Why should there not be a gradual development here in the time honored rule of reason method to determine to what extent distribution practices of this kind should be encouraged and to what extent distribution practices of this kind should be discouraged. It is suggested, using Mr. Justice Black's opinion, that there can be no redeeming purpose in arrangements of this kind. I say there is a redeeming purpose. It is the purpose to continue in business and to compete effectively. And the suggestion that there is any other dominant or purpose here is certainly not established by this record. It couldn't be on a summary of judgment record. So I ask Your Honors to send this case back and give us a chance to try the case.

Earl Warren: -- the Hertz Corporation, Petitioner, versus United States. Mr. Bernhard, you may continue your argument. Edgar Bernhard: Mr. Chief Justice and may it please the Court. The issues in this Hertz case are similar to those in Evans. This case arises under the 1954 Code and involves the double declining balance method of depreciation, permitted under this Code, but before we get into that method and how it operates, I'd like to pick up counsel's answers to questions put late yesterday by Mr. Justice Harlan and Mr. Justice Douglas. I know that the counsel for the Government, when asked whether the elimination of capital gains, was the real issue here, answered that it was not. But he's apparently unaware that the Government has, on three different occasions, admitted that the elimination of capital gains was its objective. First of those, that I do want to call the Court's attention to, appears in the Government's brief in Evans. The Government stated at page 11 of that brief, the question, in this case, bears upon the proper computation or determination of capital gain. In the Government's opening brief in the Third Circuit below, in the -- in this Hertz case, the Government said at page 40 of that brief, “The simple fact is that the profit is taxable at capital gains rates and taxpayer, under its view, receives the benefit of a deduction at a 52% rate and pays tax on the profit resulting from the increased deduction at a 25% rate." This result can be avoided by defining useful life for purposes of depreciation as meaning, the period during which an asset is useful to the taxpayer together with a reasonable computation of salvage value. This has been done by Section 1.167 (a)-1 (b) of the regulations referring to the 1956 regulations under the 1954 Code. Potter Stewart: Mr. Bernhard, what were you reading from this time? Edgar Bernhard: I was reading from the Third Circuit brief by the -- filed by the Government below in this case. Potter Stewart: All right, thank you. Edgar Bernhard: Third, the Government admits the same point in its brief in this Court. At page 49, it lays stress on the point that the deductions are taken at a 52% rate, whereas, the capital gain rate established by the Congress is 25%. And fourth, the Undersecretary of the Treasury, this month, appeared before the House Ways and Means Committee, in behalf of new legislation in this area. He was asking, he said, for legislation which would “eliminate the opportunity which now exists of converting ordinary gain into capital -- ordinary income into capital gain”. He told about the workings of depreciation, particularly under the double declining balance method and the fact that, as he said, under present law, taxpayers were entitled to take capital gains on the sale of depreciable assets. And on that basis, he asked for statutory change to eliminate capital gains on the sale of depreciable property at least, to the amount of the depreciation taken. Just prior to that and the letter which was -- and the -- the incident which was responsible for the calling of those hearings at which the Undersecretary appeared and said what I've just accounted, was a letter dated February 12, 1960, which appears in our brief in this Court at page 53 in the appendix, Appendix A -- our reply brief, I'm sorry, our reply brief in this case. And at the foot of -- of page 53 of -- of the brief, towards the end of the letter, the Secretary of the Treasury, who has, in this letter, asked for special legislation says “The proposed statutory change which would require the gains from sale of depreciable personal property be treated as ordinary income to the extent of depreciation previously claimed, would make it possible for agents of the Internal Revenue Service to accept more readily, taxpayer judgments and taxpayer practices with respect to depreciation rates on salvage value.” In other words, the Secretary of the Treasury is really saying to the Congress, “If you will just give us this legislation to cut off capital gains, we can be much more lenient about our definition of useful life.” What he really means is that he would then be willing, if capital gains can be eliminated by new legislation, to go back to the 40-year practice and the 40-year definition of useful life, not broken until the 1956 regulations were issued. Now, in view of all that, counsel's answer to that question and I want to take up another answer for just a moment, counsel's answer yesterday is simply not understandable, in view of these forthright statements from the Government that its real purpose is to eliminate capital gains by redefining these basic, long standing concepts of useful life and salvage value. Now, the Government also stated to this Court, yesterday, that its practice in the past, in response to a question, its practice in the past was consistent with its position here in these cases, the Evans and Hertz cases. Now, as opposed to all our citations in our briefs to show that this is not the case, the Government's briefs, first of all, answered actually with only one case, the Ludey case, with one sentence from that case which actually is dictum, because the Ludey case, as Your Honors are probably aware, does not deal with useful life, how useful life is to arrived at, the measure of depreciation and the sentence quoted which -- which the -- is the only part of the case that can be quoted at all, that seems at least to have some connection here, is pure dictum as we pointed out in our briefs. And yesterday, in response to a question, counsel for the Government when pressed to name a -- a single case, as we have been asking for the Government to do, a single case prior to the promulgation of the 1956 regulations under the 1954 Code. Not in which, it established the -- its new definition of useful life, but in which it contended for and -- in which it contended for any other definition except the one we are espousing in the Evans and Hertz cases. Counsel finally answered with a single case, the Cohn case, 259 F.2d 371, but the difficulty is that this is in the same category with Evans and Hertz. It was decided in 1958. It's subsequent to the 1956 regulations, it does not meet the --the real question here, whether the Government is now changing position entirely or is simply following up with its past practice. Now, I -- I wonder what the Government has to say today about its rulings, its repeated interpretations of useful life in case after case, and in its own Bulletin “F”, which came up yesterday and which I should like to bring up again in a moment. But as to the cases, in Merkle Broom Company and I can -- I can do each of these in just a second or two. In Merkle Broom Company, a 1926 case before the Board of Tax Appeals, the taxpayers' holding period was two years. The Government claimed a five-year useful life, the whole physical life of the asset. The Board of Tax Appeals held four years and the Commissioner officially acquiesced. In Max Kurtz a year later, 1927, a Board of Tax Appeal case. The holding period, two to three years. The Government claimed a five-year useful life. The Board of Tax Appeals held a five-year useful life. And, of course, the Commissioner officially acquiesced, the whole physical life despite a shorter period of -- a shorter holding period known. In Sanford Cotton Mills, 1929 case, holding period, two and a half years, Government claimed five-year useful life. Board of Tax Appeals held four-year useful life and the Commissioner officially acquiesced, to move along to present day or almost present day, 1956, although there other cases and our -- our briefs present them, in 1956, Pilot Freight Carriers, 15 CCH T.C.Mem.1027, holding period, 32 to 36 months. The Government claimed five years and six years useful life, two kinds of assets, tractors and another kind of vehicle. The other cases were automobile cases. The Government claimed, holding period 32 to 36 months. Government claimed five years and six years useful life. The Tax Court held four years and five years useful life. Bulletin “F”. William O. Douglas: What -- what case is that? I don't find it in the briefs. Edgar Bernhard: Pilot Freight Carriers, Your Honor. We -- we cited in -- William O. Douglas: I'll find it. Yes, I -- I found it now. Edgar Bernhard: It's at pages 29 and 62 in our brief. Potter Stewart: Mr. Bernhard, I'm -- I'm right in thinking am I not, that it is a practical matter in the -- in the ordinary case, it would be to the Government's physical interest to have as long a useful life as possible? Edgar Bernhard: That's right, Your Honor. Without -- Potter Stewart: The -- Edgar Bernhard: -- without the new 1954 accelerated depreciation -- Potter Stewart: It would -- generally speaking, (Inaudible) the Government's interest to have each year's depreciation deduction as small as possible. Edgar Bernhard: Exactly. Potter Stewart: And that the reason these cases are kind of offbeat, is because of this very high salvage value and the problem is further accentuated by the new deduction method allowed by the 1954 Code, is that it? Edgar Bernhard: Well, the -- the reason for the salvage value, if Your Honor please, only appears after the 1954 Code allowing accelerated depreciations, so more depreciation could be taken. And the adjusted basis therefore, reduced. And then, if salvage value is to be interpreted as the Government interprets it, which we don't for a moment agree with, then you get the difference, a wider difference, it's true. Potter Stewart: That I -- Edgar Bernhard: That also -- I'm sorry. Potter Stewart: Well that I understand that there's a controversy as to what a salvage value means. The actual resale that you get under your -- under the experience of your business, but that -- it's the introduction of that very high resale experience that -- Edgar Bernhard: That causes the (Voice Overlap) -- Potter Stewart: -- creates -- creates this issue, isn't that (Voice Overlap) -- Edgar Bernhard: Well, no, Your Honor. I -- I wouldn't say that.The -- the reason for this controversy is this, that in 1954, the -- the Government, in granting our 1954 Code in granted, accelerated depreciation including double declining balance method, restricted it to assets with a three-year useful life. It didn't define useful life in the statute, but, of course, you'd pick up the definition that had been standing for all these years. Now, the Government now becomes interested in changing its definition of useful life to holding period, so as to keep down as many assets as possible into the category of assets with less than a three-year useful life, in order that the taxpayer, owner of those assets, will not be able to claim double declining balance. Potter Stewart: That's the new problem in this case that was not present in the Evans case. Edgar Bernhard: That's right, Your Honor. And it forsook, we say, its unbroken attitude about useful life and redefined useful life to holding period in order to get down below the three-year limitation and it's interesting, if the Court please, that in cases where the Government cannot contend for less than a three-year life, because under any definition of useful life, it's three -- it's a three-year life. It's been held for three years and its total useful life is three years, the Government again switches in -- in Schaumburg the -- the Government has switched back and once it is beyond the three-year life for an asset, it then proceeds to stretch it out and go back to its old concept of full physical life. Why? Because it can then, by that method, again reduce the percentage -- the percentage rate of depreciation to be applied to those assets. If it can stay under the three-year limit -- Speaker: What case it that? Edgar Bernhard: It's Schaumburg. Your Honor please, Herbert Schaumburg, 33 Tax Court, Number 28, a 1959 case and it's dealt with at page 43 of our opening brief in this case. Now, I'd -- I'd like to refer to Bulletin “F”, which came up yesterday and was dealt with just in passing. Bulletin “F”, as a matter of fact, if the Court please, was issued first in 1920, it was revived in 1931. It was last revised in 1942 and has been distributed to taxpayers in all these years from 1920 to at least 1959, I assume 1960 also. Hugo L. Black: Is it printed in the record? Edgar Bernhard: It is in the Hertz record, Your Honor. And I have Bulletin “F” here and it consists -- Hugo L. Black: You don't know the page -- you don't know the page number? Edgar Bernhard: It's apparently -- it's not printed in the record, I'm -- I'm told, Your Honor. But it -- it was offered in evidence in the Hertz case. In fact, it was offered in evidence by the taxpayer and then -- and another copy of it, in evidence by the Government. It was offered by both to make sure that we have the current Bulletin “F” revision and -- and we did. I'm sorry, I can't give, Your Honor, the -- Hugo L. Black: Is it any part of it printed in your brief? Edgar Bernhard: Portions are, Your Honor and quotations from it and the -- unless I give me a page of that brief. And is referred to, if the Court please, at -- beginning at page 32 in our opening brief here, 33, 34 35 and 36, so that it has dealt with at some length, and with some quotations from it. And -- Earl Warren: Are those the quotations that you're going to quote to us now? Edgar Bernhard: Well, it's beyond what I'm going to quote now, Your Honor, now too, yes. It -- so far as automobiles are concerned, first of all, the Bulletin “F” provides -- and Bulletin “F” is, first of all, 67 pages long, pamphlet -- 67 pages long of which 66 pages are lists of depreciable assets, showing the useful life of each asset. Now, is the Government really contending that those 66 pages don't represent total, physical, functional lives but represent the length of time that the asset will be held for the taxpayer before he sells it? If -- if Bulletin “F” represents holding periods, it could've been produced in a -- a half of page because the Government had simply have said in its Bulletin “F”, “If you have depreciable assets, your holding period is the useful life.” Speaker: Now, are you -- Edgar Bernhard: Certainly be no need to -- Hugo L. Black: So it's your contention, I'm -- I'm just asking because I don't know. The Bulletin “F” sets out an inflexible decision of the Government? Edgar Bernhard: No, Your Honor. Hugo L. Black: One that you can follow and depend on? Edgar Bernhard: No, Your Honor, not inflexible. But it is described by the Government as a guide to taxpayers. There's a realization that there maybe heavy usage as in taxicabs which are on the street for 16 hours for instance or more, or in two shifts of -- of more than 8 hours each. It is also, of course -- Felix Frankfurter: Those are specifically dealt with in -- in “F”? Edgar Bernhard: Yes, Your Honor. Felix Frankfurter: Denying that this which is you've just gave. Are they (Voice overlap) -- Edgar Bernhard: Oh, for taxicabs? Felix Frankfurter: Yes, or -- or other instances of heavy use -- excessive use of -- Edgar Bernhard: Oh, yes, Your Honor. Felix Frankfurter: (Voice Overlap) -- Edgar Bernhard: I guess since other motor vehicles. Automobiles, passenger, five years, salesman, three years and in our case, we rent cars to salesmen, we rent -- we rent cars to other persons, passengers, we took the -- it seems that our four-year life fits perfectly with Bulletin “F”, but in addition to that, we had offered testimony. Testimony in the record, uncontroverted that a four-year useful life is the accepted useful life among accountants, among taxpayers, among business concerns, among renting and leasing companies and has consistently been that. Evans took a four-year useful life since 1936 and in W.N. Foster, 2 T.C.M. 595 in 1943, when the Commissioner was trying to show what useful life was, he said in Bureau Bulletin “F”, “The average useful life of a passenger automobile used in -- of -- in business other than by a salesman is five years”. Petitioners have not proved that the automobile was devoted to such extraordinary uses, Mr. Justice Black, if you please, that -- that the petitioner -- petitioners, the taxpayers have not proved that the automobile was devoted to such extraordinary uses as to justify a higher rate of depreciation than that determined by respondent. That is by the Commissioner, so that what the Commissioner is really saying is, “Here is you guide, if you, the taxpayer, want to bring yourself outside the guide for any reason, put testimony onto show that you don't come within it either because of -- of less peruse or because of extraordinary uses.” And in our case as I -- as I said, we only got -- the only testimony was as to the four-year life uncontroverted and including -- Hugo L. Black: I -- I understood you to say four-year life, which accountants and taxpayers, has considered. Did you have any evidence to show that the four-year life was an actual -- actual life of your cars? I'm not talking about potential life or accountants' life, but the actual life. Edgar Bernhard: No, Your Honor. Except to this extent, we accepted the Government's Bulletin “F” as a guide. We have testimony to the effect that, business cars, business automobiles have a useful of four years and there was no testimony offered to bring it outside of the guide. There was no testimony offered to show that by reason of usage, that that was not before useful life of automobiles. And we also testified to the fact that we had a reasonable maintenance program, a repair program and that our automobiles therefore, had at least, reasonable if not more than reasonable care and as I say, that was uncontroverted by the Government. Charles E. Whittaker: Mr. Bernhard, do I correctly understand however, that your dispute here is over a principle and not over detailed facts. As I understand, and you correct me if I'm wrong because I want to understand, you contend that the depreciation is to be taken over the useful life of the asset as an asset and you argue that the Government contends that the depreciation should be taken only over the holding period by the particular taxpayer is that it? Edgar Bernhard: That's right, Your Honor. And I -- we went a step far -- Hugo L. Black: Am I correct in assuming from that, that your argument is that you're entitled to a greater depreciation and actually a term and that the Government contends that it -- you're only entitled to the depreciation which actually does occur from wear and tear. Edgar Bernhard: Well, Mr. Justice Black, if you are saying amount of depreciation, then that it is not the issue, but if you are saying what rate of depreciation (Voice Overlap) -- Hugo L. Black: Well, out here, I'm here I'm talking about (Inaudible). That in your instance -- that in your instance, it results and you're getting greater than actually appears? Edgar Bernhard: No, Your Honor, because in a four-year asset, if it is held two years, an asset with a useful life of four years should be depreciated at 25% per year -- Charles E. Whittaker: Without regard -- Edgar Bernhard: -- and depreciate it -- Hugo L. Black: -- without regard to whether at the end of that four years, it would be worth 90% of its whole value or worth just 10%? Edgar Bernhard: At the end of that four years? Hugo L. Black: Yes. Edgar Bernhard: Yes, Your Honor. If you're talking about this specific car, that's true, because the -- the uncontested principle as Mr. Justice Whittaker has indicated, the -- the principle is that the whole useful life be taken into consideration and in automobiles, we have already the four-year standard, permitting therefore, a 25% reduction by depreciation in the cost. Felix Frankfurter: In fact -- in fact, the car doesn't appreciate equally each of the four years does it? Edgar Bernhard: That's correct, Your Honor. Felix Frankfurter: In other words, you've taken average of what the Government calls an abstraction, namely, an automobile which is -- which is in the hands of the -- have an asset for four years is averaged out to be 25 years, but that isn't what happens, in fact, in nature does it? Edgar Bernhard: That's right, Your Honor, because that's in the alternative would be to investigate every part actually. I mean an impossible test. Felix Frankfurter: Well, you could get -- get the point of de minimis, but I certainly suppose there's more depreciation in the third year than the first year. Edgar Bernhard: That's right, Your Honor. And if it -- Hugo L. Black: And the result -- the result is that it's charged off as a whole within four years time even though it might actually be useful to somebody 15 years. Edgar Bernhard: Well, that's right, Your Honor. And it could happen. Hugo L. Black: And it's charged off -- it's charged off, so that at the end of four years, you start from nothing as its value, although it might be worth a $1000. Edgar Bernhard: Yes, Your Honor. That's true. Hugo L. Black: And you say that the Government is committed to that by reason of its practices and the regulation. Edgar Bernhard: And pronouncements over all this period and I say, of course, that if the Government were contesting that in any case, it could put testimony on the stand. It could offer testimony to show that with this particular taxpayer, his -- the useful life of these automobiles are to be six years or are to be three years, instead of four by reason of his maintenance program, by reason of usage for a shorter time per day or by reason of excessive use. May I (Voice Overlap) -- Hugo L. Black: You say that the Government could do that, could offer proof to show that. But it hasn't -- is that what I understand? Edgar Bernhard: That's right, Your Honor. It has not. It offered no such no testimony. William J. Brennan, Jr.: Mr. Bernhard, many things about this case is about which I need enlightenment, but I haven't heard you say anything yet about double declining balance method. Edgar Bernhard: That's correct, Your Honor. And I -- I am very anxious to -- to hold time for rebuttal, if I may. And -- William J. Brennan, Jr.: Well, that's in the -- Edgar Bernhard: -- I -- I take it with counsel will -- will describe double declining balance. If he does, I'll be happy -- William J. Brennan, Jr.: Someone will. Edgar Bernhard: What's that? William J. Brennan, Jr.: I hope someone's going to. Edgar Bernhard: Well, I -- I'm sure they -- they will and if that's satisfactory to you Mr. Justice Brennan, I would like withhold my time if (Voice Overlap) -- William J. Brennan, Jr.: It's your (Voice Overlap) -- Edgar Bernhard: Thank you very much. Earl Warren: Mr. Heffron. Howard A. Heffron: Mr. Chief Justice, may it please the Court. I'd like to first advert to the touchstone in this area and that is cost. The whole purpose of the -- of the depreciation deduction is to ascertain what the cost of the use of the physical asset has been to the taxpayer during the year, because by using that asset, he has produced income. The taxes imposed are net income and so, we must deduct his cost from his income. We are not dealing here with wear and tear in the air or in the abstract. We are dealing with the financial figure to be ascribed to wear and tear for the purposes of computing the taxpayer's net income. Felix Frankfurter: But for auditing that we do know for other reasons, for simplicity reasons, Congress might do what it did in (Inaudible) Oil. Maybe all wrong, but I've always assumed that I've read so much -- but that does -- that's an abstraction. Sort of a hypothetical, whatever it is. As no -- may have no relation to actuality. So Congress, for its physical reasons, or for administrative convenience, or for some other reasons, may do this -- what you call unreal or abstract thing. Howard A. Heffron: Well, Congress might have -- Felix Frankfurter: (Voice Overlap) is abstracting. You got to argue it with reference to treasury practice, treasury regulations, which make you or not to be unreal as this appears to be. Howard A. Heffron: Well, I intend to get to the regulations and the practice. The basis for my statement that cost is the touchstone here is the statute which this -- which states that depreciation shall be based upon cost. Cost is the basis of the asset which is used as the measure of the depreciation. Felix Frankfurter: But you've just stated an absolute -- you yourself -- and thus stated an abstraction. We're still going to contradict the argument, if that's the basis on which -- Howard A. Heffron: No, no -- Felix Frankfurter: -- the depreciation has been -- by which the depreciation has been governed. Howard A. Heffron: We would conceive that if Congress said give depreciation without recourse to cost, without any relevance to cost as it is done in the field of percentage depletion, that then, of course, cost would be an irrelevant factor, but Congress hasn't done that. Felix Frankfurter: So -- Hugo L. Black: But what is the -- Felix Frankfurter: -- and how did you say it's unrelated and said, you take the course and later spread it on the four years although as a matter of business practice you only hold it for two years. Howard A. Heffron: Well I -- I was going -- Felix Frankfurter: You are not in crossed out the adjustments. The -- the question is the -- the baseline on which you allow the depreciation when in fact there never -- Howard A. Heffron: Well -- Felix Frankfurter: --is a four-year period. Howard A. Heffron: I think that's right, but we're talking -- if we're talking simply in terms of a rate and we're talking about a rate which when applied aggregates cost, what point is it to base that rate upon factors which are wholly unrelated to the period the taxpayer will use the asset or what he receives when he finishes with the asset. Why would a rate be meaningful? We would suggest if that rate is predicated on a period of years, the asset is used in the taxpayer's business, if among the factors to be ascertained in determining the rate is the mode of operation of the taxpayer, how hard he uses the machine, the climate. Why would we base the period of time which is in terms, the measure of the rate on all this factors which are personal to the taxpayer's operating situation, if we're not concerned that that period of time be -- produce such a rate that when aggregated, cost will be recovered. I mean that is -- that is essentially our point here. It doesn't make any difference to say that the asset will be used 10 years by someone and therefore, the rate should be 10%, if, in fact, you know the taxpayer will only use the asset five years -- Felix Frankfurter: But that -- Howard A. Heffron: -- because then the aggregate 10% only equals 50% and we're looking for a rate which when aggregated equals a 100% of the taxpayer's cost. Felix Frankfurter: Is there any reference in the regulation to that fact, Mr. Bernhard stated from the regulation, variations as to the kind of -- the kind of vehicles, three years, four years, five years? Is there any reference in the regulation to the holding periods or is that -- does that all have to be spelled out from your conception of the relation of these factors to cost? Howard A. Heffron: The regulation states in terms that the proper allowance for depreciation is an amount which when aggregated over the useful life of the property in the business, equals cost. Felix Frankfurter: Well then, that it brings on what useful life means, whether useful life as a thing or useful life as an asset for the particular holder? Howard A. Heffron: Now, we say useful life there means just what the regulation says, useful life of the property in the business, because if it meant anything else, you would not be recovering cost and the purpose of the deduction is to enable the taxpayer to recover cost, if the rate is based on factors which have no bearing and no relationship to the taxpayer's business, there is no guaranty, there is no probability. There is no likelihood that the imposition of the rate when aggregated during the term the taxpayer holds the property will result in 100%. As where the taxpayer determines, 10% to be the rate, because this abstract model is 10 years, but he using it five years. You add five-10% equals 50%. And we say when you know the taxpayer will only hold it five years, you cannot use a 10% rate. You have to use a -- such a rate which will give back cost to the taxpayer. Speaker: But there is a dispute between you as to what the significance of -- in the business is. They say as I understand it that that simply is a description of the character of assets and they're subject to 117 jail, whatever it is, treatment and you say it means holding period as descriptive of useful life. Your arguments, it seems to me, completely bypass each other. There are arguments from the standpoint of administrative practice and what they argue is the law, your argument from what you conceive to be sound economic theory and you haven't met each other on either premise. Howard A. Heffron: Well, I think we're going to meet directly in the next few minutes. Speaker: Good. Howard A. Heffron: I have also had trouble in understanding what the taxpayer's conception of useful life is here. As a matter of fact, I've just called at random, a few of the different terms he uses to describe it and he calls it whole life, overall life, business life, economic life, inherent functional life, normal useful life, inherent physical life, physical life and economic physical life. Now, those terms can be, I suppose, made to bear any meaning the taxpayer cares to place upon them. The one concession we have extracted from the taxpayer here, which I think is decisive, is that we're dealing with economic life. Now, economic life presumes that there will be factors taken into account other than the engineering factor of physical deterioration of the property. There will be factors other than physical deterioration, economic factors. One of those economic factors we call obsolescence. Other factors, we call inadequacy for use in the taxpayer's business, supersession by invention or technological changes, changes in consumer demands. These are -- there are a host of economic factors and it is those economic factors to which I should like to make reference now, because it has been quite clear from the outset that economic factors other than wear and tear, economic factors peculiar to the taxpayer's business are factors which must be taken into account. Now, in particular -- Potter Stewart: May I speak, before you go on. The -- in the regulations to which you referred in answering Justice Frankfurter's question, were you referring to the 1956 regulations, Mr. Heffron? Howard A. Heffron: No. I'm referring to regulations which date back from the earliest times. Potter Stewart: Because the 1956 regulations, of course, made some changes in the -- and were more specific at least, were they not? You -- I -- I understand your position to be that they simply clarify and reinstated the -- the long time consistent position of the Government, but at least, they -- they were verbally changed, were they not? Howard A. Heffron: In 1954, they were changed, yes. Potter Stewart: And that is why -- and may not be based on the 1954 statute -- 1954 Code? Howard A. Heffron: Yes. Potter Stewart: The regulation is based on the 1954 Code, made verbal changes do they not? Howard A. Heffron: Yes. Potter Stewart: More specifically -- Howard A. Heffron: Well I've -- well, they're more specifically, the 1954 regulations are clearly and directly in support of the position we're advocating here, but I was not going to refer to the 1954 regulations, because I don't think we have to rely on a bootstrap argument. Potter Stewart: That's -- that's why I was trying to get at. You were not referring to those regulations in answering Mr. Justice Frankfurter's question? Howard A. Heffron: No, I was not. Felix Frankfurter: You'll -- Howard A. Heffron: And -- Felix Frankfurter: -- return to “F” will you, Bulleting “F”? Howard A. Heffron: No. I -- I've been accountable at that, but right now my thesis is that he -- Felix Frankfurter: I need your thesis, but there was answer to my questions. I was referring to this -- the provisions in Bulletin “F”, which Mr. Bernhard read, differentiated three, four and five. Howard A. Heffron: Yes, sir. I have not -- I was not referring to that particular segment of Bulletin “F”, but I will make reference -- Felix Frankfurter: To put another regulation, what other regulation? Howard A. Heffron: Well, our regulations which have -- which have been with us since the Revenue Act of 1918. Felix Frankfurter: Yes, but which one -- which one's significant to our problem? Howard A. Heffron: Well, I think all of the -- all of the regulations from the time that the depreciation deduction was put in other statute are significant. And I think that all of them show that from the outset, economic factors other than physical deterioration were all considered as relevant in determining useful life and they are economic factors which are dependent upon an analysis of the taxpayer's business alone. Now, the regulations, for example, from the start have said, with respect to depreciation in the case of tangible property, it applies to that which is subject to wear and tear from natural causes and to obsolescence due to the normal progress of the art or the becoming inadequate to the growing needs of the business. Now, there is an indication that there are economic factors which must be taken into account. Now, that has always been in the regulations and the Commissioner has always taken the position that economic factors are to be taken into account. I'd like to advert to Bulletin “F”, if I may for a minute. And Bulletin “F” says, with respect to depreciation, “Past experience furnishes a reliable guide for the determination of the useful life of the property. Such a determination should reflect all the peculiar circumstances of the use or operation of the property such as the purpose for which it is utilized. The conditions under which it used or operated, the policy as to repairs with new rules and improvements in the climatic and other local conditions.” Now, on the salvage value, Bulletin “F” has said, “Salvage value is the amount realizable from the sale or other disposition of the items recovered when property has become no longer useful in the taxpayer's business.” Now, all of these factors are geared. They are keys to an analysis of economic factors which bear upon the way the taxpayer operates his business. Hugo L. Black: Are those the old regulations? Howard A. Heffron: Those regulations have been in effect and substantially that form since 1918. The whole concept of obsolescence has been one which has been adopted by this Court in situations which while precisely the same facts were not presented, this was by analogy, the principle was directly applicable in the case decided by this Court in 1932, U.S. Cartridge Company against the United States. The taxpayer had built an ammunition plant in 1914 on property which he leased. The lease ran until 1924 at which time he would have to leave the premises and leave the building there, of course. He had never been in a business of making military ammunition and did this as part of the war effort. When the war terminated in 1918, he had no more orders and he sought to take a large deduction for obsolescence of his plant in that year. There is no question that this plant physically, which had been built new in 1914, as an abstract proposition had many, many years to run both beyond the end of the war and beyond the termination of the lease. The Commissioner contended not as he would have contended had taxpayer's theory been correct. He did not contend that depreciation or -- was to be allowed over the period of the abstract model life of a factory, let us say 50 years or 40 years. He contended that the cost of the plant should be taken over the unremaining period of the lease. That is until 1924. Now, why did he choose 1924 as the terminus? Because that was the period when the taxpayer's holding period ended and he -- he also contended that the taxpayer should not take obsolescence in 1918 because it's a factual matter. It has not been demonstrated that he could no longer use the plant for any commercial, whatever. But the principle was the -- the principle which the Commissioner supported was the principle that the holding period of the taxpayer is one of the essential factors in determining the useful life of property to him. Now, this Bulletin “F”, for example, in another analogous situation, provides with respect to bridges that the useful life of a bridge shall be so many years unless otherwise limited by a franchise. Now again, the purpose of limiting it to a franchise is because this limits the taxpayer's holding period of the property and to base a rate of depreciation upon a period which went beyond the franchise, would not provide that the aggregate amounts during the period of the taxpayer's holding of the property that is, the franchise period, would equal the amount of the cost he had incurred. Now, these have always been in Bulletin “F”, the feature with respect to the lease that I mentioned is also in Bulletin “F” when it talks about furniture and fixtures in certain retail businesses, where it says that the normal average useful life shall be so much, unless otherwise limited by the term of the lease. Now, the purpose again of limiting it to the lease is because that limits the holding period of the taxpayer. And again, mathematically, you will not aggregate cost if you based the rate on a period which is not coextensive with the actual facts, with the period the taxpayer will be using the property. The regulations have always provided with respect to the depreciation of mining equipment. That mining equipment shall be depreciated for their abstract normal useful life, unless the mineral deposit will wear out, will be terminated, will no longer be useful in a shorter period. If that is so, in that event, the taxpayer will depreciate his mining equipment over the shorter period, over the economic life of the property. Now, in many of those cases, both the mining equipment is theoretically usable. An engineer could analyze it and say, “Well, it's got so many more years of abuse left.” And the reason we're not interested in that is because we are solely interested in returning to the taxpayer his cost. We are not interested in wear and tear in the abstract. And you can see that in the normal application of straight line depreciation. Even on the taxpayer's theory, he takes 25% in the first year. Well now, I'm sure that engineering studies would show that the actual rate of physical wear and tear is much less in the earlier years and increases vastly in the later years. We're interested in following the curve of physical depreciation. We would not use straight line depreciation and a fortiori, we would not use the double declining balance method which accentuates the deductions in the early years running directly contrary to the curve of physical depreciation. Potter Stewart: As a matter of fact, the double declining balance method does mark, that they reflect depreciation in terms of market value, so far as automobiles go, is that it? Isn't it true? I don't -- I'm really asking for information. I've always had the idea that this -- from the point of view not of physical depreciation, but of market value -- the depreciation -- that the big depreciation occurs in the first year. Second year -- Howard A. Heffron: Well, I think that would normally be so, for most of us who buy on the retail market -- Potter Stewart: -- speaking about (Voice Overlap) -- Howard A. Heffron: -- for a taxpayer here who gets the fleet discount when he buys his new car is, of course, that same pattern is not demonstrated. Felix Frankfurter: Mr. Heffron, I do not want to derail you, derail your argument from the course you want to run, but I'd like to put this view. For me, almost the decisive question in these cases is the claim that the Government is seeking to deviate from a fixed 40 years practice to the contrary of its present contention. Will you be good enough to leave yourself time now to deal with two questions that I'd like to put to you? In the first place, is this argument taking out of the air and if isn't, what is the basis for the argument? And secondly, what is its demonstrable falsity or false (Inaudible)? Howard A. Heffron: I -- I had hoped that I was demonstrating its demonstrable falsity in the last few minutes. Felix Frankfurter: But you're doing it argumentatively. You're doing it argumentatively. What I want to know is the establishment of what the Treasury has actually done. Howard A. Heffron: Well -- and I have referred to the regulations which refer to these economic factors to the -- Felix Frankfurter: Well, I know regulations of print. I want to know what the practice of tax levies in this field has been. Is that an unfair or an irrelevant question? Howard A. Heffron: Well, I -- I am -- I'm trying to refer the Court to the authoritative, administrative pronouncements. Now, Bulletin “F” to which we referred the Court is the bible -- Felix Frankfurter: Well, but you (Voice Overlap) -- Howard A. Heffron: -- on depreciation. Felix Frankfurter: -- but this has been argued. Felix Frankfurter: I hear arguments that -- that are respectively, if I may say so, intellectually on both sides and I can draw my inferences from there. What I want to know is as you stand there, what can you say has been actually done as to specific taxpayers in -- in this kind of a situation? Not what the Bulletin says as you interpret it one way, as he interprets it another. Howard A. Heffron: We have been advised that in accordance with Bulletin “F”, the practice has been to take into account all of the relevant economic factors concerning the taxpayer's business which affect useful life. And I have averted to these many analogous situations, bridges, property held under lease and mining equipment as examples of cases where the authoritative, administrative materials have demonstrated that you do not, you do not follow the abstract physical life where it is clear from the facts that the taxpayer's period of use of the property will be shorter. I believe that is so in the mining case. I believe that it so. Felix Frankfurter: May I -- may I interrupt you, if I may interrupt you. I am very -- my knowledge is zero on -- in this field, but am I wrong in thinking that the Hertz Enterprise isn't a thing that began yesterday? Howard A. Heffron: Yes. Felix Frankfurter: It's been rather an old concern -- Howard A. Heffron: Yes, sir. Felix Frankfurter: -- doing the same kind of business. Well, what actually have been the tax returns to which the Government either has yielded or hasn't yielded? Howard A. Heffron: I can only -- Felix Frankfurter: (Voice Overlap) find out -- find that out? Felix Frankfurter: Or the Massey Company, I don't know about them. The Hertz, everybody knows. Can't we know that? Howard A. Heffron: I can only -- Felix Frankfurter: The claim is made quite emphatically, isn't it? That you're -- the Government is now making a somersault, a legal somersault. Now, you ought to be able to refute that not by having us agree or disagree with you on your construction of a bulletin or a regulation, but what actually has been done physically year after year. Howard A. Heffron: I was attempting to demonstrate that the -- the practice has been -- Felix Frankfurter: By practice, you mean, the returns filed and accepted, is that it? Howard A. Heffron: By practice, I mean my own deduction from what the authoritative administrative materials prescribed, shall be done in these cases. Now, I don't believe the taxpayers resort to any situation where there has been any deviation and I'd like to say again -- Felix Frankfurter: That's the issue. That's what I call literature. But there must have been returns over these years -- Howard A. Heffron: Well, I'm -- I'm -- Felix Frankfurter: Precisely similar situations, haven't there been or have been? Howard A. Heffron: Well, as we know, the car leasing business is a business which has been a relatively new development. Felix Frankfurter: (Voice Overlap) -- Howard A. Heffron: We cannot refer to the Court. Felix Frankfurter: How is it -- how is it? Howard A. Heffron: Well, I think the testimony was that its major growth occurred probably in the last 10 years, since World War II, in any event. Felix Frankfurter: And we can't find out, can we? Unless you tell me, my question is irrelevant, (Inaudible) opaque or hasn't any sense to it. And I'll be prepared to accept your answer. Howard A. Heffron: Well, I wouldn't -- Felix Frankfurter: To further my dividends in this field. Howard A. Heffron: I would not -- Felix Frankfurter: If you don't tell me that, then there ought to be some way of telling us, what has actually been the tax, the -- the concrete tax conduct on the part of the taxpayer and the attitude towards such conduct by the Treasurer? Howard A. Heffron: Well, perhaps I can answer it by referring to specific cases which I've called from the B.T.A. reports and which are available. The books are full under the heading of obsolescence of cases where taxpayers and the Government argued over the issue of whether the peculiar economic facts which affected the taxpayers' business was such as to cut down the life. Felix Frankfurter: In calling of businesses, I don't want to know about bridges and I don't want to know about other things, because they maybe different, because I don't know. Howard A. Heffron: Well, like I'm unable to refer to the Court to a -- to car rental businesses. I can refer the Court for example, to the Corsicana Gas and Electric case, which was a B.T.A. decided in 1927. There, a power company had a plant which had not physically deteriorated and had many years of life left in it. Because there, the local town grew at a pace which exceeded the capacity of this plant, the taxpayer knew that it would have to build a new and larger plant. It was permitted to deduct the cost of the plant over the shorter period, not because the property had physically depreciated, not because the property in the abstract model sense had reached the end of its life, but because the unique facts affecting the taxpayer's business made it perfectly clear. He was not going to hold that property any longer. And therefore, the necessity arose, if he was to recover his cost to permit deductions over the shorter period. Now, that's a case affecting a power plant. That kind -- Speaker: Would that kind of a controversy concern what the proper physical useful life is, not the case you have here where you don't dispute the physical useful life, but claim that the period of useful life in terms of the use in the business of the taxpayers are not shown to them? Howard A. Heffron: No. Believe these were cases where there was also no controversy over the physical life of the property. The -- these were all cases where the question was granted the physical life of the property, are the economic facts surrounding the taxpayer's business such that we are justified in cutting down the life from that physical life because of these operating facts. Now, on the power plant case, it was because of facts which were utterly unrelated to the physical rate of deterioration of the property to the growth of the local community requiring the taxpayer to use this plant for a shorter period of time. Speaker: Could I put the question that was asked you, if I understand it correctly from Mr. -- by Mr. Justice Frankfurter, a little differently. Until these cases came along, had you previously -- had the Government previously claimed -- objected to Hertz reporting on a physical useful life basis? Howard A. Heffron: In this -- in the Hertz's case? Speaker: Yes. Howard A. Heffron: I'm unable to answer that question. I don't know. Speaker: Or on any of the -- any of the cases of these three taxpayers. Howard A. Heffron: I -- I don't know the answer to those questions. William J. Brennan, Jr.: Well, Mr. Heffron, along the same line and that was in 104 of the -- page 104 of the record has apparently -- or J. Frank Connor which was the predecessor of Hertz before the mergers. It must have done something about this on its tax returns ending March 31, 1948 to March 31, 1953. Each cases start from the tax years ending March 31, 1954, 1955 and 1956. Now, is the -- Connor follow the same practice in the earlier years they followed -- and the three years we have before us here? Howard A. Heffron: I -- I don't know. I would assume so. William J. Brennan, Jr.: And the Government never challenged it from 1948 to -- to 1954? Howard A. Heffron: I -- I don't know the answer to that question precisely, but I would say that even if that were so, that we -- we would not be bound by what a particular agent did in analyzing a particular return. The course of an audit may develop many problems in connection with a particular taxpayer's return, depreciation and a host of other issues. And the -- the taxpayer and the agent may swap issues, will you give me that issue and I'll -- I'll take an adjustment on this issue. Felix Frankfurter: How many says -- Howard A. Heffron: The mere -- Felix Frankfurter: -- how many car rent enterprises are there in the United States roughly, just two or three or 200? Howard A. Heffron: Well, of course, the -- the Hertz's Corporation has a great many, quite (Voice Overlap) -- Felix Frankfurter: -- and why does they make returns on -- they've got -- they've got subsidiaries all over the place? Howard A. Heffron: I believe they do. Felix Frankfurter: Well -- so, it isn't just an isolated instance and of course you're not bound, the Government isn't bound by this or that particular adjustment. But if over a course of years, returns are made on one day, which the Government hasn't made objections, then the Government from time to time, in other cases, urges administrative factors in the sense of what is done. And if the difficulty is the reason why you can't answer the question which Justice Harlan rephrased, because these are confidential returns, I suppose they're open to the Government, why aren't you in a position to say that it is not true, let's say for 10 years since this business has become current, it is not true that over the period of a decade, returns have been made on the basis urged by the -- by -- by the taxpayers here and the Government has acquiesced them in such returns, why can't you make such analysis? Howard A. Heffron: I can give this statement which is what we said in our petition for certiorari in Evans that there are 503 cases now pending before the Internal Revenue Service at various stages in which this issue is involved. Felix Frankfurter: In reference to (Inaudible) Howard A. Heffron: I believe so. Now, that's 503 cases which are now in suspense because this -- the Internal Revenue Service has raised this issue. Felix Frankfurter: But it doesn't -- it doesn't deal with the question of whether this is -- the issue is raised anew in deviation from their -- what theretofore, had been accepted for a long stretch of time or not, which seems to me, to be unless you tell me I put the wrong the question. And to me, it's important to put the right question. Would you tell me that's wrong to assume I can understand, but if you say it isn't a wrong question, it's a relevant question that the Government can't answer, then I have difficulty. Howard A. Heffron: Well, I can refer the Court to the -- to the brief of the American Automotive Leasing Association which was filed in a related case in the Fifth Circuit and which has been made available to counsel and to the Court. That association which represents approximately 65% of the long term leasing industry in motor vehicles in this country, represented to the Fifth Circuit that the Government's position on useful life was precisely what they had understood it to be all along. Now, that brief is on file with the Court. Hugo L. Black: May I ask you, has the other side presented in the evidence of a long practice under which the Government has lead people to believe that the method they wished to use of artificial depletion or depreciation has been carried on by the Government? Howard A. Heffron: I don't believe they have. They have offered in evidence, testimony of accountants as to what useful life means and these accountants have indicated that economic life is what useful life means without indicating which economic factors are critical and which are not. (Voice Overlap) -- Hugo L. Black: (Voice Overlap) One other question. I don't know. The Congress has in the case of oil depletion, allowed what many people considered to be deductions so far wear and tear or depreciation which not actually suffered just on the basis of arbitrary figures. Has Congress done that in any other emphasis that you know of? I'm asking for information. Howard A. Heffron: I -- I can't answer the -- I'm not aware of other cases where it has been unrelated to cost. Hugo L. Black: Has the -- has the department any regulation on the books that you know of where they have fixed artificial -- artificial -- the amount of depletion or depreciation sucked and allowed deductions on it. Inflexible rules, I don't know. I'm asking you. Howard A. Heffron: No. There are no inflexible rules.As a matter of fact, Bulletin “F” says on its first page as a caveat to taxpayers. The estimated useful lives and rates of depreciation indicated in this bulletin are based on averages and are not prescribed for use in any particular case. They are set forth solely as a guide or starting point from which correct rates maybe determined in the light of the experience of the property under consideration and all other pertinent factors. Hugo L. Black: Now, outside of the oil statute, do you know of any statute or -- I'm asking you this for information. I do not know. Any statute or regulation or practice under which Government has allowed depreciation and -- and a wear and tear which is not actually suffered so that people get depreciations and deductions in a greater amount than the amount actually sustained. Howard A. Heffron: I'm not aware of it and I should think a taxpayer would have to make a very great showing based upon their legislative history and the language of the Act to justify a situation where he is entitled to deduct on his income tax return as they saw it here. From the income, he realizes through use of an asset more than the cost of the use of that asset to him during the year. As a matter of fact here, the statute says very specifically that it shall be a reasonable allowance for depreciation and we would say that it is not a reasonable allowance for depreciation when you depart from the fundamental principle of returning to the taxpayer his cost. Charles E. Whittaker: Mr. Heffron, is it not essential here in this matter to bear in mind the distinction between depreciation and depletion in answering Mr. Justice Black's question? Or, he spoke about the 27% depletion of oil? You do have other depletion statutes with respect to stumpage, coal, other things, do you not? But they do not apply to depreciation and that's your answer? Howard A. Heffron: That is correct. No, the depreciation statutes make it very clear that cost is the ultimate goal of the deduction, the return of cost to the taxpayer in a reasonable way. Earl Warren: Mr. Bernhard. Felix Frankfurter: Would you be good enough before you get on the way to answer the question that Mr. Justice Black thus, questioned? The question that interest me so much, what is the basis for saying as you have been saying that this is a deviation of the clutch up from the federal practice, (a) state what the certain practice is. And (b), how can I find out, I, an innocent lamb trying to find out what is the truth about this business? Edgar Bernhard: Your Honor, the record show in the evidence in Hertz cases, that Evans filed its returns on the basis of the physical life, a four-year basis for automobiles, irrespective of holding periods since 1936 and that Hertz has been filing its returns since 1918 on the basis of four-year life, physical life, irrespective of holding periods. In -- in Evans, the year 1955, it says at record page 114, was specifically reviewed and approved except in a -- in a -- with respect to an item that has no pertinence here and so the -- Felix Frankfurter: Since 1936, up to -- Edgar Bernhard: I beg your pardon? Felix Frankfurter: Did you say since 1936 in Evans? Edgar Bernhard: Yes, Your Honor. And since 1918 in Hertz. Felix Frankfurter: Since 1918? Edgar Bernhard: Since 1918 in Hertz. These income tax returns year after year showed the four-year life for automobiles and if that was not the practice and the consistent practice over all those years, it seems to me that the Government would surely have put someone on the stand to answer, for example, what the -- one of the accountants said in the Hertz case, record page 46. He said he had under his supervision, an informal review of the practice of industry not solely that of a rent-a-car business, but general businesses in many lines. And just as rough example, we had accumulated companies, whose gross sales were about $5 billion and in those cases, the average life was four years and a preponderant use by these companies was four years. I -- have you referred to page 115 I thought in the Evans case, did you not? Edgar Bernhard: In the -- in the Evans, I think at record page -- Hugo L. Black: I thought you referred to that as the one that would show that they had been making these reports over a certain period of years. I must have gotten the page wrong. Edgar Bernhard: No. That was -- no, the page is -- the record page in Evans at 114. Hugo L. Black: 114. Edgar Bernhard: That indicates that the 1955 return was specifically reviewed and the -- a record page on Hertz's practice is 50, that it has filed these returns (Voice Overlap) -- Hugo L. Black: What page -- what page is that? What page -- Edgar Bernhard: Record page 50 in the Hertz. Oh, the business since 1958. I see. I'm sorry. That -- that Hertz has been in business since 1950 -- I mean since 1918, I'm sorry -- Hugo L. Black: What year? Edgar Bernhard: -- at record page 50. Hugo L. Black: But where is the evidence to which you referred they'd been making this same kind of return and has been accepted? Edgar Bernhard: Your Honor, I'm pretty sure that Mr. Jacobs testified that they've transferred. Tom C. Clark: In the finding of page 129 in Hertz, to that effect? Edgar Bernhard: I beg your pardon, Mr. Justice Clark? Tom C. Clark: Page 129 of Hertz, the Court's opinion, was that clear that the right dollar return amounts (Inaudible) long continued interpretation of his own regulations and he was on? Edgar Bernhard: Yes, Your Honor. Tom C. Clark: Was that there? Edgar Bernhard: That's correct, Your Honor. And -- and the long and continued interpretation of its regulations was to permit, in fact, to contend for the four useful life for depreciation purposes. William J. Brennan, Jr.: Mr. Bernhard, at page 111 of the Hertz statute, as part of Judge Leighton's opinion, there's a table preceded by the statement of Judge Leighton on its income's tax returns for its tax years and so forth, Connor claimed the following amounts computed as indicated that he has a table and that he -- has this some reference to the way they return themselves who have filled out in that year? Edgar Bernhard: Yes, Your Honor. William J. Brennan, Jr.: In other words, on each return that there appear in that column, four-year life using rates of and so forth? Edgar Bernhard: That's right. That was the method of computation which he used. William J. Brennan, Jr.: No, no. But my point is did the Hertz's return or the Connor return have a table which shows the -- that method of computation, namely, the expressed reference of the four-year life? Edgar Bernhard: Oh, no, Your Honor. This is a summary. This is a summary made up of those three returns, the three returns and the three -- for the three years in question here. William J. Brennan, Jr.: Well, then, if -- if that is not so, do you know whether the returns themselves indicated that the computation was based -- Edgar Bernhard: On four-year life? William J. Brennan, Jr.: -- so notified the -- Edgar Bernhard: Oh, yes, Your Honor. William J. Brennan, Jr.: -- review on a four-year life basis? Edgar Bernhard: Oh, yes, Your Honor. I -- I'm satisfied. I'm (Voice Overlap) -- Hugo L. Black: Where is -- where is that? Edgar Bernhard: Now, I -- I'd like to -- I'd like to find that record and perhaps I can have someone search for it because the consistent custom of the rent-a-car companies in these two cases -- William J. Brennan, Jr.: No, but -- if I may, and supplementing what Mr. Justice Black has asked you. Is there anything in the record, if this is what appeared on each annual return namely, expressed notice that you are using a four-year life basis? Is there anything in the record to show that this was done for tax years before 1954? Edgar Bernhard: I'm -- I am very sure that's true, Your Honor, because I -- I am satisfied that both these companies followed this practice for many, many years. William J. Brennan, Jr.: Well, whether they followed it or not, what I'm -- Edgar Bernhard: On the returns? William J. Brennan, Jr.: -- what I am interested in this -- Edgar Bernhard: Yes. William J. Brennan, Jr.: -- is whether it -- Edgar Bernhard: On the returns, Your Honor. William J. Brennan, Jr.: -- appeared affirmatively on the returns that the computation was based on four-year life. Edgar Bernhard: I am satisfied that's true, although I cannot give, Your Honor, the record page at this time and -- William J. Brennan, Jr.: Well, can you give it to us later? Edgar Bernhard: I would like -- William J. Brennan, Jr.: I'm just completely have to see in these cases. Edgar Bernhard: I would like very much to send the Court a memorandum, if I may, on -- on this (Voice Overlap) -- Hugo L. Black: Can you give us later, if you can find it? Edgar Bernhard: I beg your pardon? Hugo L. Black: Can you give us later if you can find it, references to the kind of interpretation which have been mentioned here, not using the word, “useful life”, but which showed that the Treasury has had the practice of allowing people whether what you call a useful life for four years, even more of that with wholly charge off something it left them who had paid probably of 50% value. Can you refer us to such interpretations you say there have been? Can you refer us to them, when you send them the other information? Edgar Bernhard: Sure, Your Honor. I -- I'll do that (Voice Overlap) -- Earl Warren: You may respond to it Mr. -- you may respond to it Mr. Heffron to (Voice Overlap) -- Felix Frankfurter: And as I understand the Government's argument -- as I understand the Government's argument, it isn't of the holding of less than four years, but that the practice of the business was not to hold it for four years, namely that the sales were usually made within whatever the period is, two years is it, Mr. Bernhard? Edgar Bernhard: It's -- it's something over two years, two years and three months -- Felix Frankfurter: So that whatever -- Edgar Bernhard: -- so as what the average contended for by the Government. Felix Frankfurter: Must be -- must be accepted practice of the business is at the outset, not longer than four years? Edgar Bernhard: Now, Your Honor, the testimony -- the clear testimony in Hertz and in Evans uncontroverted, is that there is no practice. There is no rule and that the -- the selling of automobiles, the time of selling the automobiles is dependent upon unpredictable factors. It is no part of wear and tear. It is dependent upon such factors as strikes and lockouts in automobile factories, in the companies which delivered the cars. What our competitors do, war or peace, weather conditions even, new demands, new compact cars for instance, shall they sell their cars and buy compact cars or will that compact car not be accepted. It's easy to hindsight, to use hindsight, but most difficult to say in 1948 what you ought to do in 1950. Now, whether you are going to sell your cars in 1950, 1949 or 1952 and what the conditions will be which will permit you to sell and buy new ones or whether they will not be available. Felix Frankfurter: Well then, why is there this -- why is there this uniformity to which I understood you to exceed a minute ago, if knowing the holdings are not for four years, but are for two years or a few months? Edgar Bernhard: Well, Mr. Justice Frankfurter, what I said was that in the years in review here, the years in issue here, it is true and we would not contest that we did not hold the cars for four years. Felix Frankfurter: Well -- Edgar Bernhard: But actually, the -- the figures in the record show a wide variation because of these unpredictables. May I just say -- Earl Warren: May I ask you one more -- one more question, during these years of practice that you have just told us about, so far as depreciation is concerned, did you also claim, as capital gains, the difference? Edgar Bernhard: Where we had a -- Earl Warren: Where you had a sale? Edgar Bernhard: Where we had a gain? Earl Warren: When you had a gain, you -- you -- Edgar Bernhard: (Voice Overlap) -- Earl Warren: -- have that's why you practice also? Edgar Bernhard: Yes, sir. May I just say -- Earl Warren: Well, you may have just one minute to -- we'd take from there. Edgar Bernhard: I -- I would like to say in just that one minute, if the Court please, that -- that I think we have clearly shown and I think the record in both cases clearly shows that until the Treasury's regulations of June 1956, there were no definitions of useful life and salvage value in the regulations and the consistent interpretation of the courts and the Commissioner himself was our way. I -- I want to add only this much with reference to Massey, the -- the case which the Court will hear next. I -- I just want to remind the Court again that we do not represent Massey. We are -- we consider it the form to in -- in certain respects, to our two cases, Evans and Hertz and it is not contained in the case. Potter Stewart: I gather (Voice Overlap) -- Earl Warren: All right. Potter Stewart: -- its very hard to find, to understand double declining balance, I will have to get it out of your sleeves. Edgar Bernhard: I would be happy to recite the double the declining balance arrangement now and I'm awfully sorry that we did not get to it. If -- if I could have lived to extend my time just a couple of minutes for that purpose, I would be glad -- in fact anxious -- Potter Stewart: Well, is that a crucial element in the Hertz case? Edgar Bernhard: No, Your Honor. Actually, I -- I do not believe it is necessary to understand double declining balance in order to arrive at the -- at the answer to that basic question here, which is, is physical life the full -- is useful life, the full physical life as interpreted consistently for 40 years or is the Government now espousing an old concept instead of a brand new one? Felix Frankfurter: Well, if it isn't relevant, then it will help me at least, not to be told what it is.[Laughter] Charles E. Whittaker: Mr. -- Edgar Bernhard: Thank you very much. Charles E. Whittaker: -- Bernhard -- Earl Warren: Very well. Charles E. Whittaker: Mr. Bernhard, might -- might I ask you, sir, why is it you -- that you feel you want to distinguish your cases from Massey? Edgar Bernhard: Yes, Your Honor. In the -- in the Massey case, the -- the record, I believe, shows that Massey was a dealer in cars, not through of Evans or Hertz, that he, from time to time, shifted cars, which he owned as a dealer, into car renting or leasing. And then shifted them back or sold them, let's say after a six-month period or shortly thereafter and there is no such indication in either Evans or Hertz, plus the fact that he consistently sold the cars. I think the Court will find consistently sold the cars for more than his cost and the -- the dealer question is very much in the -- in the Massey case as it is now. It's not at all in the -- in the Evans or Hertz case. Earl Warren: Very well. Edgar Bernhard: Thank you very much.

Earl Warren: Number 692 Pure Oil Company Petitioner, versus Pascual Suarez. Mr. Deutsch? Eberhard P. Deutsch: Mr. Chief Justice may it please the Court. This was an action instituted by a seaman who was a resident of the northern district of Florida against the petitioner here, the respondent below, Pure Oil Company instituted under the Jones Act in the southern district of Florida in which the petitioner, Pure Oil Company does business. It is however an Ohio Corporation with its principal office in the northern district of Illinois. At this point I should like briefly to trace a phase of the legislative history of the Jones Act which strangely has never been discussed in any of the decisions in this or any other cases involving anything in the nature of the issue here presented. It has been stated frequently that the purpose of the Jones Act was to expand the rights of seamen and I think that is true except in the point here at issue on which the legislative history demonstrates that it was expressly and clearly intended to restrict the venue of seaman’s actions under the Jones Act. That the statute in the course of its enactment was part of the Merchant Marine Act of 1920 and the Jones Act itself was the creature of Senator Wesley Jones of the State of Washington who proposed it to give seamen the right of action for negligent, the sort of common law right of action in federal and state courts to be governed, as it came out originally, by the provisions of a Federal Employers Liability Act. The house objected to that latter provision insofar as venue was concerned because the Federal Employers Liability Act provides for venue in any jurisdiction in which the respondent is doing business. After three or in the course of three-senate house conferences the position of the house of representatives was to accepted for the senate conferees and the statute was enacted to provide that only the Court of the residence or of the principal office of the respondent should have jurisdiction as it is called and now that has been held to mean venue. I repeat that that restrictive provision in the statute, the legislative history regarding that, has never been mentioned by any court so far as I know in this or in any of the other cases and there have been several, three at least, involving the precise point at issue here. It was discussed. It was put in the briefs. It was put in application for rehearing in the Court below in this case. It was argued. It was presented and the matter was not mentioned. Now until 1948 with the revision, general revision of the judicial code, the word residence was taken to mean with regard to corporate entities the state of incorporation. In the overall revision of the judicial code in that year which expounded the term it was given in effect meaning to apply to any jurisdiction to any district in which the respondent did business. William J. Brennan, Jr.: Well that you referred, it applied to [Inaudible] that would put it on the same basis as FELA's, is that right? Eberhard P. Deutsch: That's correct. William J. Brennan, Jr.: As you mentioned? Eberhard P. Deutsch: That's correct. That's why I mentioned – William J. Brennan, Jr.: The 1948 statute is more a general application, is that right? Eberhard P. Deutsch: The 1948 statute is the general judicial code 1391 (c) which does provide without question and unequivocally that the term residence for venue purposes shall be taken to include any district in which the respondent corporation is licensed to do or is doing business. William J. Brennan, Jr.: But your proposition is going to be not so as the Jones Act? Eberhard P. Deutsch: Right. That is my proposition. William J. Brennan, Jr.: Yes. Eberhard P. Deutsch: Now, this Court has had a case to consider that question with regard to a somewhat similar and somewhat different provision of the judicial code itself dealing with patent litigation which also provides a specific venue within which patent litigation may be instituted. As it stood prior to 1948, it provided for immediate purposes in any district of which the defendant is an inhabitant. William J. Brennan, Jr.: Is that code you're -- Eberhard P. Deutsch: Pardon? William J. Brennan, Jr.: What code you're -- Eberhard P. Deutsch: 1400 (b) William J. Brennan, Jr.: No, I mean the Fourco decision. Eberhard P. Deutsch: Fourco, Fourco Glass. Now in the overall revision of the judicial code they were inhabitant in the patent section which changed to residence that is the same statute which provided in 1391 (c) that the term residence for venue purposes should be taken as meaning let us say in an over simplification any district in which the corporation does business. So that by the same statute the word inhabitant in the patent section was changed to residence and the term residence and another part of that same statute was said to mean such and such for venue purposes. Now this Court nevertheless held in that Fourco case that the general statute did not change the special venue provision with regard to patent cases. The ratio decidendi of the court below, the Fifth Circuit in this case, is expressed in its postulate and I quote, that there is a shocking inconsistency in a rule of law which permits a corporation to maintain the regular establishment – a regular established place of business in the district, but allows the corporation to insist on a trial of the factual issues in the district in which it is incorporated or in which its principal office is located. The Fourth Circuit has reached the same conclusion as the Fifth in a recent case decided just two or three months ago. In United Fruit case they reversed the District Court and they held much to the same of fact that there would be that that principle for which I stand here at the time at this moment would be obviously unfair. Now, we submit that that is a matter for Congress to determine and not for this Court in light of the other factors involved. But I do say that (a) the legislative history of that provision of the Jones Act has never been mentioned, that it has a specific restrictive effect, that in calling this shockingly unfair these courts forget that for 30 years that was an unchallenged rule laid down by the Congress as a result of this legislative history, it couldn't have been so shockingly unfair and that in the Fourco case this Court held that no changes in the policy were to be presumed, then they quoted Professor Morris stating that the – as I read him and this Court apparently read it the same way that the venue provisions were not intended special venue provisions as I read it were not intended to be changed by the overall general provision of the judicial code. In the Third Circuit, the court has specifically followed the position which we have presented that is that the Fourco case compels a holding that the general venue provision of the 1948 code does not supersede the special venue provision of the Jones Act. And we simply submit, and may it please the Court that this is a matter for the Congress to determine with regards to the questions of say forum shopping or others because in modern times briefly this does not apply simply to two or three court jurisdictions in which matters of this sort can come up. The Pure Oil Company, the petitioner in this case so far as I know certainly for practical purposes could be sued in any state of the union and if the plaintiff in the Jones Act case saw fit under this broad construction he could go and cue them in Nebraska if he thought he could do better there than in Florida, New York or elsewhere. This is not – and that is true I would say if all of – let's say of all of the oil companies of the tanker companies and so on. And as Mr. Justice Fortas wrote in the Brumley and United Steel Workers case, the proper forum to which in our submission to submit a matter of this sort is the Congress and not this Court. Earl Warren: Mr. Roth? Arthur Roth: Mr. Chief Justice and members of the Court. This is basically a situation where the defendant does not want to be sued in the most convenient form and is now coming into this Court to take a seamen away from his residence which is in Florida place where he was born, place where he was employed, the place where he basically did his work as this – he worked on this vessel for four years. The vessel traveled – he would get on the vessel at either Tampa or Port Everglade which is slightly north of Miami. Whenever he would come back from vacations or leave of things of that type, and the vessel would fly between Houston and supply pure oil gasoline in Tampa or in Miami or Jacksonville and sometimes up to Savannah and then circuit back and this is – William J. Brennan, Jr.: I gather the fact is Mr. Roth that this at all happened before 1948 he could not have sued it in Florida, could he? Arthur Roth: Well he could have in state courts but – William J. Brennan, Jr.: No I mean he'd decide -- Arthur Roth: For a civil and jury trial in the federal courts I don't think -- William J. Brennan, Jr.: He would have to go either where Pure Oil was incorporated or where it has principal offices. Arthur Roth: That's right, that's what he would have gone before 1940 -- William J. Brennan, Jr.: Well suppose the issue really is not based on how hard it may be if upon him to do it but whether indeed the 1948 statute did allow him to bring an action further doesn't it? Is that the relation? Arthur Roth: Yes, the question is whether or not the Congress had intended to make a – to facilitate the bringing of suits by plaintiffs against large corporations. Hugo L. Black: Where would the suit have to be tried? Arthur Roth: Sir? Hugo L. Black: If the other side wins? Arthur Roth: In Chicago. Hugo L. Black: Chicago? Arthur Roth: Yes sir. Potter Stewart: He could bring it. No question that he could bring it to the state court of Florida, isn't it? Arthur Roth: There's no question about that but the problem in the state court is basically one of the discovery where we don't have the privilege of taking a subpoena and sending it out to a marshal in Texas or a marshal in Savannah where the man was treated for his injuries and having a subpoena issued and this is really the basic issue and the second basic issue is that the state judges have – do not have the same understanding concept of the Jones Act that seamen problems says to the federal judges -- Hugo L. Black: Does the forum non conveniens statute have any relevance in your mind to this issue? Arthur Roth: We were asked that below and I would put it this way Mr. Justice Black that the forum non conveniens statute would be, I think basically, available to a defendant rather than to a plaintiff because if we were to file a suit to say in Chicago and then come in and say to the judge in Chicago we want to go down to Tampa or Miami which is the real forum where this case should be trialed we would somewhat be I mean how can we ask the judge when he says you came here to stop well this was your election. And so -- Hugo L. Black: I assume he did sue in Miami in the federal courts that the defendant could have – if they could prove it and have it removed in Chicago under – be more convenient forum. Arthur Roth: Yes because this was the very purpose of 1404 where they point that at the FELA was the real reason that 1404 and that is Federal Employees Liability Act which is incorporated in the Jones Act that 1404 revise's purpose clause that it was the FELA that made 1404 the forum non conveniens statute a necessity because the railroad workers were bringing their cases in the most profitable forum and the railroads couldn't change the forum and the 1948 revision amended the venue of -- and in fact amended the venue, the general venue provisions and permitted the transfer to a more convenient forum where the witness would be – Hugo L. Black: When was the forum non conveniens statute passed? Arthur Roth: 1948. Hugo L. Black: 1948? Arthur Roth: Yes it is – Hugo L. Black: When did this take place, this statute? Arthur Roth: 1391 and 1948 they are both – Hugo L. Black: Both in 1948? Arthur Roth: Yes sir. Hugo L. Black: Were they a part of the same procedure? Arthur Roth: Yes of the same revision of the judicial code. Hugo L. Black: Same revision? Arthur Roth: Yes sir. They were both passed on June 25th, 1948 I believe was the effective date of the statute. The purpose of the statute or the revision as I understood the attorney general's report to the Congress at that time was that it was to reconcile the old laws. Now in the Jones Act it merely says residence and we can understand that in 1920 in the give and take when the ship owners didn't want more liberal provision for seamen when they didn't want seamen to have a better access to the courts that there had to be some give and take and I can understand this three conferences between the Senate and the House. But 1948 when this Court and the other courts have implemented and said that this is remedial legislation that should be liberally construed so as to afford a remedy to the seamen that at that time when the judicial code was enacted this was a remedial legislation to liberalize the access of the courts to plaintiffs. Now – Hugo L. Black: Have there been any cases that plaintiffs have filed in the jurisdiction 408 from the place where it happened and then plaintiff asked to have it moved to a place where it's more convenient? Arthur Roth: I couldn't find a single case on point. Now in the liberalization of the courts making it more accessible, readily available I believe is the term that the Congress or the revises of the judicial code used, that at that time I believe that I don't read that the Congress at that time meant to exclude seamen where as they might give the remedy to a – I'll put it this way. They certainly meant to give the remedy to the victim of an automobile accident if a Pure Oil truck as we say in our brief were to have an accident with an automobile in Miami there's no question Pure Oil could be sued in Miami under the statute. Now I don't think that the Congress and the Fifth Circuit below and the Fourth Circuit both agreed on this point that Congress intended that the seamen should have 1924 less rights than those victims. Now as I understand that gist of the – thrust of the petitioner's argument is that since the Congress didn't mention the Jones Act as intended to be revised and consequently there should be no revision of the Jones Act venue intended by Congress or given by Congress. Well Congress didn't mention any type of lawsuit in the revision of 1391, Section 1391. So to what does the revision apply? Certainly the statute was changed. Congress certainly changed the common law when it said, “From now on the venue shall be wherever that corporation was doing business,” which every district is doing business in. Certainly Congress didn't say that well we don't want to restrict it to the Jones Act we got to state the Jones Act well which that – which actions did Congress made, or was the whole revision just meaningless? I don't think the revision was meaningless. William J. Brennan, Jr.: But suppose it might have had some special reference to diversity cases? Arthur Roth: No sir, I look through the revision and I couldn't find in the notes or the revises and there is no reference to anything specific. William J. Brennan, Jr.: Well it would be very significant though wouldn't it if diversity cases, suits against the corporations that they might be sued with any – might spread the work around instead of concentrating in some district? Arthur Roth: Yes, this is what I'm going to come to Mr. Justice Brennan. The fact is that in their petition the petitioner states that of some 3200 Jones Act cases which ought to be filed or were filed in 1965 over 1,000 of them or 1/3 of them were filed in the Fifth Circuit. Now the corporations don't do business in the Fifth Circuit. They do their business -- I mean they have their principal offices and their incorporating offices in Delaware and New York and Chicago. They don't – a very few of the corporations, the big ship owners have their principal place of business in the Fifth circuit. Now certainly is it their intention to deprive the seamen of their forum. Now if we were to file a case in a forum as the petitioner suggests let's say in Nebraska certainly the 1404 (a) statute is available to transfer because the very purposes I stated before was the FELA -- to get at the FELA cases. It revises notes indicate as to get at the FELA cases. William J. Brennan, Jr.: Now get at them in what way? Arthur Roth: Sir they wouldn't be filed in inconvenient forms. And have them transfer -- so that it can be transferred to the more convenient forms where the witnesses are located. William J. Brennan, Jr.: I don't follow that. FELA actions always as I understand it could be brought wherever the corporation did business. Arthur Roth: That's right. William J. Brennan, Jr.: It was Jones Act cases that were limited to principal office or state of incorporation, is that right? Arthur Roth: That's right. William J. Brennan, Jr.: But now you say what revise would say about the FELA is? Arthur Roth: When section 1404 was enacted in 1948 at the same time of the revision, the intent of the Congress was to get at this provision of the FELA where they could bring it in any district they wanted so that these railroads could transfer to the more convenient forum. So that the argument that is made by the petitioner here that we could bring our case in Los Angeles or Nebraska doesn't bear weight because the Jones Act and FELA being in effect one, indicated, I mean the Congress indicated at that time that they were going to get at the FELA cases from – so that the plaintiffs the injured railway worker wouldn't be able to bring it at any forum he want, that he'd have to come into the more convenient forum at the it is at the petition of the railroad. When they enacted the statute in 1404 at the very -- William J. Brennan, Jr.: Let me see if I follow this Mr. Roth. Arthur Roth: Yes. William J. Brennan, Jr.: You say FELA actions before 1948 to be brought at any district or the corporation business? Arthur Roth: Yes sir. William J. Brennan, Jr.: Where the railroad business, anyone. And at the 1948 the revision contemplated, what, that these cases should be funneled into a more convenient forum? I don't understand it. Arthur Roth: Yes. Now what section 1404 (a) the transfer, the venue transfer section was enacted the revises specifically stated that the purpose of the revision to allow a transfer from the forum as soon as it began to a more convenient forum – William J. Brennan, Jr.: In other words a railroad could come in the District Court the suit was brought to say no, this is not the phase that should be tried, transfer it somewhere else. Arthur Roth: No, they would have to come and make a showing under the section to say so we have all the witnesses here the man was injured in this district, he was treated in this district, most of our witnesses live in this district that means when the railroad made a proper showing -- William J. Brennan, Jr.: Now if you say had to make a showing, you say the reason for 1404 is that the number in the 1948 Act was in the railroad to have it transferred out of the District Court where it was brought to some other more convenient forum if there was one? Arthur Roth: That's right and the same thing of course -- William J. Brennan, Jr.: Now what bearing does that have an issue before us? Arthur Roth: Well it was to answer the argument of the petitioner that we could bring a case against Pure Oil Company in any district of the country practically because they are doing business in any district of the country and – William J. Brennan, Jr.: Your point is if you prevail here what will happen is that the Pure Oil Company could do at any railroad can do as the FELA suit namely transfer it to a more convenient forum, doesn't it? Arthur Roth: Yes, this is -- now I would say this that if they can do that with the Jones Act case, this is a change of venue in a Jones Act case. This is in effect modifying the venue provisions on the Jones Act that is and it modifies the venue provisions of every statute, every venue statute because there was no transfer of forum for convenience at common law and by the enactment and application of the transfer statute this is in effect a modification of the common law venue. We state at the – William J. Brennan, Jr.: I wonder if I understand this Mr. Roth that are you suggesting here that we should agree that Congress by the 1948 provision permitted Jones Act cases to be brought wherever the corporate defendant did business because the corporate defendant's interest could be protected by the transfer provisions under 1404, is that the same? Arthur Roth: Exactly. I think that was the intention of 1404. Speaker: What bearing do you think the Fourco case has? Arthur Roth: I think the Fourco case as all of the tax writers have stated and as the two decisions below that is the Fourth Circuit in the Fanning case that came out just a couple of months ago and below, that the Fourco case applies solely to the patent statute because of the very peculiar issues involved in patent violations and patent trials. So I think Professor Moore pointed it out, I believe Barron & Holtzoff pointed out that that's what it implies to and the Michigan Law Review article which is cited by both the courts below the Fourth and the Fifth Circuits point out that even in that and at the Fourco case is severely criticized because it doesn't take into account the remedial purpose of the 1948 revision of the judicial code. Although I believe that this Court in the Fourco case pointed out that the venue of provisions must be met only by residence coupled with the violation of the patent. I believe that the reasons given by Judge Sobeloff below are most compelling. The opinion is quoted extensively in our brief and one more point I would like to make I believe and we urge that the residence, now if the 1948 revision of the code had any purpose, it would be as the court below stated of course to define what is residence? Now residence has a common law definition. It means as to corporations. It means as to corporation the state where the corporation is – where the corporation exists where it has been incorporated, but the Congress we state came along for venue of purposes Congress has now defined the term residence in all venue statutes. The courts below have both stated the same thing that there is now a definition of residence for the purpose of venue that all common law definitions must give way to the congressional definition, statutory definition and we urge that this Court adapt that and a firm on that basis that there is now a definition of residence for venue purposes that the common law cannot supersede the statute, and if Congress once intended, if they had once intended, something else that that intention has been overridden by the statute. I would further say that the argument that we must petition Congress for every little wrong, I don't think that that was the intention of the judicial code. The judicial code revision was to take away from Congress all of these petty little matters and to leave it to the courts to apply speedy and accessible remedies to plaintiffs. Thank you. Earl Warren: Mr. Deutsch? Eberhard P. Deutsch: If the Court remains in session a few minutes longer I would be particularly brief. I daren't remain in my seat and hear that the Fifth Circuit is not important in the shipping business. The port of New Orleans is in effect the greatest port in the United States, the largest steamship company in the world has its domicile as do a number of great many others and I don't want to be chastised by my chamber of commerce when I return home for not having met that particular challenge. I do want to say Mr. Justice Black so that there will be no misunderstanding. We did not move to dismiss this case. We merely moved to transfer not to take any the statute permits a dismissal. We did not even moved for dismiss, we merely suggested transfer. Hugo L. Black: Transfer it to where? Eberhard P. Deutsch: To the principal place of business of the corporation. Hugo L. Black: Where is that? Chicago? Eberhard P. Deutsch: The northern district of Illinois. Hugo L. Black: Illinois? Eberhard P. Deutsch: It's Palatine, Illinois I'm not sure. Hugo L. Black: Did you move to dismiss it on the ground that the witnesses are there and it would be more convenient to trial on the grounds of the statute? Eberhard P. Deutsch: Strictly under the statute. This would merely transfer under 1404 this is under the Jones Act. Hugo L. Black: Under the statute? Eberhard P. Deutsch: Under the statute. Hugo L. Black: You didn't ask to move it on the ground of forum non conveniens? Eberhard P. Deutsch: Not at all that question didn't arise. Hugo L. Black: I asked that question because it was rather my impression that the Congress took a new look at all of these thing on forum non conveniens and most of these other troublesome questions were ended by it, I'd hoped? Eberhard P. Deutsch: As long as the Congress sits, not as this Court said, as long Congress sits there will be questions which will bother this Court and us, I'm sure at least that it has been my experience -- Hugo L. Black: But I would – it bothered me in the respect that I had an idea that gave a new deal and all that legislation 1948 and they did not intend to have a forum non conveniens statute affect this ploy by keeping old interpretations that no longer fitted the term. Eberhard P. Deutsch: That forum non conveniens statute. The 1404 statute is itself restricted to permit transfers to jurisdictions in which the action might have been brought for instance. Hugo L. Black: That's right. Eberhard P. Deutsch: That wouldn't help him in this case. Tom C. Clark: So it wouldn't be available to him, wouldn't it? Eberhard P. Deutsch: That's right. Hugo L. Black: So he couldn't move it. He couldn't bring it up and lose? Eberhard P. Deutsch: As plaintiff he could seek to move to any jurisdiction he saw fit, that is within the scope of that statute. I don't know but if you all remember I do – I presented right here before you the series of three or four cases under the forum non conveniens statute one of them was one in which the plaintiff has sought transfer under the statute and had been successful. Hugo L. Black: But he couldn't move it back to Miami under your argument. Eberhard P. Deutsch: That's correct. Now -- Tom C. Clark: But he couldn't transfer it of the 1404. Eberhard P. Deutsch: I'm sorry. Tom C. Clark: I say he wouldn't be able to transfer it under 1404. Eberhard P. Deutsch: He could not transfer them to 1404. Tom C. Clark: But you wouldn't – that's right. Eberhard P. Deutsch: I want to mention very briefly as long as Barron & Holtzoff have been brought up as not, if I understand it, as making the distinction that only the patent cases should be involved. This is a photocopy of the page from Barron & Holtzoff I read it in a slight amount of difference. The Supreme Court after some vacillation has now rejected any such reading for the patent infringement cases at least and has held at the special granting statute is not modified about the general provisions of 1391 (c). This result appears desirable for all such special venue statutes. We fairly confine that to the patent statutes at all, and -- Byron R. White: What did Mr. Moore say about that? Eberhard P. Deutsch: Substantially not quite the same thing. He says that it's apparently the rule. Byron R. White: Well don't waste your time, it's all right. Eberhard P. Deutsch: I'm sorry I don't -- I did have it here on separate page. What he says was this rule will undoubtedly be applied to all special venue statute. I'm not -- Byron R. White: Do you remember what his attitude was before Fourco? Eberhard P. Deutsch: Well you will find it quoted in Fourco. Byron R. White: And it was to the contrary, wasn't it? Eberhard P. Deutsch: It says that we did not intend the Congress did not intend the change at these special venue provisions by this general provision in 1391 (c) and this Court quoted into that effect as the consultant who certainly should be in authority on this point. Now I think you start reading all the different editions, lose leafs of Moore, you can get almost any idea you want depending on what the phase of the matter he is attacking and I don't pretend to quote him as completely authorized and all among because I at least want to be consistent. But he does do that and I want to mention this one further fact very briefly and that is we have many of the special venue statutes. They're under the antitrust law. They're not in the judicial code. The Interstate Commerce Commission Act suits against the United States involving certain matters and so on and so on. In each one of those cases now Fourco has been followed to the effect that the general statute 1391 (c) does not affect the special venue statute and each of those cases and all the lower court cases some certain point. Hugo L. Black: Is it your argument that they must all be together? That there's just one general blanket holding that was intended to say that without regard to what purpose the statute was passed and I have interpreted it all, you look at this and you say whether you decide that Fourco under this special statute therefore you're going to decide it all maybe that's true, but is that your argument? Eberhard P. Deutsch: I think that is the effect of it sir. I'm -- I don't like to indulge in dicta. I'd like to stick to my own case if I may. But -- Hugo L. Black: Well I thought you were going outside of your case, was the reason I asked -- Eberhard P. Deutsch: I'm trying to avoid it frankly sir. But insofar as it is necessary and I will be completely frank, I think that each of those special venue statute should be treated as on its own bottom without reference to the general statute which applies principally in diversity action. Thank you Your Honor. Earl Warren: Thank you.

Earl Warren: Number 201, Willie -- Willis Shaw Frozen Express, Incorporated, Appellant, versus United States. Mr. Layne. A. Alvis Layne: Mr. Chief Justice, may it please the Court. This is an appeal from a judgment of a statutory three-judge District Court of the Western District of Arkansas, affirming as wholly proper and lawful an order of the Interstate Commerce Commission. The order involved denied in part and granted in part, the application of Willis Shaw Frozen Express for operating rights as a common carrier by motor vehicle on the so-called grandfather provisions of the 1958 Transportation Act, Section 7 (c). This appeal presents questions as to the proper statutory interpretation and the administrative application of the grandfather section of the 1958 Act as it applies to Shaw and to other common carriers of the formerly exempt agricultural commodity. Just a moment as to the background of the 1958 Transportation Act and the provision which this Court is asked to determine as to its interpretation and appropriate administrative application. First, the 1958 Transportation Act fixed the limit and the scope of the agricultural exemption from the economic regulation of the Interstate Commerce Commission. It did so by saying that it -- certain commodities, the interpretation that had been placed by the courts and the Commission with respect to certain commodities was to be it. This is the limit. These are the commodities that are to be agricultural commodities. These are the commodities that can be transported, free of the certificate and rate regulation requirements of the Interstate Commerce Commission applicable to motor carriers of general commodity. Also, and the source of the controversy in this case, the 1958 statute specifically provided that certain items which had been determined to be exempt agricultural commodities were no longer to be exempt and were to be subjected to economic, that is to say rate and certificate and permit requirements, operating authority requirements of the Interstate Commerce Act. This fell into -- and I don't want to get into an argument about the -- whether it’s a group or a class, but this fell into roughly two groups. One group was a group of frozen commodities. That is commodity -- agricultural commodities that had been subjected to freezing and therefore were transported in a frozen state. These were the frozen fruits, berries and vegetable. These were subjected for the first time to economic regulation by the Interstate Commerce Commission. The second group, in general, were commod -- agricultural commodities not produced in this country but imported. They were agricultural commodities not grown, harvested and marketed by our farmers. They were cocoa beans, coffee beans, tea, bananas or hemp, and wool imported from any foreign country, wool tops and noils, and wool waste. That is imported wool. The same 1958 statute provided specifically that cooked or uncooked frozen fish was to continue to be exempt. And as a matter of fact, in that aspect, the statute broaden somewhat the exemption from economic regulation by the Interstate Commerce Commission transportation of fish and the shellfish product. Now, as to the commodities, frozen fruits, frozen berries and frozen vegetable, the cocoa beans, the coffee, tea, the bananas and the wool, imported wool, the statute in Section 7 (c) created grandfather rights. And they used exactly the same language in the 1958 statute that they used in the 1935 statute when interstate cooking was first made subject to economic regulation, rate, certificate and operating authority regulation by the Interstate Commerce Commission. It provided in exact language and this is the language of the 1958 statute. It says that operating rights are to be issued without further proceedings to those making application who have been in bona fide operation, and the statute uses the term "bona fide operation" on May 1, 1958 over any route or routes or with any -- within any territory of the commodities made subject to regulation and has so operated since that time except as to seasonal variations or interruptions in control over which the carrier had no control. Now, as I have said, this language was precisely the same language used in the 1935 statute and that language was considered at length by two case -- in two cases in this Court which I considered dispositive of the issues now placed before the Court. Those cases read and applied to the situation, to the statute, both as to its interpretation and application will result in a reversal of the judgment below and it remanded this case for an appropriate consideration under the statute, and the two cases are, Alton Railroad versus the United States in 315 U.S. 15 and United States versus Carolina Freight Carriers, 315 U.S. 475, both written by Mr. Justice Douglas. Now, if you apply what the Court said in those cases, this order cannot stand. In order to demonstrate that, it's necessary for me to tell you something about as briefly as I can, the Shaw -- Willis Shaw Frozen Express and its predecessor, Willie Shaw, it's president and present owner. It began a trucking business in 1938. He transported primarily fresh vegetables, berries and live poultry. When these products began to be frozen or marketed in a different fashion, eviscerated poultry, frozen poultry, when they began to freeze the vegetables, the berries and the fruits, his operations changed or his come -- his equipment changed so that he was able to transport them in this new form or in this changed form. And he purchased refrigerated equipment and substantial quantities for a trucker considering that he was limited to only transporting those things exempt from the Commission's economic regulation. As a matter of fact, he advertised widely prior to the grandfather date, as a specialist in performing this kind of transportation. And on May 1st, 1958, the grandfather day, he was a very substantial trucker of this exempt agricultural commodity. He was operating some 34 tractor trailer units. That is the combination, 34 of them specially equipped with refrigeration capable of transporting the frozen fruit. Now, he was holding out a service and he's advertising. He was holding out a service in his actual performance where his trucks were over a very broad area. He filed an application with the Commission when this -- under the grandfather statute. There was a hearing at which a number of railroads and existing regulated truck lines intervened and protested it. There was an examiner's report in which a substantial grant beyond that which is now before this Court in the form of the order of the Commission was given by the hearing examiner. The matter was then presented to the Commission and that it is the Commission's decision that is here and has been affirmed below. Now, the Commission's decision and the interpretation upon which we -- which this case rest and the Commission errors on which we ask this Court's determination, are those in which the Commission sharply limited the prior operations by Shaw and did so by -- by a process which this Court and Carolina Freight Carriers called a pulverization of the prior operation. And the result if you'll look at the record is to distort what was in fact a unitary and integrated operation by Shaw transporting an extremely limited number of commodities over a very broad territory. Commodities which moreover as the examiner found but which the Commission never mentioned were affected by climatic crop conditions and by variations which necessity of the type of commodity that you have were affected by growing seasons. They were affected by a whole variety of events over which certainly the carrier had no control and a whole series of factors involving the marketing over which the carrier had no control and which were in the record. Now, what precisely did this pulverization or atomization as the Court in Carolina said happened to Shaw? What did they do? They held that although Willis Shaw was a common carrier and a common carrier by motor vehicle within a substantial territory of all of the frozen agricultural commodities, fruits, berries and vegetables, yet they took certain specific points in certain specific areas and they sharply restricted that to saying only take fruit from this point to that point. You can take vegetables from this point to that point. And they didn't do it with respect to different points. They did it with respect to the same points. Let me -- they're the same origin areas. It wasn't a question of what was grown there. Let me give you a specific example which I think highlights exactly the kind of commodity treatment to which Willis Shaw was accorded by the Commission below. The Interstate Commerce Commission found that Willis Shaw was entitled to transport frozen fruits, frozen berries and frozen vegetable from the points in the Lower Peninsula of Michigan to Kansas City, Missouri. That's all of the frozen commodities. That's the whole scope of those made subject to regulation. But, from the same origin area of the Lower Peninsula of Michigan to St. Joseph, Missouri, he was authorized only to transport frozen fruit. Now, how did they get that way? Why would Willis Shaw transport or as a common carrier restrict his holding out to the public in the Lower Peninsula of Michigan, the shippers there, to transport only frozen fruit to St. Joseph, Missouri, a few miles up the road from Kansas City or as they also said, you can only transport frozen fruit to points in Kansas right across the Missouri River from Kansas City, Missouri. The only excuse or the only justification given in the Commission's report is that they tabulated the commodities that he transported in what they considered the relevant period and he hadn't transported during that relevant period anything but frozen fruit from the Lower Peninsula of Michigan to St. Joseph, Missouri or the points in Kansas but had transported a shipment or more from the Lower Peninsula of Michigan to Kansas City. There was no consideration given to his status as a common carrier as this Court held the Act required in 19 -- in the Carolina case. There was no consideration given to whether the -- that he -- Byron R. White: What was the -- what was the common carrier of? A. Alvis Layne: He was a common carrier of all of those commodities. Byron R. White: All exempt commodities. A. Alvis Layne: All -- all of the refrigerated -- Byron R. White: But he was -- A. Alvis Layne: -- exempt commodity -- Byron R. White: But he was not a certificated carrier -- A. Alvis Layne: Of course -- Byron R. White: -- prior at the time. A. Alvis Layne: Well, he was -- no sir. He had been -- that's the way he was created. He has had subs -- obtained certificate subsequently. But at the time we're talking about, the grandfather period, Shaw was nothing but a transporter of the exempt agricultural commodities which required refrigeration, commodities which he and his equipment -- Byron R. White: The equipment -- he was a special kind of common carrier you say and the problem is what were the scope of his common (Voice Overlap) -- A. Alvis Layne: That's right. And if his scope was from the Lower Peninsula of Michigan, the Kansas City frozen fruits, berries and vegetables were all that they sub -- all the refrigerated commodities that were made subject to regulate. How did he get to be such a limited common carrier for the purpose of going to St. Joseph, Missouri? The fact is that he did not, and the Commission didn't make any finding that he was at all limited in he's holding out to the public or that Shaw took the slightest difference. The fact is that he was holding out. The fact is that he was available for service. Earl Warren: We'll recess now Mr. Layne.

William H. Rehnquist: We have another case coming up that we're going to hear right now, and that case is Number 95-5207, Cooper v. Oklahoma. Mr. Ravitz, you may proceed whenever you're ready. Robert Alan Ravitz: Mr. Chief Justice, may it please the Court: This case presents the question whether the State of Oklahoma may allocate a level of proof as high as clear and convincing evidence on the defendant in determining his competency to stand trial. Despite uncontroverted expert testimony the accuracy of which was not disputed by the trial judge, despite testimony from defense team investigators that Mr. Cooper was cracking up and was incompetent, despite numerous witnesses and court observations of peculiar conduct throughout a 3 to 4-week period prior to trial, and despite the fact that the trial judge in Oklahoma failed to find Mr. Cooper was malingering, the court, utilizing a clear and convincing standard of proof, held that Mr. Cooper was competent to stand trial. William H. Rehnquist: Well, if the evidence was so overwhelming, as you describe it, Mr. Ravitz, one would think that it met even a clear and convincing test. Robert Alan Ravitz: I think, Mr. Chief Justice, that goes exactly to the crux of this argument, that when people look at a clear and convincing test, they take it as such a high burden that despite this type of evidence they can legitimately conclude, using this burden of proof, or this standard of proof, and say, as a matter of law, despite all this evidence, this person is still competent to stand trial. William H. Rehnquist: What do you mean, as a matter of law? I take it the State is certainly entitled to put the burden of proof on the person who is claiming to be mentally incompetent. Robert Alan Ravitz: Absolutely. William H. Rehnquist: And so, if you say... you say as a matter of law, the trier of fact is free to disbelieve witnesses, so I don't see where you get as a matter of law coming out of this. Robert Alan Ravitz: What we're saying is that the competency standard, the clear and convincing standard is a standard of law. This particular court has said that to reach this you need certain levels of certainty. This court has specifically said that this standard is used to take away a liberty interest, that's how high of a standard it's used for, and this standard can only be met, and Oklahoma used the term, the uniform instructions at the time of the Cooper trial used the term unmistakable. Now, there's no evidence to show the judge used the term unmistakable, but this judge was familiar with the stock instructions, so he had to be satisfied unmistakably that Cooper was incompetent. William H. Rehnquist: Well, to say... the supreme court of Oklahoma didn't use the word unmistakable, did it? Robert Alan Ravitz: The Oklahoma Court of Criminal Appeals-- William H. Rehnquist: Is that the one that decided... did it use the word unmistakable? Robert Alan Ravitz: --They said there was no evidence from the record that unmistakable was used. They recognized that was the standard. Currently there was a different standard applied, but it doesn't matter, the clear and convincing standard is such a high burden, regardless of whether you call it unmistakable, or you say this is the standard necessary to take one's individual liberties away from him. William H. Rehnquist: Well, the clear and convincing evidence standard is intermediate as I've understood it and as I think our opinions... between the preponderance of the evidence standard which obtains in most civil cases, and beyond a reasonable doubt, which is what you have to find guilt by. It's... obviously, it's higher than the preponderance, but it's lower than beyond a reasonable doubt. What is it that enables us to say that it ought to be one rather than the other? Robert Alan Ravitz: I think we have to look at the fundamental liberty interest involved in an incompetent individual being placed on trial. Our system of justice demands that an individual who cannot appreciate the consequences of his actions and does not understand the proceedings cannot assist counsel, cannot go on trial for his life, and this standard takes away liberty interests of that individual. William H. Rehnquist: We can hear you pretty well, Mr.-- Robert Alan Ravitz: I'm sorry. I'm sorry, Mr. Chief Justice. The truth-seeking process of a criminal trial is compromised when we require clear and convincing evidence of incompetency before we go to trial. That's why this Court in Medina looked at the impact on the particular harm to the fundamental right. This Court concluded in Medina that in the narrow class of cases where the evidence was at equipoise... in other words, where the evidence was just as likely for competency as incompetency... that it justified the risk as to the fundamental right not to be tried while incompetent. However-- Sandra Day O'Connor: --Do you rely on historical practice in this case? Do we know what States have required in this area, and do we know how many States are now changing to this higher standard of proof? Robert Alan Ravitz: --Justice O'Connor, historically at common law there was no question that this was... there was a preponderance standard. Yes, we do rely on history. There are only four States that have a clear and convincing standard. Antonin Scalia: How recently did they adopt that, would you remind me? Robert Alan Ravitz: Yes, Justice Scalia. Connecticut... Pennsylvania was the first State adopting it in 1976. Connecticut and Oklahoma adopted it shortly after Addington. Wisconsin initially adopted it after Addington, but has since changed their statute. Antonin Scalia: Why did Addington cause them to adopt it? Robert Alan Ravitz: Well, I think that the court, or the Oklahoma legislators and the legislators of Connecticut misunderstood what this Court said in Addington. I think they tried to combine the finding of dangerousness necessary for an indefinite civil commitment with the standard of proof utilized for determining competency hearings, incorrectly, I might add. Antonin Scalia: Well, it's certainly convenient to combine the two, so that if the person can't be tried he can be put away. I mean, once you make that... right? Robert Alan Ravitz: Well, there-- Antonin Scalia: If there is a clear and convincing indication, two things happen. Number 1, you can't try him, and number 2, he also does not walk away. He gets put into a mental institution. That's pretty handy, you must admit. Robert Alan Ravitz: --There's no problem... we don't dispute the State's right to, at a competency determination, have the fact-finder make a determination of whether the individual is clear and convincingly dangerous. We don't dispute that. There's no question that they have an absolute right, but additionally that's not even necessary for the initial competency determination. Oklahoma has a right, without even a showing of clear and convincing evidence of violence, to have someone treated for a period of time to restore their competency upon motion of the individual court. Sandra Day O'Connor: But I guess the reason States are now experimenting with requiring a higher standard of proof of competency is because of Addington's requirement that to civilly commit someone the proof must be by clear and convincing evidence of dangerousness to self or others and of mental illness. Robert Alan Ravitz: The standards involved with regard to commitment, Justice O'Connor, are totally different than the standards involved in the competency determination. In other words, the Dusky determination for competency has no relation to the subsequent final commitment. That's not to say that the court cannot commit-- Sandra Day O'Connor: But that is what's driving the States to adopt a different standard on competency, I suppose, the hope that they won't have someone found to be incompetent in a criminal case and then... for mental disability, and yet not be able to commit them for civil treatment. Robert Alan Ravitz: --I'm not saying it's not what may have caused the State to do that, but you're... as what I said in my reply brief, you're comparing apples to oranges. In this particular case, the standard to commit somebody has no relationship to the determination of how high, or the certainty that we must have before we find an individual incompetent. John Paul Stevens: But isn't-- --Well, it-- --Doesn't the point... let's see, if the burden... the different... in the two different cases, in one, the plaintiff, I mean, the individual seeks... the higher standard in the Addington context is to protect the individual. The lower standard in the criminal context is to protect the individual, because he has the burden of proving incompetence in the criminal case, and the State has the burden in the civil case. Robert Alan Ravitz: That is correct, but again, that doesn't go into effect until the trial court has determined that after a period of time the individual who is being treated can no longer be continually treated. Anthony M. Kennedy: But in either case there is a presumption of competency that most jurisdictions, if not all jurisdictions, recognize, I take it. Robert Alan Ravitz: That is correct, Justice-- Anthony M. Kennedy: And Addington said that presumption of competency is sufficiently valid that we're going to require clear and convincing evidence to overcome it, and it seems to me that's all that Oklahoma is saying here, is that we are giving... we are giving substance, we are giving recognition, we are giving force to the presumption of competency. Now, I recognize that you can have different standards for commitment than for assisting counsel at your trial and so forth, but leaving that aside, it seems to me that what Oklahoma is doing is giving vigor and substance to the presumption of competency. Robert Alan Ravitz: --Well, I think the presumption of competency and the State interest is adequately protected where... in what Medina did, where the defense must come forward with all evidence. They must paint a portrait to the fact-finder that this particular person is more likely than not incompetent, and if the fact-finder does not... is not convinced of that, regardless, based on the presumption of competency or for whatever reason, the fact-finder is going to conclude that the individual is competent. In fact, what this particular standard does is allow people that... a fact-finder, the trial judge himself, he looks at this person and he says, this person is more than likely incompetent to stand trial. That's what I think in my mind from all this evidence. Yet because of the clear and convincing standard, I'm not clear and convincingly convinced, so therefore I am not going to find this person incompetent, and this person is going to have to go through trial. William H. Rehnquist: The Court of Criminal Appeals mentioned what it thought was a propensity of some defendants to malinger in this area as a justification for the clear and convincing standard. What is your response to that? Robert Alan Ravitz: First of all, if the court concludes, Mr. Chief Justice, that as a matter of fact the individual is malingering, the court's going to conclude that the defendant hasn't met his burden of proof under a preponderance. William H. Rehnquist: Yes, but it's quite possible that a... the trial judge may feel, I can't say for sure that this person is malingering, but if I had to do it by a preponderance standard, I would have to say he's incompetent, but clear and convincing, I can say I think he's competent, and can't a State court adopt a rule of burden of proof to adjust for that sort of thing, the possibility of malingering, even though it's not... you can't show it in a particular case? Robert Alan Ravitz: Raising the standard of proof does not facilitate a more accurate finding of malingering. Let's take the situation where we have 100 incompetent individuals, okay, 5 of whom are malingerers, okay, 95 of whom are not. As we raise the level of certainty requiring an incompetency finding, let's assume that 20 individuals are thereafter now found competent, one-fifth of the individuals by virtue of the raising of the standard. How many malingerers? Let's assume we had 5 malingerers out of this 100, as I said. How many malingerers will we have identified? Well, if we do, an odd one, and at what cost? At what cost to the fundamental right not to be tried while incompetent, because incompetents, if you go to trial while you're incompetent... Cooper sat there for 2-1/2 weeks in orange coveralls never even talking to his attorneys. It was obvious that he was scared of his attorneys from the testimony of the experts, yet Cooper went to trial. Cooper couldn't assist in his defense. Cooper could not tell his lawyers why the act was done, how it was done, was anybody with him, the degree of culpability. Competence is necessary to protect all sorts of fundamental rights that are implicit in the trial itself. Sandra Day O'Connor: Well, you're basing your argument on the Due Process Clause? Robert Alan Ravitz: That is correct, Justice O'Connor. Sandra Day O'Connor: Are you not pressing any Eighth Amendment claim here? Robert Alan Ravitz: I think-- Sandra Day O'Connor: There's some language in your brief, but I thought it ought to be clear. You're basically resting on the Due Process Clause. Robert Alan Ravitz: --I think this Court has recognized that-- Sandra Day O'Connor: Yes or no? Robert Alan Ravitz: --Yes, we are following the Due Process Clause, but this Court has applied heightened levels of due process in situations where the death penalty was involved. This Court, recognizing the risk in Turner v. Murray, said that in... that you could voir dire an individual on race and in a capital case but not in a noncapital case. Sandra Day O'Connor: So you're not making a general argument applicable to all criminal defendants. You want us to just address the situation in the capital context? Robert Alan Ravitz: No, my argument is addressed to every... is addressed to all cases, but if this Court chose to divide the two situations they would have ample opportunities to do this. This Court and several members of this Court have recognized that there are due... different due process considerations in a capital case versus a noncapital case, but we are advocating this across the board. Ruth Bader Ginsburg: What about the standard in the State for not guilty by reason of insanity? That's incompetence at the time the act was committed to have the necessary state of mind. What is Oklahoma's standard for that defense? Robert Alan Ravitz: I may be wrong, Justice Ginsburg, but I believe it's a preponderance standard. Ruth Bader Ginsburg: Just a preponderance. Robert Alan Ravitz: Yes. Ruth Bader Ginsburg: So could the State have a higher standard? Could it say, an NGI acquittal has to be established by clear and convincing evidence? Robert Alan Ravitz: Oh, yes. The Federal statute does it. This court in-- Ruth Bader Ginsburg: Even beyond a reasonable doubt? Robert Alan Ravitz: --This Court in Leland recognized... proved the beyond a reasonable doubt standard. Now, it hasn't been addressed since Leland. Ruth Bader Ginsburg: Then how do you... that also involves the same kind of fundamental right, doesn't it, not to be convicted of a crime when one is not able to form the mental state necessary? Robert Alan Ravitz: This Court has never recognized that insanity defense was a fundamental right. I believe that you said that in Medina, that they've never recognized this as a fundamental right. This obviously would be different if a court was instructing someone that they couldn't take insanity into consideration in determining whether a defendant proved... had been proved beyond a reasonable doubt as to the elements of the crime, but once the elements have in fact been proven beyond a reasonable doubt, this Court has never said that the insanity defense is a fundamental right. Whereas here we have a fundamental right, and here we have a right before any evidence of guilt has been established by the State, and that's what's so different. Again, we've got to look at the truth-seeking function and what it does to the criminal trial when we require somebody to prove with this kind of certainty that he's more likely than not incompetent. Who is going to be brought to trial? People who are more-- Antonin Scalia: If you're going to talk about, you know, realities, you know, I think the history is with you. I'm not sure the realities are. Once upon a time you could not put on a parade of psychiatrists who will testify that this person has all sorts of new mental afflictions that nobody ever heard of. It's very easy to raise a doubt of concern in competence nowadays, as it was not much earlier. The fact-finder could just look at this person and make his own judgment. Now, he has to listen to a parade of expert witnesses, and it's always... in my experience, you can find a psychiatrist who will say that this person is not competent. Robert Alan Ravitz: --As early as 1790, Justice Scalia, in Ley's Case, which is cited in our brief, the judge remanded the individual to a surgeon to have the surgeon look at him, so we've had people looking at competency for over 200 years on that particular theme. But additionally, let's look at the resources. What that court said-- Antonin Scalia: A surgeon is not a psychiatrist. Robert Alan Ravitz: --That's correct, but probably in 1790 that was probably the best we could do. Antonin Scalia: Yes, right. Robert Alan Ravitz: But I think when we look at that, let's look at the experts. How many experts do we have to prove? What kind of cost to the system? How many experts? Do we have to have five experts, six experts? We had one uncontroverted expert. And again, should the defendant be required to come forward with that kind of evidence, and at what risk? This Court specifically said in a narrow situation where the evidence is at equipoise, that's one thing, but the tie goes to the State after Medina, there's no question. If I don't come forward with evidence, if I don't come forward with the psychiatrist, if I don't come forward with friends-- John Paul Stevens: Well, it's more than coming forward. Robert Alan Ravitz: --with doctors, with-- John Paul Stevens: It's more than coming forward. You have to have, at least have a preponderance of the evidence. You have to have at least 51 percent probability. Robert Alan Ravitz: --I have to convince that fact-finder. I have to show all this. The State can actually hide behind the clear and convincing evidence. They can paint less of a picture. Yes. Stephen G. Breyer: You know this area of the law better than I do. Is there... has it been held or decided about whether you could have a trial for a person who was physically ill to the point where he couldn't understand what was going on, like a coma, somebody who's in a coma? Are there any... is there case law on that, about the right to be present and participate in your trial? I mean, suppose a person were in a coma, so he couldn't understand. He might recover, he might not. Robert Alan Ravitz: If-- Stephen G. Breyer: If he recovered, you could try him, if not, not. Is that right? Robert Alan Ravitz: --I think clearly under Dusky that person could not be tried. Stephen G. Breyer: It's Dusky. Robert Alan Ravitz: Well now, Dusky just establishes the standard, but an interpretation-- Stephen G. Breyer: But I mean, is it clear that a person who is in a coma cannot be brought to trial? Robert Alan Ravitz: --If that person cannot-- Stephen G. Breyer: Can't understand what's going on. Robert Alan Ravitz: --Then that person cannot be brought to trial. Stephen G. Breyer: It has nothing to do with psychiatry. Robert Alan Ravitz: That person cannot be brought to trial. Stephen G. Breyer: And the law that says that is, the case that says that? Do you know, off-hand? Robert Alan Ravitz: Well, Dusky establishes the two-prong test for determining competency. If the person cannot assist his lawyer in presenting a defense-- Stephen G. Breyer: And he couldn't assist the lawyer, okay. Robert Alan Ravitz: --Then you can't... assist-- Stephen G. Breyer: I mean, it seems to me possibly that this... well, I'll ask your opponent. I mean, the question here I would think is whether he is competent. Whether he is physically incompetent or mentally incompetent, or whatever, it's a competency question. Robert Alan Ravitz: --That's correct. Stephen G. Breyer: All right. Robert Alan Ravitz: The picture that the fact-finder gets with regards to a preponderance standard is the most accurate picture, because the defendant must come forward with all sorts of evidence to prove his incompetency. John Paul Stevens: Mr. Edmondson, may I ask you-- --No, it's Mr.-- --I'm sorry, Mr. Ravitz. I looked at the wrong name. May I ask you just on your basic theory of the case, in the last case we had there were two different opinions supporting majority result. One relied on the Mathews analysis, and the other relied on Patterson v. New York, a more historical analysis. Do you have a preference between the two as to what you think should be followed in this case? Robert Alan Ravitz: Well, obviously I think this Court would follow... Medina was a five-member majority, so I think this Court is bound to follow Medina. I think that the... Mathews is a useful guide, looking at the interests at stake. John Paul Stevens: But you would follow a Patterson approach, and then your emphasis would be on history, I gather, rather than on basic fairness. Robert Alan Ravitz: I think when you look at basic fairness, Justice Stevens, it's just as compelling as history, maybe even more compelling than history, because basic fairness-- John Paul Stevens: How could it be more compelling than history? If your brief is right, and I don't know if they challenged or not, all the history, except for these four responses to the Addington, all the history says preponderance. Robert Alan Ravitz: --That's correct, but fairness is just as compelling. Antonin Scalia: Mr. Ravitz, you need both, don't you? I mean, all history shows you is that it may be a fundamental right protected by the Due Process Clause. If it never existed in history, it certainly is not. If it did exist in history, you still have to ask the question, well, yes, there was always a 12-person jury historically. Does that mean that it's a lack of due process if you don't have a 12-person jury, have a new rule, have 10 instead? You have to ask yourself was it important enough, so you really do have to get to the importance question anyway, regardless of what the history says, don't you? Robert Alan Ravitz: Yes, but I think we have to realize what-- Antonin Scalia: You wouldn't if the history was the other way, if the history showed that... you know, that there had never been a right to a preponderance of the evidence claim, then you lose without any further inquiry, but having established that there was historically, you still have to show that it's so essential to our form of ordered liberty that it can't be changed. Robert Alan Ravitz: --What we have to do is look at the impact of this standard on the fundamental constitutional right not to be tried while incompetent, and if we look at the impact, what we're saying is, we're going to have a group of individuals who are now more than likely incompetent, who are going to go on trial for their life, who are going to have an opportunity to get before a judge and waive the guiding hand of counsel, are going to go before a judge and plead guilty, make decisions on whether to... not to testify, or, too, to testify, and that's the risk that we take, and what interest does the State have? What interest has the State shown in their brief? The only interest the State really shows is, I can show it's okay for me to try individuals who are more likely than not incompetent because I want to move them through the court system. I'd like to reserve the balance of my time for rebuttal, Mr. Chief Justice. William H. Rehnquist: Very well, Mr. Ravitz. General Edmondson, we'll hear from you. W. A. Edmondson: Thank you, Mr. Chief Justice, and may it please the Court: The burden of proof at issue here today is not a stand-alone provision. It is part of a procedure, a system involved in the State of Oklahoma. It was designed to do essentially two things: 1) minimize the risk of false findings of incompetency based upon fabricated symptoms, and 2) while still preserving, protecting, and safeguarding the fundamental due process right not to be tried while incompetent. If I could, before I go into the substance of my argument, respond to a couple of questions that were asked earlier, Justice Ginsburg asked what the burden of proof was in an insanity case in the State of Oklahoma. Under the statutes and case law of the State of Oklahoma, the defendant has an initial burden showing that his sanity at the time of the commission of the offense is at risk. It is then placed upon the State to show the defendant's sanity beyond a reasonable doubt as part of the elements that are proved in the case-in-chief. The other question by Justice Breyer was what happens if a defendant is by physical problems rendered incapable? The example of coma was given, and the statutes of the State of Oklahoma on determination of competency at 1175.1 et seq provide not only for the mental ability to proceed but also incompetency by reason of physical disability. Sandra Day O'Connor: Was an insanity defense made in this case? W. A. Edmondson: No, Justice O'Connor. There were questions raised in the second stage in particular about the defendant's terrible upbringing, about his childhood, about the pressures that were brought upon him and the fact that he was terribly disadvantaged as a child, but the defense to the case was not guilty. Sandra Day O'Connor: And the statute has been changed since this case was tried on the clear and convincing standard? The language is different now? W. A. Edmondson: The uniform jury instruction-- Sandra Day O'Connor: It used to say it had to be unmistakable proof. W. A. Edmondson: --The uniform... it was clear unmistakable and convincing in the uniform jury instruction, which may well have come into play had there been a jury trial on the issue of competency. Now, that jury instruction did not comport with the law of the State of Oklahoma as enunciated by the Court of Criminal Appeals, which is found in the case of Matter of C.G., a 1981 case that predated this trial, and as a matter of fact which was cited by the amicus American Association on Mental Retardation. Sandra Day O'Connor: Now, there wouldn't be a jury trial in Oklahoma on the decision of competency made by the trial judge? W. A. Edmondson: Yes, ma'am, there is a right to demand a jury trial at two stages-- Sandra Day O'Connor: On that question. W. A. Edmondson: --On two stages in the competency proceedings under 1175.1, and that's why I stress, Justice O'Connor, that the burden of proof has to be examined in the context of the entire system. John Paul Stevens: 1175 is... that's your civil commitment statute-- --Yes... no. W. A. Edmondson: No, on the competency proceeding. Under our-- Sandra Day O'Connor: In the criminal case, would you explain exactly how the Oklahoma system works if a defendant says through counsel I want to challenge this defendant's competence to stand trial? W. A. Edmondson: --Certainly. The process is initiated by an application to determine competency which must state facts sufficient to raise a doubt, not even a bona fide doubt as required by Pate v. Robinson and the Drope case, but just a doubt as to the competency of the defendant. That application can be brought by the accused, by a relative of the accused, by a friend of the accused, by a person with whom the accused resides, by a person in whose house the accused lived, or certainly by accused's counsel. If the application is determined to raise a legitimate doubt, or even a doubt as to the defendant's competency to stand trial, the defendant then is remanded for an examination by experts, and subsequent to that examination, there is a hearing on the issue of the application. The defendant or any of those parties that I mentioned have the right to demand a jury trial to determine whether there's even a doubt as to his competency, a jury trial to trigger the examination by experts. Sandra Day O'Connor: But then who makes the determination of whether the defendant is competent or not after the application is accepted and the examination is conducted? Robert Alan Ravitz: By the statute at both provisions on the determination on the application and on the post examination competency hearing, the issues reserved for the judge are then reserved for the jury, and the jury will make those findings. John Paul Stevens: May I just ask you to clarify one thing? I understand clearly when someone else seeks to have the individual judged incompetent, then the individual can ask for a jury trial and insist on clear and convincing evidence. But now, when the individual himself says I am not competent to stand trial, does he also ask for a jury trial on that issue? He's trying to prove his own incompetence. W. A. Edmondson: He has the right to demand a jury trial. John Paul Stevens: Is that ever done as a matter of practice in criminal trials in Oklahoma? W. A. Edmondson: Justice Stevens, it's common on the post examination competency hearing. Jury trials-- John Paul Stevens: No. No, I'm asking about criminal trials in which the defendant himself seeks to establish his own incompetence. Is it common to have the issue submitted to a jury? W. A. Edmondson: --Yes. John Paul Stevens: It is. W. A. Edmondson: On the post examination competency hearing. It is much less common on the application itself. The application is designed to raise a doubt as to its competency because uniformly in the State of Oklahoma those are granted. William H. Rehnquist: Okay, the post examination, does it first go to a judge and he... because here, I gather, it didn't go to a jury. W. A. Edmondson: That is correct. William H. Rehnquist: So here, at first the judge makes the determination? W. A. Edmondson: Mr. Chief Justice, the matter... when the examination is completed and a report is made back to the court, the matter is set for post examination competency hearing, and then the question is asked, do you demand a jury trial, and in this case-- William H. Rehnquist: Here a jury trial was not demanded. W. A. Edmondson: --That is correct. William H. Rehnquist: But could have been had. W. A. Edmondson: Yes, sir. William H. Rehnquist: And so in this case the judge made it in a bench trial, on effect. W. A. Edmondson: That is correct, Your Honor. Anthony M. Kennedy: And the jury trial obviously would precede the trial on the charges. W. A. Edmondson: It would not be the same jury, Justice Kennedy. Anthony M. Kennedy: Actually a different jury. W. A. Edmondson: Yes, sir, a different jury, because under Oklahoma statutes nothing that is said by the accused in the context of a post examination competency hearing can be used against the accused in any proceeding whatsoever, and so the same jury categorically could not hear that evidence. Anthony M. Kennedy: And whether or not it's for the jury or the trial judge it's clear and convincing, that's the standard. W. A. Edmondson: That is correct. Antonin Scalia: General Edmondson, I must say, what Oklahoma has done with respect to the defense of insanity on the merits at trial casts a great deal of doubt in my mind concerning the necessity of the standard that Oklahoma has adopted with respect to sanity to stand trial. You're willing to accept the burden of proving to a jury beyond a reasonable doubt that this individual was sane 2 years ago when he committed the crime, but you say it's too onerous to accept the burden of proving to the jury by... or not even proving to the jury. It's too onerous to have the defendant prove to the jury by a preponderance of the evidence that he's sane today. It seems to me sanity 2 years ago is a lot harder to prove, and the State accepts a much higher burden with respect to that. W. A. Edmondson: Justice Scalia, to some extent that emphasizes the risk that Oklahoma feels on a determination of present competency, where the incentive to malinger or to create symptoms is much greater, in our estimation, than the prescience of the defendant to try to create those kinds of manifestations at the time he's committing an offense. John Paul Stevens: But that doesn't make sense, because the burden on the State, if you lose on the insanity issue he walks. If you lose on this issue you just keep him in custody until he improves, and then you try him later. W. A. Edmondson: No, Justice Stevens. On a finding of not guilty by reason of insanity-- John Paul Stevens: Well, at least he's acquitted of the crime. W. A. Edmondson: --That is correct. John Paul Stevens: I mean, he doesn't have the criminal... whereas in this case it's only a temporary delay in the trial, and you can in the meantime medicate him, and treat him to try and restore his competency, so it seems to me the cost of losing on the insanity is much heavier for the State than the cost of a temporary delay in the trial, in this proceeding. W. A. Edmondson: The cost may be heavier, Your Honor, but we feel that the ability to prove present sanity at the time of the commission of the offense, when the defendant will not contemporaneously be trying to manifest symptoms of incompetence, but will simply be carrying out the commission of an offense, is a manageable burden for the State of Oklahoma. We feel greater jeopardy, particularly in a serious case, being able to meet on a preponderance level the ability of fabricated symptoms by a defendant falsely claiming to be incompetent. Stephen G. Breyer: Can I ask you to get... because it's right on the merits, and I want to be sure you do address what I take it to be their, in my mind strong argument... or the strongest argument they make, in my mind, is, one is the history is against you, but the other thing they say is, leaving the history aside, imagine you had a certain number of people who are in comas, and some of them are faking, and some of them are not. If you're really in a coma, you can't get a fair trial. If you're faking, you can't, all right. Now, they say a preponderance of the evidence test, you will undoubtedly make some mistakes, and there will be some people in jail or dead, because you executed them, who were in comas. You made a mistake. But for every one of those there's a mistake the other way, so you're doing the best you can. Then they say, you change that, you change everything. Suddenly, you have maybe eight people who were executed or in jail who really were not faking, they were in comas, for every one you let outside, so this thing that's very harmful to the system at the same time you don't have much justification for it, because after all, when you do make a mistake, and you wrongly let somebody out who, you know, who wasn't in a coma, he was a faker, you put him in the mental hospital anyway, he's more likely to get tried because he can't fake the coma forever, and so there isn't much harm to the State from the preponderance of the evidence. At the same time, there's quite a lot of harm to the fairness of the system the other way. All right. Now, I'm just restating what I take to be their argument because I want to be certain that you respond to that. W. A. Edmondson: Justice Breyer, of course, it's easier to respond to the coma argument because they very-- Stephen G. Breyer: I use the coma because I want to get away from the all kinds of other issues of the earlier insanity defense, et cetera, but you can respond in terms of the insanity. W. A. Edmondson: --Thank you. Coma, of course, rarely arises spontaneously during the context-- Stephen G. Breyer: I just did that for illustration. W. A. Edmondson: --In terms of the allocation of the risk of error, which I believe is the direction that we're heading in, I again point to the entire context of Oklahoma system rather than simply the burden of proof. Also embodied in Oklahoma statutes is the fact that the issue can be raised at any time during the proceedings, which means if the issue is raised early on and the decision is not satisfactory to the accused-- Stephen G. Breyer: He says there are a lot of good things. He says that ultimately, if you apply this standard of proof, the only difference between that and what, 48, or 46 States do, the preponderance, is that a very large number, a significant number of not... of people who weren't faking will be in prison, and that's a big harm to the system, and the need for that in Oklahoma is very small... not nonexistent, but small, because the other people, the people that you wrongly got off the trial who were faking, you put them in the mental hospital anyway for the most part, or they recover and you try them later. Now, that's... he's saying the harm to the system of fundamental fairness is great, the benefit to the system of your rule is small, and you have the history against you. That says, I took his argument. I mean, I took that to be the argument, and I want to be sure you, you know, respond to it. W. A. Edmondson: --I would like to respond first of all if I could, Justice Breyer, to the allegation that assigning a preponderance of the evidence is the uniform or even the overwhelming practice of the States. It is not. There are 25 States that assign a preponderance of the evidence and 25 States that do something different. I would certainly not claim that clear and convincing is by any stretch the majority. I think there are four States-- David H. Souter: Some of those States that do something different in fact put the burden on the State, don't they? W. A. Edmondson: --Yes. Antonin Scalia: So in fact it's not just 25 to 25. The line up is less favorable to you than that. W. A. Edmondson: Justice Souter, there are 25 that use the preponderance of the evidence. The other States may or may not allocate a burden, but we're talking about the level of proof. Some States don't say what the level of proof is at all. Two States-- David H. Souter: But I'm just saying that if there are 25 States that put the burden on the defendant to prove by a preponderance, and there are 25 who do not, some of the 25 who do not in fact place a burden not on the defendant at all, but upon the State. I come from one of those, and I know it's not unique, so it... I'm just saying that this is not an evenly balanced division among the States. W. A. Edmondson: --That is exactly the point I was attempting to make. If there was a very wide variety of approaches to the competency issue among the 50 States, that it is not four States have clear and convincing and everybody else has preponderance of the evidence. That is not accurate. David H. Souter: But it is accurate, isn't it, that of the States that place the burden on the defendant, only four place that burden to a degree of clear and convincing. The others have a lesser burden. W. A. Edmondson: That is correct, Justice Souter, except Oklahoma does not place it on the defendant, Oklahoma places it on the party that raises it, and there could be instances where the State of Oklahoma-- John Paul Stevens: But if a party other than the defendant raises the question and wants to commit the defendant, must that party prove more than incompetence? Must the party also prove a danger to himself or the community? W. A. Edmondson: --That is correct. John Paul Stevens: But the defendant need not prove the danger of that kind in order to establish incompetence to stand trial. W. A. Edmondson: That is correct also. John Paul Stevens: So that if the defendant carries his burden, even under the clear and convincing standard, he will not necessarily receive civil commitment, will he? W. A. Edmondson: Not necessarily. John Paul Stevens: Because there are different issues in the case. W. A. Edmondson: But interestingly, in Oklahoma's statute we incorporate in title 22, our criminal provisions, the provisions out of title 43 on involuntary commitment and, at the post examination competency hearing stage, if the jury or the judge determines that this individual is incompetent, is not capable of regaining competence within the foreseeable future, and is a person who is mentally ill as defined under title 43 and is dangerous, then that same hearing can result in the civil commitment under a clear and convincing evidence standard mandated by Addington. John Paul Stevens: Yes, but the issues are sufficiently different that you could not say that in the routine case of the criminal defendant seeking to establish his own incompetence, if he prevails at the hearing he will not necessarily be civilly committed. W. A. Edmondson: I certainly would not say that that would be a routine decision, Justice Stevens. I would say in a case, for instance, like this one, where there are allegations of mental illness and where there is evidence of dangerousness, had there been a finding that this defendant was incompetent and unable to be restored, there may very well have been also a finding that he should be committed civilly under the burden of proof required by Addington. John Paul Stevens: But of course, the unable to be restored element of it, he would be trying to prove that himself, would he? Normally he wouldn't have to do that in order to prevail to postpone the trial. W. A. Edmondson: If... he would not be required to do that. John Paul Stevens: And certainly the State wouldn't be trying to prove that. W. A. Edmondson: If I were facing a potential trial in a capital case, I would be trying to prove that. I don't know whether a typical defendant would or not. John Paul Stevens: Because then you'd be permanently civilly committed. W. A. Edmondson: Because... no, not under the rulings of this Court. I would be civilly committed only so long as there is a continuing finding that I'm dangerous. John Paul Stevens: But as soon as you lose that finding, you could be tried for the crime. W. A. Edmondson: Not necessarily. Only if he's also found to be restored to competence. Now, he could be found to be not dangerous, still not be competent to stand trial and be released. Antonin Scalia: In any case, as long as that continues, you're still alive, aren't you? W. A. Edmondson: That is correct, and the important aspect-- Antonin Scalia: Which is a good thing from your point of view. W. A. Edmondson: --Yes, Justice Scalia, and the important fact is the meshing of those two requirements. David H. Souter: Well, there's a meshing... I recognize the fact that if you had defendant's burden being preponderance to show incompetence, State's burden being clear and convincing to commit, that there is in fact a kind of gap between them in which some might fall. I take it, simply because I haven't heard anything about it, that there is no indication that in fact any substantial number of defendants were in fact walking away from the courthouse having, under the preponderance standard having shown that they were incompetent, but with the State being incapable to commit them. W. A. Edmondson: Nor, Justice-- David H. Souter: That wasn't a serious problem, was it? W. A. Edmondson: --Nor, Justice Souter, has there been any indication that in the 15 years that the State of Oklahoma has required a clear and convincing evidence standard, that defendants who were factually incompetent have been forced to stand trial in the State of Oklahoma. These things obviously, by nature and by definition-- David H. Souter: Yes, well, that would be very difficult to tell, whereas the question that I raised would be very easy to answer. We'd just have to look at the courthouse door and see who was walking out, and I take it that there's no indication that was happening to the degree of raising a systemic problem. W. A. Edmondson: --I cannot answer that historically, Justice Souter, and my experience as a prosecutor and Attorney General only date back to 1982, so all of my personal experience has been under the new statute. Sandra Day O'Connor: Of course, this could be one of those cases. The trial judge at least said, because of the clear and convincing standard, I'm going to find competence here, even though reading the cold record might cause one to really question the result, at least under a preponderance standard. W. A. Edmondson: Justice O'Connor, I... the judge's pronouncement seemed to indicate that he made that finding solely on the basis of clear and convincing evidence. I agree with you that the cold reading of the transcript, absent the evidence of malingering, should have led any trier of fact to conclude that this defendant was incompetent, and I can only rectify the judge's finding with the transcript by the conclusion that he also found that this defendant was malingering and fabricating his symptoms. John Paul Stevens: Yes, but the likelihood of malingering is just one of the facts the trier of fact has to take into consideration in reaching the ultimate conclusion, and it necessarily follows, as I understand the Oklahoma system, that there at least exists the possibility that there are a class of people who are more likely than not incompetent. Taking into account malingering and all of this, more likely than not they are incompetent, and therefore under most States they wouldn't try them until they'd recovered, but in... Oklahoma is willing to say, no, you go to trial anyway. W. A. Edmondson: That is correct-- William H. Rehnquist: Yes. W. A. Edmondson: --Justice Stevens, but not without a hearing to determine whether or not they are factually incompetent. John Paul Stevens: No, they've had the hearing, and after the hearing the conclusion might be, it's 55 percent chance they're incompetent, but it's not a 65 or 75 percent chance so we're going to let... the risk of error is placed on the defendant in those cases. W. A. Edmondson: That is correct, with the other safeguards of the statute designed to overcome that risk of error by providing multiple opportunities for the defendant to reraise the issue. John Paul Stevens: Yes, but the multiple opportunities would be there regardless of the standard. Even if you reduce the standard, you'd still give the same multiple opportunities. W. A. Edmondson: You have the same multiple opportunities, that is correct. You don't have the opportunity except under Oklahoma statute to change your forum. If you're dissatisfied with the ruling of the judge on incompetency when you raise it again you can demand a jury trial, or vice versa, a new jury. John Paul Stevens: Yes, but all of those features of the system could remain in place under a different standard. W. A. Edmondson: Exactly. John Paul Stevens: Yes. W. A. Edmondson: Except for my point that the reason those safeguards are there are to guarantee that the safeguards preserve the substantive due process rights of the defendant while still protecting against the false findings of incompetence based upon malingering. David H. Souter: General Edmondson, is there any evidence in the record or any references to studies in the record to indicate that in the last 20 or 30 years juries or judges as fact-finders have in fact been getting hoodwinked either by malingerers or by psychiatrists? And I'll be candid to say... I was a trial judge once, and I'll be candid to say that I thought juries were very good at smelling this sort of thing out and I never, as a trial judge, had the impression that juries were particularly impressed with psychiatric testimony at all, and I... is there any indication that in fact the practice of deception was more successful than I was observing it? W. A. Edmondson: Judge... Your Honor, there are, of course, studies about the effects of malingering, and there is the fact that it has reached the stage where it is a separate diagnosis under the Diagnostic and Statistical Manual, Fourth Edition. I don't know-- Antonin Scalia: What do you mean, a separate diagnosis? You mean that itself is a psychiatric disease, malingering is? W. A. Edmondson: --It is not classified as a disease, it is classified as a finding. Antonin Scalia: Oh. W. A. Edmondson: With requisite elements to make that finding. John Paul Stevens: Even the psychiatrists can tell. You got that right. W. A. Edmondson: None were presented in the context of this trial below, and I doubt if it would be very easy to get a collection of jurists who were willing to say that they were in fact hoodwinked by an accused who was falsely claiming incompetence. I would suggest that in the context of this case the accused might have been well advised to demand his jury trial because the jury would not have had what the court had, which was the repeated statements by defense counsel that in their opinion the defendant was faking, and I doubt if counsel would have made those same statements, which they were required in candor and under disciplinary rules to tell the court, I doubt if they would have made those same statements to the court... to the jury, had a jury trial been demanded. Now, whether the jury under those circumstances would still have denied the finding of incompetence is pure speculation. I don't know. David H. Souter: I would... let me ask you... I don't want to go off on a tangent of the details of this case, but if he really had demanded a jury trial, wouldn't the State have had the opportunity to require his counsel to testify after there being a substitution of counsel? W. A. Edmondson: The case law and the statutes of the State of Oklahoma are absolutely silent on this. The standards of the American Bar Association provide that there are circumstances in competency proceedings where counsel might not only be a witness but might be the best witness, and I do know as a matter of practice that courts pay great deference, particularly in the application stage, to a presentment by counsel that in his opinion this... his client is not competent to proceed. David H. Souter: So probably you could have gotten it in front of the jury if it had become a jury issue. W. A. Edmondson: I don't know the answer to that question. I do know that under these ABA standards, even if counsel becomes a witness as to the manifestations of his client, he cannot be inquired as to communications with his client over his objection. Stephen G. Breyer: Is there anything else you want to say in response to what I've raised before, which I take it as being that he's saying under your test the only difference is that there will be five people in prison or executed who absolutely were the same as if they were in a coma for every one who is a faker who you caught by this test, and you don't need the test to catch the fakers, because the fakers are going to be put in mental hospitals anyway. Now, I know I raised that before, but I just wanted to be... you then went off on a number of other things, and I wanted to see if you-- W. A. Edmondson: Justice Breyer, I would have to concede that Oklahoma has not constructed a perfect system. I don't know if any State in the Union has. I will concede that there will be errors. I do not concede that there have to be errors. I do believe that the clear and convincing standard in a case of actual incompetence is a standard that can be met, and that truly in-- Ruth Bader Ginsburg: --What about beyond a reasonable doubt? Could Oklahoma go that far? Could you say, we have a real problem with people faking it, so we want to ratchet it up one notch higher and say, if you're going to avoid trial on grounds of incompetency, you have to show you're incompetent beyond a reasonable doubt? Is that-- W. A. Edmondson: --Justice Ginsburg, I would very much doubt if any State could enact beyond a reasonable doubt consistent with the fundamental requirement of fairness and an opportunity for the defendant, if he's the one presenting the cause of incompetence, to meet that burden of proof no matter... and we have enacted a great number of safeguards in the Oklahoma statute, but I don't know if they would be sufficient to require beyond a reasonable doubt. No State has done that, except the State of Maryland, and they place that burden on the State. Antonin Scalia: --So-- --Of course, you're not prepared to concede, I take it, that innocent people are necessarily going to go to prison because of this. All that we're talking about is deprivation of the value, whatever it's worth, of being able to advise your attorney during the proceeding, and you know, it's not clear how many defendants profit considerably from being able to advise their attorney during the trial. W. A. Edmondson: Justice Scalia, I do not concede that innocent people are going to go to prison. I-- Ruth Bader Ginsburg: Are you saying there isn't any fundamental right involved, because that's important. If there is a fundamental right involved, that's one thing. If there isn't, then there's no due process claim here, but I thought you recognized that yes, there is a fundamental right not to stand trial when one doesn't understand what's going on. W. A. Edmondson: --Not in those terms, Justice Ginsburg, but there is a fundamental right, under due process, not to be tried while incompetent. Ruth Bader Ginsburg: All right. If there is that fundamental right not to be tried while incompetent, can the State say, but you're not going to be able to prove... to have available that fundamental right you have to show incompetency beyond a reasonable doubt. I thought you said that would be going too far, that that would cross the constitutional... that would go from what's constitutional-- W. A. Edmondson: I think, consistent with Patterson v. New York, a State has great latitude in constructing the procedures to guarantee that right. I don't know if that latitude extends to beyond a reasonable doubt. William H. Rehnquist: --Thank you, General Edmondson. W. A. Edmondson: Thank you. William H. Rehnquist: Mr. Ravitz, you have 5 minutes remaining. Robert Alan Ravitz: Thank you, Mr. Chief Justice. Addington cannot be read to require the individual to bear a high burden before his constitutional rights will be honored. The judge in this case was given an opportunity to find malingering. The prosecutor argued it. The judge did not find malingering. Sandra Day O'Connor: Now, the defendant here never asked for a jury determination of competency. Robert Alan Ravitz: That's correct, Justice O'Connor. Sandra Day O'Connor: Why is that? Were you involved at the trial? Robert Alan Ravitz: Yes, sir... yes, ma'am. You can't win a jury trial on incompetency on a clear and convincing standard. It's impossible. It's just not done. That's why we never asked for it. We hope that the trial judge will do it. In the other States that Mr. Edmondson talks about, they all do it with decisionmaker satisfaction, or something similar to that. I'll take decisionmaker satisfaction. But here, the decisionmaker was able to utilize this higher standard, a standard that was initially enunciated to protect individual-- Antonin Scalia: How fundamental is this right, Mr. Ravitz? That's what it comes to. Robert Alan Ravitz: --I think-- Antonin Scalia: We've... it's always been... some legal systems, of course, allow a trial in absentia, where he's not only incompetent, he's not even there. He's not even physically there, much less mentally there. Robert Alan Ravitz: --Less than 4 years ago, Justice Scalia, in Medina, this Court said it was a fundamental right. I mean, if the Court says it's not an important fundamental... to me, it's really important. To me, it's real important to be able to talk to my client, to be able to find out about the case, to find out the individual's culpability, and I can't do that when my client is incompetent, and we... Oklahoma is asking you to try individuals who are more than likely incompetent, and the State of Oklahoma has no legitimate interest in minimizing correct or just determinations of competency, and that is exactly what they're doing. Thank you. William H. Rehnquist: Thank you, Mr. Ravitz. The case is submitted.

Warren E. Burger: We will hear arguments next in Insurance Corporation of Ireland against Compagnie des Bauxites. Mr. Trent, I think you may proceed whenever you're ready. Edmund K. Trent: Mr. Chief Justice, may it please the Court: This case comes before this Court on a cross-petition for certiorari to the Court of Appeals for the Third Circuit, brought by the Appellants there, Defendants in the District Court for the Western District of Pennsylvania. The pleading in suit was the second count of the complaint by the Plaintiff, the Compagnie des Bauxite de Guinee, a non-Pennsylvania corporation, against a number of Defendants, including the 14 Cross-Petitioners, non-Pennsylvania insurance companies... Indeed, they were non-American insurance companies... on contracts of insurance made in London insuring a risk in Africa. The Defendants pleaded lack of personal jurisdiction and filed a motion to dismiss for want of personal jurisdiction. The Plaintiff requested the Defendants to produce their insurance policies covering Pennsylvania insureds, Pennsylvania risks, and emanating from brokers in Pennsylvania. At the hearing before the district judge on the motion to dismiss and on the Defendants' objections to the request for documents, the counsel for the Defendant insurers, two young people from New York at the time, pointed out to the court that the Defendants did not have copies of their policies in their possession. The contracts of insurance consisted of for the most part each contract a single piece of paper called a placing slip, where the terms of the risk were summarized in shorthand form, abbreviated form, in accordance with the practice in London. And so then the district court said, well... oh... the Defendants' counsel said: These are in the hands of about 150 brokers in London. According to British practice, the broker is not the agent of the insurance company, but the agent of the insured or the prospective insured seeking insurance. And so the district judge said, request them from the brokers. New York counsel for the insurers went to England to see what he could find out about these things. In effect, he undertook to do what the court had ordered him to do. And he found there that there were about four million files involved in these policies, because the insurers did not have indexes relating to Pennsylvania. Their indexes were based on large geographical areas. The continent of North America was the smallest group that they had. And so he came back and, within the time allowed by the court as extended for 30 days, he filed an affidavit offering to produce all the Defendants' own records, these placing slips, at their places where they were kept in England, mostly in London, and for one of the Defendants in Tel Aviv, where its records were kept. At the hearing... oh, the Plaintiff then filed a motion to compel, and at the hearing on that motion the district judge said, I'll give you another 60 days to get these policies from the brokers. Speaker: Did the district court at that time, Mr. Trent, say where the production should take place? Edmund K. Trent: Not expressly, no. But the request for documents asked for them to be brought to the office of Plaintiff's counsel in Pittsburgh, and it was assumed that that's where they were to be produced. Speaker: Is that disputed at all or does everybody agree? Edmund K. Trent: I think everyone agrees on that. There was no specific statement by the court that they should be produced in Pittsburgh, but everyone assumed it because the request for documents said to produce them at the office of Plaintiff's counsel in Pittsburgh. Speaker: Counsel, insofar as I was able to determine reading the briefs, the Defendants at trial indicated that that would basically be possible; it was a question of when, not if. Is that right? Edmund K. Trent: To produce in Pittsburgh, you mean? Well, it would be possible, yes, to bring 4,000, four million files to Pittsburgh. But as a practical matter I would say no. I question even whether Hercules could do such a thing, and we have no one of his caliber on our staff. As a practical matter, it was impossible. When-- Speaker: And that position was articulated at all times before the district court? Edmund K. Trent: --Yes. It was not-- Speaker: That it was impossible physically? Edmund K. Trent: --Well, I can't say that it was expressly said, but it would seem to me that it's just obvious that you can't bring four million files across the ocean as a practical matter. And that was the position that we took. Now, then the district court gave the Defendants another 60 days to get the policies from the brokers in London. The Defendants then sent letters to roughly 150 brokers, and the brokers answered that it was impossible for them to get these policies out of their files or that it was impossible to do it within the time limit, which was a little less than 60 days by the time they got the request. So that there they were taking the definite position that it was impossible because their files too were not indexed according to the states in the United States. After that the Plaintiffs filed a motion for sanctions to have the court find that the Defendants were subject to jurisdiction in Pennsylvania. While that motion was pending, the Defendants, based on some newly discovered evidence which they had received a few months before, filed an action in London for a declaratory judgment that they had the right to avoid, as the British term is, to rescind the contract, because of the failure of the Plaintiff to disclose material information at the time they asked the Defendants to assume the risk. The Plaintiff then filed a motion to enjoin that London action, and at the hearing on the preliminary injunction the district court entered a sanction, finding the Defendants subject to jurisdiction and entered a preliminary injunction enjoining the action in London. About two months later, on the Plaintiff's motion he entered orders saying that the jurisdictional finding is conclusive, there shall be no discovery on jurisdiction and no testimony on it at the permanent injunction hearing. Then on appeal to the Court of Appeals, the Third Circuit, in an opinion by Judge Aldisert, reversed the injunction, but affirmed on the jurisdiction. Plaintiffs filed a petition for certiorari on the injunction, which is still pending, and the Defendants filed a cross-petition on the jurisdiction, which Your Honors granted. Speaker: Mr. Trent, before you get into your argument could I ask just perhaps kind of a stupid question? What is the position of these British insurance companies as to where they should properly be sued? Edmund K. Trent: Where they should be sued? In London. The custom over there is that if-- Speaker: That if an American company enters into an insurance... gets insurance from an English company, they're expected to sue in London? Edmund K. Trent: --Yes, because the way that the insurance is placed, it's the broker in London who makes the contract with the insurer there. Speaker: And they wouldn't even have been subject to suit in West Africa, either? Edmund K. Trent: No, unless it's stated on the placing slip, it's assumed that it will be in London. Now, in the present case the insurers, the underwriters who accepted the contract for the insurers thought that this was a Guinean company in Africa. They had no knowledge at all that the Plaintiff was a Delaware corporation. Its name being in French and French being the language in the Republic of Guinea, they thought it was a Guinean risk. As a matter of fact, the testimony was they thought they were reinsuring a Guinean company, because many of the countries there have preference for their own insurance companies and the London companies then reinsure them. The Court of Appeals in... well, I should say that the question is then whether the sanction was proper. The Court of Appeals held that it... no. And we say that depends on two things, whether a court can make a sanction, make an order requiring discovery and impose a sanction for not obeying before the court has found the Defendants subject to personal jurisdiction; and second, that the order in this case, the sanction order, is valid only if the discovery order is valid, and a discovery order requiring us to bring four million files from London to Pittsburgh is a complete abuse of discretion, it's impossible. The Defendants could not comply with it and therefore they didn't willfully disobey it. It was just impossible to obey. And there's not a shred of evidence in the record that the young New York lawyers who were handling the matter were contumacious in any way. They were trying to do what the court wanted them to do, and when they-- Speaker: Mr. Trent, that's I think the third time you've used the phrase "young New York lawyers". I take it you wish in some way to disassociate yourself from-- Edmund K. Trent: --Well, I beg Your Honor's pardon. I was in effect excusing them because of their lack of experience. They are very nice people. Speaker: --Excusing them for what? Edmund K. Trent: For not immediately saying, we will produce these things in London. They first... they tried to get-- Speaker: But they did have authority to represent your clients at the time? Edmund K. Trent: --Oh, absolutely. They were in charge of the case. Speaker: And we must presume they are duly admitted and competent lawyers, even though they're young. Edmund K. Trent: That's right, Your Honor. Now-- Speaker: Counsel, was the court's order to produce only the files on policies issued by these companies to people in Pennsylvania, or was the order to produce all four million files? Edmund K. Trent: --The order was to produce the Pennsylvania policies, but in order to do that the brokers in London and the Defendants in London would have had to go through four million files to see which ones related to Pennsylvania. Now, in the course of one of the hearings, arguments in court, the lawyer from New York said: Well, suppose we admit that we're doing one percent, we get one percent of our income from Pennsylvania. Will that satisfy? And Mr. Mellott for the Plaintiffs said: No, I will not take your word for that. I want to see all the records to make sure that you're showing them all to us. So we would have had to bring four million files over, even if we had been able to sort out just the Pennsylvania ones, because Mr. Mellott was not willing to accept the representation-- Speaker: But that was not the court's order, in any event? Edmund K. Trent: --No, the court's order was just the Pennsylvania files, that's right. Speaker: How much easier would it have been to get into these records in London once they're identified? Edmund K. Trent: Oh, they're there. They're all available. It would be just a matter for the Plaintiffs' counsel to go and look at them and see. He would have to dig it out, and the cases say that the party seeking discovery has to bear the burden of whatever work it is to find what he wants. Speaker: Mr. Trent, if I find myself unable to excuse what these lawyers did because they're young lawyers from New York, do you lose? Edmund K. Trent: If you do not excuse them? Speaker: If I find that I just can't excuse them-- Edmund K. Trent: Cannot excuse them-- Speaker: --because they're young and inexperienced-- Edmund K. Trent: --Well, I don't think that would. Speaker: --did you lose? Edmund K. Trent: No, I wouldn't think I would lose on that. Speaker: All right, Well, you act like it. Edmund K. Trent: Well, I beg your pardon. I was trying to in effect explain what took place. Speaker: I took it that your reference to these young men was to indicate that there was no deliberate, there was no xx conduct on their part. Edmund K. Trent: Right, right, exactly, Your Honor. That's true and that's correct, and I don't think the other side contends that there was. Their principal basis is that we just did not produce the records in Pittsburgh. Now, on the Court of Appeals Judge Aldisert... there's a split of authority in the circuits. The latest case before this one was the case in the Fifth Circuit, Familia de Boom v. Arosa Mercantil in the Southern District of Texas, where the district court had dismissed an action because the plaintiff did not comply with... answer interrogatories. And the Fifth Circuit, reversed that and said you cannot make an order requiring them to answer interrogatories until your first have jurisdiction over them. The second ground for the Court of Appeals ruling here was that... Judge Aldisert admitted that the general rule is that where the documents are voluminous the party seeking... wanting to look at them must go where they are. But he said that's a matter of discretion for the district court and we cannot find that... we can't say we disagree with it. Now, we say that that is completely wrong, that it was an abuse of discretion to require us to bring four million files over to America, and we've cited cases in the brief that support that. Speaker: Would it not have been compliance with the order for your people in London to search through the files and found those that showed American business and just brought those? Edmund K. Trent: Yes, but that would have been a Herculean task, because they had no indexes. They would have had to examine-- Speaker: Well, you said a moment ago that if Plaintiff's counsel went over the files would be available to them. But it would also be a Herculean task for the Plaintiff's counsel. Edmund K. Trent: --Yes, that's right. And because the Plaintiff is seeking the information, the Plaintiff must bear the burden of that. Speaker: And there is no way in which these companies can find any shortcuts to know how much business they've done in Pennsylvania, I guess? Edmund K. Trent: Well, two of them by... or some of them, by taking files for a limited period, part of the period... the period they asked for was about six years. They took part of a year or a year or something, and then they made estimates, and they all said, well, we don't do more than one percent. That was-- Speaker: How would they even know about the one percent? That's what puzzles me. Edmund K. Trent: --Well, I think that was just the general feeling of the underwriters. Speaker: I mean, I'd assume there'd be some executives who would remember some policies that came from-- Edmund K. Trent: Oh, I think they could have remembered some particular ones, but that wouldn't satisfy the Plaintiff. And by taking-- Speaker: --There was no attempt to sort of say, well, maybe we... if we give you everything we can find in the first few days of search or something. Sometimes these things can be worked out. Edmund K. Trent: --Yes. Well, that was where they got their one percent, by looking at a short period. Speaker: Yes. Edmund K. Trent: But there was never any proposal by the Plaintiffs to accept something like that. They wanted the whole thing and they wanted to look at every paper in the file to make sure we weren't withholding some. So as I see it, the way these things ought to be handled is if there's no jurisdiction... until jurisdiction is found, there's no power in the court to enter any sort of order against a defendant. But the plaintiff is not without a remedy there. That was one of the things Judge Aldisert said, that it was necessary to do this, otherwise how can the Plaintiff prove his case of jurisdiction. All they had to do was to initiate discovery against us as non-parties. The British statute permits that. We would have had to produce our documents pursuant to subpoena in London, and then they could have looked at them. Now, as a practical matter we weren't going to insist on that. We said, sure, come over, we'll let you see them. And if they then wanted to look at the brokers' records also, they could have subpoenaed them. But I think the brokers would have let them come and look at them. They... except for, one of the brokers said these things are confidential. The others did not object to producing them as such. They objected because it was just such a terrible job to do. Speaker: Well, it's your position, then, that the extreme nature of the discovery required by the district court, as you regard it, really doesn't have any bearing on this case, because I take it you would have objected on your jurisdictional argument to even requiring one witness who resided in Pittsburgh to be deposed on the jurisdictional issue. Edmund K. Trent: Yes, yes. Well, we had the right to do that. I can't say that I would have objected if they wanted to take one. Now, I have said in one part of my argument that these files in the... policies on the brokers' possession were not subject to our control. As a practical matter they were not, because the brokers would not produce them, although I think we had a legal right to get them from the broker. After all, when the insurance company writes insurance and signs a policy and the broker keeps it, the insurance company has a right to get that. But the general rule in the law is that if a party which has control of another's documents, a non-party to the action has control of the documents of a party and the party says, please give them to me, and the person with custody says, no, I won't, then it's up to the other party to the case who wants them to go after that party who has the custody. And I cited some cases on that. Because they wouldn't produce them for us. So... I started to say that the best way to resolve this would be if there is a... jurisdiction is contested and then the party asserting jurisdiction would file affidavits and the other one would file affidavits. And if they're conflicting, then you cannot... you could dismiss the motion to dismiss. You could deny the motion to dismiss, but you couldn't grant it on conflicting affidavits. You would have to hold a hearing, and that I think should have been done. Judge Simmons in the district court should have held a hearing and tried to resolve, to see whether there would be evidence to support a finding of jurisdiction, and then he could order discovery to get more evidence. But he didn't do that. At the same time as he made his injunction order, he entered a sanction and we had no opportunity, then, to try to comply with the sanction. I would like to reserve the remainder of my time for rebuttal. Warren E. Burger: Very well. Mr. Mellott? Cloyd R. Mellott: Mr. Chief Justice and if it please the Court: It is the position of the Cross-Respondent that when a party to a litigation in a federal court comes into the court and asks for a binding determination of no jurisdiction... and incidentally, it was not a motion to dismiss under 12(b) that was filed here. It was a motion for summary judgment that was filed 18 months after the action was commenced. Motion for summary judgment was filed asking the court to determine... make a binding determination that there was no personal jurisdiction over 17 of the excess insurers. Now, not only did the excess insurers come into court and ask for that action by the court; the excess insurers took advantage of the discovery rules themselves. They served us with a request for production of documents. They served us-- Speaker: How many documents? Cloyd R. Mellott: --Well, they asked us to produce policies which they had issued to CBG or to Halco or to another affiliated company, and to produce policies which had been referred to in an affidavit of Marsh & McLennan, policies which Marsh & McLennan, a broker in Pittsburgh, had written for either Halco, CBG... and when I say CBG I mean the Cross-Respondent here... or Alcoa, in which Marsh & McLennan state in the affidavit during a period, I believe, from 1971 until 1975, when the lawsuit was filed, they had written numerous policies for each of the excess insurers here involved, and they list them by number... it appears in the appendix, Your Honors... setting forth the number of contacts that they'd had in Pennsylvania. When we tried to obtain additional information concerning policies written for other companies, we of course were unable to get them from Marsh & McLennan. Speaker: Mr. Mellott, it was never clear to me reading the briefs whether it was your position in the lawsuit that your clients had jurisdiction because of the Pennsylvania contacts related to these particular policies alone, or whether it was your position that there was jurisdiction because the original Defendants had done so much business in Pennsylvania that there was general jurisdiction. Cloyd R. Mellott: Justice... excuse me. I didn't mean to interrupt. It was our position that we had jurisdiction on several grounds, and Judge Simmons so found in his preliminary findings and in the findings on the permanent injunction. We contended, first of all, that there was sufficient contacts in this particular transaction. I find myself disagreeing completely with the statement of facts which Mr. Trent has stated to this Court and I think the record will support-- Speaker: Well, if you were willing to rest on that you wouldn't need all these four million files. Cloyd R. Mellott: --Your Honor, we also contended that they had conducted sufficient other business in Pennsylvania so as to meet the tests under International Shoe and other cases which this Court has decided. And we contended that they had adopted the primary policy. You see, we have a policy covering the first $10 million of loss with INA insurance company in Philadelphia, in Pennsylvania. The excess insurers do not deny that they adopted the terms of the primary policy. But they would have us sue INA in Pennsylvania and them, at least some of them, in London and one of them in Brussels. We submit that when they adopted the terms of the primary policy they were subject to suit where the primary insurer was subject to suit. We also contend that there was an implied term in the policy that they would consent to suit in Pennsylvania. Other policies... and they're listed in the record... other policies had been issued to my client previously in which most of the excess insurers were involved, in which there was a consent to suit clause, anywhere. Speaker: If there is an implied term in the policy, why is there any need for an express consent to suit clause? Cloyd R. Mellott: Well, Your Honor, obviously I was trying to prove jurisdiction on one of several grounds, and the Defendants were contending that they didn't do enough business here... or in Pennsylvania... to be subject to suit there. And it seemed to me that when they're coming into court and asking the court to make a binding determination of no jurisdiction on the ground that they don't have sufficient contacts in Pennsylvania to satisfy the tests under International Shoe, that by doing so they've at least agreed to produce or consented to the jurisdiction of the court to produce those facts which are relevant to that determination. Otherwise it seems to me, Your Honors, it's a complete abuse of our judicial process. Furthermore, there is evidence in the record, contrary to what Mr. Trent says, that the excess insurers knew that INA was the company that had written the primary insurance, that they knew of the contact with Pennsylvania. We have affidavits from the brokers, we have testimony on depositions. The excess layer was $10 million. 40 percent of that was reinsured with INA Reinsurance in Brussels. The same London broker who the excess insurers would have this Court believe for all purposes is the agent of my client, at the same time they were negotiating the excess layer of coverage, they were also negotiating the reinsurance, not for my clients but for the excess insurers, with INA Reinsurance in Brussels. That company took 40 percent of this excess layer of $10 million. That company is an affiliated company with the primary carrier. That company had full information in its files, furnished by the broker, concerning CBG, its U.S. connection, the fact it was a Delaware corporation, who its owners were, completely consistent with the affidavit of the London brokers as to what they had in their files and what was available for the excess insurers to see. Now, if they gave it to the reinsurance company, I submit there is reason to believe it was also given to all of the excess insurers. There are a lot of other misstatements of fact which appear in the brief and which were repeated here again today. Now, the only way that I can explain it is that Mr. Trent came into this case some time after the sanctions were entered. I've been in the case from the beginning. There was never a question at any time in any of the proceedings as to whether the documents had to be produced in Pittsburgh or in London. There was never an objection made by the excess insurers on that basis. I never refused to go to London to look at documents. The court never really ordered them to produce them in Pittsburgh. As a matter of fact, as Mr. Trent should know, I went to London and to Europe, to Brussels, both before and after this offer that was made four months after they were ordered to produce the documents, to look at documents when the documents were produced. What did happen here? A motion... after they filed the motion for summary judgment claiming no in personam jurisdiction because, they said, they didn't have sufficient contact... the fact is they had initially filed affidavits in connection with the motion for summary judgment in which all 17 denied any business in Pennsylvania. But after we filed counter-affidavits establishing business to the extent that we were able to prove it, they filed new affidavits, in 13 of which these excess insurers acknowledge under oath that they are engaged in writing insurance and covering risks on a worldwide basis. They don't exclude Pennsylvania. Pennsylvania is a rather commercial state, with a lot of industries that are engaged in business worldwide. In some of these affidavits we find representations that they conducted... that they had reviewed some of their files and that they had determined that certain percentages, either one percent more or less, had been determined to be derived from Pennsylvania. Now, that's not just in a representation of counsel, as I understood Mr. Trent to indicate to the Court previously. It is in signed, sworn affidavits of the excess insurers. Justice Stevens, I believe asked the question about, how did they know. Well, presumably, at least the representation made to the court was that the files had been reviewed to support the affidavit, not that they had some general understanding out of the air. Now, it may be, and I submit should be, that one percent of their premium income, which in all probability runs into the millions of dollars, is enough contact with Pennsylvania to meet the test of International Shoe. And when they... when we were in court and they asked whether that wasn't adequate, whether I wasn't satisfied with that, I said that if you are still contending that that extent of business does not meet the regularity test then I want you to produce the documents, as you were originally ordered to do. And they said, what difference... the lawyer said, what difference does it make whether it's one or two percent? Well, I offered to withdraw the request for production of documents if they would acknowledge that the one or two percent of their business was sufficient to meet the tests of the Pennsylvania long arm statute and the requirement of International Shoe. They were not willing to do that. They still contended that the contacts were not adequate. Now, they were originally ordered to produce, on July 27th, 1978. Mr. Trent would have you believe, and in fact says so in his brief and in his reply brief and intimated it again today, that the lawyers from New York, who are experienced insurance lawyers in the international insurance field, immediately went to London to contact the brokers. In fact, that's what he says in his brief. There's no citation to the record for that. Speaker: Counsel, do you agree with Mr. Trent that the order to produce did contemplate production in Pittsburgh? Cloyd R. Mellott: No, Your Honor, I do not. Speaker: Where do you think it contemplated production? Cloyd R. Mellott: Your Honor, I think that matter was never settled. They never objected. At any time there was any discussion about this matter on the record, Your Honor, they never objected that it was the burden to bring it to Pittsburgh. That's not in their objections. The burdensomeness that they objected to was the collection of the documents. The only objections in the record to this production, contrary to what Mr. Trent has indicated in his brief and again today, are objections as to relevancy... I think it's clearly relevant... and objections as to burdensomeness from the standpoint of having to contact the brokers to get the documents. Speaker: Well, but if as you say there really was no place for production specified, then they would have had no occasion to get into the question of whether it was too burdensome to bring it, once it had been assembled, from London to Pittsburgh. Cloyd R. Mellott: Well, Your Honor, in the order which the judge entered there was no provision for place of production. And we had gone to London previously to look at documents. We were perfectly willing to go again, and I'm sure the lawyers so understood. That to me is a red herring that's come into the case after the sanctions were entered. It's not something that was involved at all. We went to London and looked at their documents. We went to Brussels and looked at documents. We did it both before and afterwards. Now, the problem is, at the July 27th, '78, hearing the counsel from New York told the court they'd have to contact brokers, there were 150 brokers involved. In fact, they had filed an affidavit earlier that day in which they said there'd be 150 brokers involved and it would require contacts. The judge suggested that a letter be written to the brokers, a form letter. This is in July. And there was no objection at that time that they were outside of the control of the excess insurers. When was the letter finally written to the brokers? Six months later, in January 1979. Even though at the July hearing their counsel is saying, the documents you want are in the hands of the brokers, they're not saying, however, that they're outside their control... and if I understood Mr. Trent today, he's now not suggesting that either, because I think clearly they are not outside the control of the excess insurers... instead of immediately going to London, as Mr. Trent indicates in his brief, and in his reply brief, and again today, they admitted five months later at the December hearing that they hadn't contacted even one broker, five months after they had been ordered to do it. As a matter of fact, they had only contacted 15 of their 21 clients. They hadn't even contacted all of them. And that's conclusively established by the affidavit that they filed in November, and by the-- Speaker: Mr. Mellott-- --Where is that affidavit? Cloyd R. Mellott: --It's in the record, Your Honor. Speaker: Well, we don't need to take your time hunting it up. Cloyd R. Mellott: The affidavit is at 98a and 99a. Speaker: Of? Cloyd R. Mellott: Of the appendix, volume one. Speaker: What volume, what volume? Cloyd R. Mellott: Volume one, Your Honor. Speaker: Okay. Cloyd R. Mellott: Now, the admission as to the fact that they hadn't contacted any brokers as late as five months after they were originally ordered to produce the documents and the judge had originally suggested that they do it appears in the transcript of the December 27, 19... or December 21, 1978, hearing, which also appears in the joint appendix, volume one. It starts on page 105a. At none of the... well, first of all, the judge gave them all the time they wanted in-- Speaker: Counsel, you went to London and looked at the documents? Cloyd R. Mellott: --Not these documents, Your Honor; other documents. Not these documents. They did produce some other documents, Your Honor, but not these. Speaker: Did you make any attempt to review these documents for business in Pennsylvania? Cloyd R. Mellott: Your Honor, prior to the time that the sanction was he entered, except for the offer to produce four million files... and while it's been characterized in the brief and here today as being a list of the North American files, it was never so identified to us, nor was it so identified in any of the papers or in any of the discussions. All it was was an indication to us that they would open the files of 15 of the excess insurers. That's were the four million files were supposed to be located. At the same time they're telling us that the files are in the hands... the documents that they were ordered to produce are in the hands of the brokers. So these four million files may or may not contain what they were ordered to produce. Speaker: Well, time is getting away and I have two questions-- Cloyd R. Mellott: All right. Speaker: --I'd really like to hear you address. And one is the question of whether it was an abuse of discretion for the court to order the production of four million files. And secondly, if not and if the court could properly impose sanctions in this discovery effort, was it an abuse of the court's discretion to prevent any further litigation of that problem at the trial on the merits, the jurisdictional question? Cloyd R. Mellott: Your Honor, in the first place, Judge Simmons did not order the production of these four million files. He ordered... and he changed our request after the counsel for the excess insurers had presented arguments. All they were ordered to do was to give us names of the policies, the policy numbers and the general outline of those policies which had a Pennsylvania contact, either by being written for a Pennsylvania insured, being written through a Pennsylvania broker, or covering a risk in Pennsylvania. Now, that's what they were ordered to do. I submit, Your Honor, that when they made this offer, four months after they had been originally ordered to produce, it was not an offer that complied with what they'd been ordered to do. I mean, on the one hand they're telling us they don't have the files, they're with the brokers... although they never said that they were outside their control... I mean, that they didn't have the documents. On the other hand, after coming to the court at the end of the 90 days, asking for an extension of time and representing to the court that in all probability we can comply with the court's order within 30 days, and the court granted an extension of an additional 30 days, all we get is a two-page affidavit, the end of November, four months later, which simply says 15 of the companies will open their files. Now, those are not the documents the court ordered produced. There was not even any representation that those included the documents which were produced. In fact, if you believe them when they say that the documents that we were requesting were in the possession of the brokers, those files didn't even include any of them. Speaker: If we assume for a moment that the court had the power to enter some sanction and to compel discovery for the purpose of reviewing its own in personam jurisdiction, do you think the court also properly precluded any further consideration of that issue at trial? Cloyd R. Mellott: Well, I think the court did, Your Honor, and I think by virtue of the holding of this Court in the National Hockey League case that's required. If sanctions are going to mean anything and have any deterring effect, you can't say that once the sanction has been entered it can be removed by compliance later. All that'll do is bring about a complete abuse of the discovery process. Speaker: That doesn't necessarily follow, it seems to me. Maybe this particular sanction was not the correct one. Maybe there should have been a monetary sanction based on all of your time and energy and interest and all the rest, and delay. Wouldn't that serve a deterrent purpose? Cloyd R. Mellott: Your Honor, I submit that it was not... and I'm not even sure that it's the case today. The Defendants haven't even today, so far as I know, offered to produce the documents which they were ordered to produce. Now, Mr. Trent after he got into the case made a new offer, and it's not clear from the offer whether he's talking about producing the documents including those from the brokers or whether he's talking about the same four million files. But in any event, Your Honor, I don't agree with what Mr. Trent said about my view as to whether the lawyers acted in good faith or not. I do not believe they acted in good faith. I think they did not act in good faith, as the Third Circuit found. And I think a review of the record will make it very clear here they did not act in good faith. And the judge gave them nine months to comply-- Speaker: It seems to me that all of that goes to the question of what would be an appropriate sanction. Maybe you're dead right that you were really given a terrible run-around here and entitled to a very severe sanction. The legal question, though: Is it correct for the sanction to be a finding of jurisdiction when in fact there may be no jurisdiction? Cloyd R. Mellott: --Well, if Your Honor please, I think if you look at the evidence that's in the record... and I submit that there is adequate evidence in the record for the court to find jurisdiction even now on the face-- Speaker: Well then, really, you've spent an awful lot of time on an unnecessary project. Cloyd R. Mellott: --Well, that may be, except that there's a lot of money involved in this case, Your Honor, and... the suit was filed in December '75. Here we are in March of 1982. And most of the reason why this case isn't to trial-- Warren E. Burger: We'll resume there at 1:00 o'clock. Cloyd R. Mellott: --Thank you, Your Honor. Warren E. Burger: You may resume, counsel. Cloyd R. Mellott: Mr. Chief Justice and may it please the Court: I would like to continue with my response to Justice Stevens' question. There are three points that I would like to make in response to your question as to whether a money sanction wouldn't have been better. Maybe I haven't phrased it exactly as you did, Your Honor. In the money sanction, as I understand it, you were suggesting that they pick up the expenses that were involved from the delay. I submit, Your Honor, that that type of a sanction would have no deterrent effect on the type of misconduct that was engaged in here, particularly in a time of high inflation, which we had during the period of dilatory tactics. Speaker: You mean deterring other people or being effective in this case? Cloyd R. Mellott: Deterring other people, Your Honor. Speaker: Well, what do you care about that? You just want-- Cloyd R. Mellott: Well, what I'm suggesting-- Speaker: --to deter somebody in this case, don't you? Cloyd R. Mellott: --Well, yes, Your Honor, I'm really primarily concerned in this case. But I'm suggesting that the sanction that was imposed here is fully in accordance with the provision of Rule 37(b)(2)(A), which presumes under that rule that the facts which would be established if the discovery were complied with are deemed to be established. And that's exactly what Judge Simmons did, and he did it only after he had warned them, five months after he had originally ordered the production, he warned them that if the production wasn't made in another 60 days the sanction of the type he's mentioned would be entered. He gave them actually 120 days, so that they had a total of nine months to comply. And they didn't comply. Furthermore, I submit that sanction is in accordance with the rules and... the rule, Rule 37, and with the decisions of this Court in the National Hockey League case, in which the sanction of dismissal was used, which is even more severe than the sanction here involved. At least they still have an opportunity to defend on the merits. Furthermore, I think it's in accordance with the holding of this Court in the Hammond Packing case, in which a sanction of a dismissal-- Speaker: I'm not so much concerned about the severity of the sanction as the question of the theory by which, if there in fact is no jurisdiction how does the court have power to impose it? Cloyd R. Mellott: --Well, Your Honor, on that point, I submit that when a party comes into court and asks the court to make a binding determination that there is no personal jurisdiction over him, and when that party engages in discovery against another party already in the case-- Speaker: All these arguments are arguments that you didn't really need the discovery that gave rise to the particular order before us, because those are independent grounds for jurisdiction. Cloyd R. Mellott: --What I'm saying, Your Honor, is that when they come into court and ask for a binding determination of the court, as the Fourth Circuit held in the Lekkas case which we've cited in our brief, they are deemed to submit to the jurisdiction of the court, at least to the point of providing relevant evidence on the issue that they've asked the court to decide. It seems to me it would be a complete misuse of our judicial process-- Speaker: Would you mean the court has jurisdiction has to determine its jurisdiction, and that there were efforts, you say, that frustrated the determination of jurisdiction and therefore this drastic step is taken? Cloyd R. Mellott: --That's correct, Your Honor. I mean, it would be a real misuse of process to say on the one hand, as this Court has said, that there is jurisdiction to determine jurisdiction, and that a party can come in and invoke that jurisdiction and yet say: but I'm not going to produce the evidence that's relevant to that determination; you have to decide it on what evidence is in the record; I'm not going to produce the evidence that's in my possession. Now, that's what the excess insurers ask this Court to hold. I submit that that would be clearly improper. I also would argue that this is a question... the test here is, did Judge Simmons abuse his discretion in applying this sanction? He warned them that it would be applied. They elected not to comply. And as I said this morning, I do not believe that their offer, their belated offer to open files of 15 excess insurers, was a compliance with the order to produce certain specific documents which they say are in the hands of the brokers, so they couldn't have been in the files that they were offering to produce in any event. Speaker: Does the record show what interest will be payable on the claims when, as and if they're allowed? Cloyd R. Mellott: No, they do not, Your Honor. But we have made a claim and we've amended the complaint to ask for an inflation factor, and the court has permitted that amendment. Now, whether we'll be able to sustain it ultimately or not I don't know. Speaker: Permitted the amendment? Cloyd R. Mellott: The court permitted the amendment only, Your Honor. Your Honor, I believe some of you asked me questions this morning about, why did you go ahead with the discovery if you felt so confident there was jurisdiction. Well, if this Court holds from the contacts, as I believe it could on the basis of International Shoe, that there's no need for this discovery, that there is sufficient evidence of contacts in the record, as I believe there is, then of course... I don't need the sanction, because there's no appeal from this decision. But I felt that I had to assert jurisdiction on every ground available to me, and that's what I tried to do, as long as they were trying to contend that there wasn't sufficient jurisdiction. Speaker: Does the order that was entered here foreclose any further investigation of jurisdiction? Cloyd R. Mellott: Yes, it does, Your Honor, primarily based on the reasoning of this Court in the National Hockey League case. Speaker: Was that specifically done under the rule? Cloyd R. Mellott: That was done subsequently by an order of court, Your Honor, that in view of the fact that one of the grounds for jurisdiction was that he had imposed a sanction under Rule 37(b)(2)(A) and based on the National Hockey League case, that that issue should not be further litigated. Speaker: And so the question of jurisdiction supposedly is no longer open in this case, is that it? Cloyd R. Mellott: That's right, Your Honor, on the basis of the reasoning of this Court in the National Hockey League case that if you permit them to avoid the sanction after it's been imposed by then complying with the court order, all you'd get would be dilatory tactics. Speaker: You are not now complying with a court order, proving that there isn't jurisdiction. That isn't the same as complying with the order. Cloyd R. Mellott: The court actually, in the preliminary injunction order and in the permanent injunction order, found jurisdiction on several grounds. Speaker: Yes? Cloyd R. Mellott: Including the sanction. And the court has held that, in view of the entry of the sanction, that the issue of in personam jurisdiction is no longer open for litigation, that it's finally binding on the parties in this case. Now, the Court of Appeals, I believe incorrectly, dismissed as to three of the Defendants, and that's part of what is included in our petition for cert to this Court, which the Court presently has under consideration, because we believe there is adequate evidence of contacts in the record. There is also evidence that they did not comply with the order, either. And our petition for cert also includes the injunction, a point which they-- Thank you very much, Your Honors. Warren E. Burger: Mr. Trent? Edmund K. Trent: Mr. Chief Justice, may it please the Court: One thing Mr. Mellott has just mentioned now and he mentioned as well before lunch, he said that we had asked for a binding determination of jurisdiction, not merely a motion to dismiss. Now, he is incorrect in that. On page 38a of the prayer of the affidavit which was filed by the New York lawyers under their New York practice, where they make an affidavit and contain the motion in it-- Speaker: That's 38a of what? Edmund K. Trent: --Of the joint appendix. Speaker: Volume one? Edmund K. Trent: Yes. "Wherefore, it is respectfully urged that the motion for summary judgment dismissing the complaint against the moving Defendants on the grounds of lack of in personam jurisdiction and forum non conveniens, be, in all respects, granted. " So all he was doing was moving to dismiss for lack of jurisdiction. He did not invoke the jurisdiction of the court by saying it had no jurisdiction. I think that's just a complete contradiction to say that. Now, one thing I think has not been clearly brought out here is to just what was being asked for in these records. First, the request for documents asked for the policies, and then the court said at the hearing on that, we'll get up this list in a general way. And Mr. Mellott then said, I want to see the policies. And then counsel for the Defendants said that the brokers had the policies, and so mister... Judge Simmons said, well, write to the brokers. So we understood that we were to get the policies. Then after New York counsel had gone to England to investigate the situation... and Mr. Mellott's correct, he didn't talk to the brokers, he talked to 15 of his clients, but they knew about the brokers and so forth... he came back and he made this affidavit... and there's not anything dilatory; he did it within the time... that it would involve four million files. Now, he was talking then about the insurers' own files, but they would show the same thing as the brokers' files. That is, the contract is the placing slip and the insurance company keeps that. The broker, as agent for the insured, then prepares a policy, gives it to the insured to sign and then takes it back and keeps a copy of it. So the same information would be in the brokers' files as would be in the insurers' files. So New York counsel, Mr. Bruckmann, thought, well, let us offer our own files and we will make those available. They would show the same thing as the brokers' files. Now, Mr. Mellott says that we never did offer to produce the documents anywhere. But after I got into the case, which was after the sanctions had been entered, I thought, well, let's see if we can get the... offer to produce them now and satisfy the court and be done with it. And so I expressly offered to produce all these files in London. And Mr. Mellott said, no, we're not interested in the files relating to jurisdiction now, and he prepared this order and he submitted it and the judge said he was going to sign it, barring us from ever contesting jurisdiction again. And I said, on the strength of that I offer to produce all these records in London on July 2nd, 1979. That's right in the record. So Mr. Mellott is incorrect to say we never did offer to produce the files. Speaker: You didn't offer to produce them until the sanction had been entered. Edmund K. Trent: No... well, that was my offer. But Mr. Bruckmann before the sanction had been entered, he offered to produce them in London, and I just repeated that offer in the hope that it would be accepted and we would get the thing done. Because we were perfectly willing to produce our files, and they could look through them and rummage through them all they want. Speaker: Mr. Trent, did your offer pertain to your files or the brokers' files? Edmund K. Trent: Our files. Speaker: Where did I get the notion that the information was only obtainable from the brokers' files? What was all this fussing around about the brokers' files? Edmund K. Trent: Well, that was because Mr. Mellott's request for documents asked for policies, and we did not have any policies in our files. We had only the placing slips, which were the contracts. Speaker: I thought I also got the impression that your files wouldn't disclose whether it was Pennsylvania business or-- Edmund K. Trent: Well, the indexes... the placing slips themselves would, if you looked at each one. But the indexes did not say which ones were from Pennsylvania, and the same was true of the brokers. They did not have the indexes, either. Speaker: --Because I'm puzzled about why you sort of shuttled them off to the brokers. It probably would have been much more efficient in the first place to stay with your files, wouldn't it? Edmund K. Trent: Well, I think it would have been. But that was Judge Simmons' idea, because they wanted... they had asked expressly for the policies and only the brokers had the policies. Speaker: And you didn't... your predecessor representing your client didn't happen to say, well, really a quicker way to get it would be to look at our own files instead of going through the policies? Edmund K. Trent: No. No, that was not said. That could have been said. I don't know whether the realized that or what at the time. Speaker: Would you think on your theory of the case or of the rule the district court would have been justified in saying, I'm going to impose... I'm going to find that there is jurisdiction unless you sustain the burden of proof that there isn't? Edmund K. Trent: No. Speaker: And that you will have to get your own documents and come in here with proof? Edmund K. Trent: No, that was wrong. I think Judge Simmons in effect did say that. But that is not correct. The burden is on the Plaintiff to show jurisdiction. Speaker: When did the judge say that? Edmund K. Trent: I beg your pardon? Speaker: When did the judge say that? Edmund K. Trent: He said that-- Speaker: Before he imposed the sanction? Edmund K. Trent: --Yes. Speaker: So he said to you: Look, I'm going to find that there's jurisdiction unless you come in and prove-- Edmund K. Trent: Yes, yes, precisely. Speaker: --Now, that is... and you think that was unjustified? Edmund K. Trent: Yes, that was erroneous, because all we have-- Speaker: Let's assume for the moment that you agree that there had been a refusal to discover. I know you say there wasn't. Edmund K. Trent: --Yes. Speaker: But assume there was. Edmund K. Trent: All right. Speaker: And you agree that a sanction, some kind of an effective sanction, was justified. You say that sanction would be bad, to put the burden of proof on-- Edmund K. Trent: Yes, yes. Speaker: --Even though you had refused discovery? Edmund K. Trent: Yes. Speaker: And even though the rule says that you may, as a sanction you may deem the facts sought to have been established? Edmund K. Trent: Yes, because we say that doesn't apply where it's a question of jurisdiction. And the Familia de Boom case held exactly that, that even though the burden was on the plaintiff to produce the... to prove jurisdiction, if the plaintiff couldn't get it it was too bad, but he should make other efforts. Now, we say, as I said before, that the Plaintiff was not hamstrung here. All he had to do was go to London and look at our records. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Northcutt Ely: I find on a review of yesterday's proceedings that the points that I had intended to return to this morning have been enlarged part -- anticipated by corrections from the bench. And I shall -- consequently this morning simply identify for you the places in our reply brief where the material is found which I referred yesterday, invite your attention to it and reserve the balance of my time for rebuttal unless there are questions this morning. The reply brief was follow -- was filed October 2, 1961. The limitation issue is found beginning at Page 19. It is captioned, “The legislative history of the Project Act does not support severance of the Colorado River Compact from the California Limitation Agreement”. The priority issue is covered beginning at Page 34 and it is captioned, “The priorities of California's established projects up to 4,400,000 acre-feet annually should be protected from impairment by new projects in Arizona and Nevada”. The water supply or justiciability issue is covered beginning at Page 98. And if this caption -- if the conclusion is reached by the Special Master as urged by the other parties are correct, this controversy is not justiciable. It goes on to say, however, that upon our premises, this controversy is justiciable. And may I invite your attention also to the preliminary material which begins at Page 1 which is captioned, “The basic controversy”. And here, we attempt to sum up the impact of these three issues. The limitation or severance issue, as we sometimes call it, the priority issue and the jurisdictional water supply issue as compared with California's claims and the impact, the effect of the Colorado River Compact. And now may it please -- William J. Brennan, Jr.: I agree. Northcutt Ely: In our reply brief of October 2, 1961. That brief in turn gives cross references to the more detailed treatment of these materials in our earlier briefs and also a cross references to what our opponents would have to say about them up to that time. And so now if may it please the Court, I -- unless there are questions, I shall reserve the balance of my time. Hugo L. Black: Mr. Wilmer. Mark Wilmer: May it please the Court. Arizona's case brief itself naturally into two parts. The first being the controversy between the states over the Colorado River, the interstate controversy mainly Arizona versus California in that we are supported largely in the Master's -- in upholding the Master's Report by United States and by Nevada. The second portion of the controversy which is really almost a separate controversy involves the dispute between Arizona mainly and the United States with respect to the claims of the United States for federal establishments mainly the reservations on the Colorado River, the Indian Reservations. Because of that of the fact that in one sense we are appellee here insofar as California is concerned and that we mainly support the Master's Report, we have yielded to California our plaintiff's position to open. However, with respect to the United States in effect, we are the appellant. And therefore, with the Court's permission, we propose to divide our argument as I've indicated. I will discuss the Arizona position and the reasons why we believe the Master's Report fundamentally is sound. And Mr. Reed, in turn, will discuss with you Arizona's views with respect to the apportionment made to the federal establishments and particularly, the Indian Reservations. I expect to use approximately four hours of our allotted time and Mr. Reed approximately an hour and a half. Please the Court, some 36 years ago, Justice Holmes in an opinion written for this Court in Sanitary District of Chicago versus the United States could very well have been using language which we think appropriate to this case. He first discussed the great issues involved, the claims of the Sanitary District of Chicago as to the vast amounts of money which had been expended. He then turned to their claims of the great importance for many billions of people residing in the Chicago area. He then said after having summarized the issues as presented by the pleadings, this brief summary of the pleadings shows the importance and gravity of this case. But importance and gravity alone do not tend to impede the ability to decide the case. The exact language were, do not stand in the way of a quick decision. He then said the mere fact that great sums were involved and that the millions -- the welfare of millions of people is involved does not do more than ten to cause disputes which would less mighty interests involved, no one would venture to question. He round up with this significant phrase dealing there with navigable water as we are dealing with navigable water here, “The law is clear and when it is known, the material facts are few”. And we say here dealing again with a navigable stream that the law is clear and when it is known, the material facts are indeed few. This great record undoubtedly will serve as a repository of many interesting studies, of many interesting excursions into the field of hydrology, into the field of many things but from the stand point of relevancy to this case, it is our belief that ninety percent of the record is in the same category as was characterized by Justice Holmes in the Sanitary District in Chicago case. Either this case is one -- if it please the Court, in which to take it by a mighty phrase which Senator King used in the project debates, the United States has put its mighty hands down upon the river and has you surfed its flow has laid aside all other lesser interests except in supplier as to that they indicated a contrary purpose, either that or else despite the fact that under the navigations of under the par which the Congress has under the Commerce Clause when they can call of a navigable river. It has expended these great sums to store the entire flow of the Colorado River. It has expended these great sums in building that works that are involved. And this Court has said it has done so constitutionally under the Commerce Clause. Either that, as we have said or else as California would request this Court that river still flows as it was want to flow, the river is still a course as its old course down the Colorado. We say, if it please the Court that the law is clear and that the material facts are few. Significantly, if it please the Court, despite the fact that the Special Master relied strongly upon the Chandler Dunbar case decided in 1913, upon the appellates in Electric case decided later, upon the Twin City Power case but despite those cases which the Master relied upon and which Arizona and the United States relied upon as ruling this case, California has not even cited those cases. We suspect that perhaps the reason is that it's impossible to cite them, to read them and not to find the answer to this lawsuit. I do not need -- if it please the Court to -- I might add to that the early case of United States versus Rio Grande Irrigation and Dam Company in 174 United States. The Court will recall that that was a case in which this Court examined the power of Congress unto the navigation of the Commerce Clause and in the light of the Rivers and Harbors Act of 1890 and 1899, in that case, 1890 because the 1999 Act had not been passed. And in that case, this Court held that with respect to a navigable river, anything which impaired its navigable capacity violated the Rivers and Harbors Act of 1890 and in that case, sent it back to the District Court in New Mexico, the Federal District Court, to ascertain if in fact the proposed construction of this dam would impair the navigable capacity of the Rio Grande. The Court in that case said that Congress under the Commerce Clause had the right not only to demand no obstructions to the flow of a navigable stream itself but had the right to reach up into a tributaries if interference on the tributaries impair the navigable capacity of the stream below. I make that point because I think it will become quite important later in our discussion with respect to the so-called truncation of the Colorado River. It is our position briefly, if it please the Court that the position of the Upper Basin in this case is of no more consequence than the rights of Massachusetts or New York. This case is solely a case of statutory construction of the Project Act. This case no more involves the rights of the Upper Basin than it involves the rights of Mexico. Congress in enacting the Project Act, in our review, if it may please the Court, spoke under its dominant servitude which this Court has called “a power over navigable water”, a dominant power not in terms of property but in terms of power. In the Project Act, the Congress of the United States, exercising the power which resides in it by a virtue of the Constitution has put the river water in its pocket. It has bonded up in Lake Mead and it is then said how this water is to be distributed. I don't care, if it please the Court whether Congress talked about 3 (a) or 3 (b) or 3 (c), the decisive question before this Court is, ”What water did Congress have in mind?” Whatever terms it may have employed become wholly immaterial if it is clear what water it was talking about. I say again, if it please the Court that if it is clear from the legislative history, from the surroundings which existed at that time that Congress was talking about mainstream water which it was going to store at Lake Mead and which it was going to direct the apportionment of then the terminology used to tell us what it intended becomes relatively important. The Master has said that the Congressional reference to 3 (a) of the Project Act related to a fourth hand method of describing the first 7,500,000 acres available for consumptive use. Arizona has disagreed to one extent. We fully agree with the Master that what the Congress was talking about was at first 7,500,000 available for consumptive use in the Lower Basin each year. The Master has said that 3 (a) constitutes an appropriative ceiling against the Upper Basin and necessarily if it's a appropriative ceiling against the Upper Basin, it has to be with respect to the mainstream because you don't get an appropriative right against the source of water that you don't have access to. So our tributaries have no access to the Upper Basin, therefore, it's a short junk in the Master's position to our position. But I do not propose, if it please the Court, to pursue at length any attempt of interpretation of the Compact. The Master, at the outset turned to the Delphic instrument and he said, “Each time you shake the kaleidoscope, you get a different picture”. I think that is true. But because it is irrelevant, because the Master has held it irrelevant and because we agree, we do not propose to pursue an interpretation of it because it would serve no purpose. It's nice to debate how many angels can dance in a point of a pin but unless it becomes of some consequence in the lawsuit, best be laid aside at least in the Court of this dignity. Felix Frankfurter: What you're doing is demand side the -- the literal terms of the language, you say, in this case they're not qualified, as you say? Mark Wilmer: Right. Yes Mr. Justice Frankfurter, I say that whatever Congress said and Congress stored this water, whatever terms Congress used if it is clear what water it was talking about -- Felix Frankfurter: You say whatever Congress said but if Congress used the term, you have to define it. You'd have to the pause a meaning into the word, don't you? Mark Wilmer: Certainly, Your Honor, yes. Felix Frankfurter: And you disregard the word in pouring in the meaning into the word, is that it? Mark Wilmer: No. Please the Court, Mr. -- Mr. Judge Murnaghan, I believe at one time made a very wise observation at a (Inaudible) jurisprudence is not -- does not look to the dictionary as a fortress. It looks to the words and it looks to the -- the purpose that the Congress is attempting to achieve and then interpret the statute in the light of that purpose which the Congress was going to achieve. Felix Frankfurter: (Inaudible) from saying just -- (Inaudible) in all the words. Mark Wilmer: No Your Honor, I certainly would -- Felix Frankfurter: In other words, you -- you've quoted Justice Holmes but no one is more frequent than he said intention of Congress is derived from the word it used. What the words mean is a different story, but it seems to me a bit of cavalier just to start on an argument by saying we disregard the word altogether. Mark Wilmer: Your Honor I -- if I could capture my argument and quickly cover the legislative history, I would be, I think justified in the -- taking the position I have taken. I think that no one and I say this advisedly no one can read the legislative history in the light of the environment then existing and come to the conclusion other than that the Congress was speaking of mainstream water at Lee Ferry. Felix Frankfurter: But your -- but it's a different thing from saying you disregard that, what you're saying is it's because of the (Inaudible) statute if in Congressional English, this is what those words mean. Mark Wilmer: I will accept that, Your Honor. Felix Frankfurter: Pay no attention to the word and go on because you're talking Congress. Mark Wilmer: I am most happy to accept that, Your Honor. I think that's exactly what I was trying to say. I put it that way. William J. Brennan, Jr.: You say that -- Mark Wilmer: Yes sir. William J. Brennan, Jr.: -- the content that the Master (Inaudible) namely the reference to 3 (a) is just a short hand that way of saying the first 7,500,000 feet, do you agree that's -- Mark Wilmer: We agree. Yes Your Honor. We have minor what I would call -- I supposes it's matter of attempting to justify a position taken, the end result is the same whether you call our position of 3 (a) right or the Master's position, the end result is the same. William J. Brennan, Jr.: But how is yours different from him in that respect? Mark Wilmer: We believe, if it please the Court, that 3 (a), if the matter was before the Court for the Compact not the Project Act, but Compact was before the Court for consideration today, we would be urging that 3 (a) and 3 (b) are correlative. That in fact, what 3 (b) means is a leveling out of the 3 (a) demand from the Upper Basin. Your Honors, yesterday we saw how erratic this river is. You saw how the flows are up and down. It's our belief that the Upper Basin demand this safety valve against the year when they would have a short supply and in favor of a year when they would have a long supply. In other words, if you look at the record of the flow, you'll see some years where there's very little water. I mean, by that down to either -- William J. Brennan, Jr.: Specifically in the context of the Project Act, you do agree with the Master -- Mark Wilmer: We do. William J. Brennan, Jr.: -- the reference to 3 (a) is just shorthand for the first 7,500,000? Mark Wilmer: We accept the result, Your Honor. We accept that as a sound conclusion. Now -- William J. Brennan, Jr.: To the meaning of the reference in the Project Act? Mark Wilmer: If it please the Court, we do not believe. I say this again, we do not believe the Compact is here for construction by the Court. We believe the Project Act is here for construction by the Court and that whatever the Congress said in the Project Act is what governs. What the -- what these seven men thought in 1922 or what their secret beliefs or thoughts or discussions were or even their stated words becomes completely immaterial, as we see it. When we see what Congress said when it enacted the Project Act -- William J. Brennan, Jr.: Well, I'm sorry Mr. Wilmer. Mark Wilmer: Yes, Your Honor? William J. Brennan, Jr.: I don't seem to -- clear about just what your position is as to the reference in 4 (a) in the Project Act to 3 (a) in the Compact. Mark Wilmer: We believe that the reference in the Project Act to 3 (a) in the Compact means what the Master said it does. William J. Brennan, Jr.: That's what I want -- Mark Wilmer: That it means the first 7,500,000 acre-feet of water released or available rather in the Lower Basin, the rest is academic. If the Upper Basin were here, perhaps we might debate the matter but they're not here and they're not necessarily here because in the Hinderlider Case, this Court construed the Compact which involved four states with only two present because only two states' rights were involved. And here, the impact of this decision cannot reach to the Upper Basin because we're not construing the Compact. We're construing a statute passed in 1929 which has reference only to a supply coming down from the Upper Basin in which does not pretend to reach into the Upper Basin and ask or demand any water. In fact, if it please the Court, counsel yesterday talked of Section 18 of the Project Act which you will recall, in substance provides that, ”No local waters, no local rights shall be invaded, shall be impaired or otherwise affected by the Project Act”. The exact language, “Nothing herein shall be construed as interfering with such rights the states now have either their water within their borders or to adopt such policies in the next such laws that they may deem necessary with respect to the appropriation control and use of waters within their borders except -- except as modified by the Colorado River Compact or other Interstate Agreement”. The contention which California makes is perhaps plausible but when this Project Act is read in the light of its legislative history and of the conditions then persisting -- then existing, when we read in this Project Act the great care, the actual overemphasis upon protection that the Upper Basin demand, we understand what this means. The Court will recall the Master said that the peers of the Upper Basin were against the quick development of the Lower Basin. Wyoming versus Colorado had been decided in 1922 and from that point forward, the peers of the Upper Basin increased because of the recognition of the doctrine of prior appropriation in an equitable -- equitable apportion. This language in substance says what? It says that the rights of the Upper Basin are preserved and are not affected by this Act with one exception as modified by Colorado River Compact -- as modified by the Colorado River Compact. We say, if it please the Court, that Section 18 is a barrier which the Upper State erected as between the Upper and the Lower Basin States to be sure nothing pass through that barrier by virtue of the Project Act except the burden they assume under the Compact. So I say again, if it please the Court, that the rights of the Upper Basin are not involved and cannot be involved because they're not affected by the Project Act. And the Project Act stands, if it please the Court, as the sole instrument before this Court for interpretation as the rights of the states because Congress did bottle up on that water, Congress did put the hand -- mighty hands of the United States down upon that stream and it did take it into its custody and did apportion it. If I might, digressing for a moment, please the Court, I think it might be helpful because we have not have the advantage of it at this point to just briefly review the geography of the area and some of the background which existed. Again, if I might use the words of a great jurist Learned Hand, he said that where'd you like chameleons which take their color from their environment. And I think we need to know the environment that existed when the Project Act was passed to understand the full impact of the words which are contained in the Project Act. Briefly and I'm sure the Court has perhaps read this many times, the Colorado River is -- as the Master said the stream of continental proportions. It is the third largest in the United States surpassed only by the Rio Grande and the Mississippi that extends approximately 1300 miles generally as you saw in the map yesterday in the northerly and the southerly direction rising in the high peaks of Colorado some 14,000 feet high. It extends to Colorado 245 miles, to Utah 285 miles to Arizona alone 295 miles. It is the common border of Arizona and Nevada 445 miles. It is a common border of Arizona and California for 235 miles and it is a common border of Arizona and the Republic of Mexico from 16 to 20 miles. So immediately, it becomes apparent the great State of Arizona has in this river because as far as access, as far as it being a part of Arizona, Arizona's contact with it outweighs down of all other states. Master further found in the tables are in the report and I will briefly cover them to the save taking it up. Arizona has a total square mileage of 113,900 miles, California, 158,693 miles. And Arizona's total of 113,900 miles, 107,242 fly within the drainage basin of the Colorado River System. California has 3,599 miles within the drainage basin of the Colorado River System. The percentage of the total state in the drainage basin, Arizona is 94 and one tenths percent, California 2 and three tenths percent. The percent of the entire basin in the State of the entire basin 44, a basin system, 44 and three tenths percent is in Arizona, 1 and five tenths percent in California. The square miles of the State in the Lower Basin of Arizona 100,306 California, 3599. The percent of the State in the Lower Basin that is of the entire State is 88 and five tenths percent against California, two and three and tenths percent. Now, it is true, if it please the Court, that in the past, Arizona has been charged with being rather unreasonable with respect to this river. And yet I think this figure should bring home to its very quick to the fact that Arizona has to be a little unreasonable because this is a sole treasure Arizona has. This is the sole practically access Arizona has to life getting water because if you can see, practically the entire State, future is wrapped up in the Colorado River and therefore, when your very life perhaps as a State, we just be justified perhaps being just a little unreasonable. If I might pursue that matter just a little further, the Upper Basin is noted for the fact that it is at very high altitude. It has a short growing season of three to four months. Most of its irrigable areas are narrow valleys. The access to irrigation water is difficult, costly. On the contrary in the Lower Basin, it has a growing season almost the year around. It has broad large expanses of level land rather usually available for irrigation. So far as community of interest is concerned, the two Basins are separated by a thousand mile canyon. Actually, the picture which shown -- the map which you show on the easel yesterday correctly depicts the square miles of the two Basins but actually they should be viewed in a shape of a -- of an hourglass, perhaps, not in the exact -- it's a little bit of a crooked hourglass but you have in the Upper Basin a basin which is in itself a (Inaudible). You have a thousand miles of arid, canyon, difficult country where the river flows in the canyons. You have the Lower Basin or you have the level land and the long growing seasons. I say this -- I bring this to your attention for mainly this reason, there is absolutely no community of interest between the two basins other than their common interest in the river. And I might say perhaps the fact that there was a religious interest in the Mormon Church, the good people of Utah and the good Mormons of our State of course had a strong religious community of interest. But communication is practically non-existent in the century nor today. New York and Chicago was more accessible to Arizona than Denver at those days. So that these things are important when we come to consider what Congress was talking about when it enacted the Project Act because actually, the low Upper Basin had no more interest in the Lower Basin than it had in Mexico. There was simply nothing there other than the one common treasure that they both sought. They both desired access to and wanted to get as much of as they could and that was the Colorado River as it extended from the Upper Basin and to Lower Basin. When further fact, may I brought your attention of the Lower Basin tributaries, the only one of consequence, of real consequence is the Gila, which empties into the Colorado River above the City of Yuma and some 20 miles or so above the border. In the early days, the Mexican, the imperial liberation was to (Inaudible) which came out of Arizona about four miles above Mexico when down into Mexico followed a course to Mexico to above Calexico is now and there reentered California. So that from the standpoint of the Upper Basin, it had no interest whatever in the Lower Basin tributaries, it couldn't get to them, they weren't accessible to it. They simply used a hydrological fact that water doesn't run uphill. So that the only fund of water which was available for consideration and division among both basins was the mainstream as it flowed down from the Upper Basin. It would be assuming that the Upper Basin desired to impose upon the Lower Basin an economic ceiling to say it was concerned with how much water was used in the Lower Basin for consumptive use. The Upper Basin was concerned with one thing, that thing was how much water have we got to give them down below under threat of court action. The Lower Basin was concerned with just one thing, how much can we shake out of it? How much can we force them to give us to supply our needs under threat of problems? It seems crystal clear to me, if it please the Court, that in approaching the understanding of the Compact Act, we have to understand that the Upper Basin had no interest whatever in the Lower Basin. It had no interest whatever in the tributaries of the Lower Basin. It had no interest whatever in their supply of water except for one thing to put on the bargaining table to say you've got so much water. Therefore, you shouldn't ask so much mass but to say that the Upper Basin without any competitive position at all with respect to Lower Basin was visibly engaged in trying to apportion the water of the Lower Basin, to me applies in the face of reason. There's no economic motivation for it, no religious motivation for it, no long standing history of rivalry, nothing -- nothing to say that the Upper Basin should give one concern -- one bit of concern with respect to the supply of the Lower Basin, it was concerned with one thing and one thing only and that is how much of this common treasure must we surrender. I think reason should supplant the actual language -- Felix Frankfurter: Well, that's the (Inaudible) all around -- Mark Wilmer: Thank you. Felix Frankfurter: -- that would call it contention. Mark Wilmer: Yes Your Honor, I agree. Felix Frankfurter: (Inaudible) out of this full of water. Mark Wilmer: The point I was trying to make -- Felix Frankfurter: -- did we know what (Inaudible), isn't that true? Mark Wilmer: Your Honor, I was trying to make this position -- this point that if we have some ice cream to divide up and we both have access to it, we're going to find out how much ice cream we bought and how much I scoop out and how much you scoop out but if it happens to be a pot sitting there that you don't have any interest in and no access to and the right to, I would say that there are statute which referred to that division would have to be given an unreasonable construction to assume that you had some rights to dig in this bundle of water over here which you've never used, which you can't use, which you can't get to and which you have no access to. Felix Frankfurter: But after you make the division of the ice cream, divide it between two -- between two parties then of course those within one half of the division or whatever you're talking about have no interest in the other half. But in the original division -- the original (Inaudible) derived from the interest in this what you call a common treasure and that to say in controversy within the Lower Basin, isn't it? Mark Wilmer: The same consideration, Mr. Justice Frankfurter, withheld Arizona's ratification of the Compact has caused the Upper Basin to refuse to pass the Project Act. I think that's a fair statement. Now, as I've indicated, it is Arizona's position and it is Master's position in which we will highly concur that this is the statutory construction case. This is a case which involves the construction of the project -- Boulder Canyon Project Act. It is true, after the Master found the Compact had no relevance, after he had said that it is to be laid aside and has no consequence in this case because it is what Congress meant when it passed the Project Act. He then said however, in view of the fact that the Court may not agree with me. On the chance that the Court might decide to construe the Compact, I will express my views as to what it means. And he then went on to several pages using language which is in effect as California has told you except that he did limit his holding as to 3 (a) that it was an inappropriative ceiling as against the Upper Basin which is a far cry from –- an appropriative ceiling in the entire basins. The Court will look in his -- the Master's Report in page 114, I believe it is , you'll see that he twice holds that it is a ceiling in the Lower Basin only as against the appropriators in the Upper Basin. In other words, he construed the Compact fairly and squarely as an interbasin instrument and he said this 3 (a) is a ceiling against rights in the Lower Basin against the Upper Basin. And since the only water in the Lower Basin in which rights could be obtained against the Upper Basin would be mainstream water necessarily we have reference from mainstream. Now I take it there's no point in going into a discussion of appropriative rights. We all know that to get an appropriative right, you must get it again to someone else, an appropriative in the vacuum does not exist. It is of importance only because it gives you precedence over someone else. And that precedence of necessity must be against someone else who has access to that water, otherwise, it would have no meaning it'd be a little medal you pin on your chest and say I've got an appropriative right but so what? So that as I said earlier, it's a short junk from Arizona's contention actually in practical effect to the Master's conclusion because he did say that the 3 (a) is a limitation as against the Upper Basin only in gaining appropriative rights. He then went on and discussed it at some length and used general language but he's holding is as I have told the Court. This Court -- if it please the Court in the Chandler-Dunbar case if you recall was considering the question of excess capacity over navigation in the Saint Mary's River. The Chandler-Dunbar Company there was seeking compensation for loss of power rights on the basis that there was excess capacity in the river above the requirements of navigation and therefore, they should have compensation that having been taken by the Congress. This Court said in that case, in substance, there is no room for judicial review of the determination of Congress as to whether this water should be taken, there is no room for review as to whether or not the excess water, there is excess water and if so, should there be compensation? It's squarely held that it was a legislative determination by the Congress and that it was not the function of this Court to review the discretion of Congress in the exercise of its powers under the Commerce Clause. Now, that holding has been cited many, many times. This Court in the appellates in case used the language, “In truth, the authority of the United States and the regulation of Commerce on its waters' navigability in a sense just stated, is but a part of the whole. Flood protection, watershed development, recovery of the cost of improvements to utilization of power are likewise parts of Commerce control”. I would like if I might, to repeat again that last statement, recovery of the cost of improvements to utilization of power are likewise parts of Commerce control because I think that will bear quite heavily upon our friends in California's criticism of the Master's truncation of the river. It will bear quite heavily upon the notion of whether or not Arizona or California for that matter, could go above the river and stick a pipe down in its supply in the mainstream which has been dedicated by Congress to the provision of water pump in the Project Act and thereby take out a substantial flow of water from that river because -- I would come to this in a moment, the Project Act requires the Secretary before entering into the project, before beginning construction, that he shall make a determination if the revenues from the project shall be sufficient to repay its cost of construction. So that anyone who for and moment would stand here and tell this Court that despite the fact that the Congress plainly in the debates looked to the supply at Lee Ferry as a supply of water plainly told the Secretary, "Before you construct this project, you shall see you have revenues sufficient to repay it”. But nonetheless and despite that, Arizona, California or anyone else could interfere with the water supply of that project as it comes in Lee Ferry and dam. Despite or in addition of course, you have Rivers and Harbors Act, you have the requirements that you obtain a permit from Congress and of course, you have to have the Congressional approval. I merely say that the language of the case I just cited, the Appelachian Electric case plainly indicates, plainly indicates that as a part of the Commerce Clause Power, that the powers of Congress go far beyond just the matter of regulating the flow of the river but extends through all these peripheral -- peripheral things which go to aid the exercise of this power by Congress. Felix Frankfurter: If I -- if I understood, it remained constitutional argument, I must have missed them. Mark Wilmer: I don't think he made it constitutional arguments, Your Honor. The argument made and if you recall on the map there was shown a proposed route from -- I believe it was Bridge Canyon and the argument was made and is made in the brief that this construction, the Master would permit Arizona and California to go deep in the river above the lake. And I say, if it please the Court, that can't be done except Congress authorizing it. And if Congress sees fit to authorize it, I then say it becomes more concern of Arizona, California or this Court. Felix Frankfurter: All I'm saying I -- if we recall that the he invoked the Commerce Clause that compelling or prohibiting this or that? Mark Wilmer: Mr. Justice Frankfurter, I know there's one thing, a very outstanding about Mr. Ely's argument. He religiously stayed away from the Commerce Clause. Now in the Twin City Power Company, this Court again said, “The interest of the United States in the flow of a navigable stream originates in the Commerce Clause”. Maybe I'm a little out of order reading to this Court which Your Honors yourselves have said, but if I might, I would like to just cover it. That clause speaks in terms of power, not of property. But the power is a dominant one which can be asserted to the exclusion of any competing or conflicting one. The power is a privilege which we have called a dominant servitude. The legislative history in the construction of particular enactments may lead to the conclusion that Congress exercise less than its Constitutional power, fell short of appropriating the flow of the river to the public domain and provided that private rights existing under state law should be compensable or otherwise, recognized. Such with United States v. Gerlach Live Stock Company, Federal Power Commission v. Niagara Power Company suit. I might say in passing, California did cite the Gerlach case only to misconstrue it and to state that held something which it goes -- it does come -- have no place for it. They said it recognized and established appropriative rights, it did no such thing. It recognized that Congress could, in enacting a statute, provide for compensation that it could exercise less than the whole of its power if it desire. And if it did so and this Court construing that case held that it did, not intend to exercise the full extent of its power but it did not. But this Court for one second indicated that the Congress did not have the right to usurp the entire flow of the river without compensation in the navigable stream. We have a different situation here, one where the United States displaces all competing interests and appropriates the entire flow of the river for the declared public purpose. Now we say, if it please the Court, that we have here a situation where the United States has usurped the entire flow of the river and has displaced all lesser interests. Hugo L. Black: May I ask you? Mark Wilmer: Yes. Hugo L. Black: Now you say -- that sound seems to me that the word you're using certainly has meaning that are not consistent with the thought of the argument you're making. You said that several times that the United States has usurped -- Mark Wilmer: Yes, Your Honor. Perhaps I spoke -- a little too enthusiastically, Your Honor but what I meant was this-- but I meant was this, that the United States in building Boulder Dam did usurp the entire flow of the river. It did stop the entire flow, it did bottle it up, it did take it over, it did take it into its control and possession. And thereafter -- and thereafter, by a virtue of the Project Act provisions, it released some of that but we do say Your Honor and I'll say it without equivocation. The United States did usurp the entire flow of the river and then did -- Hugo L. Black: You merely mean by that when they took it over and had the power to do it or they took it over wrongly? Mark Wilmer: Oh no, I don't mean wrongfully in the slightest sense, Your Honor. Not in the slightest sense. If I used it -- if it were to have that connotation, I -- I made a mistake in using that -- Hugo L. Black: Well, it has a more limited meaning also? Mark Wilmer: Well, I used it in the sense, if it please the Court, that the United States did take control of this entire flow, did set it to assign and store it and then the Project Act said, “Now here's how we're going to use this stored water. Here is how it shall be used”. Hugo L. Black: May I ask you just -- Mark Wilmer: Certainly. Hugo L. Black: As I understand if you're saying that United States did build it, they took it all over -- Mark Wilmer: Yes Your Honor. Hugo L. Black: If you reach the constitutional question which is not if -- maybe not yet to be reached at all, had the power to do it, what it is done is to give Arizona a certain amount and California a certain amount? Mark Wilmer: And Nevada a certain amount. Hugo L. Black: And Nevada. Mark Wilmer: Yes. Hugo L. Black: And that -- to that extent it has apportion the stream and you accept that apportionment? Mark Wilmer: Yes, Your Honor. That in fact rather is we believe the only conclusion that a reasonable mind can come to in reading the debates and in reading the Act itself. That is the only conclusion that we've been -- can be reached is that when Congress did under the Commerce Clause and this Court so held in the first Arizona, California case, constitutionally could build the Dam under the paragraph in the Commerce Clause. Justice Frankfurter or Justice Brandeis in that case as I recall laid aside the consideration of the General Welfare Clause and simply said we do not need to reach that but he did say squarely under the navigation under the power over navigation -- or power under the Commerce Clause over navigation, that Congress could constitutionally take over the entire flow of this river. Felix Frankfurter: If that were the essence of the litigation in the -- Mark Wilmer: Correct. Felix Frankfurter: -- first Arizona case. Mark Wilmer: Constitutional question. Felix Frankfurter: You're raising else, it was subordinate? Mark Wilmer: And all the rest of it is -- Felix Frankfurter: Not only subordinate but almost disregard it. Mark Wilmer: Well, Judge has (Inaudible) of the litigation Your Honor was that one question. Felix Frankfurter: Yes. Mark Wilmer: And the -- and the Court cut Arizona's (Inaudible) as far as that's concern on that particular point. If I may use that as a question. Felix Frankfurter: I -- I think that they even started from there. Mark Wilmer: Well I think if it please the Court we feel to get a little bit of the environment to get the color of these words that the Congress used before we start to construe them just in the color light of black and white on a piece of paper. Now if I might just briefly -- Felix Frankfurter: And that's -- that -- Mark Wilmer: Yes Your Honor. Felix Frankfurter: -- if I may say so, is more convenient to my ear. You don't construe it black and white on a piece of paper rather than saying that the Compact is irrelevant. That doesn't mean much to me considering the fact that the Act which is to be construed refers to the Compact. I don't know how many times -- Mark Wilmer: Yes it does Your Honor. Felix Frankfurter: -- has to say irrelevant means that you -- that -- that a special meaning has to be given to the reference in the Project Act not with the Compact which preceded it as irrelevant because it's in there, in this -- Mark Wilmer: I think I stand corrected, Your Honor. I -- I certainly -- Felix Frankfurter: Well, even the Master says that I don't know what that means to say it's irrelevant on part of the statute which you construed makes a reference to that. I don't understand, i know those evidently and constantly told this is semantics, but that's what all law is about. Law is about words or rather conveyed by word, therefore, we should say things that just verbal. That's the -- that's what all business is. Mark Wilmer: Your Honor, I think the Master meant that it's unnecessary to construe the Compact to reach the decision in this case. Felix Frankfurter: Or rather that the reference in the Project Act requires a construction about the -- or what the scope of the Compact is with a reference to the Act and not with reference to itself. Mark Wilmer: With respect to the Project Act, yes, You Honor. Now, I'm certainly not going to trouble the Court with a review of the entire Project Act. There are about four or five provisions, which we think are decisive. We would like first to just briefly touch it by laws to indicate the fact that the Congress of the United States did exercise its full power under the Commerce Clause. We would like then to pursue if we might the legislative history of two or three of those sections because they are most in like then we would like, then we will go -- Felix Frankfurter: That -- that's crucial to your case. Mark Wilmer: Yes Your Honor, it certainly is. Felix Frankfurter: As it is to Mr. Ely's case, namely -- Mark Wilmer: Yes. Felix Frankfurter: -- the legislative history insofar as authority is preceding discussions in the Congress are relevant no more than constructions. That's crucial to this case, isn't it? Mark Wilmer: There is no question about that Your Honor. There is no question about it. That the legislative history of the Act as it develops and the words of the managers of the bill and the managers of the amendments to the bill are crucial. We're glad they are because we think that they wholly support our position. I should say if it please the Court that beginning in 1922, the first of what were known as the Swing-Johnson bills was introduced in Congress. Introduced by the Honorable Phil Swing from California Representative and the Honorable Hyr -- Senator Hyrum Johnson of California. I'm sure that many of you have personal acquaintance with at least Senator Johnson. The original Swing-Johnson bill as introduced for a little resemblance to the bill as finally enacted in 1928. The first Swing-Johnson bill failed, the second Swing-Johnson bill failed. Chiefly because of the opposition of the Upper Basin as has been indicated to you yesterday, Arizona refused to ratify the Compact. She refused to ratify it because there is no allocation of Lower Basin Waters between herself and California. And she held that until it was such at the basin, she could not safely ratify the Compact. Because of that, I would not stand here for one moment and suggest that too little Arizona in those days of a few hundred thousand population stood in the way of mighty California but stood in the way of mighty California in those days with the Upper Basin because the Upper Basin did not propose to permit the construction of this storage. Permit California to take the full Lower Basin apportionment and leave Arizona at liberty and at large to take a further share of the water since she had not ratified the Compact. So that the California attempts to secure that into the Project Act failed. Now I'd call Your Honors' attention to this, that Arizona was not unsympathetic to the Project Act. Colorado River as has been indicated was an erratic and a violent strip because its flow came mostly from the melt of snow water in the high mountains of the North to the -- in the Upper Basin. Its flow in the spring was sometimes of tremendous proportions. A violent destructive plot but it was destructive in Arizona as well as California. Yuma in the lower southwest corner of Arizona border (Inaudible) of this sled as did the California interests. So Arizona was not unsympathetic to the notion of either the Compact or Project Act. She merely wanted to know that this one source of life to her from the standpoint and development should be at least equitably apportioned. The third Swing-Johnson actually it was two thirds in Johnson but only one of which is recognized and that is the one that's introduced in February. Beginning with the third Swing-Johnson, we began applying some evolvement, begin to find some development attempting to adjust the claims and demands of the Upper Basin and in favor of the -- in their favor and attempting to give them some measure of protection at the same time attempting to induce Arizona to ratify the Compact. If I might first turn to the Project Act as enacted but I will cover only a few sections. Section 1, the first portion of it, after the enacting clause, provides that for the purpose of controlling floods and this is found in either in the Master's Report Appendix 2, I believe Your Honors or the Arizona's opening brief, Appendix B page 9A, “That for the purpose of controlling floods, improving navigation and regulating the flow of the Colorado River, providing for storage and for the delivery of the stored water thereof for reclamation of public lands and other beneficial uses exclusively within the United States, for the generation of electrical energy as means of making the project herein authorize a self-supporting and financially solvent undertaking, the Secretary of the Interior, subject to the terms of the Colorado River Compact hereafter mentioned is hereby authorized to construct, operate and maintain a dam and related works in the mainstream of the Colorado River at Black Canyon or Boulder Canyon, adequate to create a storage reservoir of the capacity of not less than 20,000,000 acre-feet of water”. Now may I say this at this point (Inaudible), the United -- the California has severely criticized the Master for saying that the Secretary of the Interior had no power beyond the reservoir and the dam. That's all the Congress gave him. They said the Secretary might construct a dam and create a reservoir above it but capacity of not less than 20,000,000 acre-feet. So that's where the Project Act ends so far as the Secretary is concerned as of the top end of that reservoir because there is where Congress ended his authority. That's what Congress told him he could do and then they told him what he was to do after that. If I might then turn before going to Sections 4 and 5 to Section 6. That the dam and reservoir provided for -- the dam and reservoir provided for in Section 1 hereof shall be used, first, for river regulation, improvement of navigation and flood control. Second, for irrigation and domestic uses and satisfaction of present perfected rights in pursuance of Article VIII of the Colorado River Compact. Now I would invite the Court's attention to the peculiar language of that phrase, not in satisfaction of present perfected rights but in satisfaction of present perfected rights in pursuance of Article VIII of the Colorado River Compact, plainly the Congress had some reason in so phrasing their language. Hugo L. Black: What do you think it was? Mark Wilmer: I think it was this Your Honor. Now I have to -- Article VIII of the Compact, if it please the Court, provides this, it first says, “present perfected rights are unimpaired by this Compact”. It then says, ”When storage on the mainstream of the Colorado River in or for the benefit of the Upper in or for the benefit of the Lower Basin shall have been provided in the mainstream of the Colorado River, then rights of users or appropriators, if any, on the mainstream as against users and appropriators in the Upper Basin shall attach to and be satisfied from water storage -- not in conflict with Article III of the Colorado River Compact”. It is our view and in this we depart from the Master's conclusion Your Honor, but again it is not a large matter. We believe that the Project Act did not intend to perfect, to -- to protect present perfected rights per se. We believe that this language was intended solely -- solely to discharge the obligation contained in the Article VIII of the Colorado River Compact solely to provide that we have now discharged the burden laid by the Upper Basin Compact. Hugo L. Black: I don't quite understand it, that the present perfected rights -- Mark Wilmer: Well, if it please in Court, we would have them -- Hugo L. Black: I don't believe that the -- Mark Wilmer: Excuse me. Hugo L. Black: -- that Section 6 or any of the others were intended to preserve right which had already been recognized in particular persons. Mark Wilmer: Well, Your Honor, may I express it this way. First of all, the question of the extent of rights in the Lower Basin is indeed a (Inaudible). We have first of all, the fact that in the Rivers and Harbors Act of 1890 and 1899, the Congress forbade, forbade under criminal sanctions, anyone impairing the navigable capacity of a stream and as Summers once said, “I don't know how you get more impair the navigable capacity of a stream than taking all the water out”. So we would say, first of, whether you can gain any appropriative rights in a navigable stream by exhausting its flow without the consent of Congress, indeed presents the authority question. Hugo L. Black: What I would -- I -- I didn't make my -- Mark Wilmer: I'm sorry. Hugo L. Black: -- make it clearly at Section VI which you refer to say irrigation and domestic users and satisfaction present perfected rights in pursuance of Article VIII. Now what do you understand was meant by present perfected right? Mark Wilmer: I understand, if it please the Court, that by present perfected rights coupled with and tied to in pursuance of Article VIII of the Colorado River Compact, it limited the present perfected rights protected to those which the Colorado River Compact intended to protect and those which should be protected under the Colorado River Compact. But that, if it please the Court, only preserve that protected those against Upper Basin appropriators. It did not protect or preserve them against Lower Basin appropriators intra Basin. The only function, if it please the Court, of this language we have quoted is to discharge the Upper Basin obligation against claims of the Lower Basin mainstream users at such time as they were provided storage. In our view but isn't it again it isn't a matter of supreme ones, our view is that this language was intended solely to say that Upper -- the Lower Basin appropriators, once this storage is completed had no further claim against the Upper Basin. It was not intended to preserve intra- Basin, State versus State in the Lower Basin, any rights. We say that for several reasons. One, the administration of the river with a prime purpose of preserving navigation, controlling the floods and or rather protecting against floods and controlling the flow is incompatible with the recognition. Hugo L. Black: Concretely, what does that mean that you believe in reference to as such water has already been appropriated for use and being used in equipment of California either in one of this statute. Mark Wilmer: If it please the Court, the Honorable Philip Swing several instances we have quoted used this expression that you can't read the English language other than that Article VIII of the Compact discharged appropriative rights in the Lower Basin. He said not once but several times that the impact of Article VIII was simply that you took stored water in lieu of natural flow. In other words, if it please the Court, the Lower Basin said, "We are content, give us adequate storage, we're content to accept, we are content to accept stored water. We are content to then waive any further rights we have against the Upper Basin and take our water out of storage because we get what? We get an adequate year round supply, we get clear distilled water, we're released from the floods and all in many other benefits inherent in that storage”. There is nothing, if it please the Court, that I know of which justifies the conclusion that present perfected rights are to be preserved absent a provision for piloting the natural flow to the reservoir. You don't store the entire stream irrespective of its natural flow; you don't give a person downstream gobs of water as he asks for it without respect to his appropriative rights and say yet, appropriative rights are preserved. Hugo L. Black: I still don't quite understand. Let's assume that there were quite a number of projects some in Arizona, some in California and some in Nevada already in use, being used for irrigation, domestic purposes -- Mark Wilmer: Yes, Your Honor. Hugo L. Black: -- at the time the Act was passed. Do you think that the Act displaced those so that they could be ignored in the carrying on the work by the manager of the project? Mark Wilmer: I think if it please the Court, that the Act substituted stored water for those appropriative rights. Hugo L. Black: But -- but was still water and you think you're right were preserved, is that it? Mark Wilmer: I think the Congress contemplated Your Honor that there should be allocated ample water so that those rights would be protected. I do not think the Congress expected that those rights were to be protected in the sense of a preservation of their historic, time, quantity and amount of flow at a given point. Hugo L. Black: I don't understand how they could be protected if you ignored the fact that they have been using a certain quantity and they want to continue to use it. Mark Wilmer: Your Honor -- Hugo L. Black: How would you protect it if you took the right? How -- the right away those people to enjoy the full protection of the same amount withheld? Mark Wilmer: Your Honor, in particularly, in Imperial Valley prior to construction of the Project Act, the low flow in the summertime was inadequate -- was inadequate to service that just been claims on that water was all gone, there's been when the crops were started. Congress gave in place of those rights in the natural flow, which is inherent in an appropriative right a great body of stored water. Congress said, "We're going to give you a block of water which in our judgment is ample to give you year-round water not just when it would naturally come to you by virtue of the normal flow of the river in a state of nature”. Now I say this, it if it please the Court, that if Congress set aside, if Congress stored the entire flow and said, "This is to be used to satisfy these appropriative rights.” The States then had the privilege perhaps of saying, "No we want natural flow. We refuse to give up our appropriative rights." Pile up our natural flow to the river and give it to us as it was want to flow and perhaps it would've had some basis for complaint but they didn't do that. They accepted the proper of Congress to take in lieu of the natural flow and their rights in the natural flow a stored water, a body of stored water the same as if they went to the store to buy some bread. It was there in ample quantities for them but not in relationship to their historic method and time and place of taking. Now the only distinct that I'm going to draw is this Your Honor. I think the notion of present perfected rights being preserved cuts across the theory and philosophy of the Project Act. I think Congress realized that it was storing an ample supply of water because it was storing it all and then it was going to allocate that out not according to the natural flow but as people wanted it to the extent of the apportionment it made. And if you'll recall, many of the debates in Congress, particularly in the Senate, in the second session of the 70th Congress which was all in the enactment of this Act, Senator Johnson was asked time and again, "What are your present rights in imperial? What are the present rights in California?” And at one point, he gave a figure which I have and can give you the Congressional reference to. In which as I recall he stated the California present users were something in excess of million, I believe 159,000 in that general order of magnitude. Those were the present uses in California. Those were how much California was then using. Hugo L. Black: Did he also refer to certain projects that already inclusive construction such as the Metropolitan? Mark Wilmer: No -- yes he did, Your Honor. There was quite an exchange which is quoted in our legislative history between he and Senator Walsh of Montana. In which say the Walsh of Montana asked him about this so called appropriative right of Los Angeles and he said, yes, they had one in 1924, they have followed notice of appropriation for a million and I believe 95,000 acre-feet. And Senator Walsh then pursued him, "But, what have you done about this?" Well, we've spent some money on surveys and finally forced from Senator Johnson that concession that without the project, they couldn't give any water. Finally a portion in the agreement that absent storage, the natural flow was all appropriated and that there's no place in which they could get the water other than storage. That discussion did occur Your Honor and a round up would be, I would say concession on the part of Senator Johnson that California's paper filing which without value unless there was storage. That was recognized and add that for the 2,100,000 and some thousand you've got 3,000,000 and some thousand. Now I might say and I'm the aggressor a little bit here but I want to make this point of -- this point because we've had considerable talk about it. In the course of this discussion, in the -- in the second session the 70th Congress, Senator Johnson (Inaudible) it up what he said was the total requirements that California would need ultimately. He thinks that the million, I believe nine thousand -- six -- I'm sorry, a million and nine thousand and he totaled all out there. And then he discussed the governor's conference which I want to come in a minute which has taken place in 1927 and he used the significant word which I'm going to quote to you in (Inaudible) a little later. We agreed to take 4,600,000 recognized it and we aren't getting enough water. We agreed to take 6,000,000 -- 4,600,000 in effect to get this project underway, recognized that this wasn't sufficient to take care of all our needs and that we were taking a calculated risk. To get the Project Act passed, California did take the calculated risk. And now having got the Project Act, she wishes she hadn't taken that competitive risk (Inaudible). Now, in any event Your Honor, I'm going to come back to this in respect to the Master's treatment of present perfected rights and if I might and if the Court will permit me, I will defer at this moment further -- Hugo L. Black: I thought it's a -- Mark Wilmer: -- discussing this point. Hugo L. Black: -- just simply wanted to know that parties at -- Mark Wilmer: Well, I -- I said that isn't the right thing Senator Johnson said there, the likelihood of wherever being any question shortage is remote, it really isn't something that we need to get too excited about, although I would have at this point in passing correct Mr. Ely when he said that the Master's shortage apportionment cut across established rights. The report expressly provides that in the event of shortages, present perfected rights are fully paid, are fully taken care of and then the shortage is apportioned. I'm sure Mr. Ely spoke as it at least as we read the Master's report his holding squarely was an untimely shortage present perfected rights take precedence and thereafter the -- the water -- (Inaudible) water is shared (Inaudible). Now I want to just -- again refrain to Section 6. The Secretary of the Interior -- I'm skipping to the second paragraph, shall prescribe and enforce rules and regulations with the -- conforming with the requirements of the Federal Power Act as far as after who, respecting the maintenance of work, conditions of repair adequate to their efficient operation, maintenance of system, accounting control rates and so on relating only to power. He then -- then further provides he shall also conform with other provision, the Federal Water Power Act and the rules and regulations of the Federal Power Commission which have been devised or which may have to be devised for the protection of the investor and consumer. The point I am making and reading this is only this Your Honor that when we come to a considerate -- Your Honors, when we come to a consideration of Arizona's position that 4 (a) and 5 of the Project Act constituted a mandatory formula. It becomes most significant to find in the Project Act detailed treatment -- detailed treatment of how power shall be handled, detailed treatment of who shall get it, what policy shall govern and if there'd be conflicted applicants, they shall have a hearing and yet in the disposition of this most precious commodity water, we find only the language that the Secretary shall conform with the provisions of Article 4 (a). I want then to go if I may, to Section 4 (a) and Section 5. They're long, I am not going to read them. I'm simply going to note two things. The first paragraph of Section 4 (a), as it was finally passed, provided for either a six or a seven-state ratification within six months or a six-state ratification within or within six -- I'm sorry, provided for a seven-state ratification or if that did not occur within six months, then for a six-state ratification; provided further, that as we read it and as the Master found in any event, the Project Act shall not take effect until California shall have, for the benefit of the United States and for the benefit of the other Basin States, enacted the Limitation Act. It further provided in paragraph 2 for what is termed the permissive compact, it simply provides that in paragraph 2, unnumbered of 4 (a), that the three states were authorized to enter into a compact dividing the 7,500,000 in accordance with the way it was divided in 4 (a). At least with respect to the fact that in 4 (a), it said California can't take more than 4,400,000 that therefore there was a 2,800,000 and 300,000 left for Arizona and Nevada, provided for certain other things which I am not going to discuss here. Then provided in (b) that before any money is appropriated for the construction of said dam or power plant or any construction work done or contracted for, the Secretary of the Interior must make provision for revenues sufficient to ensure repayment of the Act. Then in Section 5 as present as an Act, it provide that he was authorized, the Secretary, under such general regulations as he might prescribe to contract for the storage of water and its delivery. Then, if it please the Court, this language will become significant and will be heard again and again. Contracts respecting water for irrigation and domestic uses shall be for permanent service and shall conform to paragraph (a) of Section 4 of this Act. No person shall have or be entitled to have the use for any purpose of the water stored as aforesaid, except by contract made as herein stated. The Master has held and Arizona agrees that Congress intended by this provision to prohibit the use of any water stored pursuant to these works, other than by contract; but that was the intent of it. Now if I might, I would like to, in reviewing the legislative history of this matter, first turn to the Governor's Conference of 1927 that is found in the last page of the Arizona legislative history. It is printed in various other places but if you will turn to the last two pages 158 and 159, the recommending -- the recommendations of the Governor's Conference are set forth. I would call Your Honors' attention to the fact that up to this point in 1927, the Swing-Johnson Acts have been appointed and rejected in the Congress and at Denver in 1927, in September and first part of October, the seven Governors of the seven Basin States met at Denver in a conference. It is apparent it was quite a conference because we will see later Senator Pittman was there. We know that Delph Carpenter was there from his testimony. We know that Senators Phipps was there from his testimony. Therefore, we can assume, I think, without stretching the record that it was quite a conference. It was attended by all of the prominent water people of the seven Basin States involved. Its purpose, to try to work out this conflict between Arizona and California, to try to work out some kind of a meeting of the minds so to speak, whereby Arizona would ratify the Compact and the Project Act could be enacted. It is significant, if it please the Court, that one of the Governors attending this conference was Governor Emerson, Frank Emerson, who had been one of the Compact negotiators for the State of Wyoming. It is significant that from his testimony, Delph Carpenter, another of the negotiators of the Commissions of the Compact was in attendance of this conference because from his testimony in the Congressional hearings, we know he was there. Now, I say in passing that we have here the people concerned who are most vitally affected, the Upper Basin States. Finally, the four Governors of the Upper Division States New Mexico, Utah, Wyoming and Colorado sat as arbitrators -- sat as arbitrators to determine what should be the division made to the Lower Basin. I have mentioned the names of the arbitrators because it seems to me that they, particularly Carpenter and Emerson must have been keenly aware of the exact obligation of the Upper Basin under the Compact. The Governors there recommended of the average annual delivery of water to be provided by the States of the Upper Division at Lee's Ferry under the terms of the Colorado River Compact, 300,000 to Nevada, 3,000,000 to Arizona, 4,000,000 to California. Secondly, that Arizona should have the unequivocal use of a million acre-feet, the Colorado River Tributaries employing in the State with reference to Mexico. Significantly, in paragraph 3, these Governors of the Upper State -- of the Upper Basin recommended that as to the all Lower Basin Tributaries, they should go to the states in which they were flowing except that it was a two base -- two-state river that it should be subject to division between the states. But it is significant that these four Governors who would be most interested in the Lower Basin tributaries if they were in fact involved, recommended that they be given to the states of the Lower Basin free and clear and without limitation. Why? Because with respect to the mainstream in paragraph 5, they provided Arizona and California may each divert and use one-half of the other portion of water of the main Colorado River flowing at below Lee's Ferry. Subject to further equitable apportionment between the states after the year 1963 quickly turning back to Colorado River Compact in Article III (f) provided that after 1963 that there might be a further equitable apportionment of the unapportioned water, the water unapportioned by A, B and C upon application of the Governor of any state. The significant thing? Lower Basin States were not tributaries were not reserve for further equitable apportion. Mainstream, excess flow was reserve for future equitable apportion. Now, if it please the Court, this recommendation of the Governors we believe is equitably reflected in the legislative history became then the vehicle -- the vehicle for working out a settlement and compromise as between California and Arizona in the United States Senate because Arizona and California still could not agree. Arizona demanded 4,600,000, the Governor recommended 4,200,000, Arizona stood under 3,000,000. So that -- Speaker: (Inaudible) in Section 1? Mark Wilmer: 4,600,000 or Your Honor I can best answer that but the Governors were referring to the 7,500,000 let down at least third. So the exact language of the average annual delivery of water to be provided by the States of the Upper Division at Lee's Ferry. Now Your Honor engineering wise, hydrologically, any other wise we want to choose that had to be Upper Basin water because Lee Ferry I analogized the minute ago with respect to the two Basins as an hourglass. The Upper Basin is defined as that portion of these states which naturally drain into the river above Lee's Ferry which was named as a point a mile below the mouth of the Perry River so that the Lee's Ferry was the point of division. It was in effect where the Canyon section which isolate the Lower Basin from the Upper Basin begun to ameliorate something although the Grand Canyon still lies below it. So that when they said of the annual delivery at Lee's Ferry, there could be no conflict. There could be no claim that that did not mean Upper Basin water. It just -- isn't any getting away from it. You can talk until you're blue in the face and then were at everyone's faces, that lawyers who are very intense sometimes do have. Speaker: I would have comprehended however the portion of the mainstream that is referred to between Lee's Ferry and then -- Mark Wilmer: Yes and I think it does. I think if it please the Court that the Master's holding is misunderstood. He has said that the Secretary, the Secretary has control over only the dam and the reservoir. I would not for one minute contend in the light of the legislative history that Congress did not dedicate the water at Lee's Ferry to the uses of the Project Act. There's no question about it. They did because that's what they talked about. All through the -- the legislative history, as we will demonstrate there's a water let down at Lee Ferry, the water provided at Lee Ferry. Speaker: Well, do you disagree with the Master's (Inaudible) you construed into that water in California litigation? Mark Wilmer: I wouldn't know that I would read his decision Your Honor as in quite that light. As I understand the Master's decision, he held that the water which the Secretary had control over and which he might contract with respect to was water stored in the dam, in other words, it was water which the Congress had authorized him to store and to manage in the interest of navigation and to then apportion. But I would have to make this distinction if it please the Court and if we disagree with the Master we disagree with it. I do not think you can read the legislative history of the Project Act particularly in the third – in the second session of the 70th Congress and conclude other than that Congress had reference to the supply of water coming from the Upper Basin that it was to be stored. I do not think it can come to the conclusion other than that in effect was dedicated to the purposes of the Project Act including the generation of power and including the related phases of management which necessarily inherent in that type of thing. But all Congress gave the Secretary power to do was to build the dam and free the reservoir and then manage that reservoir but that doesn't rule out the fact that Congress was looking into the water at Lee Ferry as a supply for that project. And that doesn't rule out the fact that therefore the Congress has preempted the flow at Lee Ferry for the purposes of the Project Act. But it doesn't necessarily say that the Secretary of the Interior is giving control over that water until it gets within his grasp because he is the only the agent of the Congress. The Congress delegated to him management of a certain supply which it looked to for this reservoir. The -- the significance as we see it, if it please the Court is that -- William J. Brennan, Jr.: May I ask then, well, what -- Mark Wilmer: Yes, Your Honor? William J. Brennan, Jr.: -- what's under the diversion -- the status of diversion between the lake and Lee Ferry. Mark Wilmer: The suggestion that might be done? There's two answers to that Your Honor. Your Honor, the Master gave one, which was that no one can do it without the consent of Congress and if Congress consents, that's Congress' business. William J. Brennan, Jr.: And what's your view of it? Mark Wilmer: My view of this exactly that one you can't -- you can't build a dam and take water out off a navigable stream except either with the permit of the Secretary of Water or the consent of Congress, that is, the Rivers and Harbors Act of 1890 as amended in 1899, he simply can't do it. Secondly, and I think of equal cogency is a statement that Congress has set aside the flow of the river as it comes to the Lower Basin at Lee Ferry for the purposes of the Project Act. Congress, by their very terms of the debate, the very terms of the language of the Senators who finally hammered out the Project Act in effect said the supply at Lee Ferry shall be used for this purpose among which -- William J. Brennan, Jr.: That's -- does that add up to this -- that all the Secretary can do is contract in respect to the water which actually gets to the lake only has to -- Mark Wilmer: (Inaudible) has Your Honor. William J. Brennan, Jr.: -- that if anything else needs to be done or rather if anything maybe done through the water between Lee Ferry and the lake this requires -- as I say suggest the approval of the Secretary of Water plus further Congressional approval, Is that it? Mark Wilmer: Your Honor, I -- I can -- I can come to no other conclusion. William J. Brennan, Jr.: Well, is that what the -- the Master said? Mark Wilmer: The Master did say that this was not a matter of consequence because it couldn't be done without the consent of Congress. He did definitely take that position. We did not urge to him at that time. I think if he had pursued it, he would have come to the same conclusion and that is, that in addition under the Project Act, none of the Congress here has plainly -- plainly in the debates and in the committee hearings and everything else, has shown that it was looking to the supply of water from the Upper Basin at Lee Ferry to make this Project feasible. Now to me its maxim of a -- of a what's this -- plain nonsense to suggest that once the Congress having dedicated this supply of water at Lee's Ferry and I defy it if it please the Court, anyone who come to a contrary conclusion if you read the legislative history objectively. Congress having dedicated that supply at Lee Ferry to suggest with the straight face that Arizona might go up and construct the dam above that and take that water and run into Central Arizona, I just don't think that to adds up I don't think it makes sense. William J. Brennan, Jr.: Above what? Above Lee Ferry? Mark Wilmer: Above Lee Ferry and below Lee -- I mean above the lake -- William J. Brennan, Jr.: Above the lake -- Mark Wilmer: -- and below Lee Ferry? William J. Brennan, Jr.: -- and below Lee Ferry? Mark Wilmer: Just physical facts would deny it, but it's in the deep Canyon, it's impossible to get to but that isn't the answer -- the legal answer is that one, the water is been set aside from the Project Act by Congress. Two, under the Rivers and Harbors Act of 1890 and 1899, you can't build the dam in a navigable stream without the consent of the Secretary of Water or of Congress. William J. Brennan, Jr.: Well now, is that -- is that your -- I didn't I understand your pleadings correctly, but I believe not just today, he was talking of Project of which Canyon and (Inaudible). Mark Wilmer: Yes. William J. Brennan, Jr.: And your answer is, that you couldn't do those -- Mark Wilmer: My answer is -- is two things, Your Honor. One, the two projects have both been abandoned, but if that were not true -- that were not true, it could not be done without the Congressional approval and I don't know of any better power to give us authority than the Congress. Congress has stored this water and the Congress wants to say to Arizona, we authorize you to take some additional water, they are not going to say we're going to charge you for the Lake Mead but this is a body of water. It's as if the situation of Lee Ferry was a fountain, a spring as far as this lawsuit is concerned. So far as this lawsuit is concerned is the same as if there was a spring at Lee Ferry which gushed out so much water every year because under the Compact, that is the delivery point in the Upper Basin that is the measuring point of the Upper Basin. And it's just the same as if the Congress have said, “That supply of water used to be dam by the construction of the Boulder Canyon project, it is to be stored.” And for anyone to commit and say well the State of Arizona or the State of California may (Inaudible) under those circumstances in deep in that body of water and defeat the Project Act, defeat its purpose, defeat the contracts which the Secretary was required to make to provide revenue by depriving the project of water. All of those things simply the reason cries out against them and there's no basis for concluding that the Congress having said to the Secretary, “You, in effect measure this water. You determine how much of a head you're going to have for generating electricity. You determine how much of a supply of electricity you're going to have to sell and then based on that, you determine the piece if only the project and go ahead and build it. And then to commit and say despite that Arizona can go and take half that water and defeat the project, defeat the computation of the Secretary”. I can find no basis for that at all. They assigned the Rivers and Harbors Act and this point was not urged on his Master -- the Master. This point is not made until the argument in New York that this in effect amounted to a permission to Arizona and California to went above the lake and take the water and accordingly, frankly, we haven't thought of this argument and honestly I think. But on reflection upon further thought and upon further reading of the Congressional history, it just doesn't make sense to suggest to having set aside this water for the purpose of this project having considered and measured at Lee Ferry having consider the supply at Lee Ferry. Having told the Secretary he is to figure out how much water this will supply in the way of water to sell, water to generate power. And based on that, he is to build the project and then to say that despite that, Arizona or California can commit and take half that water without his consent or the consent of the United States. That is why, if it please the Court, I quoted with care from the appellates of the case to the effect that it involved not only the Commerce Clause involve not only the matter of navigation but the peripheral and other factors which went to make that exercise of that part feasible or economic. Now if it please the Court, I would like if I might to travel for just a moment to legislative history by way of the evolution of Sections 4 (a) and 5. For the convenience of the Court and only for that purpose, we had printed a little piece of paper here which is supposed to have been supplied to you in evolution of Sections 4 (a) and 5, first paragraph of the Boulder Canyon Project Act for our use in oral argument, this amounts to no more if it please the Court than -- Byron R. White: Excuse me Mr. Wilmer, this just came in, did it? Mark Wilmer: It was. Byron R. White: The agreement? Mark Wilmer: Yes, Your Honor. Byron R. White: -- the evolution is that -- Mark Wilmer: Yes, that is correct. Byron R. White: Nothing different? Mark Wilmer: That is correct. It is. Byron R. White: Why are you keep adding in these things -- Mark Wilmer: I realize the Court is getting a few papers it might even be felt distractive. The only purpose of this if it please the Court is conclusion. There's no editorial commentaries, there's no argument, it is simply excerpts from amendments as proposed. First -- in the first section, though I shouldn't say that, it goes back to the third Swing-Johnson bill. The first printed Section is Section 5 of S 33, 31 which was in the 69th Congress, the first session. Hugo L. Black: What year was that? Mark Wilmer: 1926, Your Honor I believe. I -- I think that's right but I -- the only purpose of this first quote, if it please the Court, is to show how the evolution of Section 5 began. You will note that it has a provision contracts respecting water for domestic use -- for domestic use maybe for a permanent service but subject to rights of prior appropriators. I would therefore call Your Honors' attention that at this stage of the evolution of Section 5 which is the provision of Project Act which we say interlocking with Section 4 (a) constitutes an allegation. This provision specifically say the rights of prior appropriators and that if it please Mr. Justice Black is one of the reasons for our belief that present perfected rights in pursuance of Article VIII means less than it might mean at first blush because here we have an express provision in the Act as introduced which protected and preserved rights of prior appropriators. Now in the 69th Congress, the Senate Committee on Irrigation and Reclamation reported out Section 5 of the Senate Bill. The eliminations are bracketed, the additions are italicized for the convenience of the Court in quickly recognizing the difference. The significant portion of course is at the top of Page 2, “No person shall have or be entitled to have the use for any purpose of water stored as aforesaid except by contract as herein stated”. The Committee of which I believe at that time Senator Hyrum Johnson was the Chairman deleted the provision, ”may be for permanent service”, and changed it to, “shall be for permanent service”. And deleted, “but subject to the rights of prior appropriators.” And added, “no person shall have or be entitled to have the use, for any purpose, of the water stored as aforesaid except by contract made as herein stated”. We believe that is persuasive, if it please the Court, that at least the Senate Committee which acted upon this ruled out subjugating this water of the rights of prior appropriators and rule in the proposition that no person should have this water for any purpose except by contract with the Secretary. Now, the next little excerpt is just by way of a (Inaudible) to our esteemed to Senator Ashurst but in fact the first mention of a limitation on California working out this problem between Arizona and California, appeared in a bill which he -- which I believe he had printed but did not offer in which he suggested a limitation on California. Up to this time the Swing-Johnson Acts had not propose any limitation on anybody in the Lower Basin. And up to this point, they have gotten exactly no one. Now in the 70th Congress which was 1928, Section 5 as introduced is most illuminating. Not as introduced, I'm sorry. It was introduced as it ended up in the third Swing-Johnson, was introduced in the form which you have seen on the bottom of the preceding papers, as amended. I saved a little printing by simply saying that Section 5 of Senate 728, which was the Senate Bill in the fourth Swing-Johnson introduced in the 70th Congress in the form shown above as reported out of the Committee on irrigation and reclamation provided the following. Again, I'll bring your attention that this Committee, I believe it was Chairman by Senator Hyrum Johnson. The addition is of two things, one, minor related to generation of electrical energy. Hugo L. Black: Why do you say that was minor in that kind of -- Mark Wilmer: Well, I'm wrong Your Honor, it wasn't. I was thinking of it was minor in the later I mean this is major the later point in the fight. I agree with you Your Honor. You have corrected it. But -- excuse me -- the italicized language is most significant. It has been California's assertion time and time again that this Project Act did not deal with mainstream water. Well here is the Committee amendment in the first session of the 70th Congress adding this, “provided however that said contracts”, these are the Secretary's contracts, no one can have any water without them, “shall not provide for an aggregate annual consumptive use in California of more than 4,600,000 acre-feet of water allocated to the Lower Basin by the Colorado River Compact mentioned in Section 12 and one-half of the unallocated excess, and or surplus water, provided further, that no such contract shall be made until California, by act of its legislature, shall have ratified and approved the foregoing provision for use of water in said State and then no person shall have or be entitled to have the use for any purpose of the water stored as apportioned except by contract made as herein stated”. In other words, the first limitation on California, the first movement toward the final passage of this Act came in Section 5 and by a virtue of a restriction on the right of the Secretary to contract with respect to water. Now if we are right that this water that was being stored was mainstream water and it's pretty difficult to come to any other conclusion. We then find that the first mention of a restriction on California, the first attempt to divide this water is how?By limiting the right of the Secretary to contract with respect to how much that water they could give in California. I would like also if you would please note above five lines in the bottom of that, the words appeared that no such contract shall be made until California to the end with the italicized portion. Before going to the next amendment which was printed, I'd like to suggest this to the Court that this was a period of foremen. This was a period when subsequent to the Governor's conference unquestionably backroom conferences and front room conferences in California conference and all kinds of conferences were going on. We find gradually evolving the notion of how to protect the Upper Basin if Arizona didn't ratify how to reduce Arizona to ratify and that is the purpose of our printing of the next several amendments. But I want to call one other thing to Your Honors' attention. Senator Johnson, Chairman of the Committee -- Chairman of the Committee which reported out this measure made this observation on the floor of the Senate and it appears in 69th Congressional record at 7250. Section 5 provides, “That the contract must be generally for storage and delivery of water and the Secretary shall fix charges to meet the revenue requirements and that contracts for irrigation and domestic uses must be for permanent service”. An amendment has been inserted here to request to the Upper Basin States offered I think in the Committee by the Senator from Wyoming which provides that and then he quotes the italicized provision you have just read. Then he said, “That is another rigorous provision. A rigorous provision to which those who represent California are willing to consent in order that legislation might be accorded but binding California perpetually and forever to use not to exceed 4,600,000 acre-feet of water”, binding California how? A reasonable limitation upon the power of the Secretary to contract with respect to stored mainstream water and yet to have told time and again, California didn't understand what she was getting into. California built these great projects upon the assumption that she was safe and doing so at least for the system allocation. Now, I ask Your Honors to note the portion of the italicized Section 5 as it came out the Committee. Senator Waterman, one of the Senators from the Upper Basin, I have forgotten, Colorado I believe -- Speaker: Colorado. Mark Wilmer: -- printed an Amendment with respect to Section 5 which struck out the words I have asked you to note that no such contract shall be made until California and so on and propose to insert therein the language which is set forth. The only significant thing I'm going to call Your Honors' attention to is the fact that he specifically stated, “shall have first ratified and approved all of the provisions of this Section and set in this Act in anyway relating to the use of waters of the mainstream of the Colorado River within or by the State of California or by any virtue of cooperation for said State”. And then on the next page, “That any and all water demanded and required are lawfully appropriated and applied for beneficial use for the State of Arizona or any of its inhabitants including corporations, municipal or otherwise, or any of them out of the mainstream of the Colorado River shall at anytime exceed and so on”. In other words, Senator Waterman clarified and definitely identified what they were talking about was mainstream water. It was water which was in the mainstream of the Colorado River which that I have said before you Your Honors, was the only concern of these people, these Upper Basin States were not concern in the slightest with the uses of our tributaries. They were concerned with the notion of the tentacles of the Lower Basin reaching up into the Upper Basin by means of an equitable apportionment suit and demanding more water. That's what they were afraid of and that was what they were protecting themselves against and the one thing they were concerned with was mainstream water because Lower Basin tributaries weren't accessible to them, rights are and couldn't be asserted against them because they were not of the supply. Just doesn't add up to assert that the Upper Basin was concerned for one second with uses in the Lower Basin or concerned that it should be a system matter insofar as a Project Act was concerned. Hugo L. Black: They were concern whether or not being compel to give up water left in their amount they agreed to have in the Upper Basin? Mark Wilmer: Your Honor, there's just isn't any other answer to it. Otherwise, we have to consider that the States of the Upper Basin, the Senators of the Upper Basin were concerned with limiting the economic development of the Lower Basin which have no relationship to it. What did they care of? Hugo L. Black: Suppose your arguments should be fully accepted? Mark Wilmer: Yes, Your Honor. Hugo L. Black: That suppose you should win every point that you have. Would that jeopardize in anyway either temporarily or permanently, the right of the Upper Basin to have 7,500,000 acre-feet? Mark Wilmer: Unequivocally, no. That is the purport of Section 18, that is the reason for Section 18 which I quoted earlier which said, “That nothing herein contained in the Project Act shall be construed”, I'm not trying to repeat this from memory, I'm simply giving the substance of it, “shall be construed as interfering with the right of any state to control the waters within its borders except insofar as modified by the Colorado River Compact”. William J. Brennan, Jr.: Well, Mr. Wilmer, what -- what does that mean in the event there's enough water to have 7,500,000 feet in the Upper Basin and at the same time deliver at least 30 of the amount that they're obligated under the Compact delivery? Mark Wilmer: Your Honor, under the Compact, the Upper Basin assumed that they obligation in 3 (c) -- in 3 (d), assume the obligation knowingly, willingly, purposely that they would deliver on an average 7,500,000 every year at Lee Ferry. William J. Brennan, Jr.: So if -- if in discharging that obligation that leads them with less than that in the Upper Basin, they accept the deficiency? Mark Wilmer: That is a calculated risk they took to get the consent -- William J. Brennan, Jr.: Well, I didn't quite understand your answer to Mr. Justice Black. Mark Wilmer: I'm sorry Your Honor, I meant to say this that nothing that Your Honors do today or I shouldn't say today I mean in the decision of this case. Nothing Your Honors can do in the decision of -- should do in the decision of this case assuming that it is a statutory construction case with respect to the meeting of what with respect to what Congress meant in enacting the Project Act can effect the Upper Basin. Nothing -- nothing can affect the Upper Basin. Hugo L. Black: What -- what effect would it not if it's with use the amount of usable water in debate below 7,500,000 acre-feet? Mark Wilmer: Your Honor is now speaking of a system Lower Basin -- Hugo L. Black: I'm talking about what practically the Upper Basin will be free to use if you win all your points. What will they be free to use, no, they can use or that having a demand, by reason of demand you brought about by a decree remedying this controversy? Mark Wilmer: The best way I can answer that is this Your Honor. This Court should not enlarge the obligation of the Upper Basin under the Colorado River Compact. This Court does not need to enlarge the obligation of the Upper Basin under the Colorado River Compact. Hugo L. Black: Neither -- neither to enlarge, I presume not to diminish or to diminish unless they were here perhaps. Mark Wilmer: Unless they were here and I see no occasion for having them here or offer than being here. As I said before Your Honor -- Hugo L. Black: (Inaudible) might have some bearing on the fact as I understood either statement was made that if you should win, your argument plainly had a decree you seek that the Upper Basin would be tied to that so that might not be able to keep for its own use as much as the 7,500,000 acre-feet. Mark Wilmer: Your Honor, I am sure that perhaps Mr. Ely did not mean to make the statement he did when he said that the 75, excuse me, that he said that the 75,000,000 of 3 (d) water included Mexico. I'm sure he did not mean to make that statement because -- Hugo L. Black: Of course Mexico is a different situation. Mark Wilmer: That -- Hugo L. Black: No controversy, it's never been in the controversy in the Compact anywhere else as to the Upper Basin and the Lower Basin derived being subordinated to carrying out and to (Inaudible) Mexico. Mark Wilmer: I think there could be no question of what the treaty must be carried out. Hugo L. Black: But I'm -- I'm saying now that if it should be diminished by what you add and the decree should be written in such way that the Upper Basin is denied its 7,500,000 eliminating all of that Mexico with anything your argument you'll make required a decree to be written which wouldn't do that in -- Mark Wilmer: No. Hugo L. Black: -- the Upper Basin. Mark Wilmer: No, we'd have no right to ask that Your Honor. Hugo L. Black: It's your idea that if you would win on your basis the decree which was molded according to your argument would still lead the Upper Basin at all time so that it did not either temporarily or permanently, unless by reasonable negligence, have its the usable water for use below 7,500,000 acre-feet. Mark Wilmer: Obviously, there's no question Your Honor unless they can hear one qualification. Unless under the Compact as agreed to, that result followed and I mean by that merely their obligation under 3 (d). In other words, this Court, I do not think would attempt to either interpret or modify the Compact and the Compact fairly requires that the Upper Basin must and they were on an average 75,000,000 over a 10-year period. So that I would qualify my answer only in the summary, that nothing which we have urged on the Court, nothing which we would suggest in the decree this Court enter could in any fashion enlarge or lessen the obligation of the Upper Basin. My answer to Your Honor is quick but fair. Hugo L. Black: I understand. Mark Wilmer: The provision I might simply note in passing of 3 (c) which is a Mexican treaty application is that if such surplus which is a surplus above (a) and (b) shall prove insufficient for this purpose, then the burden of such deficiency shall be equally borne by the Upper and Lower Basin and whenever necessary, the States of the Upper Division shall deliver at Lee Ferry water to supply a one-half of the deficiency so recognized in addition -- in addition to that provided in Paragraph (d). Now Paragraph (d) is a paragraph which provide for 75,000,000 on a 10-year average. And therefore, the Mexican water is not included within the 75,000,000 because it shall be in addition to that required by Paragraph (d). Now, the following is an amendment printed, get myself cleared. The other Waterman amendment following that is Section 4 (a). In other words, we have now progressed with the Section 5 amendment through the first Section of the 70th Congress which has resulted in an amendment restricting California by a limitation upon the Secretary's power to contract that ends our treatment of 4 (d) and 4 (a) Section 5 at this moment. We have started now in the first session of the 70th Congress with the Section 5 out of Committee with a limitation upon the Secretary's right to contract limited to 4,600,000. Speaker: With that 4,600,000, you mean all water below Lee Ferry? Mark Wilmer: That is our belief, Your Honor, yes. Speaker: Not below Lake Mead? Mark Wilmer: No. No it's -- it's the water in Lake Mead and because the only place he could contract under the Project Act Your Honor. Speaker: Insofar as the limitation is concerned, the point you've arrived, there's no distinction between -- there's no diminution of the California limitation or the California rights to back the fact that the water between Lake Mead (Inaudible). Mark Wilmer: (Inaudible) it confines California's rights to water below Lee Ferry and in Lake Mead. I would say the Secretary's rights to contract are with respect to water which he is to store under the Project Act because that's safe. Speaker: (Inaudible) the limitation with respect of Lake Mead and all water in the mainstream below -- Mark Wilmer: Lee Ferry and in Lake Mead, yes. Speaker: Well that's the question. Mark Wilmer: Well, the water in -- below Lee Ferry Your Honor has got to go to Lake Mead, that we think it's committed to Lake Mead, we think it is tied to Lake Mead, that it's dedicated to Lake Mead and we think that it is, in effect, in Lake Mead because hydrologically it must go there. Speaker: (Inaudible)

Warren E. Burger: Mr. Kuhlik, I think you may proceed whenever you're ready. Bruce Neil Kuhlik: Mr. Chief Justice, and may it please the Court: The question in this case is who is the proper party to control the attorney-client privilege of a corporation in bankruptcy. Our position is straightforward: Control over the privilege rests with the corporation's management. The bankruptcy trustee manages the debtor corporation and therefore the trustee must have the power to assert or waive the corporation's privilege. This case arises out of the demise of a commodity brokerage firm, Chicago Discount Commodity Brokers. Over a period of time, the firm's President, Frank McGhee, who is one of the Respondents in this Court, had embezzled several million dollars in customer funds. And by the fall of 1980 the firm's finances were in such disarray that the Commodities Futures Trading Commission filed a complaint in federal court alleging various violations of the Commodities Exchange Act, and the same day that the complaint was filed the brokerage firm, through Frank McGhee, who was at that time its sole remaining officer and director, entered into a consent decree with the Commission that provided for the appointment of a receiver. John Notz was appointed the receiver and he immediately took control of the firm's operations. It quickly became clear to him that really the best course for the firm was to file for bankruptcy and, pursuant to an express authorization in the consent decree, he filed a voluntary petition for liquidation under subchapter IV of chapter 7 of the bankruptcy code. Now, subchapter IV of chapter 7 is the only bankruptcy avenue available to commodity brokers. They cannot go into reorganization. Congress had two concerns when it set forth that requirement. The first is with the customers of a commodity broker, whose funds are primarily at risk. They are the people that put up the margin payments and the deposits, and it's typically that money that is lost in a commodity brokerage bankruptcy. Congress was also concerned that the bankruptcy of one commodity broker not have a ripple effect through the complex and interdependent commodity markets and thereby cause problems throughout the futures markets. So under these special provisions the trustee, who was Mr. Notz, came in and he operated the commodity brokerage business with a view toward liquidating it and closing out its contracts in an orderly fashion as quickly as possible. Pursuant to Section 766 of the code, the trustee in a commodity broker bankruptcy must identify contracts that may be transferred to solvent commodity brokers, he must seek customer instructions, he must make and meet margin payments daily, he must be prepared to accept or to deliver commodities in contracts that cannot be closed out before their closing dates. Sandra Day O'Connor: Mr. Kuhlik, I'm curious about how this process would work. Assuming that you are correct ultimately that a trustee in bankruptcy has the power to waive the privilege for the corporation, is that limited in any way? In other words, is that qualified by a power to waive it if it will somehow benefit the estate? And if so, is it somehow necessary that the trustee would find out first what it is that's going to be waived before making that decision, and how would that be accomplished? Bruce Neil Kuhlik: You ask a number of questions, Justice O'Connor. The trustee in a bankruptcy is a fiduciary who has a responsibility to all of the parties in interest in the proceeding: the creditors, the shareholders, the debtor corporation. And it is open to any party at any time to challenge the actions of the trustee as not being in the best interests of the estate. In fact, it's a fairly common occurrence. People are doing it all the time. So in a sense, the rule we are asking for is a presumptive one. We feel that the trustee is the best person in the first instance to make this cut. He is obviously in a better position in this case than Frank McGhee. Sandra Day O'Connor: Well, wouldn't the trustee have to know what the communication was before deciding whether to waive it? Bruce Neil Kuhlik: Well, not in all circumstances, and I would note in this particular case that the McGhee's have asserted the privilege or instructed their attorney to assert it with respect to the trustee as well. In this particular case, the trustee had been pursuing a number of adversary actions and the CFTC had as well, and the trustee and the CFTC were both aware that the McGhee's were the people who had primarily caused the problems with this brokerage firm. And it was quite apparent to the trustee that waiver of the privilege in favor of the CFTC with respect to the questions that were asked of Mr. Weintraub in this deposition would be in everybody's best interest. But I would emphasize here that this proceeding arises out of the subpoena enforcement action. Sandra Day O'Connor: Well, how does the trustee know that without knowing what the information was? Bruce Neil Kuhlik: Well, he knows in this case from his experience in pursuing other actions against the McGhee's and other insiders, that information concerning access to the safe, loans to corporate officers and the like, very, very unlikely that they would redound to the detriment of the estate. And what we're talking about here is a question of whether this will be in the best interest of the customers, the creditors, the shareholders. The questions that were asked of Mr. Weintraub with respect to which the privilege was asserted were questions that could not possibly have hurt those groups of people. The only people that could have been harmed were the insiders who engaged... had engaged in fraudulent transactions. I would emphasize here that the CFTC is statutorily authorized to seek disgorgement of ill-gotten gains in a proceeding such as this. So it was quite apparent to the trustee that the CFTC was seeking to go along the same lines that he himself was, which was to find the money. The customers had put up these funds for margin payments, for deposits, and this money was supposed to be separated... "segregated" is the word that's used in the statute... and not used for any other sort of trading. And what happened here was that Mr. McGhee and perhaps other insiders had used this money to trade on their own accounts, and it was quite apparent that the only way this money was going to be recovered was to determine where it had gone, what the insiders had done with it. And I would emphasize, though, again that this is a subpoena enforcement action. If the McGhee's had wished to challenge the propriety of the trustee's waiver, there was a place for them to do it and that was in the bankruptcy court, not in the subpoena enforcement court. Sandra Day O'Connor: And what procedures are there in the bankruptcy court to do that? Bruce Neil Kuhlik: Well, at any time, Justice O'Connor, anyone may file a motion with the bankruptcy judge alleging that the trustee has violated his fiduciary duty, has not acted in the best interest of the estate. The trustee, of course, has to file a bond at the beginning of the action and he is constantly subject to supervision. So that procedure would clearly be available here or would have been available had they chosen to-- William H. Rehnquist: But really, the subpoena enforcement proceeding and the bankruptcy challenge are two different kinds of challenge, aren't they? One is based on the fact that the trustee is not acting in the best interest of the estate, which I would presume to be the bankruptcy challenge. The subpoena enforcement proceeding would be that of the person whose testimony is to be compelled, and I don't suppose that person is limited just to claims that the trustee is not acting in the best interest of the estate. Bruce Neil Kuhlik: --No. I would suggest, Justice Rehnquist, that he doesn't have that option available to him. He has the legal option of presenting the legal question here of whether the trustee has the power to act for the corporation the way that in a non-bankruptcy proceeding, if the board of directors had waived the privilege, for example, it could be contended that they weren't really the board. And of course, whether or not the information was in fact privileged would be a question for the subpoena enforcement court. But I would strongly suggest that the... clearly, the question of whether the trustee acted here in the best interest of the estate is simply not before this Court. William H. Rehnquist: On these particular facts. Bruce Neil Kuhlik: On these particular facts. William H. Rehnquist: That should have been raised in the bankruptcy court. Bruce Neil Kuhlik: Yes. There may be circumstances, with procedural difficulties, where it may arise first in the subpoena enforcement court, but this is not... that question simply is not before the Court. Sandra Day O'Connor: Well, is the power of the trustee to waive the privilege limited to matters concerning the estate's claims and assets? Bruce Neil Kuhlik: Well, it's difficult to imagine anything that would concern the corporation's causes of action that wouldn't in some way be related to its assets. Sandra Day O'Connor: Well, I think it's conceivable that there might be some that aren't related. And is there any limitation? Bruce Neil Kuhlik: I don't see any limitation on the trustee's power, his absolute power, Justice O'Connor, to act for the corporation. That is clearly implicit in everything that the trustee is given the power to do in the bankruptcy code. And as I say, if the trustee in a particular case has not acted in the best interest of everybody, that action may be challenged. The trustee in this case, like other liquidation trustees, has the duty to maximize the value of the estate for all of the parties in interest. The estate in a corporate bankruptcy is composed of all of the corporation's property. Unlike an individual, a corporation doesn't have any exempt property. Everything goes into the estate. And most significantly perhaps, the estate includes the corporation's causes of action, its litigation. Under Section 541 of the code and under bankruptcy rule 6009, the trustee takes control of the corporation's litigation, both its causes of action and its defenses. And it would be completely anomalous to suppose that the person who is in control of the corporation's litigation does not have the power to obtain and to control its communications with counsel. It's simply impossible to see how his function in prosecuting causes of action could be carried out without access to that information. And in this very case, I would note that the trustee has filed over time approximately 75 adversary actions seeking the recovery of approximately $6 million. Because in bankruptcy proceedings the resources of the estate are often quite limited, it would not be unusual for a trustee to cooperate with the Government where, as here, it is apparent that the Government is looking for the same thing that the trustee is, which is the missing money. And just that sort of cooperation as we've been discussing was contemplated here. And after the trustee, at the CFTC's request, waived the privilege, the district court ruled that he must answer the questions and the McGhee's, Frank McGhee who I've mentioned and his brother Andrew McGhee, who was a minority shareholder in the firm and a former officer, appealed to the Seventh Circuit, and the Court of Appeals reversed, holding that the trustee does not have the power, absolutely doesn't have the power, to waive the corporation's attorney-client privilege. This conflicts with decisions of the Second, Eighth, and Ninth Circuits and virtually every district and bankruptcy court to consider the question. Now, our position really can be summarized in a nutshell: The privilege of a corporation is controlled by its management, its board of directors or its officers if they're authorized to so act by the board. When a new board of directors takes over in a non-bankruptcy case as a result of a takeover or a merger, shareholder dissatisfaction or the like, it takes control of the privilege. It has access to the privileged communications. It can waive the privilege. That much is settled corporate law and it's undisputed by the parties here. So the question is who manages a debtor corporation in bankruptcy when a trustee has been appointed. There can really only be one answer: It's the trustee. As I've noted, the trustee has power to exercise... can exercise power over all of the corporate property. He's under the direct supervision of the bankruptcy court in this regard. He operates the business in a commodity brokerage bankruptcy. He can operate the business in other liquidations, with the approval of the court. He has a specific duty to investigate former management to reveal causes of action, to set aside preferential transfers and fraudulent conveyances. As I've said, he stands in the shoes of the debtor corporation in prosecuting and defending its causes of action. We don't think he could do any of these things without-- Sandra Day O'Connor: Mr. Kuhlik, do you think the same rule would apply in an individual bankruptcy? Bruce Neil Kuhlik: --An individual bankruptcy, Justice O'Connor, raises quite different concerns, as we noted in our reply brief. An individual's privilege is personal to himself. There isn't a management that controls the privilege for him. Sandra Day O'Connor: So what's your answer? Bruce Neil Kuhlik: My answer is that that is a question that does not have to be decided here. Sandra Day O'Connor: Well, I would hope you'd respond a little more fully than that. Do you think the privilege is different? Bruce Neil Kuhlik: Justice O'Connor, I do not think as a matter of course that in every circumstance a bankruptcy trustee should be able to waive an individual's privilege. There may be circumstances that arise in an individual bankruptcy that require such a result. But my main point is that whatever the Court does here will not require a result one way or the other in an individual case. Sandra Day O'Connor: What if the third party asking for the information in a corporate liquidation is some tax commissioner, and suppose that the disclosure of the information would have the effect of revealing some taxes that might be due that would eliminate any hope of recovery by the creditors? Bruce Neil Kuhlik: Justice O'Connor, that's exactly the situation where the trustee would not waive the privilege. Sandra Day O'Connor: Well, how is the trustee going to know unless he finds out the answer first as to what the information is? Bruce Neil Kuhlik: I would suggest the facts of this case may be somewhat unusual in that the trustee did not have the information before him when he made the waiver, and that in most circumstances one would hope that the trustee would have the information. But even the nature of the request and the requesting party would probably give a fairly good clue as to what was being sought and what it might be used for. But the trustee's fiduciary duties and his responsibilities-- John Paul Stevens: May I just ask one question. Bruce Neil Kuhlik: --Yes, Justice Stevens. John Paul Stevens: Following up on Justice O'Connor's question about individual, I gather then from your answer on individual you do not contend that the privilege is an asset of the estate? Bruce Neil Kuhlik: We make that as an alternative argument. John Paul Stevens: If you make that as an alternative argument, that would apply to an individual. Bruce Neil Kuhlik: That is correct. If the Court were to adopt that argument, we feel it would apply to the individual. John Paul Stevens: But since you said this case does not necessarily control individual situations, you must be saying it's not an asset of the estate. Bruce Neil Kuhlik: If you decide this case on the ground that the-- John Paul Stevens: Well, let me put it to you: Is it your position that the privilege is an asset of the estate? Bruce Neil Kuhlik: --That is an alternative position. It is not my preferred position, Justice Stevens. My position-- John Paul Stevens: In other words, you don't really have a position on whether it is or is not? Bruce Neil Kuhlik: --Many-- John Paul Stevens: You want to win the lawsuit, is what you're saying. Bruce Neil Kuhlik: --We believe that the most reasoned approach to this and the one that makes the most sense is to find that the trustee is the management of the corporation and controls the privilege in that capacity. A number of lower courts have reasoned that the privilege is an asset of the estate and we present that for your consideration. John Paul Stevens: Does it follow under your management theory that if you have a reorganization and the reorganization trustee employs counsel and gets legal advice, that after the reorganization successor management could waive his privilege? Bruce Neil Kuhlik: I believe that would follow, Justice Stevens. Thurgood Marshall: In normal business when a man sells his business to another individual, the attorney-client privilege is part of it? Bruce Neil Kuhlik: Justice Marshall, the answer to that question depends on whether the privilege is necessary to realize the acquired interest. It's a form of property law. Thurgood Marshall: I thought basically that attorney-client privilege was a "personal" privilege. Bruce Neil Kuhlik: I believe the cases-- Thurgood Marshall: Well, how do you pass along a personal privilege? Bruce Neil Kuhlik: --I'm sorry, Justice Marshall? Thurgood Marshall: How do you pass along a personal privilege? Bruce Neil Kuhlik: If you pass along a property right that the privilege is necessary to-- Thurgood Marshall: Is that a property... is attorney-client privilege a property right? Bruce Neil Kuhlik: --No. If you pass along, if you convey to someone an interest in property that itself requires control over the privilege to realize that interest, then the privilege goes as well. Thurgood Marshall: My only point is, speaking for myself, the personal one, you're carrying a whole lot of baggage. If you didn't insist on it you wouldn't have that baggage. That's all. Bruce Neil Kuhlik: I suggest I'm not trying to suggest here absolutely that the individual should control the privilege. We're far more interested in what is presented in this case, which is the corporate privilege, and I simply suggest that our management theory, which does not depend on a conveyance of assets and is not directly applicable to the individual situation, does not apply... if what it takes... if the Court believes that it cannot distinguish between the corporation and the individual's privilege, we would do without the individual's privilege. But we believe that it is reconcilable and that there are situations perhaps, that the Court simply need not reach right now, with respect to the individual privilege. The bankruptcy trustee's duty to maximize the value of the estate is precisely analogous to the duty of management outside of bankruptcy to maximize the profits of the corporation. And Respondents raise the possibility of conflict between creditors and shareholders, and I would like to put that to rest. In a liquidation proceeding such as this one, everybody desires exactly the same thing, to maximize the value of the estate. The corporation's property is being sold off. It is not going to exist in the future in any meaningful sense. The only way anybody is going to get paid is to make that sum of money that the property is sold for as large as possible, and everybody wants that. More fundamentally, though, the Respondents' argument relies more on form than the substance of the matter. The substance of the matter is that management's duties run to owners. In a bankruptcy proceeding, creditors are owners. They have an ownership interest in the property just like shareholders do. John Paul Stevens: Mr. Kuhlik, can I back up just a second. Bruce Neil Kuhlik: Sure. John Paul Stevens: Take the situation right before bankruptcy, when a corporation is in desperate straits and feels it needs legal advice in a lot of difficult problems. Should the lawyer advise the corporate client that comes to him in that position, say: Remember, anything you tell me now is going to be fair game for the trustee to disclose? Bruce Neil Kuhlik: It is absolutely a usual practice for corporate counsel in a situation like that to advise corporate officers that they are not the ones who control whether their communications will be disclosed. That's true with respect to bankruptcy proceedings, in contemplation of a takeover bid, any other sort of investigation. That is what counsel do, as we point out in footnote 52 in our brief. And it wouldn't be any different here. Justice Stevens, I think you're raising perhaps-- John Paul Stevens: Then your answer is yes, they should tell them that? Bruce Neil Kuhlik: --They should definitely tell them and they do. I think what you're raising, though, is perhaps the possibility that attorney-client communications would be chilled, and I want to address that very briefly. All we are asking the Court to do is to apply the same rule in bankruptcy proceedings that's applied out of bankruptcy, and that is that management controls the privilege. We are not concerned here with the existence of the privilege or its scope. All we ask is that you not upset the balance struck in non-bankruptcy corporate law, which is that current management controls the privilege. In any event, the chilling effect that is suggested really disappears upon analysis. I would emphasize to the Court that in reorganization proceedings, which are the method of choice for bankruptcies for corporations, the presumption is against having a trustee. The presumption is that the officers and directors will stay in as the debtor in possession and control the corporation even in bankruptcy. When they are not in possession, when a trustee has been appointed, it is often because former management was fraudulent or grossly inadequate. So if counsel... or if corporate employees were to consider the possibility of bankruptcy, I would suggest that that possibility itself might be remote. But equally importantly, the possibility of having a trustee is quite remote in most proceedings. Moreover, the trustee won't necessarily waive the privilege. If the employee is concerned about corporate liability, he can rest assured that the trustee will act in the best interests of the estate, just as would management outside of bankruptcy. And finally, as you suggested, Justice Stevens, corporate counsel could inform the employee of the possibility that the privilege might be lost, that he doesn't control it, and suggest that the employee seek his own counsel as well if that is necessary. In sum, where a trustee is appointed in a bankruptcy proceeding the officers and directors have no managerial role to play, either in terms of their powers or their duties. Their role is minimal and ministerial. They must turn over the property of the corporation to the trustee and, significantly, under Section 521 of the code, there's no provision made for assertion of a privilege against the trustee by the debtor corporation. The officers and directors or one of their delegates must appear for examination by the creditors. But that's really it. Anything else they do in practical terms tends to further their own interests. If the shareholders wish to have their interests furthered, they can form a committee, just as creditors have committees, and seek to assert their interests that way. But the former management itself has really been, as the House report says, "completely ousted" in favor of the trustee. They don't have any say in the corporation's liquidation... or litigation, rather. They are likely to be the people most likely to have a conflict of interest with respect to the communications. The trustee, by contrast, is a court-supervised fiduciary who has responsibilities to the entire community of interests in the estate. He is the person who can be relied upon to exercise it in-- William H. Rehnquist: Well, does he have any real fiduciary responsibility at all to the people in the position such as Mr. McGhee? You speak of him having fiduciary responsibilities to everybody, but that's much like a fiduciary responsibility to no one, it seems to me. Bruce Neil Kuhlik: --Justice Rehnquist, he has fiduciary responsibilities to everyone who has an interest in the estate. That is, the creditors, the customers, the shareholders. He does not have a fiduciary responsibility to act in the best interests of Mr. McGhee, which is all that Mr. McGhee is concerned with. William H. Rehnquist: Or of prior management generally? Bruce Neil Kuhlik: That's true. He must act in the best interests of everyone who currently has an interest in the property. It's a consequence of the corporation's own continuing existence. And as the management of the debtor corporation, the trustee is entitled in our view to control over its attorney-client privilege. If there are no further questions, I'd like to reserve the balance of my time for rebuttal. Warren E. Burger: Mr. Epstein. David A. Epstein: Mr. Chief Justice and may it please the Court: Our position in this case, both on the specifics of this case and perhaps more importantly on the general proposition being advocated by the Government, could not be more directly opposite the Government. We contend that upon the occurrence of bankruptcy, when a trustee in bankruptcy is appointed for either an individual debtor or a corporate debtor or a partnership debtor or a trust debtor, that the power to control the attorney-client privilege of the bankrupt does not pass to the trustee. It does not pass in the first instance because Congress has not given it the power to the trustee. Despite all the briefs which have been submitted on this point, we still find that nowhere in the bankruptcy code or in any other Congressional enactment has there been any transfer of anybody's attorney-client privilege to bankruptcy trustees in any circumstances. The code does not say what the Government would like it to say and it does not say what the Government asks this Court to read into it. Byron R. White: Whose privilege is it? David A. Epstein: It is... in this instance, it is the corporation's privilege. Byron R. White: Well, it was and it still is. David A. Epstein: That's our position, Your Honor. Byron R. White: Well, I know. But it's just a question of who can exercise it or who can give it away. Do you agree that your prior management could have waived it? David A. Epstein: I would agree with that upon the occurrence of bankruptcy. I would only disagree with-- Byron R. White: Well, just forget bankruptcy for a minute. Before bankruptcy could then-current management waive the privilege? David A. Epstein: --Yes, and they're the only ones who can. Byron R. White: Well, and suppose then they had a stockholders meeting and they voted out the old management, put in some new management. The new management could waive it? David A. Epstein: Absolutely. Byron R. White: Well, what's wrong with the trustee waiving it? David A. Epstein: He's not management. Byron R. White: Why isn't he? David A. Epstein: Because the board of directors, who is management, still exists. Byron R. White: What are the trustee's powers? Isn't it to operate the business? David A. Epstein: It is perhaps-- Byron R. White: This isn't a debtor in possession, is it? David A. Epstein: --No, but I don't think it matters. Byron R. White: Well, I know you don't. You must think that at least. But the trustee... the old directors haven't any power to run the business. They are no longer managing the business. David A. Epstein: They are no longer operating the business. They are, however-- Byron R. White: Well, operating, then. David A. Epstein: --Well, let's talk about operating if that's the direction Your Honor wishes to pursue. Byron R. White: Well, that's your direction. I think the trustee is managing the business. David A. Epstein: In a chapter 7, such as is before the Court in this case, the operation of the business is nothing more than winding down its affairs. In a chapter 11, it seems to me the Government's argument at least superficially is stronger because-- Byron R. White: A reorganization. David A. Epstein: --In a reorganization, whether it's a debtor in possession is a trustee, there is a genuine operation of the business. But in all of the powers which the bankruptcy code vests in trustees to manage, temporarily or on a longer term basis, the business of the debtor, control of privilege is not amongst the powers, nor is it reasonably implied. If it were, then I think the Court should recognize that those powers, whatever they are, are identical for individuals, for corporations, and for other types of debtors which can file bankruptcy or be involuntarily put into bankruptcy. They're identical, whatever they are. Now, the power which today in oral argument the Government focuses most strenuously upon is the power to control litigation. Examine that for a moment. The same is true for an individual. The same is true for litigation concerning the business and affairs. Justice O'Connor's question to Mr. Kuhlik earlier hits the point right on the head. Insofar as we are talking about disclosure of confidential information relating to the business and the affairs and the litigation of the debtor, the code is 100 percent symmetrical. There's no distinction between individuals, corporations, or anything else. Ultimately this case, to the extent it is being argued, perhaps more so than many other cases, on a theoretical level, the theoretical difference between a corporation and an individual ultimately devolves upon one connector-- John Paul Stevens: May I interrupt. I didn't mean to interrupt you in the middle of the sentence. If you finished, what factor was it you were talking about? David A. Epstein: --The only factor is that, unlike an individual who operates a business, a corporation who operates has divided the management from the ownership. But there is still management in either event. John Paul Stevens: The question I wanted to ask, I guess it applies equally to an individual or a corporation, is really the same one Justice O'Connor asked earlier. What about access to privileged information? Would you agree that the trustee would have access to corporate information that's in the mind of... that had been imparted to counsel in a privileged communication? David A. Epstein: I would not agree, but I would suggest to the Court... and frankly, the reason I would not agree is because, having examined the law and the cases, and I must say somewhat to my surprise as I got into this, it's not there either. And it seems to me that, while a good portion of the briefs in this case talk about the power of the trustee, not to waive the privilege, which is the issue in this case, but the power of the trustee to get inside the privilege, as it were, to obtain the information, which is your question, Justice-- John Paul Stevens: I should think there'd be many cases in which information that had been imparted to counsel in a privileged communication might well be an important corporate asset. David A. Epstein: --Well, I think-- John Paul Stevens: For example, you might describe a trade secret or a customer list or something like that in the course of such a communication. David A. Epstein: --As a practical matter, Your Honor, I might agree with you. The difficulty is that the cases over the years and the Congressional understanding and certainly the understanding of the commentators for 100 years at least is that the debtor's attorney-client privilege not only survived into bankruptcy, but applied as against the trustee. Now, it's remarkable, if not astounding, Your Honor, that for a hundred years this question has simply not been litigated until the waiver theory came up for the first time in the late 1970's, mid-1970's. For a hundred years we've had bankruptcy laws, we have not had a waiver theory, and we have not had litigation over the privilege either passing to the trustee or the trustee's invading it. Byron R. White: Give me an example of where it's held that the privilege is not to be waived? Give me a concrete case? David A. Epstein: I cannot give you any case before 1976, I believe. The Amjoe case was the first case ever to consider the possibility of a waiver by a trustee in bankruptcy. Nobody has found, not only a case, nobody has found academic discussion of this possibility. Byron R. White: Well, does the question come up when the trustee sues somebody? David A. Epstein: The question of waiver has never come up. It is simply there is a silence for a hundred years. Byron R. White: Well, give me an example of litigation where the privilege would be claimed, and by whom. David A. Epstein: The litigation, which are very old cases, around the turn of the century mostly, are cases where the trustee sought to question the attorney of the debtor. Now, I want to make clear, the Government is right that two of the cases we have cited to the Court of those, that was discussed by the Court. But the actual fact before the Court was that it was a third party's lawyer. The other two cases did involve the lawyer for the debtor himself, and these were individuals. These were not corporations. Byron R. White: And the lawyer claimed the privilege? David A. Epstein: The lawyer claimed the privilege, absolutely. And the courts were, to the extent they addressed it in those days in that context, were unanimous that... everybody said, well, of course the privilege carries over and applies, and you can't, even the trustee can't, get inside the privilege as to pre-bankruptcy matters. And we submit that what the Government is contending here through the theory of a waiver is not only the access of the trustee to the secrets, where there's at least a reasonable case... and even that has not been previously held, but there's at least a claim to that. Here the problem of the waiver is that when the privilege is waived it's waived for everybody. It's open, and if the corporation's privilege is waived then the corporation's attorney is an open book. Everybody can subpoena him. There's no longer a privilege to prevent his testimony. Similarly with documents-- William H. Rehnquist: Well, what's the matter with that? If the one party whom the privilege is designed to protect, i.e. the client, chooses to waive it, the attorney should be an open book. David A. Epstein: --If the board of directors of the company, who represent the ownership of the company, if they determine to waive the privilege for reasons that are good to them, I have no objection whatsoever. When the trustee comes in, he doesn't represent the owners of the corporation. He has very different interests. Sandra Day O'Connor: Well, how did the interests of the shareholders and the creditors differ in the context of a liquidation? It seems to me both of them stand to be advantaged by anything that will maximize the value of the estate. I don't see a conflict. The trustee is trying to produce the largest number of assets and defeat claims against the estate, and the shareholders and creditors will all benefit by that action. David A. Epstein: Ordinarily, in the common case, I would assume that Your Honor's suggestion would be correct. However, it's not always the case. It depends on where there are liabilities from the corporation to, and that is the other side of the question which the Government does not address. They talk about marshalling the assets. That's one-half of the ledger. The other side of the ledger is liabilities or potential liabilities. And if certain disclosures are made there may be liabilities which would not otherwise be asserted or proveable, which all of a sudden become asserted or proveable. The principal example, which we cite in our brief... it's not the only one. I think Your Honor in fact mentioned a very good one, which is the possibility of tax liabilities, perhaps unthought of previously, which can-- Sandra Day O'Connor: Yes, that's why I asked those questions. But assuming that the trustee knows what the communication is and has reason to believe that the waiver of it will benefit the estate, either by advancing the acquisition of assets or defeating some claim against the estate, why shouldn't the trustee be able to waive it? David A. Epstein: --The trustee shouldn't be able to waive it because the trustee may or may not be doing it for that reason. If in that situation that's what he believes, he ought to go to the board of directors of the company, which still exists, and if your hypothetical is the case then the board of directors not only ought to waive it, but it seems to me that they would have to waive it or they in turn-- Sandra Day O'Connor: Well, but the trustee doesn't have to go to the directors for any other purpose in maximizing the value of the estate. There are a whole raft of things that the trustee can do without consultation with the board of directors. And I don't understand why the privilege should be any different from those other things. Byron R. White: Especially when he may have a suit pending against the board of directors. David A. Epstein: --Well, I think the simple answer to that is that the importance of the attorney-client privilege and what it protects and the need for this Court to continue that protection and not abrogate it-- Thurgood Marshall: Is there any other privileged matter that needs the protection? David A. Epstein: --Well, it doesn't arise in this case, but I would say-- Thurgood Marshall: Is there any other? David A. Epstein: --I would say the other privileges, certainly. Thurgood Marshall: What privilege? David A. Epstein: The doctor-patient privilege. If the trustee can waive the attorney-client privilege, why can't he waive the doctor-patient privilege? What about the priest-penitent privilege? Thurgood Marshall: Well, why can't he? David A. Epstein: Your Honor, all I can say-- Thurgood Marshall: As the law is now, what is privileged that the corporation only can waive, other than the lawyer-client privilege? David A. Epstein: --The only one which comes readily to mind where it exists, in some states, is the attorney... excuse me... the accountant-client privilege. And that of course is variable. It doesn't exist in all states. Thurgood Marshall: That's a variation of the attorney-client. David A. Epstein: Yes, it is. Thurgood Marshall: What else? David A. Epstein: For the corporation-- Thurgood Marshall: Isn't it true, you just want to cut this little niche out? David A. Epstein: --Yes, but-- Thurgood Marshall: They can get all of the secrets they want, all of the secret formulas, everything else, but if a lawyer's attached to it you don't get it? David A. Epstein: --Well, it's not a matter of the lawyer being attached to it. Thurgood Marshall: What else is it? David A. Epstein: What this case-- Thurgood Marshall: What makes it so different because a lawyer's attached to it? David A. Epstein: --Because if the corporate personnel, whether it be corporate officers or, as it was in the Upjohn case, lower echelon corporate employees, are not free to confide in the attorneys, knowing that only when it's in the company's best interests, not the creditors' best interests but the company's best interests, that that's going to be disclosed, you're not going to have that kind of disclosure. You're going to have a chilling effect. Thurgood Marshall: But I thought that once you took a chapter 7 or any of the others, the trustee was acting in the company's interest. David A. Epstein: No. I think as counsel put it and indeed as the cases put it, the trustee acts in the best interests of everyone. Thurgood Marshall: Including? David A. Epstein: Including people whom management does not act in the best interest of. Thurgood Marshall: But it also includes the management. David A. Epstein: I would submit, Your Honor, if I may, that the principal driving force behind the trustee's decisionmaking, unlike pre-bankruptcy management's decisionmaking at all levels the trustee sides with the creditors. Pre or non-bankruptcy management sides with, or ought to side with or they ought to be removed, the owners' interests, and that is a fundamental difference. Thurgood Marshall: You can get as many people to agree with you on that as disagree. David A. Epstein: I only want nine of you to agree with me, Your Honor. [Laughter] Byron R. White: Five is enough. Thurgood Marshall: Five. Won't five do? David A. Epstein: I'll settle for five. Thank you. Byron R. White: Well, isn't the normal result of a corporate chapter 7 liquidation the extinction of the corporation? David A. Epstein: Normally, but not necessarily, yes. Byron R. White: Well, suppose that this was the normal case. The trustee gets title to all the assets? Does he still do that under the new bankruptcy code? David A. Epstein: No, I don't think so. Byron R. White: But he used to. David A. Epstein: He used to. Byron R. White: But he has the management of all of them, and his powers with respect to them are very much like under the old code? David A. Epstein: That's correct. Byron R. White: And the corporate management, the old corporate management, cannot interfere with those duties of the trustee. Well, what happens if the corporate... when do corporations go out of business? Do they formally dissolve? What do they do? David A. Epstein: They may formally dissolve. I would submit-- Byron R. White: They certainly don't have anything to do in chapter 7. David A. Epstein: --Well, no. What normally happens, assuming they don't come out of chapter 7, assuming that it goes through to completion, is that they ultimately are dissolved by the incorporating state. Byron R. White: What happens to the privilege then? David A. Epstein: That's an excellent question. Byron R. White: Well, I don't know why, if you know that the inevitable result in 99 percent of the cases is going to be liquidation and there's nothing that old management can do about it, or dissolution, what's so earth-shaking about saying the trustee can waive? I'm not sure he even has to waive. There wouldn't have to be a waiver after dissolution, would there? David A. Epstein: Well, I don't know. I see nothing in the ethical guidelines that tell the lawyer that he's free to disclose just because of the death of the client. I say that quite seriously, Your Honor. In most states the privilege survives the death of the client, and I don't know that it's any different. But I think there's a more interesting concern here. If-- John Paul Stevens: Yes, but could the executor of an estate waive the privilege? David A. Epstein: --In some states yes, in others no. The cases are divided on that. However, Your Honor has a valid point. In some cases, yes. But it's interesting, because that's only in the course of litigation. There are certain exceptions-- John Paul Stevens: Well, that was going to be my next question: Who has the power to control litigation? David A. Epstein: --The trustee, for most purposes. John Paul Stevens: Isn't the waiver decision almost invariably made as an incident to tactical decisions in litigation? Isn't it fair to say this is an incident of the power to control litigation? David A. Epstein: Well, I think this case demonstrates that that's not always the case at all. In this case you don't have that. In this case you have the Government coming to a trustee and saying: We are investigating your client; waive the privilege in our convenience, for our convenience, so we can get at the attorneys. That's what happened here. That's all it was. And as indicated previously... and I think in response to the Government's argument today, I should make at least one or two statements. this waiver was not only blind... and by blind I mean not only did the trustee not know the information that was sought... he didn't even know the questions that were being asked. It was also retroactive. It was an after the fact waiver, and that's the difficulty. If this Court says that after the fact waivers are okay, that trustees can come in and waive privilege of a corporation going back to the birth of the corporation, not just in the period right before bankruptcy but ever, then I submit as to the chilling effect, which the Government really has no response to except to say it's no different from future management, it is different, because in a corporation if management knows and if the workers of that corporation know that a stranger to the corporation elected by the creditors may some day open their secrets to the Government in making an investigation, they aren't going to talk. John Paul Stevens: How different is that from the takeover, new management type of thing? I mean, they're not necessarily friendly or buddy-buddy with the old people. David A. Epstein: Oh, not friendly or buddy-buddy at all, that's correct. But they presumably have a profit-making interest on behalf of the corporation in mind. And maybe that's the only security there is, but that's very different from a trustee, who is himself subject to at least some level of supervision by the law enforcement authority of the United States himself, saying, as the Government says, we're going to cooperate in a Government investigation, with apparently no quid pro quo for the corporation, which in non-bankruptcy is at least what most of I think would-- Byron R. White: Well, new management can sue old management and frequently does. David A. Epstein: --Absolutely. Byron R. White: And they can waive, in connection with that they can waive the privilege. David A. Epstein: Well, they don't have to waive the privilege in connection with that. They have the information themselves. Byron R. White: Well, I know, but if the lawyer refuses to testify he's going to be in trouble if management says, the current management says, please talk. David A. Epstein: Absolutely. Byron R. White: Well-- David A. Epstein: But Your Honor, the creditors can't do that, and that's the difference when the trustee comes in because, despite the paper fiduciary duty-- Byron R. White: --It depends on how delinquent the corporation might be to those creditors. David A. Epstein: --Well, but the creditors are the ones who select the trustee. Corporate management and corporate ownership are prohibited by Congress from participating in that election. One other... if I may get back to the question that Justice O'Connor asked my opponent earlier, in terms of where this attack, the attack we have made on the trustee's exercise of the privilege, ought to have been made procedurally, in this case I would remind the Court... and I apologize; it may not be very clear in the briefs. But what happened in this case is that when this waiver, such as it was, this one-line waiver, was submitted to the bankruptcy court there was no notice to anyone. There was no proceeding in the bankruptcy court surrounding the giving of this waiver. The adversary action from which this appeal has been taken was already in progress. It was more than in progress. It was already being briefed on the question of privilege. And the first time that Respondents found out that there had been a so-called waiver was when a supplemental brief was filed by the Government in that proceeding informing us. So there was never really an opportunity, even assuming there was a procedure to accommodate it, for these issues to be raised in the bankruptcy proceeding. William H. Rehnquist: Briefing, you mean briefing in the district court? David A. Epstein: In the district court on the subpoena enforcement action, absolutely, Justice Rehnquist. That's when it came... that's when we found out about it, and we were off and running and briefing it at that point. In fact, the only arguments... the only opportunity that there really was to present arguments was at the oral argument, just because of the time constraints in the subpoena enforcement action. It was very much of a last minute idea, very much as the waiver theory, at least in terms of the history of bankruptcy law, is kind of a last minute idea to circumvent what appears to have been the law for a hundred years, that privilege applies. And I would point out, in getting back to the importance of protecting privilege, whether it's individuals or corporations, that if... and I think the Upjohn case... I can't say it better than this Court did in Upjohn. If you don't have the security of the privilege, if its sanctity is not protected, if it is waivable on a whim by a person who is a stranger, by a person who does not even know the questions that are at issue, by a person who makes assumptions about who's benefited from disclosure, then the privilege isn't worth anything and the privilege is not going to do what the privilege is designed to do, which is to assure both sound advice from counsel and full information to counsel. And this case-- Thurgood Marshall: I don't assume that all corporations that have privilege with their lawyers are going bankrupt. David A. Epstein: --Nor would I, Your Honor. But when that happens-- Thurgood Marshall: It sounded like it a minute ago. David A. Epstein: --But when that happens, the knowledge that that can happen in the future is an insecurity. And today, when the largest corporations in the country are in danger of bankruptcy, when institutions who haven't gone bankrupt for 30 years are suddenly going bankrupt, it's a very immediate thought. And the rule contended for-- Thurgood Marshall: Does that also apply to countries that are going bankrupt? David A. Epstein: --Apparently not, Your Honor. The consequences of the rule contended by the Government are simply much broader than they submit. I submit that if this Court, whatever it says, if it goes the other way, if it rules against us in this case and says that the privilege passes, it will pass for individuals too. It will have to. The same statutes apply. The same justifications by the Government apply, to get at fraud. They're the same. Everything is the same. And the consequences are simply worse for individuals. But what happened in this case... and I think Your Honors should be aware of this... is precisely what will be discouraged in the future. In this case, it was the bankrupt's attorneys who suggested to it that they turn themselves in. And on a Saturday the attorneys... it was the attorneys who called, with the client's consent, called the CFTC and said: You better come in; there's problems here. You wouldn't have that, and you wouldn't have the disclosures to the attorneys, without the privilege. What is at issue here is making the attorney a witness, nothing less. It will change the role of attorneys from that of advisors and confidants and maybe internal investigators to that of an aid in the Government's war to prosecute, to prosecute fraud, to prosecute misfeasance. It's a fine goal, but the lawyers for private companies have a different mission to fulfil, and we ask this Court to affirm and to keep that mission precisely what it has been. Byron R. White: It sounds like you're concerned about the lawyers more than the client whose privilege it is. And I thought it belonged to the client, and that the attorney just exercises on behalf of the client, not to protect himself. David A. Epstein: Absolutely. What this... what the Government would do would be to take that role and take that choice from the client and give it to the Government, and that's why we object. What lawyers do... and I think I'm basically through. I should say, what lawyers do they do on behalf of their client. But they only do it if they're allowed to. Thank you. Warren E. Burger: Very well. Do you have anything further? Bruce Neil Kuhlik: I have nothing further. I'd be pleased to answer any questions. Warren E. Burger: Very well. Thank you, gentlemen. The case is submitted. Speaker: The honorable court is now adjourned until tomorrow at 10:00.

Warren E. Burger: The Court will hear arguments first this morning in Meritor Savings Bank against Vinson. Mr. Troll, you may proceed whenever you're ready. You may elevate that lectern if you wish. The other direction. 0.... F. Robert Troll, Jr.: Mr. Chief Justice, may it please the Court. The primary question in this case is whether a corporate employer is automatically liable under Title VII for a supervisor's sexual advances toward a subordinate even though the employer did not know about the advances and never had a chance to stop them. The district court, after taking eleven days of evidence, found that the employee had suffered no Title VII discrimination and it rendered judgment against her. The district court also found that the bank had no notice of the supervisor's alleged discrimination and therefore it could not be liable as a matter of law. The Court of Appeals reversed and remanded. Let me turn to the specific facts of this proceeding. Ms. Vinson, plaintiff in this case, went to work as a teller trainee at one of the bank's branch offices in September 1974. Over the next four years, she was promoted to teller, head teller, and finally to assistant branch manager. It was undisputed at trial that these promotions were based on merit. Ms. Vinson's immediate supervisor throughout this period was Sidney L. Taylor. Mr. Taylor was the branch manager and an assistant vice president. At trial Ms. Vinson claimed that she and Mr. Taylor began a sexual affair in May 1975, to which she consented out of fear of losing her job. She claimed that for the next two and one-half years Mr. Taylor repeatedly demanded sex from her and otherwise harassed her physically and verbally. But she admitted that she never complained to the bank about Mr. Taylor, even though she herself was a supervisory employee and had regular contact with higher bank officers. Mr. Taylor denied having a sexual relationship with her, and he further denied all of her accusations of harassment. He offered evidence that just before Ms. Vinson left the bank and filed this lawsuit that they had had a continuing dispute about her failure to carry out his instructions to train a new teller. The bank showed that it had a written policy expressly prohibiting sex discrimination and had appointed one of its senior officials as its EEO officer to enforce the non-discrimination policy. It also had a written grievance procedure for resolving employee complaints. Harry A. Blackmun: Counsel, Mr. Taylor is not here, is he? F. Robert Troll, Jr.: He is not before this Court. Harry A. Blackmun: Have you represented him in the past? F. Robert Troll, Jr.: No, we have not. We have represented strictly the bank in all proceedings before the district court and the Court of Appeals. William J. Brennan, Jr.: Is he any longer employed by the bank? F. Robert Troll, Jr.: Although I don't think it's part of the record, it is my understanding that he is still employed with the bank and is still at the branch premises where the alleged incidents occurred. The bank denied that Ms. Vinson or anyone else had ever complained about any harassment or any other discriminatory activity. The bank also showed that Ms. Vinson had been offered routine transfers away from Mr. Taylor to other bank departments, but that she had turned these down. Judge Penn found that Ms. Vinson's participation in any sexual affair with her supervisor, if indeed there was one, was voluntary and had nothing to do with employment. In so finding, Judge Penn necessarily disbelieved her testimony about Mr. Taylor's harassment and coercion. In fact, the court pointedly referred to testimony from one of Ms. Vinson's own witnesses, a co-worker, who said that Ms. Vinson did not appear to be afraid of Mr. Taylor. Judge Penn also expressly found that the bank was without notice of any sexual improprieties. The court said... and I'm reading from Judge Penn's findings: "The alleged sexual harassment involving Mechelle Vinson was not reported by her or by anyone on her behalf to the police or to any officials at the association. " And he also said: "Mechelle Vinson never filed an informal or formal grievance against defendant Sidney L. Taylor, pursuant to the Association's employee manual. " The district court's findings of fact not only support, but indeed compel, the conclusions both that Ms. Vinson was not the victim of sexual harassment and that the bank could not be liable for Mr. Taylor's conduct without having been placed on some form of notice. Despite these findings, the Court of Appeals reversed and remanded the case on three grounds. First, the Court of Appeals said that the trial court failed to consider whether the employee had a claim based on a sexually offensive work environment, even though she lost no promotions or other job benefits. Second, the Court of Appeals said that evidence of the employee's own voluntary sexual behavior at work should not have been admitted at trial. Third and most unsettling, the Court of Appeals stated that an innocent employer is liable automatically for a supervisor's sexual conduct. Sandra Day O'Connor: Mr. Troll, do you concede that the trial court simply didn't handle the case as one involving a recognition of a sexual harassment or hostile environment type claim? F. Robert Troll, Jr.: We would concede, Your Honor, that at the time this case was tried before Judge Penn, of course, that theory of law had not been applied to sexual harassment cases. Sandra Day O'Connor: Okay. So you agree that the district court really didn't try the case with that theory in mind. F. Robert Troll, Jr.: We agree that he did not. However, I would hasten-- Sandra Day O'Connor: Now, do you agree today that that is a valid claim or could be a valid claim under Title VII? F. Robert Troll, Jr.: --As we've mentioned in our brief, if the employee has sustained some form of tangible job detriment we feel indeed it would be cognizable. Sandra Day O'Connor: Well, even without detriment other than the suffering that occurs in the hostile environment itself, do you agree that such a claim might exist? I notice that the Solicitor General in an amicus brief suggests that there is such a claim. F. Robert Troll, Jr.: They do in fact suggest that, Your Honor. It is our position that if there is some form of tangible job benefit over and above pure psychological or emotional harm, that yes, there would indeed exist such a claim. But in analyzing that particular issue in the case, it appears to us, as we've argued in our brief, that Congress was concerned with tangible economic loss, not with psychological or emotional injury. Sandra Day O'Connor: Would you say that if it were a racial harmful environment claim that a tangible effect on employment is a necessary element of such a claim? F. Robert Troll, Jr.: We would believe, Your Honor, that a reasoned argument could be made contrary to our position. Simply put, we felt that, because this Court had never before considered the issue, because the legislative history did not address psychological or emotional harm but only tangible economic loss, that that matter should be raised as it was. Sandra Day O'Connor: Do you think the principle should apply similarly in a sexual harassment claim as it would to a racial? F. Robert Troll, Jr.: Yes, we do. The Court of Appeals secondly said that evidence of the employee's own voluntary sexual behavior at work should not have been admitted. We submit that the Court of Appeals was wrong for ordering a remand in this case. A remand is pointless and unnecessary. First, the one to one sexual relationship and harassment Ms. Vinson alleged in this case, even if true, is not a condition of employment under Title VII. Therefore, there is no need for the case to go back to the trial judge for further consideration. Second, regardless of whether-- John Paul Stevens: Let me interrupt you right there. I'm not sure I understand your argument. You say it's not a condition of employment. That means there is no such thing as a sexual harassment hostile environment claim. F. Robert Troll, Jr.: --Under the allegations in this case of a one to one sexual relationship, where the employee has remained in the environment for over a period of four years, we submit there is not, Your Honor. John Paul Stevens: Because in effect the claim just has been waived, or what is the theory? I mean, you're not denying that there can be such a case? F. Robert Troll, Jr.: I'm not denying that there can be such a case. But in this particular case, it is our argument that the employee suffered no tangible job loss whatsoever, that she suffered-- John Paul Stevens: Does that mean even if there were psychological harm, it would be-- F. Robert Troll, Jr.: --It would be our feeling that if there was psychological harm or emotional disturbance as a result of this conduct, that it would in fact constitute a state tort remedy and that would be where this employee would seek relief. John Paul Stevens: --I see. This is I guess another way of stating your answer to Justice O'Connor, that there must be some tangible loss of job economic benefit. F. Robert Troll, Jr.: In order to measure, in order to show what exactly occurs. Thurgood Marshall: Wasn't the Respondent fired? F. Robert Troll, Jr.: No, she was not, Your Honor. Thurgood Marshall: How did she become unemployed? F. Robert Troll, Jr.: The facts of this record indicate that the Respondent here filed this lawsuit before she became unemployed. She then called in sick the following day, indicated she would be on indefinite sick leave, and she thereafter failed to return to her employment. And some 60 days later, she sent a letter saying she resigned due to harassment, on the same date a letter had been sent to her. Thurgood Marshall: Do you rely fully on the point that the bank was not notified? F. Robert Troll, Jr.: Absolutely. Thurgood Marshall: Isn't that your point? F. Robert Troll, Jr.: The point is the bank was never notified. Thurgood Marshall: Now, where is the statute or anyplace else do you get the need to notify the bank? F. Robert Troll, Jr.: Well, Your Honor, in reading the statute, of course, as we've indicated in our brief, it requires intentional discrimination. We feel that the clearest indication of intent, an intend to discriminate, comes from a notice and opportunity to cure rule, which clearly demonstrates what the employer's intent is. We read it therefore out of the intentional requirement of the statute. Thurgood Marshall: What type of protest do you want? F. Robert Troll, Jr.: Pardon me, Your Honor? Thurgood Marshall: Do you need a written one or oral? F. Robert Troll, Jr.: No, sir. It is our opinion that any form of notice will suffice if in fact the notice is given to an employee internally of sufficient authority to control the situation, to stop the harassment in its tracks. Thurgood Marshall: Well, they did have notice after she filed the charges. F. Robert Troll, Jr.: We had notice once this lawsuit was filed. John Paul Stevens: May I ask on that point, do I correctly read your brief to indicate that you would not make the same notice argument if it were a quid pro quo type of claim? And if so, why do you distinguish between the two? F. Robert Troll, Jr.: We don't necessarily distinguish between the two, Your Honor. We feel that a notice requirement, at least in this case, is absolutely essential. In a quid pro quo case, however, of course, a supervisor may act with the authority actually vested in it by the employer in making an employment decision about an employee. John Paul Stevens: Yes, but is that any different from acting with respect to the conditions, working conditions around the office? F. Robert Troll, Jr.: The problem is is that in one case the intent of the employer can be measured, whereas in the other it cannot unless there is in fact notice to the employer. Sandra Day O'Connor: Well, Mr. Troll, isn't supervision... isn't part of supervision the creation of a productive work environment and the proper management of the employees who are supervised? F. Robert Troll, Jr.: I would agree with that, Justice O'Connor. The particular problem here is that the-- Sandra Day O'Connor: Why wouldn't the agency theory then cover an assumption that the supervisor is going to create a proper and productive work environment for the employees being supervised? F. Robert Troll, Jr.: --The employer here has in no way authorized supervisory personnel to harass its other subordinate employes, such that under an agency concept the acts of the supervisor would be outside the scope, actual or apparent, of the supervisor, and Title VII would probably not impose any liability. It is our position that the statute imposes a direct form, rather than an indirect form, of liability. Sandra Day O'Connor: Well, but if the supervisor discharged an employee within his apparent authority to do so, but his real reason was a racial discriminatory reason, do you think the employer has a defense? F. Robert Troll, Jr.: I think that the employee then has a duty to go forward to someone at the employer and to notify the employer. Once that notice is received by the employer, the employer I feel then has a duty to investigate and, if it in fact determines that the employee was discharged for a discriminatory reason, to stop the discrimination, to take prompt action to correct the problem. It is our position in a case such as this that the plaintiff must show defendant knew about the offensive environment and had a chance to correct it before that defendant can be held liable. Our position is consistent with the language of the statute. It furthers the objective of Title VII and, above all, it is fair. William H. Rehnquist: Mr. Troll, can a supervisor who is not an employer be made a defendant in a Title VII action? F. Robert Troll, Jr.: It is our understanding that, under the definitional section of the statute, an agent of the employer could include a supervisor. William H. Rehnquist: So that a supervisor who was not an employer could be named as a defendant? F. Robert Troll, Jr.: You're saying is not an employer. You mean in the meaning of the statute, Your Honor? William H. Rehnquist: Well, I mean, supposing that in this case Ms. Vinson had simply decided to bring a Title VII action against the supervisor. F. Robert Troll, Jr.: That is our reading of the statute, Your Honor; that would be perfectly within the statute and within its meaning. William H. Rehnquist: So you do not have to be an employer in your view to be named a defendant? F. Robert Troll, Jr.: That is correct, that would be our feeling. Let me begin with the statute. Section 706(g) requires a finding that a defendant intentionally engaged in the unlawful employment practice. Intent presupposes knowledge or at least reason to know. When a corporation is the defendant, how does the fact finder determine corporate intent, as he is obligated to do under the statute? William H. Rehnquist: But of course, supposing you had just a common law fraud action, where your fraud required intent to deceive. Now, a salesman for the corporation, if that salesman has intent to deceive, couldn't the corporation be held liable even though you couldn't show that the board of directors know about the salesman's intent to deceive? F. Robert Troll, Jr.: It would depend upon, I think, some further circumstances: the scope of the authority actually vested, the scope of the apparent authority of the salesman. And in fact, there is absolutely no apparent or real authority to harass fellow employees. It's clear that the supervisor is there for the purpose of supervising employees, not harassing them. That is not what's intended by the employer in the common law setting. And if in fact there is an intentional tort, if you will, committed, the employer may well not be liable. John Paul Stevens: May I ask you on that question, supposing the harassment, if it did occur... and of course, we don't really know exactly what did happen here. But assume that there were ten employees and supervisor, and nine of the employees harassed the other, the tenth. The supervisor just sat there and watched and didn't do anything about it, but nobody ever reported it to the home office. Would you make the same argument then? F. Robert Troll, Jr.: Well, under the EEOC guidelines there would have to be notice in that case, and it would be my feeling that, if the supervisor was charged with responsibility, as he would be, with maintaining a good working environment, you couldn't determine the corporate intent, however, unless one of those employees complained above the supervisor. There'd be no way of knowing. John Paul Stevens: The answer is you would make the same argument? F. Robert Troll, Jr.: I would make the same argument. There would be no way of knowing what the employer intended until the employer knew what was going on. Sandra Day O'Connor: Well, there certainly are a substantial number of lower court cases dealing with, for example, racial harassment by co-employees, that don't adopt your theory at all. And they go off on the theory that if the supervisor knows or has reason to know of the racial environment claims of co-employees, that's enough. Don't you agree-- F. Robert Troll, Jr.: There are several cases-- Sandra Day O'Connor: --that there is a body of opinion? F. Robert Troll, Jr.: --There are several cases of that ilk. A close examination also shows in those cases that some form of management knew about what was going on and failed to stop the harassment. Sandra Day O'Connor: Well, but some form of management, of course, is the supervisor. He's the person in place and who's in charge of trying to protect the work environment for the employees. That's part of the job. F. Robert Troll, Jr.: We would submit that the majority of those cases do involve employer toleration of a condition. That of course is not our case here. The employer did not tolerate any form of working environment. Sandra Day O'Connor: I thought that the district court kept out evidence that was offered of the supervisor's treatment of other employes. F. Robert Troll, Jr.: As the district court said in its opinion, some of that form of evidence was allowed in in the plaintiff's case in chief, some of it was not. But the plaintiff here concedes, and conceded before the lower court, that that case... that evidence came in in this case, albeit haphazardly and in unplanned fashion. But there was an express concession that it came in. The reason why it really doesn't make any difference whether that did or did not come in are the ultimate two legal defenses that the bank has in this case: first, that this was a voluntary relationship, indicating that the advances were welcomed by the plaintiff, they were not unwelcome; and secondly, in any event, the bank was without any notice whatsoever of this environmental problem if in fact there was one. Byron R. White: To whom do you have to give the notice to be able to say the employer knew? F. Robert Troll, Jr.: We think and we submit that internally notice should go to someone with requisite authority-- Byron R. White: Well, who is that? You can't just notify a corporation. You have to notify somebody. F. Robert Troll, Jr.: --Well, in this particular case-- Byron R. White: Would the supervisor's boss, this particular supervisor's boss, he adequate, that you gave him notice? F. Robert Troll, Jr.: --At some point in time you would reach a corporate level-- Byron R. White: Well, which? What about in this particular case? Where would notice have to go? You know your client, so-- F. Robert Troll, Jr.: --In this particular case, Your Honor, we feel that notice should have gone to the EEO officer, with whom the plaintiff had frequent contact. It's as simple as that. She had discussions with him. The record indicates she talked with him. Byron R. White: --What officer? F. Robert Troll, Jr.: The equal opportunity employment officer that this bank had in place. Byron R. White: Well, did he have any authority over the supervisor? F. Robert Troll, Jr.: Yes, sir, he certainly did, and the record so indicates. Byron R. White: Well, was that officer an officer of the bank? F. Robert Troll, Jr.: He was a senior bank officer who had also been designated as the equal opportunity employment official to carry out the bank's policy of non-discrimination. Thurgood Marshall: What level of notice? How high in the hierarchy do you have to go to give notice? F. Robert Troll, Jr.: It would be our feeling that if notice goes to one who has requisite authority to correct the situation, that is all that's sufficient. Thurgood Marshall: Well, suppose the vice president was guilty. Would that be notice to the corporation? F. Robert Troll, Jr.: Well, if you're positing a question in terms of-- Thurgood Marshall: I don't want anything added. I just said vice president. F. Robert Troll, Jr.: --If there would still be the president left to complain to, certainly that could be a complaint. But we don't rule out the fact that she could go directly to the EEOC. Thurgood Marshall: The Court of Appeals said you couldn't use tort law anyhow. F. Robert Troll, Jr.: That's true, that's true. Thurgood Marshall: Do you agree with that? F. Robert Troll, Jr.: We feel that's correct. We feel that there's a separate liability standard under the statute. The best evidence and the clearest indication is what the defendant does or does not do when the plaintiff complains. Does the employer investigates, take prompt action, or is the complaint met with indifference? Most important is his receptiveness to employee grievances. In this case, Ms. Vinson did not prove that the bank had actual knowledge. She also did not prove that the bank had any reason to know about it. In sum, she failed to offer any believable evidence of discrimination. We also feel that the objectives of Title VII are best promoted by basing liability on some form of notice. It encourages employees to speak up promptly, rather than to suffer in silence, and it permits the employer to end the problem before it worsens, and it encourages employers to address the problem because if they do they exonerate themselves from Title VII liability. Prompt, voluntary action is far superior to a belated federal injunction. There is simply nothing unfair about requiring an employee to speak up when she perceives that her supervisor is harassing her. After all, sooner or later she'll have to make a complaint to someone if she wants Title VII relief. But there is something, we submit, very unfair about hailing an innocent employer into court for a problem that it was unaware of and would have corrected voluntarily. We submit that Title VII calls upon the court to do equity. It is contrary to equity to hold an innocent employer automatically liable where the complainant has waited in silence and intensified her injuries. Notice and opportunity to cure is consistent with the statute, it furthers the statute's goals, and it's fair. We believe that the Court of Appeals's decision must be reversed. Mr. Chief Justice, I would ask to reserve the balance of my time, please. Warren E. Burger: Very well. Ms. Barry. Patricia J. Barry: Mr. Chief Justice, may it please the Court: The writ was improvidently granted and should be dismissed by this Court. The bank is asking this Court to rule on whether environmental sexual harassment is prohibited under Title VII. Yet, the bank did not cross-appeal in this case and consequently the issue of whether environmental harassment is actionable under Title VII was not before the Court of Appeals. Rather, the Court of Appeals determined that the trial court had not considered this case under the legal theory of environmental sexual harassment and remanded with directions to the trial court to grant Ms. Vinson an adjudication of that claim on the evidence, as stated at 21A of the appendix. Sandra Day O'Connor: Ms. Barry, did you represent the plaintiff in the action below? Patricia J. Barry: Yes, I was the trial attorney. I took over at the stage of motions for summary judgment and I represented her at the trial, which lasted for eleven days, and at the Court of Appeals level. Sandra Day O'Connor: Did the plaintiff and you on her behalf make clear in the proceedings below that you were proceeding on the basis of a hostile environment theory? Patricia J. Barry: Your Honor, in our Respondents' brief it's cited where I say to the trial court: "Your Honor, this evidence is being presented to show the poison environment in which Ms. Vinson found herself. " I couched it at that time "pattern and practice". Bundy versus Jackson had not yet been decided. That was decided in January of 1981. We were conducting this trial in January 1980. I was going on the theory of the Andrus, the D.C. Circuit case of pattern and practice. That is, evidence of how a supervisor treated other members of the protected class, other employees, is evidence that he treated this particular employee in a discriminatory fashion. But the trial court repeatedly stated: I only want to hear what happened between Ms. Vinson and Mr. Taylor, and consequently excluded that evidence. It came in in a haphazard fashion, but, contrary to what the bank argues, in my opening brief at pages 38 and 40 I never said all the evidence came in, but that that kind of evidence came in. It came in under a haphazard fashion, and certainly under no legal theory of environmental harassment. It is clear that the trial court did not believe that such a cause of action existed under Title VII. Lewis F. Powell, Jr.: May I ask, before you leave that particular point. Patricia J. Barry: Yes, Justice. Lewis F. Powell, Jr.: Which section in your complaint do you rely on as supporting environmental harassment? Patricia J. Barry: If you go to the joint complaint, one of the allegations is that there was a pattern of sexual misconduct... I am paraphrasing... engaged in by Sidney Taylor, that the bank should have known about and therefore acquiesced in and ratified. Lewis F. Powell, Jr.: Is that in your complaint that was filed September 22nd, 1978? Patricia J. Barry: That's correct, Justice. Lewis F. Powell, Jr.: Which paragraph? Patricia J. Barry: Begging the Court... paragraph 14 at page 5 of the joint appendix. Lewis F. Powell, Jr.: Yes. Patricia J. Barry: "Defendant Taylor has also sexually harassed numerous other female employees of the defendant association, and said conduct constitutes a well-known pattern of behavior which has been known to the officials of the defendant association for many years and which thereby and therefore has been condoned by the defendant association. " Lewis F. Powell, Jr.: There's no mention of Environment in that paragraph. Patricia J. Barry: That's correct, Your Honor. At page 20 of the Respondents' brief, there was an objection sustained to evidence proffered to show... and I quote what I'm saying... "the daily environment encountered whenever Mr. Taylor was in that office. " And our citation, Justice, is to the transcript of January 23rd, volume 3, page 4. Thus, we have no factual record made by the trial court on the specific legal theory of environmental sexual harassment. This Court has ruled in Tacon versus Arizona, 410 U.S. at 352, that issues not raised by the Petitioner below would not be ruled on by this Court for the first time, and dismissed the writ of cert as improvidently granted. Thus, because we are on remand with no final judgment issued by the Court of Appeals, the only finding on the existence of harassment is that there was none at this point. Yet, Petitioner would have the Court rule on employer liability without the trial court considering and ruling on whether environmental sexual harassment exists in this case. Byron R. White: What if we agreed with one of the submissions of the bank, namely that voluntariness is a defense to a suit like this. Patricia J. Barry: Well, Your Honor, the question has to be looked at in the context of environmental harassment. That is to say, if the trial court now understands that what Ms. Vinson saw being done to the other women, what she understood being done to the other women before she was made the demand of intercourse, the trial court might just likely recast its findings of fact and determine that perhaps this aspect of voluntariness was no longer there. Byron R. White: Well, the Court of Appeals ruled that voluntariness was irrelevant. Patricia J. Barry: It did in the way that the trial court captioned its findings of fact. It found it very ambiguous, because it was cast in a hypothetical finding of fact. Byron R. White: Nevertheless, the Court of Appeals thought that a hostile environment suit was quite proper, and it felt it necessary to rule on the voluntariness and the notice claim. Patricia J. Barry: That's right. With respect to the voluntariness, I think the concern was it was unclear to them whether the trial court was considering whether the fact that there appeared to be merely an acquiescence, is that what the trial court meant by voluntariness. Byron R. White: Well, are you defending the Court of Appeals' rulings on notice and voluntariness? Patricia J. Barry: I'm certainly defending the Court of Appeals' position on notice. I defend the Court of Appeals' position on voluntariness if it means that, by what the Court of Appeals is saying, that the trial court had to find something more than the fact there was, at least with respect to the first act testified to, no act of violence involved. Sandra Day O'Connor: It's been suggested that an element is a sexual harassment claim is that the conduct complained of be unwelcome. Patricia J. Barry: Yes, Justice. Sandra Day O'Connor: Is the term "unwelcome" the same as... does that equate with whether it's voluntary or not, or is there a difference in your view? Patricia J. Barry: Well, that again I think goes back to what the Court of Appeals was trying to say. The decisional law uses as a term of art unwelcomeness or welcomeness. It does not talk about voluntariness, because then you get caught up in this word game of, does it mean like, because she acquiesced, therefore she's capitulated her right to later legal redress? Sandra Day O'Connor: Well, do you think the Court of Appeals had in mind as an element of a sexual harassment claim that the conduct must be unwelcome? Patricia J. Barry: Yes. Yes, Justice O'Connor. In fact, it specifically states in part of its opinion that the touchstone of this cause of action has to be that the nature of the advances are unwelcome. And with respect to that prima facie case, it's well articulated, set out in Henson at 682 Fed. Second at 903-904-- William H. Rehnquist: That's hard to reconcile, Ms. Barry, with... your view of the unwelcomeness, with the Court of Appeals' ruling that evidence of the complaining employee's work place dress and voluntary conduct couldn't be admitted. Patricia J. Barry: --Your Honor, Justice Rehnquist, with respect to evidence of the dress, evidence of the dress by itself without anything more does not make it more likely or less likely under the Federal Rules of Evidence that she welcomed the advances of the supervisor. William H. Rehnquist: Well now, is that for you as a lawyer to say, that no finder of fact could find that relevant? Patricia J. Barry: Yes, that dress by itself is so subjective, Justice Rehnquist, that it has little probative value. And to the extent that it has probative value, the federal court has full authority to control the admission of evidence through Rule 4-- William H. Rehnquist: Yes, and the district court in this case controlled it by letting it in. Patricia J. Barry: --And did so, created such prejudice that he never got to the primary fact-finding responsibility in this case, Justice Rehnquist. He became... the Court of Appeals surmised that perhaps the trial court did become highly prejudiced by this evidence that it found inadmissible to the primary fact, that is were there sexual advances made and were they unwelcome; that he never determined whether in fact there was the act of intercourse, whether these advances were made. We have to keep in-- William H. Rehnquist: So you say, then, that evidence of the complaining employee's work place dress and voluntary conduct is not admissible on the issue of whether or not the thing was unwelcome? Patricia J. Barry: --Justice Rehnquist, what I'm saying to you-- William H. Rehnquist: Are you or are you not? Patricia J. Barry: --No, I'm not saying that. Okay, what I am saying, Justice Rehnquist, is that evidence of dress by itself standing alone is not admissible in a case involving sexual harassment. Sandra Day O'Connor: Well, of course it isn't standing alone here. There's other evidence as well. So I think you have to consider it in light of all the evidence. Now, what evidence can come in properly on the question of whether it's unwelcome, does the whole picture emerge so that the trier of fact can make that determination? Patricia J. Barry: If we're talking about work place conduct is a sexual harassment case, the California Rules of Evidence... I think it's 1103 or 1105... provides an excellent guidance, and it would be a good guidance for a federal court to follow in making rules of evidence. Work conduct related to the alleged perpetrator is relevant. Lewis F. Powell, Jr.: Ms. Barry. Patricia J. Barry: Yes, Justice. Lewis F. Powell, Jr.: May I ask whether the Court of Appeals found that any of the findings of fact by the district court were clearly erroneous? Patricia J. Barry: No, it did not, Justice. Lewis F. Powell, Jr.: And do you consider you are bound by all 21 of those findings of fact? Patricia J. Barry: Yes, unless this Court determines that it would like to review the full record and order the production of the trial transcript. Justice, I tried on four occasions to obtain the trial transcript. I was without funds. My client was without funds. Of course the trial transcript is very important on making a Rule 52 challenge, and I could not do so because we were without funds and the trial court determined that this case would not make any substantial law. Lewis F. Powell, Jr.: The final finding by the trial court was that-- [Laughter] Patricia J. Barry: So we didn't get the trial transcript. I'm sorry, Justice. Lewis F. Powell, Jr.: I was just going to say, the final finding was that the plaintiff was not the victim... this is on page 44A of the petition: "Plaintiff was not the victim of sexual harassment or sexual discrimination. " That puts this Court, it seems to me, in a rather difficult position, doesn't it? Patricia J. Barry: Well, Justice, I don't think it does, because the trial court at 44A of the appendix makes it very clear what in its mind constitutes sexual harassment, and the trial court says: "It is without question that sexual harassment of female employees in which they are asked or required to submit to sexual demands as a condition to obtain employment... as a condition to obtain employment... or to maintain employment or to obtain promotions falls within the protection of Title VII. " He was thinking of the positive aspects of employment, keeping your job, getting those promotions. He obviously, that is the trial court, and for good reason... the guidelines had not yet come out; they came out in April of '80, he decided this case in January of '80, and Bundy had not been decided. So he was not thinking in terms of, well, what about noxious environment, poisoned with sexual innuendoes, insults, aggressive behavior that was unwanted, that in this case let to a constructive discharge. But of course, we're not saying that one need prove economic injury, only psychological injury of a sort that creates an environment that is all-pervasive. We're not saying that it's only one isolated act. We agree with Henson in its prima facie case that the employee has a duty to show that it was environmental harassment, Justice. And for those reasons, I am of the belief that, now that the trial court has instructions from the Court of Appeals to reconsider this case under the theory of environmental harassment... that is, gets the whole picture... he will recast his findings of fact. We will ask him, please make a finding of fact on the credibility. Mr. Taylor said nothing happened, and the trial court never made that finding of fact. My client said something happened and that it was very bad. So we just don't have an issue of the supervisor coming forward and saying that there was a consensual relationship. That's not what was said in this case. Lewis F. Powell, Jr.: May I ask one more question. Patricia J. Barry: Yes, Justice. Lewis F. Powell, Jr.: In your rebuttal testimony, did you introduce evidence by any other women that they had been harassed? Patricia J. Barry: I did not present that at that time. Certainly if a trial court tells me that I can put on some evidence that I couldn't before, I would do it. We did not have the money to recall these women. Lewis F. Powell, Jr.: But the trial court did say you could have introduced that in rebuttal? Patricia J. Barry: In the rebuttal, but there would be no purpose because, unless the defendant, either one of the defendants or both of them, was putting on a case of environmental harassment, it would not, even under the rules of evidence, be proper rebuttal. As I understand rebuttal testimony, it has to be to controvert that which the defendant has said or to controvert, in a Title VII case under Aukens, to show the proper, legitimate, non-discriminatory reasons for the alleged discrimination was pretextual. Lewis F. Powell, Jr.: But whatever the reason, so far as this Court is concerned we have only the testimony of your client? Patricia J. Barry: You're saying that is lodged with the Court? Lewis F. Powell, Jr.: Yes. Patricia J. Barry: We have that transcribed, because that's-- Lewis F. Powell, Jr.: Only the testimony of your client as to sexual harassment or as to the environment. Patricia J. Barry: --That's correct, Your Honor, Justice. And for that reason, it may be well that this go back on remand so that all of the testimony of all of the women can be considered, and then if an appeal is taken, somehow get the money together to get the full trial transcript. We are at a very complete disadvantage, because in that eleven day bench trial there was testimony presented by a number of women for different evidentiary reasons that the trial court never discussed in its findings of fact. Now, the court wishes to... has emphasized in its opening brief that we never raised the evidence question in the Court of Appeals. That is completely correct. This issue of evidence and dress is now before this Court without also having been briefed in the Court of Appeals. William H. Rehnquist: The Court of Appeals decided that question, didn't it? Patricia J. Barry: Yes, it did, without it being briefed by either the bank or myself. I made comments because I considered it to be a form of sexual character assassination. And going back to the earlier question of Justice O'Connor, what about the work place conduct, that is the kind of evidence that could be admitted by the defendant under Aikens saying: look here, there was a consensual relationship, but she welcomed it, and I'm going to show it by the way she acted towards the alleged perpetrator. What we have here is what we call general character evidence. And it was not ever properly proffered under 608(b). You cannot present specific acts of conduct to impeach the credibility of a witness by extrinsic evidence. You have to ask the person directly and you're estopped there. They never even asked my client, Ms. Vinson, whether she wore these kinds of clothing. William H. Rehnquist: Well, you don't have to use that sort of evidence as impeaching evidence. You can use it as evidence from which a trier of fact can deduce a relevant fact, not just as impeaching evidence. Patricia J. Barry: Well, the federal rules of evidence frown on using general character evidence as proof that that person acted in conformity with that character at a specific time, and that's exactly what this evidence was designed to do. This is not the case of conduct towards the alleged perpetrator. Nobody said, Justice Rehnquist, that she had those conversations in front of Mr. Taylor, or that she directed them to Mr. Taylor. And most importantly, they don't even deal with Mr. Taylor. And most importantly, they do not deal with her sexual conduct with another person, but what she said she fantasized about sexual conduct with another person unrelated to the work site. It has absolutely no relevancy as a determination of whether there were advances made by Mr. Taylor, which the bank, Mr. Burton, denied were, which Ms. McCullugh denied were made, and which Mr. Taylor denied were made, and that she welcomed them. How a person having a sex fantasy about an individual totally unrelated to the work site... it is not alleged or said that she made that statement about the sex fantasy to the alleged perpetrator, in this case the supervisor, or that the content of the fantasy dealt with the supervisor. And for that reason, it would constitute general-- William H. Rehnquist: Well, the district court in a bench trial has a great deal of latitude in deciding what kind of evidence it's admitting. And I think the standards you're setting up are far more restrictive than any decision that's ever come out of this Court. Patricia J. Barry: --Justice Rehnquist, it would be analogous, for example, in a rape case the trier of fact certainly would not permit the defendant to present evidence of how the victim dressed to prove the issue of consent. Likewise it should be in a sexual harassment situation. William H. Rehnquist: I'm not entirely sure you're correct. I'm not sure the cases support you on that. Patricia J. Barry: In terms of that they could present evidence of how-- William H. Rehnquist: In a civil action. Patricia J. Barry: --Well, Justice Rehnquist, the evidence of dress is so subjective and has so much to do with so many other factors other than proving that that particular individual, that woman, consented to the advances. William H. Rehnquist: This may be a good argument to make to the district court. But after the district court has resolved it against you, with all the discretion that a district court has in admitting evidence in a bench trial, I just don't think you're going to win in many Courts of Appeals. I think it's a very unusual that you won in this particular Court of Appeals. Patricia J. Barry: Well, Justice Rehnquist, just once more, just alluding to the California Rules of Evidence-- William H. Rehnquist: Well, we're not governed by the California Rules of Evidence, Ms. Barry. Patricia J. Barry: --Yes, Justice. William H. Rehnquist: We're practicing under federal rules of evidence. Patricia J. Barry: Yes. I was just saying that the analogy would be that the federal courts do have... can control this kind of evidence relating to the general sexual character of the victim. William H. Rehnquist: And the district court did exercise some control. He admitted it. Patricia J. Barry: Yes, and for that reason we're arguing that in this particular case, because of what I've just argue to you, Justice Rehnquist, it was wholly irrelevant. Again, I would like to say we're not saying you cannot exclude evidence of how she comported herself. But in this case the environment was the supervisor. Therefore, how she conducted herself towards the supervisor is the kind of evidence that would be directly relevant and on point. And in fact, the trial court said over and over again that, I want to hear what happened between Ms. Vinson and Mr. Taylor. And only when they brought in this general sexual character evidence did he say that now a very broad-based kind of evidence would be allowed to come in. But also underlying that assumption, as I understand the arguments of the Petitioner, Justice Rehnquist, is that the evidence is being proffered for two reasons: either because she fantasized the charges, which is the bank's position and Mr. Taylor's position, the acts never occurred; or it's evidence that, in case you decide to believe her that something happened, that she volunteered to it. So what we have in this case is just not alternative pleadings, but alternative proof of facts. It either has to go in on one theory or it has to go in on the other, and they have argued in their brief on both theories. Now, if they're saying that this was evidence of voluntary work place conduct that proved that the relationship was a consensual one, then what they're saying, Justice Rehnquist, is that their own supervisor committed perjury in a court of law. And for that reason, we have to lock carefully at this evidence, because maybe the Court of Appeals was right, the trial court used that evidence, as it say, to jump the gun and say, well, whatever happened, it had to be voluntary and I don't really care what happened. It's very important in this case to determine what happened, and if we're allowed to go back on remand that would be the first responsibility of the trier of fact, to determine who is credible in this case, who is telling the truth with respect to the most important issue: Was it Mr. Taylor or was it Ms. Vinson? Thurgood Marshall: Counsel, I might have missed it, but how do you answer the question about notice? Patricia J. Barry: With respect to notice, we rely on the definition of employer set out in Section 701(a), which talks about an employer is a person, which is anyone engaged in commerce and employing so many employees, and an agent of that employer. That is to say, for purposes of Title VII liability there is no imputation of notice. Sidney Taylor becomes the bank because he is a supervisor. Now, in the definitions there is no direct reference of supervisor. Thurgood Marshall: That was when he was out at the motel? Patricia J. Barry: Excuse me, Justice? Thurgood Marshall: He was the supervisor when he was out at the motel? Patricia J. Barry: Yes, because the conditions of being out there was, like I have the power to hire you, I have the power to fire you. It was under the conditions of being the supervisor of Ms. Vinson that he extracted this sexual favor from her, and it was only because he was the supervisor, it was only because he was the bank at the Northeast branch, that he was able to accomplish this. And for that reason, when they say we have to have notice, notice to Sidney Taylor when she told him to stop doing these things was sufficient notice to the bank. Also-- Byron R. White: I agree that the statute defines an agent of an employer as an employer himself or herself. But that doesn't mean that... all that means is there are two employers in this case; one is Taylor and the other is the bank. But the statute doesn't say that each employer is liable for the acts of the other. It just says that Taylor is an employer. Patricia J. Barry: --And it is the-- Byron R. White: And can be sued for it. Patricia J. Barry: --That's right, Justice. Byron R. White: I don't see why you think that notice to Taylor is notice to another employer. Patricia J. Barry: Well, the employer in the sense of being the collective entity, the bank. Byron R. White: Well, I know. Of course the bank is an employer, and so is Taylor. But why do you conclude that notice to Taylor, who is an employer, is notice to another employer, the bank. Patricia J. Barry: Because-- Byron R. White: That isn't what the statute says. Patricia J. Barry: --Well, the statute says that the definition of employer shall include the agent, and-- Byron R. White: I agree with you, and all that means is that the agent is an employer. Patricia J. Barry: --That's correct, and therefore-- Byron R. White: Well, that's all it means. It doesn't now... where do you get the therefore, that therefore notice to an agent is notice to the other employer? Patricia J. Barry: --Well, it says that the employer is the person, the employer is the agent. So that when you-- Byron R. White: Well, that just means an agent is an employer. Patricia J. Barry: --Yes. And so you-- Byron R. White: That's all. Patricia J. Barry: --All right. And so you have a collective entity called the bank, made up of individuals who perform the functions on behalf of this collective entity. Byron R. White: Well, that's quite a gloss on what the statute says, I must say. Just you can sue, and in this case you could sue two employers. You could sue Taylor and you could sue the bank. Patricia J. Barry: Well, in fact-- Byron R. White: And could you sue them both? Patricia J. Barry: --Yes. Byron R. White: And the only reason you could sue Taylor is not because he was an agent of the bank, but because the statute says you could sue him as an employer. Patricia J. Barry: But for purposes of Title VII liability the courts have routinely held that the collective entity, which would be Meritor Bank in this case, Justice, would, if there were discriminatory intent and a discriminatory act proven on the part of Sidney Taylor, the supervisor, then the collective entity becomes liable. And that's important, Justice, because we-- Byron R. White: What about, what would you say if a co-employee, not a supervisor, did this harassing? Patricia J. Barry: --Then the issue of notice would come into operation. Byron R. White: Well, why? Isn't the co-employee an agent of the bank? Patricia J. Barry: No, either under Title VII definitions or even under principles of traditional common law concepts of principal-agency doctrine, that just wouldn't operate. The theory... there was a public policy, there's good public policy interests underwriting Title VII. Byron R. White: So you couldn't sue a co-employee? Patricia J. Barry: Yes, you could. Byron R. White: Under Title VII? Patricia J. Barry: I'm sorry. You can't sue. You can sue the employer for Title VII violations if a co-worker engaged in acts of environmental harassment, provided notice is given to the employer. What is the difference in this case and there the cutoff is is the theory is that the bank or any employer is in the best position to control the actions of the supervisors. They don't have that same kind of control over co-workers. They can discipline supervisors, they can send them to seminars. They can do all of these kinds of things. And by the way, in Title VII law the cases or the courts called upon to construe Title VII liability with respect to the discriminatory actions of a supervisor have uniformly held that the defendants are... that the defendant employer becomes necessarily responsible for actions of all of its employees in expressing or carrying out feelings of hostility towards women, but the defendant is responsible for acts of supervisory personnel. And that's citing Fechty versus United States Steel Corporation, 353 Fed. Supp. 1177. Warren E. Burger: Suppose Mr. Taylor was embezzling money from the bank regularly, unknown to anyone else in the bank. The bank discovers it and makes a claim against an insurer, an insurance company that insures against such things. Would the knowledge of Mr. Taylor about his own embezzlements be imputed to the bank? Patricia J. Barry: Chief Justice, I would doubt that to be the case, because there we can distinguish that particular hypothetical from the instant one. Here we're dealing with the employer-employee relationship, and with respect to the Northeast branch of the Meritor Bank or Capital City Mr. Taylor was the bank for purposes of establishing the employer-employee relationship. Warren E. Burger: Your time is expired now. Patricia J. Barry: All right. Warren E. Burger: The light is covered, hut the red light is on. Patricia J. Barry: I'm sorry, I had it covered up. Warren E. Burger: Very good. Warren E. Burger: You have two minutes remaining, Mr. Troll. F. Robert Troll, Jr.: Very briefly, the reason why notice to Mr. Taylor is not notice to the bank is that notice to the actual perpetrator in and of itself can never constitute notice. The perpetrator is motivated to keep his conduct secret and to keep it concealed from his superiors, who may discipline him for it. This rule requiring notice is particularly heightened in this form of sexual harassment case, where one on one conduct occurs. Simply put, the victim knows that notice will more than likely not come from her supervisor. If she wishes relief, she must complain. In the example given, I think, where a complaint is made to a vice president, notice can never go to the perpetrator, but it can in fact go to an EEO officer or somebody higher up, or even to the EEOC. Thank you. Warren E. Burger: Thank you, counsel. The case is submitted.

Warren E. Burger: Arguments next in 69-5003, Furman against Georgia.c Mr. Amsterdam you may proceed whenever you are ready. Anthony G. Amsterdam: Thank you Mr. Chief Justice. One thing I perhaps should make clear, it's our position on the question asked by Mr. Justice Stewart as to whether if there were shown today any legitimate legislative basis for a punishment that would itself in the Eighth Amendment is referring, the answer in my judgment is unmistakably no. The argument about whether there is a legitimate base for a legislative judgment has a very, very small part in our brief as I am sure the Court has noted. We have essentially, simply pointed out that one of the reasons why a Court need not hesitate to strike down a rare and harsh punishment like capital punishment is that it is not taking away anything that is very important to the State, both in the sense that the only thing is really an issue here is whether instead of killing 20 or 15 people randomly selected a year, they are going to keep them in prison and the impact of that from all available determiners is in current to punishment, but we do not urge that legislature could not, we do not urge in this forum at this time that the legislature could not find that there is a basis for boiling an oil. That I think really presents the question very squarely. Mr. George said and I think the State generally takes the position that if boiling an oil came before this Court, even though it had a legitimate legislative base, even though a legislature might find the boiling in oil was a deterrent that somehow the Court could say that that was a cruel and unusual punishment because it is “unnecessarily cruel.” I want to simply point out to the Court, who is arguing subjective standards here and who is arguing objective standards. How could this Court say or how could Mr. George say that boiling an oil is unnecessary if a legislature finds that in order to deter some particularly serious crime that the horrible prospect of being boiled in oil is all that we do it. I think that it is the respondents and not the petitioners who are urging the Court to react to that visceral level. Our proposition is I think the much more objective one. It looks not to what society says, but to what it does and we do not reject the fact that 41 States have it on the statutes, but that is certainly a phenomenon with which one must start, but one must also ask what did they do with it. Now, let us look at this thing if we may for a moment in the world picture and we are not talking about Mozambique and Liechtenstein. We are not talking about a progressive trend which has brought virtually every nation in the western hemisphere with a possible exception of Paraguay and Chile to abolish the death penalty. We are talking about a progressive trend which has caused all of the English speaking nations of the world except some of the American States and poor states in Australia to abolish the death penalty. We are talking about a -- Warren E. Burger: Did they do it? What process did they do it in most these places. Mr. Amsterdam? Anthony G. Amsterdam: It is different in different places. In many places, the legislature have abolished it and in many places exactly the same thing has happened as has happened in the United States, that it has simply ceased being applied in fact and we think that the fact that -- Warren E. Burger: But it is not the process that could generally won -- done by a Court in these countries? Anthony G. Amsterdam: No, no, no unquestionably not and in most countries, of course, Your Honor Courts do not have this kind of constitutional supervision -- Warren E. Burger: Now, if the Courts understook to accept your general composition on the cruel and unusual aspect, could a Court make exceptions to it for a certain crime or would it -- would the Court be obliged to follow an all or nothing approach? Anthony G. Amsterdam: If -- Mr. Chief Justice, if Your Honor means, could the death -- could the Court find that the death penalty is unconstitutional for some crimes and not for others, I believe that it could rationally, although I do not think it should or can on the indicators available to the Court in this country. Warren E. Burger: But could the Court for example make an exception as to homicides committed by a life term prisoner here of a fellow prisoner or the guards? Anthony G. Amsterdam: I might -- Warren E. Burger: (Voice Overlap) that kind of a narrow exception as a legislature could? Anthony G. Amsterdam: Well, that -- it seems to me that is a different question whether the legislature could. I do not think the Court could under a general statute as I do not think that the Court could take a statute like California which says any first degree murder imposed the death penalty or statute like Georgia’s which says any murder the death penalty may be imposed and say, well, they can it apply it in some cases and not in others. But I do think that a different question would be presented if they are different and now our statute represents, there is no doubt about that. Warren E. Burger: You are well aware of course that great many opponents of capital punishment, among them James Bennett, the former Director of the U.S. Prison Bill, very strongly against capital punishment as a matter of policy, but referring to retain it for homicide of a fellow prisoner or a prison guard and I am sure you will cover that in some detail (ph). Anthony G. Amsterdam: I have no doubt that a statute of that sort would present a different question for the Court because what we have is a general statute which proscribed death as the penalty for murder or in the subsequent cases, right. Now, we have had historical experience with that. We know what our -- Thurgood Marshall: Is it true that New York, there is such a statute, that is restricted the killing of a prison guard? Anthony G. Amsterdam: Oh! Yes. As a matter of fact there are several different statutes Mr. Justice Marshall, in different States. California has a mandatory death penalty statute for killing by life termers. It need not be a guard but it is any non-inmate. There are five States though that have a statute such the Chief Justice suggests which limit the penalty to killings of guards in the course of their duty and that sort of thing. Warren E. Burger: Do you think we would then could accept your general argument and still find such a statute, one that did not offend the constitution? Anthony G. Amsterdam: Your Honor, I think a line might be drawn. I do not urge that it be drawn and I see no occasion in these cases because no such statute is presented. The problem with those statutes is that we had insufficient experience with them. The essence of our submission here, I think it is perfectly coined that we have had a very considerable experience with general statutes punishing the crime of murder or the crime of rape with death. And what we find when those statutes are applied, actually applied by juries in particular cases is that almost never is the penalty of death in fact inflicted. I think that is not an exaggeration. Now, one does not know what juries would do with different kinds of statutes, but one darn well knows what the testimony of public opinion, of enlightened public opinion in this country is with regard to general statutes punishing murder with death. The -- what juries do -- we are in a little disagreement with I think the respondents on the significance of that. To start with it as we have pointed out, juries really only do return about a hundred death verdicts a year. Now, to understand how small that is, you have to compare it with the number of crimes punishable by death. It is a very difficult thing to do. We have attempted to do it in one of the appendage to our brief in which you point out is that juries do not apply the death penalties perhaps to more to more than one out of 12 or 13 at the very most cases in which they could and maybe a half or a third of those people are actually executed. Now, notice that the non-acceptance, indeed the repudiation which this imply. We have a country in which 43 jurisdictions have the death penalty on the books in which hundreds and hundreds and hundreds and hundreds of people are prosecuted for crimes and convicted of crimes in which death penalty is available. Under the best of circumstances for capital punishment where the -- what is involved in an execution is a secret or indefinite kind of the jury does not proceed or fully understand where the people get the death penalty, are disproportionately the pariahs, the poor and racial minorities, it's a point I want to come back to in one second, and where in addition the juries are death qualify, the juries are returning a hundred death verdicts here. William H. Rehnquist: Mr. Amsterdam, you have said that one out of 12 or 13 death verdicts is returned as what -- as what might be returned, in each of the 12 or 13 were those cases which the prosecution had asked for death or was it just the death could have been returned under the statute if the prosecution had asked for it? Anthony G. Amsterdam: It is impossible to know in what percentage of the case if the prosecution asked for it. It is however perfectly clear in a number of jurisdictions that the prosecution has no control over the matter. In a number of jurisdictions it is entirely up to the jury. The prosecutor cannot waive it and the prosecutor cannot ask for it, simply a matter if the jury’s discretion. I think no figures are available on the question of whether the prosecutor asked for it although I would say that even the prosecutors’ decision not to ask for it is a reflection of the sentiment of the total community so that I would not discount those cases even if I knew how many there were. The point -- Potter Stewart: Also your statistics, you cannot tell even from those fragmentary statistics whether, as you put it, juries are imposing the death penalty in only one out every 12 defendants or does it mean that only one out of every 12 juries imposing the death sentence? You do not know which is the constant and which is the varying factor (Voice Overlap) Anthony G. Amsterdam: No. No, that is certainly clear Your Honor. Harry A. Blackmun: Mr. Amsterdam is the -- are your most recent remarks also directed to judge imposed penalties? Anthony G. Amsterdam: The figures that are available do not discriminate so that the one out of 12 or 13 figures is a total figure that does not discriminate between a judgment and jury sentencing where prosecutors have or have not asked. All we know is that out of that number of capital cases that is the number of death sentences that are in fact imposed by the sentencing. One important factor is that the figures we have, the figures I am talking about a hundred year, run through 1968, when Witherspoon was decided. So what we are talking about is the number of sentences imposed principally by juries because although there are some judge sentences in there, most of these are plainly jury sentences, by juries from whom all persons against capital punishment had been excluded. Now this is the group that Mr. George wants us to take as the indicators of public symptom. You are already crooning out all of those people who oppose the capital punishment. Harry A. Blackmun: But Mr. Amsterdam in that connection, how many States have penalties of this kind imposable by a jury as been contested by those imposable by a judge, do you know? Anthony G. Amsterdam: I am -- how many jurisdictions -- Harry A. Blackmun: In how many jurisdictions the -- does the judge impose sentences in custom and how many if a jury impose a sentence, do you know? Anthony G. Amsterdam: To my knowledge there are 2 jurisdictions, Maryland and Illinois where the imposition of the death penalty requires the concurrence of the judge with the jury, that is the jury’s verdict is either advisory or the judge must concur in the jury’s verdict before it can be imposed. In all other jurisdictions, it is the jury which makes the sentencing decision unless the jury is waived. Harry A. Blackmun: Now this is not true in my home state? Anthony G. Amsterdam: Oh! I am -- I am then quite misinformed. I had understood that it was. If -- this is rather thoroughly canvassed in the briefs in Maxwell versus Bishop and I think the statutory section is set out there. If the Court should want to refer to them for reference, I had understood that it was true in all States that the jury made the determination except those two but there may be local differences of -- that I am not aware of. The -- Speaker: (Inaudible) Anthony G. Amsterdam: On sentences, yes. Potter Stewart: Except on those of states where or except where a jury is waived and which is then I suppose in some States at least the judge could impose a death penalty? Anthony G. Amsterdam: Oh! It is since United States v. Jackson and it is common that if the jury is waived the judge may impose the death penalty, yes, that certainly is true. The jury is sort of primary sentencing instrument in practice because it's generally -- jury does not interact with. William O. Douglas: Is there anything in the Georgia record that indicates what kind of cases Georgia executes? Anthony G. Amsterdam: There are, again, judicially noticeable figures on this. There is nothing in the record. There is no evidence that was presented, but the figures that perfectly frames the national prison statistics, judge executes black people. Speaker: In Georgia? Anthony G. Amsterdam: I want to make some reference to the -- as to the State of the record generally because there is an awful lot of talk here about facts, about what the Los Angeles Police Department says about deterrence, about who gets the death penalty, unpublished figures in the Georgia Bureau of Prisons, unpublished figures in the California Department of Corrections, I make very point that, we have been asking for an evidentiary hearing from all of these factual, a lot of Courts for a long time. Nobody has ever given one to it. The California Supreme Court Judge (Inaudible) Evans rests upon a record in which the California Supreme Court decided that case on authority, other case in which we had asked for such a hearing and had not been given to him. We are very far from satisfied with the nature of the factual evidence presented here, but we think from the factual evidence that is judicially noticeable which does not include corrections, departments, or courts in an unpublished forum, that enough appears so that the Court can call the death penalty cruel and unusual punishment. Now, if however the Court has any concern with any of this factual questions, for instance, from deterrence to who gets the death penalty, any of these things, an evidentiary hearing would be the proper way to resolve that matter and in the Akins case, at least the case can be taken in such a way to get that hearing. Now, the -- I would turn to this subject of rarity and discrimination because the significance of both rarity and who -- and the question, who gets the death penalty is twofold. First of all, when a nation decides with a growing crime scare, burgeoning population, sentences a few people to death, were in fact sentenced to death and execute the people you fear of and does this against the background where the ideological debate where the content of this debate about capital punishment makes unmistakably clear why this is happening historically because capital punishment is regarded as indecent, as inconsistent with civilized standards today then that manifests a repudiation. It's quite different from what is manifested by the maintenance of the statutes on the books. That is the second aspect of it. The very fact that capital punishment comes to be as rarely and is infrequently and is discriminatorily imposed as it is, takes the pressure of the legislature quite simply to do anything about it. For one reason why the Eighth Amendment must be measured not only by legislative disapproval, but by popular disapproval in terms of what juries and judges and prosecutors do in fact is that there are in fact more than one way to skin a cat. And that a penalty can be repudiated by public opinion, every bit as thoroughly by the legislatures making it optional and then nobody has ever applying it as by the legislature's repeal of it and this goes back to the Chief Justice’s question, how has it been done internationally? In some places it has been done by legislative repeal. In other places what has happened is exactly what happened in this country, it simply falls into disputes and when it falls into disputes, when there are only a very, very few people and those predominantly poor black, personally ugly and socially unacceptable, there simply is no pressure in the legislature to take it off. Thurgood Marshall: Let us ask them to the last case, how many are there in death row in California? Anthony G. Amsterdam: How many in death row? A hundred and five on death row in California to my -- to my knowledge at the moment. Thurgood Marshall: At the time the last time the legislature was used to abolish the death penalty (Inaudible)? Anthony G. Amsterdam: Oh! About, I would say 85 to 90. Thurgood Marshall: Well, how can you say that it is because they are so few? If you take the State of California and there is one that you try to get numerous mileage on the frame? Anthony G. Amsterdam: Well, there are number of -- I think of essential points here, few is of course a relative matter. What you are talking about is an accumulation on death row over a period of time for 12 or 13 years. You are talking about 80 people in a prison system that houses thousands and thousands and thousands of people. You are talking about and I think this is relevant, you are taking about 80 people of whom at that time 25 or 30, actually probably up around 30 were members of minority groups. This by the way is not a factor in California’s figures. One of the reasons why I have great concern about California’s putting them forward as though they were judicially noticeable, but the only racial figures California give are for 1970. It is very strange that thinking -- very clearly the 1970 was strange here in California because the last published national figures show that out of 59 people on death row in California, 25 were black. Now, the California figures show that out of a hundred now, 25 are black. There is something, you know, strange going on there which you -- Potter Stewart: How does that compare to the prison population of California? Is that out of line with the basic prison population in California? So far as racial composition of -- Anthony G. Amsterdam: It is very difficult to know. There are no published figures to tell us that. What California does compared to the received from Court 1970 and one year is no basis for making any kind of a judgment. It is true though that California counts Chicanos as white for these purposes, something which for one who lives in California, I point rather strange in terms of the question, who there is that brought on the penalty? The point essentially is that when it is this group of people who in fact suffer, realistically the pressure on the legislature is not the same. However, little we are willing to bear the death penalty in its general application, we are still less willing to bear it as applied to us. Now, the Court has been -- Warren E. Burger: Mr. Amsterdam you were speaking of pressures on the legislature. What are the figures now, the total number, something over 600 in death row? Anthony G. Amsterdam: The latest available figure to me Your Honor is 697. Warren E. Burger: Now 700 people on death row would be quite an enormous pressure on public opinion, would it not? Anthony G. Amsterdam: No, I do not think so. I think as a matter of fact, public opinion has been low in a very significant way by the failure of executions in recent years. I think the public has -- as in large measure stopped thinking about the problem. I think that it is -- Warren E. Burger: Well, I was addressing myself at least suggesting the possibility that if you did not prevail here that pressure would be reactivated, would it not? Anthony G. Amsterdam: I do not know whether it would or would not if you actually started killing people. I am quite confident it would not until you start killing people. Public is quite graphic in a way it thinks about things. Put one execution out there, take one life, people get very excited, but tell them that tomorrow or the next day a life maybe taken when one has not been taken since June 2 of 1967 and they don't think about it. I think it would cost, I think it would be constitutionally intolerable to us, the resumption of execution, to activate any kind of public sentiment. But even if you had that public sentiment activated, the point essentially remains that it is not, you are not capable of generating the kind of legislative or public disapprobation of a penalty which is asking a forum so as to be applied and which is in fact applied to very, very relatively and to essentially ugly minority group members as you are to a generally applicable penalty. Now, I would like to serve -- save some time for rebuttal in this matter, but the point made by several of the respondents said that the death penalty somehow -- the fact that the institution in the society would fall apart if this Court laid it hands on it, is not new. If I may read just for a moment from -- Potter Stewart: Is not what, I did not hear you. You said that that point is not what? Anthony G. Amsterdam: Is not new. Potter Stewart: New? Anthony G. Amsterdam: Is not new. Potter Stewart: I see, thank you. Anthony G. Amsterdam: If I may read for a moment from Lord Ellenborough speaking in the House of Lords in 1813 on a Bill for abolishing the death penalty for the crime of privately stealing the amount of five shillings from a shop, Lord Ellenborough after saying, how but by the enactment of this capital punishment law, the cottages of the industrious poor to be protected, what other security has a poor peasant when he and his wife come home that his clothing would be safe other than the death penalty. Those are on to say, your Lordships have told what is extremely true that the number of people actually put to death for stealing five shillings from a shop is very small. And this circumstance is urged as the reason for the repeal of the law. But before your Lordships are induced to consent to such repeal, I beg to call to your consideration the number of innocent persons who might have been plundered of their property or destroyed by midnight murderers if the law now sought to be repealed had not been in existence, a law upon which all the retailed trade of this commercial country depends in which I for one do not consent to be put in jeopardy. Nevertheless, the Bill making it a capital offense to steal five shillings from a shop was in fact repealed, England did not fall there. I think that all of the available evidence which is judicially noticeable makes it perfectly point that a judicial ruling by this Court applying the Eighth Amendment in the way in which we believe it was meant to be applied and in judging this repudiated penalty, a cruel and unusual punishment to take from the State nothing to which they are entitled. If I may save the rest of my time for rebuttal Your Honor? Warren E. Burger: Very well Mr. Amsterdam Potter Stewart: Before you sit down Mr. Amsterdam, I just want to be sure that I understand your ultimate argument. Is it this that even if assuming that retribution as a -- is a permissible ingredient of punishment, even assuming that rational people could conclude that the death sentence is the maximum deterrent with the minimum unnecessary cruelty, death in electric chair. Even assuming we are dealing with somebody who is not capable of being rehabilitated, an incorrigible person. Even assuming that rational people can conclude that this punishment under these circumstances is the most efficient and the most inexpensive and the most -- and that it assures the most complete isolation of a convicted man from ever getting back in the society. Even assuming all of those things which are the basic arguments made by your brothers and sisters on the other side, you say it is still violative of the Eighth Amendment, am I right in my understanding of that? Anthony G. Amsterdam: That is correct, Your Honor. The Eighth Amendment we see is a limitation somewhat like before. It is a limitation on means that says that the legislature may not use cruel penalties, cruel and unusual penalties, even though they may serve legitimate cause, so just because men engage in unlawful searches and seizures even though there may be a purpose for them. Now, we are -- I ought to point out we are limited to that on this record because of this ineluctable fact that we cannot get an evidentiary hearing on all of the issues Your Honor raises. I think on evidence which could be presented, we could show that none of the judgments Your Honors supposes could rationally be made. Potter Stewart: Well, maybe so. (Voice Overlap) Anthony G. Amsterdam: But on this record it is our submission that accepting each and every one of those propositions, the death is a cruel and unusual punishment. Potter Stewart: That is what I understood to be your argument. Warren E. Burger: Mrs. Beasley. Dorothy T. Beasley: Mr. Chief Justice and may it please the Court. The question in this case is and particularly in the case now before the Court that is Furman versus Georgia involves the Fourteenth Amendment first. I think that petitioner has in all of these arguments and all of these cases given way to the proposition that the Fourteenth Amendment hasn't anything to do with these cases and the argument is made simply that in this cruel and unusual punishment to deprive a man of his life, due process of law is not really looked that at all. However, as it affects the State that is exactly is the most important point. The Fourteenth Amendment provides that life, liberty that no State may deprive any person of life, liberty or property without due process of law. Now, that was written in 1968 long after the fifth -- the Eighth and the Fifth Amendment were written. So that when the restrictions was made on the State by way of the Fourteenth Amendment, the death penalty was already recognized and the restriction on the State was only that they not deprive a man of his life or liberty or property without due process of law. And I would submit that if the Court in these instances rules that the death penalty a cruel and unusual punishment and may not be enforced by the State then it would take a constitutional amendment because the Fourteenth Amendment as well as the Fifth could be rewritten so that we would have a proposition that no State may deprive any person of life nor may any State deprive any person of liberty or property without due process of law. Thurgood Marshall: Could the State flaw in the law (Inaudible)? Dorothy T. Beasley: I think not Your Honor because the terms of due process of law and this taking of life or property does not include corporal punishment of that type. The State may not deprive him of life, liberty or property without due process of law, but what we had at the beginning where a country -- was the understanding that it may not impose torture and that of course would be torturous as would a horse with an essence that Justice Stewart mentioned. So if things were taken out of the realm of punishment at the very beginning, with the constitution being enacted and the Bill of Rights so -- Speaker: What is the standard would you use to determine whether any part of the Bill of Rights, is that what you mean it would be? Dorothy T. Beasley: I think whether it is the claims that has been used by this Court in so many cases in applying the Due Process Clause. Is it a matter of fundamental standard, is it a concept of our ordered liberty, that is where full -- that is where a punishment period comes in, I think and whether it is cruel and unusual punishment comes in to the concept of ordered liberty, a fundamental fairness and I think that so long as the State utilizes fundamental fairness in dealing with it, you know, Fifth Amendment posing penalties that those penalties may be used, particularly since the States were specifically permitted by the Fourteenth Amendment to utilize the taking of life so long as it was done with due process of law and I think that is one of the basic frailties in most of the arguments that are made by petitioner because he talks about rarity and discrimination. Well, obviously then it is not with due process of law, is it all the jury and that is the limitation of the State. It is not to say as to the penalty. Thurgood Marshall: Mrs. Beasley, did the (Inaudible) that the State would not impose unnecessary change, the plaintiffs of this Court? Dorothy T. Beasley: Yes sir. I am -- Thurgood Marshall: They recognized a little more than just due process, it is not? Dorothy T. Beasley: But that was -- Thurgood Marshall: Even just thought in that case recognized that the Eighth Amendment was a part, well, applicable to the case? Dorothy T. Beasley: Yes, insofar -- Thurgood Marshall: And you are now saying it is not? Dorothy T. Beasley: No sir, I am not saying that at all. What I am saying is that it comes into the restrictions on the State by way of the Due Process Clause, not that in and of itself and apart for many consideration of due process is applicable to the State. That is very clear because without the Fourteenth Amendment the Eighth Amendment would not be applicable to the States at all because that is not how it was written. So that in the concept of due process is where the considerations of how we deal with punishment come in and I would submit that a State may impose a punishment so long as it is not out side of what we regard in our concept of ordered liberty and fundamental fairness and I think that is exactly where the standards come in. The standards are not so close aligned that you can measure them by polls taken today or by the number of people executed within the last ten years. That is -- assume a -- close to the line as far as that concept of ordered liberty are concerned. Moreover, I think that the standards that ought to be viewed are the ones that because the courts have used throughout the country in recognizing what cruel and unusual punishment means and the cases that come out of the State Courts now, the Lower Federal Court and of this Court indicate that it means barbarous or uncivilized or torturous and that type of thing and certainly the penalty of death per se does not come within that prohibition or that understanding. Mr. Justice Marshall, you asked about whether the meaning of unusual has changed, I would submit that it has not. The meaning of unusual has not changed from the time that the Eighth Amendment was written, but the application of it perhaps has and I think, as I have said before that the death penalty itself be outside of a consideration of that measure because it specifically reserves the state in the Fourteenth Amendment. However, if we are going to measure whether in our contemporary deciding, the death penalty is to be regarded as cruel an unusual punishment, I think petitioners are using the wrong guideline. I think there are three basic ones that are compelling with respect to what is the current sentence of this specific regard to punishment and he talked about the world community, but we do not know why these countries did waive the death penalty. We do not know for example whether it was the legislature or the petitioner, but even more we do not whether it was because they have regarded it as cruel and unusual punishment or for some other authority nor what the crime is what? Nor what the punishment where the crime has been displaced with. For example if it -- it is quite that life imprisonment, if the death penalty so much more severe that in and of itself, is grossly disproportionate as a matter of degree. Let me go back to the -- I have mentioned that there were three areas, I thought, should control insofar as measuring standards of decency, jury-- William O. Douglas: What if the standards of decency comes up? Dorothy T. Beasley: I think it comes primarily from the Trop versus Dulles, that being the last pronouncement in this area. William O. Douglas: But ever since there were no opinions of the Court, (Inaudible)? Dorothy T. Beasley: No, there was not. That is correct but I think a standard of course would have to come into play, I do not think it is that far removed from fundamental standards which to me is the basic standard that is to be used in this cases. William O. Douglas: Did you say that a statute that allows the death sentence to be imposed except on those people who make more than $50,000.00 a year, would that be (Voice Overlap) -- Dorothy T. Beasley: I think that would be the discriminatory. That is not looking at the crime. That is looking at the circumstances of the criminal. William O. Douglas: Do you think that cruel and unusual carries with it a connotation of non-discrimination? Dorothy T. Beasley: Oh! Yes, indeed. It should be applied a non-discriminatory manner. William O. Douglas: Are there any statistics on what kind of people Georgia executes? Dorothy T. Beasley: Mr. Justice Douglas we submitted in our brief, a chart that I obviously made up from the statistics the we were able to gather from the Department of Corrections, showing those people now under death penalty in Georgia. William O. Douglas: And is that under -- Dorothy T. Beasley: And I do not think that you could say that there is anyone class for that class has been discriminated against. Moreover, even if it were shown to be discrimination and we submit that it was not shown to discrimination that that would not invalidate the death penalty per se but it would be a violation of the Equal Protection Clause not the Eighth Amendment. In other words, you may have discrimination in the sentencing and largely that only black people get the maximum for larceny. Well, obviously that would be discriminatory, but that would not mean that you could not sentence anybody to 20 years imprisonment for larceny. It would simply mean that in no occasion where there was discriminations those sentences were invalid. William O. Douglas: It's case by case -- Dorothy T. Beasley: Yes indeed and I think their proof falls far short of making out the kind of a prima facie case that this Court has considered in cases like (Inaudible) with regard to discrimination by virtue of rape. And -- but even if -- I say, even if they could make it out, it would not invalidate the death penalty because the same thing would apply to any other punishment when it does not make the death penalty anymore cruel and unusual than life imprisonment or 20 years in jail or even 1 day in jail is to provide that in a discriminatory manner and of course that then goes back to the Due Process Clause. Obviously it has to be like that, it has to be in proceedings which of course in fact -- William O. Douglas: Has your court ever considered the question of discriminatory aspects of the death sentence as applied in Georgia? Dorothy T. Beasley: I think not because I do not think it has had the opportunity to do so. Mr. Amsterdam suggested that it has not had the opportunity, he has not had the opportunity to present statistics to our Courts, but that certainly is not true in the instant case. There was no effort made to bring any statistics or make any argument as a matter of fact. In Furman the argument was not even made in the lower court. It simply was stated, but no argument was made and there was a very, very short argument to point out in our brief, in the brief to the Supreme Court of Georgia, citing merely the whole statistics of how many white people and how many black people had been executed since 1930 up to 1968. But that does not prove that the death penalty is cruel and unusual punishment. Moreover, those statistics which talks about the period of time since the 1930 to 1968 in Georgia case or the old, since it's the only state failed to take account of the exact changes in criminal justice that had taken place under decisions of this Court as well as the decisions of State Court so that we are safeguarding not only criminal generally, but people who are subject to the death penalty with greater due process so that when do arrive at a consideration that they are ready to be executed we are sure that they are -- it was arrived at in manner of comporting with due process. And I think that is one of the great fallacy in utilizing the statistics with regard to the number of executions that they had then. How many of them have not been executed because of jury discrimination where group of jurors or illegals confessions or illegal search and seizure or something else and that has nothing to do with the penalty that was imposed by the jury. But again let me just return to -- for a moment to what I regard as measurements of what the standard should be. The standards of fundamental fairness and standards of an ordered society. As I have said I think that should be the jury is the one, the juries across the country are still imposing the death penalty and certainly they are representatives of the community as stated in Williams versus New York by Mr. Justice Murphy in his dissent, in our Criminal Court the jury is the representative of the community, its voice is that of the society against which the crime was committed. Its verdict is a community expression. Witherspoon also refers to the jury representative of the community and so does Trop versus Dulles and I think that it cannot be overlooked that the jury are still imposing death penalty and did in the 650 or how many other cases resulted in persons now under the death penalty offenses. They express the community feelings and standards and that was recognized in Trop. They speak for the community if we are going to look at what the standards are here. In this two cases where Georgia has standings for the Court, as a matter of fact the internment in the instant case right now before the Court, there was only one person of the total panel of 48 which means one out of 49 because one has to be added who will -- said that they were so against the death penalty that they could never encourage it in any case and that it would affect their determination of guilt. One out of 49, so that cannot show that there is an overwhelm -- these people are selected at random and moreover, their feet are put to the fire. There was some questions in one of the earlier arguments about, well, juries are perhaps just imposing the penalty now because they know it is not going to be imposed. I would submit that if it is supposed to be, the overwhelming repudiation of the death penalty that petitioners talk about, then why would jurors take the unpopular stand in imposing a penalty which the world has repudiated. And secondly, how can we presume that a juror sitting in the place of judgment is going to take a chance on a penalty not being imposed when he knows that his expressing as well as the community. I would submit that no one with a conscience would do so and in certain point his arguing presumption of that sort. Secondly, we speak also of the second measurements then of what -- who measures the standards and I would say, the judiciary. And it is particularly appropriate to look there because the jury -- the judiciary is measuring the death penalty in terms of whether it is cruel and unusual punishment not whether it is why or not whether as restriction or not whether it can be without it but is it cruel and unusual punishment and reading all those recent cases from around the country I find almost none, I find none, there are probably are some but none where the Court had declared that it is cruel and unusual punishment and talking of the State High Court and the Lower Federal Court where -- so that we have the judiciary taking this very question of whether it is cruel and unusual punishment and giving it consideration and saying in our opinion and applying the constitution, we consider that it is not. So certainly they too express the standard of decency. We have talked in others situations of this conscience of the Court that is for example the test that used in the (Inaudible) raised in the Fifth Circuit. Does it check the conscience of a Court? That is what we are talking about with regard to standards. It is not something so close to the line that can be measured as 51% today and 49% tomorrow and that certainly is not the way in which our constitution used to be utilized or to be construed. Again, it is the question we think for the legislature to determine certainly in Witherspoon, the Court noted that the power of a State to execute a sentence -- sentenced to death by a jury does not be -- has no bearing in what the Court does with respect to whether the State can select who the person so long as it is done with due process. And also we would like to point out that there is in many of the cases before this Court, Allied Stores of Ohio versus Bowers to light this constitution which were in 1866 and cases since then a presumption of regularity and a presumption of constitutionality of legislative enactment and that has been overlooked I think that petitioners’ argument and position. He has the burden to show that the legislative enactment is unconstitutional and I think that he has done so, not with respect to the death penalty per se in the abstract which is what he contend should be declared unconstitutional. Thank you. Warren E. Burger: Thank you Mrs. Beasley. Mr. Amsterdam, you have three minutes left. Anthony G. Amsterdam: Thank you Mr. Chief Justice. May it please the Court. We -- on one point I essentially do not disagree with Mrs. Beasley. I think juries are in many ways the conscience of the community although I think other organs of government, prosecutors and judges are as well and our whole case rests on what juries and prosecutors and the other agencies of government have done. What they have done is to refuse to impose the death penalty. The question then arises, well, why do we not leave them that way. If they are refusing then why should Court step in. Why should not it just die of its own way? The answer to that is the case like Furman versus Georgia. Where what you have is a regular garden variety, burglary, murder. Unintended killing, somebody shot through the door, a case submitted on the theory that it was an unintended killing, there are thousands of these. The jury comes back with death, the defendant is black, the victim is white, it is all the aggravation in the case. The State which distinguishes between torture and the mere extinguishment of human life cannot see that this case is different from the aggravated cases. But the jury is allowed in every case to return a death penalty. There are Georgia figures in this record. I do not think they are judicially noticeable but they are in this record, 33 people on death row, 27 of them of black, six whites. The reasons why a juries cannot be permitted go on doing what they have done and slowly, inexorably do away with the death penalty themselves, is that an individual in particular cases there is going to be a regression and depending largely on the color of the defendant and in the ugliness of his person -- William H. Rehnquist: Mr. Amsterdam -- Anthony G. Amsterdam: And it is that kind of selectiveness which we think that the death penalty forbids. Now, I believe the lower court cases somewhat differently than Mrs. Beasley does, I would say that the real development in the Eighth Amendment area throughout this century has been very pointedly development in the prison cases which has the Court just recognized in Haines and Kerner. What has happened there is that the Eighth Amendment has been taken and given a whole new meaning to respond to a new problem and new conditions. What we have in the capital punish plenary is the exactly the same thing. And our point, I repeat again with regard to race is not or poverty is not discrimination, we have not proved it. On these records, it could not be. What I am saying is to exactly what is happening in capital punishments, the rare arbitrary, usually discriminatory but unprovably discriminatory infliction of a punishment, escapes all other kinds of constitutional control, due process, equal protection and escapes the public pressure that keep legislatures acting decently unless there is something in the constitution that degrades. William H. Rehnquist: Mr. Amsterdam, you have mentioned a couple of times and I think Mrs. Beasley also mentioned a comparison between the type of statistics that you have used in your brief and the type of statistics that the State has used and you would state in your brief and you would say that, here is -- yours are judicially noticeable whereas you feel the States are not. I could not find in your brief so perhaps I am in position unfamiliar with it anything other than just the statement to that effect, do you cover in your brief why the jurors are judicially noticeable? Anthony G. Amsterdam: No, no. We do not but I think the basis of it can be fairly simply stated. The Court -- the concept to judicial notice is essentially that when a writing is put to there in the public domain which people may rebut, which people may study and answer that if a crime is judicially noticeable because its availability for professional criticisms makes it reliable. Now, when a State takes figures out of the State Department of Correction records, that has never been printed anywhere which was (Inaudible) is un-ascertainable, whose significance is not subject to criticisms, that is not judicially noticeable. But when you have -- Warren E. Burger: I think your time is up Mr. Amsterdam.

Earl Warren: Number 343, United States versus an Article of Drug. Mr. Wallace. Lawrence G. Wallace: Mr. Chief Justice and may it please the Court. This case is here on a writ of certiorari to the United States Court of Appeals for the Sixth Circuit and it is an in rem seizure proceeding brought by the Government against an interstate shipment of five cases of antibiotic sensitivity discs bearing the trade name Bacto-Unidisk. Counsel have asked the clerk to distribute a sample of the seized article to each member of the Court. The Government's libel alleged that the shipment violated Section 502 (l) of the Federal Food, Drug, and Cosmetic Act in that the Bacto-Unidisk was a drug within the meaning of the Act was composed in part of specified antibiotics and was neither certified nor exempted from certification pursuant to Section 507 of the Act. And the amended answer by the claimant, Difco Laboratories, the manufacturer of the Bacto-Unidisk admits that the article is composed in part of the specified antibiotics and has neither been certified nor exempted from certification. The claimant's denial that the shipment violated the Act was based solely on the contention that the antibiotics certification requirements of the statute are inapplicable because the Bacto-Unidisk is not a drug within the meaning of the statute. And the only issue in this case therefore is whether sensitivity testing discs such as the Bacto-Unidisk are drugs within the definition in Section 201 (g) of the Act which appears on page 2 of our brief. This issue arises because Section 507 of the Act imposes the batch-testing certification requirement only on antibiotic drugs. And these are to find in Section 507 by reference to the general term of drug which in turn is defined for purposes of the entire Act in Section 201 (g). William O. Douglas: Where is that 507? Lawrence G. Wallace: 507 may appears on page 3 of our brief; that is the batch-testing requirement for antibiotic drugs. And in the middle of page 4, the definition of antibiotic drugs is in terms of drug and that brings into play the general definition of drug in the statute as a whole. William O. Douglas: As I see 507, it talks about batches and drugs. Lawrence G. Wallace: That refers to production batches of -- William O. Douglas: Where the certification of batches of drug. Lawrence G. Wallace: That is correct. Each production batch has to be certified by taking a sample from that production batch in testing it to see that it has the proper characteristics of identity, strength, potency, etcetera, to assure its safety and efficacy of use, and that has to be done before that production batch of an antibiotic drug can be disseminated for use. Now, the manner in which the Bacto-Unidisk and similar products are used in the course of antibiotic therapy is described in the opinion and findings of the District Court and in the printed enclosure which the claimant includes in each carton of Bacto-Unidisk and which appears in the record, and to which I shall refer later. The discs are used in a screening test which in the words of the District Court serves as a guide to a medical doctor in his determination of the choice of antibiotic to prescribe for the patient. This is accomplished by first drawing from the patient a specimen of affected body fluid which contains the infecting microorganism that is causing his illness. Typically, this specimen is then taken to the hospital or other clinical laboratory and placed upon a culture medium in a small glass dish so called Petri dish where it is incubated for a period of hours to assure that the mature colonies of the principle infecting organism can be isolated from the specimen for use in the sensitivity test. This so-called islet of the infecting microorganism is then applied upon a second culture medium in another Petri dish and the dry paper sensitivity discs, each of which has been impregnated with a certain quantity of a particular antibiotic are placed upon the surface of this freshly inoculated culture. During the ensuing incubation period of 6 to 18 hours, the antibiotics disseminate outward forming circular zones around each of the small impregnated discs. Speaker: Can this be brought back by -- (Inaudible) Lawrence G. Wallace: I don't know the answer to that. They cannot be bought until after they have been certified. They cannot be marketed to anyone. And as a practical matter, they're used only in clinical laboratories. Speaker: (Inaudible) Lawrence G. Wallace: Well, that is correct. That's the way the Act is presently -- Speaker: That's the argument (Inaudible) Lawrence G. Wallace: Well, of course to my knowledge, they are not now being disseminated and this would be a prescription drug if our position is correct that they are drug within the meaning of the Act. Of course, if they are not a drug, that would make a difference in answering that question. Potter Stewart: They are manufacturing and sold for use by clinical laboratories not by -- Lawrence G. Wallace: That is correct. Potter Stewart: -- individual people? Lawrence G. Wallace: They are not intended -- Potter Stewart: And that's what the law is, that's what the product is, isn't that correct? Lawrence G. Wallace: The product is intended for this testing use in laboratories and not to be ingested by individuals in anyway. Now, as I say in the test, the antibiotics disseminate outward forming circular zones around each of these small impregnated discs and then if the infecting organism is sensitive to the antibiotic on a particular disc, its growth will be inhibited in the zone around back disc, leaving a clear circle, a so called “zone of inhibition” on the medium in the dish surrounding that particular discs. But in the zones around the discs containing an antibiotic to which the microorganism is resistant, the islet will grow leaving little are no clear area. From the presence or absence of these zones of inhibition around the various discs, the microbiologist advices the physician which of the antibiotics appear to be effective and which appear to be ineffective against the infecting microorganism. This report is then used by the physician as a guide in selecting an antibiotic for treatment of his patient's infection. And these discs are quite widely used; this record shows there is testimony that the volume of discs sensitivity testings is approximately 5,000 per month in one Chicago hospital. It is -- William O. Douglas: Antibiotics, in the -- Lawrence G. Wallace: They are impregnated on each of the small circular discs. William O. Douglas: Not by the doctor, but in the -- Lawrence G. Wallace: In the manufacture's laboratories and the manufacture of them. The discs as you have it has already impregnated with the various antibiotics labeled around the edge and with the one sulfur. William O. Douglas: Are those antibiotics that are produced by the manufacturer, are they subject to the testing in the batches of drugs in 507? Lawrence G. Wallace: Not unless the discs are drugs and the use in the discs is the use as a drug. Otherwise, there would be no batch-testing whatsoever if these antibiotics required under the statute. Unless, they happen to commingled with antibiotic powders that are going to be disseminated for use directly on patients in which case, they would've been tested that in that form. But the batch-testing requirement does require testing of each form of the antibiotic as it's prepared for use because of the peculiar scientific problems of change in the antibiotic from one form to another. It is clear then that these discs contain antibiotic substances which in the words of the statute are chemical substances which are produced by a microorganism and which have the capacity to inhibit or destroy other microorganisms. And it is equally clear that the use of the sensitivity discs in medical practice is dependent upon the purported capacity of the antibiotics impregnated on the discs to function as antibiotics to actually inhibit or destroy the growth of microorganisms. In this respect, the discs differ from medical books or the Petri dishes in the laboratory or other articles that may also be used as a guide to therapy. Now, for more than 20 years, Congress has recognized in Section 507 of the Act and in its successive amendments that because of the peculiar scientific properties of these biologically produced antibiotic drugs, special quality control of procedures must be required to assure their scientific reliability or in the words of the statute to ensure their safety and efficacy of use. Section 507 therefore, requires that before it is disseminated each production batch of antibiotic drugs must be tested and certified pursuant to regulations promulgated by the Secretary of Health, Education, and Welfare to assure that the drugs have such characteristics of identity, strength, quality and purity as to ensure their safety and efficacy of use. At first, antibiotics intended only for laboratory use in sensitivity testing were exempted by regulation from the batch-testing requirement.And that exemption applied to commercial sensitivity discs such as the Bacto-Unidisk which came in to use in the 1950's as the number of antibiotics began to proliferate. The exemption of sensitivity discs from the certification requirement was terminated in a rule making proceeding in 1960 in which regulations were adopted to require their batch certification. This is discussed in our brief. The order adopting the regulations recited that following numerous complaints by the medical profession, hospitals, and laboratory technicians, the Food and Drug Administration made an extensive survey of the condition surrounding the production and marketing of discs and found them unreliable in their statements of potency with resulted impairment of their safety and efficacy. It was therefore deem in the words of the order vital for the protection of the public health to adopt the regulations requiring their batch certification. The question in this case then is whether the Secretary correctly interpreted statute as authorizing the application of the batch-testing requirement to antibiotic sensitivity discs which brings us back to the interplay of definitions in the statute. The District Court was of the view that a literal reading of the Act's definition of drug on page 2 of our brief and particularly the language in subpart (B) of the definition, articles intended for use in the diagnosis cure mitigation treatment or prevention of disease. The District Court was of the view that this language clearly has application to the sensitivity discs. But despite this and despite the fact that drugs are contained in the article again in the words of the District Court, the District Court decided that the Act should not be interpreted as including sensitivity discs as drugs because no part of this article is administered to man or other animals either internally or externally, and its sole function is to provide medical doctors with information for use by them as guidelines. The Court of Appeals affirmed the holding that sensitivity discs are not drugs within the meaning of the statute expressing the view that the discs only aid to physician to determine what antibiotics to use for the cure mitigation or treatment of the patient's disease and in the words of the court that it was not the legislative intent to apply the phrase intended for use in the cure, mitigation, treatment, etcetera, in such an indirect manner. Neither court cited any legislative history in support of its interpretation of the statutory definitions. We believe first that it is clear on this record and in the District Court's findings that batch-testing of antibiotics sensitivity discs serves the congressional purpose expressed in Section 507 of assuring the safety and efficacy of antibiotic therapy. The role of the discs in therapy is adequately described in the claimant's own printed enclosure package in the cartons of that to Bacto-Unidisks which is reproduced in our appendix on page 182. We can look at the first paragraph there. It says that Bacto sensitivity discs and Bacto-Unidisk, only the latter are involved here, are standardized to paper discs containing known amounts of the more commonly employed antibiotics, etcetera. They are recommended as a rapid practical clinically accurate and inexpensive means of determining the relative sensitivity of microorganisms to these therapeutic agents. Bacto sensitivity discs are especially valuable in selecting the drug effective against chronic or persistent infections, refract to age of primary therapy. The testimony in the case explained that the test is medically important because there are various strains of the same general group or type of infecting organisms such as Staphylococcus, and there are differences among these strains in their sensitivities and resistances to various antibiotics. The claimant argues that it is somehow significant that treatment with an antibiotic frequently as began before the results of the test are known, but that does not disprove that the discs play an important role in antibiotic therapy. The testimony unequivocally shows consistently with the claimant's printed representations that as a result of the test with the discs, the treatment is sometimes switched from one antibiotic to another, and this is particularly true in the critical situations in which a patient is not responding to the primary therapy. We've collected those references on page 23 of our brief. In other factual consideration that it is important to this point in my argument also is indicated in the claimant's printed enclosure in the Bacto-Unidisk this time on page 185 of the appendix. The little chart in the middle of that page shows that a difference in the concentration or potency of the antibiotic on the disc can make a difference as to whether a zone of inhibition will appear at all in the test and not merely a difference in the size of the zone. Because of this, discrepancies in discs potencies can cause misleading test results and lead the physician to proscribe the wrong antibiotic for this patient. This was explained at the trial in the testimony of Dr. Joseph Turin, Chief of the Bacteriology section of the laboratory in Henry Ford Hospital in Detroit on page 83 of your printed appendix. After complaining of the discrepancy, his hospital had found in discs prior to the certification requirement, Dr. Turin explained in the last two paragraphs on page 83, there's a possibility of having too low of potency in that discs, too low of concentration in which case the organism would tend to be reported out as being a resistant one or being more resistant than if the true potency were in the discs. And on the other hand, you might have too high of potency which means that you would report a sensitive organism which in fact might not be in that very sensitive category. So, it might be an error in either direction which would give us false readings and we would be giving misinformation to the clinician and he in turn obviously being unaware of this situation as we would be would not treat the patient properly. Therefore, we feel that we can't take this chance of using discs that are not certified. It to us is a real hazard. Additional testimony to the same effect to summarize on page 27 of our brief, the point is that the whole legislative purpose reflected in the batch-testing requirement of Section 507 and brought out in the legislative history reviewed in our brief. The purpose of trying to assure that patients will get the therapeutic benefit intended when physicians prescribe antibiotic drugs for them can be defeated regardless of how pure and potent the pills capsules or injections administered to the patients maybe if because of faulty discs, the wrong antibiotics are administered to. We believe that a proper respect for the congressional judgment requires that the issue of interpreting the statutory definitions in this case be approached with this background in mind. When this consideration is combined with the general principle that the Food, Drug and Cosmetic Act is broadly construed in according to its purpose to protect the public health, we think it is clear first that the use of the discs shown in this record is a used in the treatment of disease within the meaning of the statutory definition of drug. The claimant argues that the use of the discs in the course of the patient's treatment is too indirect to use to be considered a use in the treatment of disease within the statutory definition. But this would mean that the discs are neither drugs nor devices within the meaning of the Act since the definition of device used as precisely the same statutory language. And since the Act's protections against adulteration or misbranding apply only to drugs and devices, the result would be that the public would be utterly unprotected against any kind of mislabeling or adulteration of the discs. There would be no statutory recourse for example, even if the discs were being marketed with every antibiotic on them falsely labeled. Nothing in the statutory language or in the legislative history requires a session absurd result which would so seriously endanger the public health. The more substantial interpretive question presented by this case in our view is the problem of distinguishing the statutory definitions of drug and device on pages 2 and 3 of our brief. Their terms insofar as pertinent here are almost identical and yet the two definitions are expressly mutually exclusive. The District Court recognized this problem and undertook to solve it by limiting the statutory term drug to what it believe to be the common medical usage of the word drug outside the statute as articles administer to man or other animals either internally or externally. We believe that this is where the District Court went wrong because this is inadequate as an approach to the interpretation of this complex technical regulatory scheme for the protection of the public health in which the Congress has provided its own definition of the term drug for the purposes of the Act. It is a statutory term of art to be interpreted in a manner to effectuate the objectives of the statute. In our view, Securities and Exchange Commission against Ralston Purina Company in volume 346 U.S. is the exemplary opinion of this Court which illuminates the proper approach to interpreting such a provision of a regulatory statute, so as to accomplish the congressional purpose. There, in interpreting the statutory exemptions from registration for a private offering of stock, this Court held that because it was the congressional purpose to exempt transactions as to which there was no practical need for the statute's application, the interpretation of the exemption should turn on whether the particular class of person's affected needs the protection of the Act. Applying this standard, the Court held that the company's offering of treasury stock to its key employees was a public offering subject to the provisions of the security's Act because in the words of the court, the employees had not been shown to be able to defend for themselves. The same basic approach was recently taken by the Court of Appeals for the Second Circuit in distinguishing between the definitions of drug and device in the statute before us. In the case of AMP Incorporated against Gardner which is cited in our brief and in which this Court denied certiorari in number 86, this term. The Court there look to the practical consequences in terms of the Act's differences in the requirements imposed upon drugs and devices to determine whether the particular article there at issue should be classified as one or the other. And the practical consequences of that difference in classification are restricted to a very few provisions of the statute. In fact, at the beginning when the definition's first came into the statute, there was no difference in the regulation of drugs and devices at all. In our own case, the only significance of the classification of the discs as either drugs or devices as if they are classified as drugs, the batch-testing requirements for antibiotic drugs will apply. And otherwise, they will not. The scientific qualities of antibiotics which led Congress to require batch-testing are the same whether the antibiotic is used for a pill for a hypodermic injection or is a test to determine what pill or injection to administer. And as I have said, the record shows that the medical need for assurances to quality and potency exist whether the antibiotic is used on a disc or in a pill or injection. And it is therefore manifest that the Secretary correctly interpreted the Act to reflect the legislative purpose in concluding that the discs are drugs under Section 201 (g) subject to the batch-testing requirements of Section 507. And accordingly, we ask that the contrary judgment of the Court of Appeals be reversed. If I may, I'll save any remaining time for rebuttal. Earl Warren: Mr. Williams. Edward Brown Williams: Mr. Chief Justice, may it please the Court. The chief effort of the Government in its brief in this matter and in its argument has been to create the impression that all or most antibiotic therapy in the United States is based on the sensitivity disc test of which we are talking here today, and that unless this procedure, this testing procedure is controlled by the Government through certification of these discs that the public health will be endangered, patient's lives will be in jeopardy. I should come back to that, we shall show you can establish very simply that on the basis of the literature cited by the Government itself and on the basis of the testimony at the trial and the judge's findings in the District Court that these efforts of the Government simply do not hold water. They won't stand up. Earl Warren: What do you mean if there is no danger? Edward Brown Williams: I mean that there is no danger and I mean that the extent of antibiotic of the basing of antibiotic therapy upon the disc test is far more limited than the Government would have us believe. In fact, I might say right here since the question has arisen that in our brief, page 18, we refer to the figures of the medical market guide which show that in 1967, 77% of the antibiotic sold in that year were purchased on prescription or on, or by a physicians. Now, it is obvious that only about 23% went to hospitals, which is the Government concedes are the place where these tests are made in the hospital laboratories. As Dr. Keefer, a witness at the trial said, “I would say from the total number of infections that doctor see and treat, the sensitivity test is not used.” It is not used for routine. There's a good reason; that is that the initial therapy with a wide- spectrum antibiotic which the doctor starts before the test is ever began, it takes 24 to 36 hours for the test, is ordinarily successful because of the doctor's experience and the information he is able to draw from other sources. It is after the fact that he looks at the test and as Dr. Keefer stated and the Court found, the test is used to confirm his judgment. Now, I should like to make a few remarks if I may about some of the statements made by my friend here. There was a trial in the District Court which lasted I believe three days. There were a quite a number of distinguished witnesses. They knew what they were talking about at least most of them did. The findings were made. They've been almost ignored by the Government in this case. They are not clearly erroneous. There's no question about that and there's been no contention as the equivocally arise. Byron R. White: They have to be? Edward Brown Williams: I think they have to be in order to be reversed. I think that's clear from your decisions. Byron R. White: All the findings with consist of -- Edward Brown Williams: I'm talking about the finding, yes sir. Byron R. White: These all factual? Edward Brown Williams: No sir, it is not all the factual question. Now, on the question of the application of Section 507, the batch-testing provision of the Act, this doesn't look like the sort of things which lends itself to description as a part of a batch. To me, -- Earl Warren: As a part of what? Edward Brown Williams: A part of a batch which is to be tested by the Government, the term “batch” to me Mr. Chief Justice set and it mean something with some homogenetic to it, and here we have a whole different, an entirely different sort of an article. Here are eight different antibiotic substances on this article. Thurgood Marshall: The Government said each of those eight came from a “batch” envelop? Edward Brown Williams: Yes sir, they came from a batch which was manufactured by a company which manufactures antibiotics which are tested by the Government on Section 507. They have been check-tested I doubt not because I can't conceive of a company who manufactures antibiotics and sells them for medicines, manufacturing separate antibiotics for use on these discs; that just wouldn't be good business. Potter Stewart: But if the only market for the manufacturer of the antibiotics were the maker of this Unidisk, then as I understand that 507 would not require batch-testing? Edward Brown Williams: If the only market was -- Potter Stewart: That's a complicated question, and perhaps I haven't thought. If -- I understand that the maker of this product here in issue is not the manufacturer of these various antibiotics but gets them from somewhere else. Edward Brown Williams: That is correct. Potter Stewart: From another manufacturer. Now, if this for the only customer of that manufacturer, then there would be no batch-testing required of that manufacturer under 507, is that right? Edward Brown Williams: Well, the Government -- Potter Stewart: The manufacturer of antibiotics, it sells only to the makers of discs. Edward Brown Williams: The Government said it would require it because they consider this a drug, and since the antibiotic -- Potter Stewart: Well, no, no, as I understand, if they consider this a drug? Edward Brown Williams: Yes sir, but they also would consider the antibiotic going into it a drug because it would be a component of the drug under the statute. That would be the Government's attitude as I understand it. But they can speak for themselves only. Sir? Hugo L. Black: I wonder if you answer him now. Potter Stewart: Well, I think your answer make accepts you start it to say that you answer to another question, whether or not these had already been batch-tested before they were sold to the maker of the Unidisk and you said, well, you thought maybe or maybe not because probably a manufacturer would not differentiated his various antibiotics depending upon to whom he was going to sell them. Edward Brown Williams: I can't conceive that he would. Potter Stewart: Well, what -- Edward Brown Williams: I think they are check-tested by the Food and Drug Administration. Hugo L. Black: Can you tell me precisely what this thing does? Edward Brown Williams: I can try Your Honor. There are in the sensitivity testing procedure which is entirely -- Hugo L. Black: Sensitivity to a drug? Edward Brown Williams: Yes sir. In this testing procedure, which is entirely a laboratory operation never comes anywhere near the patient. There are involved, this device here which is called the sensitivity disc both has an antibiotic substances on it. A Petri plate upon which is deposited agar which is strict with an islet from the patient. On top of the agar, with the islet in it is placed this discs -- Hugo L. Black: What? Edward Brown Williams: This is placed to this disc. Around the disc, if the antibiotic is sensitive to -- if the organism from the patient is sensitive to the particular antibiotic in contact with it, there will be a zone of inhibition. If it is not sensitive to it, there will no zone of inhibition. Hugo L. Black: Can you put over divide it? Edward Brown Williams: Sir? Hugo L. Black: Why do you say this is put? Edward Brown Williams: It's put on an agar plate, glass or china plate in the laboratory. Hugo L. Black: Well, what does it contact with reference to the human being? Edward Brown Williams: It doesn't. The only thing it contacts is an islet which is taken from shall we say “urine” or sputum -- Hugo L. Black: Let's take it from the -- Edward Brown Williams: -- of the human being; that is correct. That is correct. Hugo L. Black: Now, -- William J. Brennan, Jr.: Well, in layman's terms. You take in some excretion from the body? Edward Brown Williams: Yes. William J. Brennan, Jr.: Apparently, it has some kind of infection in it. The infection takes what a bacterial form or something like that, does it? If an antibiotic is used this treatment, it will effect only bacteria, yes sir. William J. Brennan, Jr.: Right, and so, they take the fluid whatever it is; they put it in the dish? Edward Brown Williams: That is correct. William J. Brennan, Jr.: Whatever you call a dish, they isolate from it whatever the particular infection in it? Edward Brown Williams: The first step is the isolation, -- William J. Brennan, Jr.: Isolation? Edward Brown Williams: -- I think some 18 hours. William J. Brennan, Jr.: And then you put this thing in the dish itself don't you this disc? Edward Brown Williams: You strict the agar on the plate of dish -- with the islet. William J. Brennan, Jr.: Don't strict me, will you? They take this thing don't they and they put it in some kind of a dish, is that right? Edward Brown Williams: I'm not sure we have never order that. William J. Brennan, Jr.: That's what I want to get straight. Edward Brown Williams: The agar goes on the disc, they isolate from the patient goes on the agar -- I mean, on the dish. They isolate from the patient goes on the agar and the disc -- William J. Brennan, Jr.: What's the agar? Edward Brown Williams: It's a growing medium, to grow -- William J. Brennan, Jr.: I see. Edward Brown Williams: -- the bacteria -- William J. Brennan, Jr.: Right. Edward Brown Williams: -- in the isolate. William J. Brennan, Jr.: Right. Now, then these little pegs on this thing are already impregnated with various kinds of antibiotics, is that right? Edward Brown Williams: Yes. William J. Brennan, Jr.: And then there is some kind of attraction to the particular antibiotic which would be effective against this particular infection whatever it maybe, is that it? Edward Brown Williams: If the infection or the infectious strain -- William J. Brennan, Jr.: Yes. Edward Brown Williams: -- is sensitive to the antibiotic, -- William J. Brennan, Jr.: Right. Edward Brown Williams: -- there will be -- William J. Brennan, Jr.: Sensitive, meaning that the antibiotic might clear it up? Edward Brown Williams: Might clear it up. William J. Brennan, Jr.: Right. Edward Brown Williams: You don't know that it would because this is an in vitro-test and was transferred to the body it may act and how to do it. William J. Brennan, Jr.: But nevertheless, this is then the tell whom of the laboratory technician or the doctor? Look this is the kind of antibiotic it would appear might be effective against this infection in this patient's body, is that right? Edward Brown Williams: That is what the laboratory technician may tell the doctor. He may say that since there a showing of sensitivity In Vitro that you might try this because it maybe effective In Vivo. William J. Brennan, Jr.: Right, and it may or may not work? Edward Brown Williams: It may or may not. William J. Brennan, Jr.: But the point is this disc is out of a case after it has performed that function? Edward Brown Williams: That is correct. William J. Brennan, Jr.: All right, and as I understand it from what at least what Mr. Wallace suggested to us; the antibiotics used to impregnate these little things on this disc are not taken from batches which have been certified, is that right? Edward Brown Williams: Well, I would assume that they are from batches which have been tested by the Food and Drug Administration. William J. Brennan, Jr.: Well, I thought Mr. Wallace told us that's one of the problems here. Edward Brown Williams: He did say that. William J. Brennan, Jr.: Yes, but what's the record -- Edward Brown Williams: I would assume differently. William J. Brennan, Jr.: Well, what's the record show? Edward Brown Williams: There's nothing in the record on that Your Honor. Byron R. White: Well, what is Government want to test the antibiotics? Edward Brown Williams: They want to test this disc. Byron R. White: So they want to -- they don't want just to test the batches of antibiotics that are used to impregnate this disc. They want to take the completed discs and test them? Edward Brown Williams: That is correct, yes sir. William J. Brennan, Jr.: And that I take it with the idea, I think that's what Mr. Wallace said that except as whatever is that impregnate these discs have gone through the certification procedures. You can't be sure that the role that this disc is supposed to perform can be properly performed. Edward Brown Williams: That is the position. William J. Brennan, Jr.: And at that then, may have a deleterious effect in consequence upon the patient who maybe treated by a result which because it's not been impregnated were certified batches might come up with the wrong answer or no answer. Edward Brown Williams: That is the position of the Government. Byron R. White: But do they claimed that there's something else that needs testing besides the antibiotics that are used to impregnated these discs? Edward Brown Williams: They claim -- Byron R. White: There's something else about disc -- Edward Brown Williams: -- should be tested. Byron R. White: I know but is there something that happens to the antibiotics because of contact with the disc which means that the discs themselves be impregnated this have to be tested? Edward Brown Williams: The Government I think they should be tested -- Byron R. White: Or would they to be satisfied with having with testing the antibiotics used to impregnate the disc? Edward Brown Williams: The Government thinks they should be -- the discs themselves should be tested because they have found that the public health in their mind will be endangered if they are not tested. We have seen no evidence whatsoever of it and let me point this out now. In six years since this litigation began in 1962 I believe or 61', nobody has come up with the single instances of an erroneous result from a test due to a faulty disc, and in the 12 years -- Byron R. White: Have they been in circulation? Edward Brown Williams: Sir? Byron R. White: Have they been in circulation? Edward Brown Williams: Yes sir. Byron R. White: Ever since the litigation -- Edward Brown Williams: Oh! Other discs which are being certified of the disc. Byron R. White: That's a different question. Edward Brown Williams: That -- I know but I'm going to -- if you permit me sir. In the 12 years pervious to certification, in those years, nobody came up with a single case of an erroneous interpretation of a sensitivity test due to a faulty disc. Now, Dr. Turin as my friend said at the hearing -- at the trial, stated the he felt there was a danger to public health involved. He said that two or three times, he was asked on cross-examination if he had one single instance to which he could point to show that the public health was involved here. He could not point to any. Byron R. White: Well, we suppose to second guess the agency on this kind of a judgment -- Edward Brown Williams: Sir, it is not -- Byron R. White: -- public health is in danger or not now, do you really suggest that we -- Edward Brown Williams: Well, Mr. Justice, they have made no -- this is not a finding made by the agency which is binding on the courts. I'm not asking any second guessing. I'm asking that the evidence be look at. It shows that there is no such public health problem. And furthermore, the law is such that there is no basis in my opinion for a holding this article to be anything other than a drug. Unless, possibly, it were regarded as a device because the definition involved reads in terms of treatment of substances intended for use in the treatment or diagnosis of diseases. Now, it's quite obvious that treatment means treatment of a patient and nobody can maintain that with the -- Byron R. White: Well, what about diagnosis Mr. Williams? Edward Brown Williams: Well, diagnosis was practically abandoned by the Government in the lower court as a ground for its position. They come back to it in the upper court, but Dr. Keefer made it quite clear and he was perhaps I should say the most distinguished witness at the trial, he made it quite clear that it cannot be a diagnosis of an infection without identification of the organism. And obvious to the test does not identify the organism. Byron R. White: Did the agency make any -- as the agency at any time made any findings with respect to why this disc qualified either under the treatment or the diagnosis? Edward Brown Williams: They made a legal conclusion in the proceeding which is been referred to when the -- in the course of which the regulations were adopted. They made a legal conclusion that the disc where drugs. Byron R. White: They didn't say whether it was because of the treatment or diagnosis? Edward Brown Williams: I don't recall that they did. William O. Douglas: Did they pass at all -- Edward Brown Williams: But they have built in terms of diagnosis, excuse me sir. William O. Douglas: Did they pass it all of whether or not the device was -- the disc was a device? Edward Brown Williams: So far as I know, that was not considered by the agency, it didn't appear in the public proceeding. William O. Douglas: There's been no ruling on that? Edward Brown Williams: No sir as far as I know. Byron R. White: I think the Government though all that concedes that the disc is also covered by the definition of device? William O. Douglas: The Government doesn't even mentioned device as I read this brief. Edward Brown Williams: Well, I think the Government's point was that the language of the device section and 201 (h) of its statute and the language of the disc of the drug Section 201 (g) of the statute are quite similar except in that 201 (g) excludes devices from a definition of drug. Hugo L. Black: Is subsiding being the drug? Edward Brown Williams: Yes sir. Hugo L. Black: Antibiotic could go? Edward Brown Williams: Yes sir. William O. Douglas: Well, in its advice you wouldn't have batch-testing if it was a device? Edward Brown Williams: No, you would not have batch-testing but you could have control as we point out -- William O. Douglas: Different kind? Edward Brown Williams: -- in our brief of a different kind. William O. Douglas: Misbranding or -- Edward Brown Williams: Yes. William O. Douglas: -- possibly? Edward Brown Williams: Yes sir. We have pointed out in our brief that control -- William O. Douglas: There is no -- that issue of device is not here, I don't find it in the Government's contentions or have I misread the brief? Edward Brown Williams: It isn't before the Court in my opinion sir. William O. Douglas: Court below didn't pass on it. Edward Brown Williams: The court below said that if there was anything, it was probably a device because the only difference between a device and a drug is that a device is an apparatus or an instrument or a contragulants. William O. Douglas: But the agency didn't rule that it was or was not a device? Edward Brown Williams: No, they rule it was a drug thereby excluding it from the definition of device. Abe Fortas: Mr. Williams, suppose these discs were made so that it was to be applied to the human body or therapeutic purposes exactly the same disc not to be applied to the human body or therapeutic purposes, were that be any doubt that it was a drug? Edward Brown Williams: No sir, there would be no doubt it was drug. Abe Fortas: Suppose, it were to be applied to the human body or diagnostic purposes, that is to say for the purpose let us say of finding out what sort of microorganism is causing the difficulty, is there any doubt that that would be a drug? Edward Brown Williams: If it were applied to the human body for diagnostic purposes? No sir. Abe Fortas: So that the question here comes down to this as I understand it. This disc is applied not to the human body, but it's applied to a smear taken from the agar plate from a substance derived from the human body and it's done in the laboratory and the question is, does that distinction remove it from the category of a drug? Edward Brown Williams: Yes sir, but I should like to stress Mr. Justice that treatment of a patient is the test of whether this is used in treatment and this there is no treatment of a patient by this device. Secondly, it cannot be use in diagnosis because it does not identify the organism. That is perfectly clear. You can't diagnose unless you know what the organism is. Abe Fortas: Well, in a sense it is viewed -- Edward Brown Williams: Diagnosis is recognition of disease. Abe Fortas: Yes. I'm sorry. In a sense it is used in treatment in the sense that it is used for purpose of determining the antibiotic to be used in treatment. And in that sense, I suppose it's arguable in a way that it is used in treatment eventhough its one step removed. Edward Brown Williams: It is used very in a sense and to determine the antibiotic used in treatment on the certain circumstances. Abe Fortas: May I ask you this sir if you happen to know the various substances, spanes and what not that are used in the laboratory for the purpose of -- for diagnostic purposes to determine what the microorganism is or what not. Are those classified as drugs? Edward Brown Williams: No sir. There are several hundred, maybe thousands of laboratory tools of this nature which are used in the industry and in clinical laboratories which have never been classified as drugs. And if this is classified as a drug, I can see no alternative to classifying all of these other hundreds or thousands of articles -- Abe Fortas: I suppose however, how about something like this if there is such thing. Let us suppose that in the laboratory, there is used for purposes of application to human tissue. Let's say a tuberculin batch or what not. Would that be classified as a drug? But I'm saying I'm sure that if there were injected into the person in the treatment of one form of tuberculosis or another, it would be classified as a drug. Does the fact that the substance is used solely in the laboratory remove it from that classification? Edward Brown Williams: I believe so under the statute Mr. Justice Fortas. Abe Fortas: You don't know of any case is? I do not happen to know of the case, but the line to be drawn here is whether or not it's used in the treatment or diagnosis of the disease. And further, -- Hugo L. Black: Mr. Williams, I asked you a few moments ago if antibiotic is a drugs, you said yes. Edward Brown Williams: Yes sir. Hugo L. Black: You said sulfur diagi drug. As I understand it, antibiotics would only need one of these (Inaudible) and sulfur diagi, why aren't they drugs when they put on them as the same as they haven't been put on them? Edward Brown Williams: I'll tell you why sir. They are not drugs because under the statutes, it is well establish, there's no doubt whatsoever that an article is not a drug unless it is intended for use in the treatment or diagnosis or prevention or cure of disease. Hugo L. Black: Well, that drug is, isn't it? Edward Brown Williams: This is not. Hugo L. Black: What? Edward Brown Williams: No. Hugo L. Black: I'm talking about this disc come from what the drug is going to put on. Edward Brown Williams: Well, this drug could -- if this drug will use to wash a window, it certainly wouldn't be -- Hugo L. Black: Its still be a drug, wouldn't it? Edward Brown Williams: No sir, not under the statute. Hugo L. Black: Is it drug? Edward Brown Williams: Not under the statute. It might be a drug in some sense, but not under the statute.. Hugo L. Black: Well, did it used in diagnostic, diagnostic purposes? Edward Brown Williams: No sir, it is not because it does not identify the organism and without identification of the organism, there cannot be diagnosis. Hugo L. Black: Do you know how much theory that when you do this, it does not give you a correct answer and you may give a man this drug on the false assumption that he does not sensitive to it. Edward Brown Williams: That is their contention and I obviously don't have time to go into my argument, but it is quite clear from the literature and from the trial that there are so many built-in protections against the sort of thing the Government apparently feared that this is simply not going to occur. The physician does not rely principally upon this test even if his initial therapy has not been successful. A physician's lye's is principle -- sir? Hugo L. Black: Whether it's a little or much, I would not go to around it at all what they say is case. Edward Brown Williams: But what they say does -- Hugo L. Black: Was involved here. Edward Brown Williams: In my opinion, it isn't the case. And I think -- Earl Warren: It was the opinion of Dr. Turin, wasn't it? Edward Brown Williams: Yes and I asked Dr. Turin for some kind of specifics on that point. He could give me none. Earl Warren: Well, do we or should we wait until they know someone who has died from the use of this before? Edward Brown Williams: After 16 years Mr. Chief Justice, you would -- Earl Warren: -- file a judgment for the Government? Edward Brown Williams: After 16 years Mr. Chief Justice I should think that something would've occurred if that were going to. Earl Warren: Well, maybe you would think so, but the Government through its research might think differently and should we hazard to help for the public by saying this isn't necessary? Edward Brown Williams: The Government through its research has come up with nothing.That's demonstrated in our brief. It was demonstrated at the trial, and it will appear from the literature cited by the Government itself. Byron R. White: Do you say that this disc is not a device either? Edward Brown Williams: I say that if it is anything, it's a device. Byron R. White: Under the -- (Voice Overlap) does it have to be one or the other either a drug or a device? Edward Brown Williams: No sir. Byron R. White: But do you say it's neither or do you say its -- Edward Brown Williams: I say it's very realistically under the statute, is neither. But if it's anything, it comes more than here that being an apparatus or an instrument than it does to be -- Byron R. White: What to be a device under the statute, it has to be used for the diagnosis or treatment of a disease just like the drug. Edward Brown Williams: That is correct. And if it were used for that, then it would be more likely to be a device. Byron R. White: But you said if used for that sort, it can't be either? Edward Brown Williams: That's my position, yes sir. I would like to conclude by saying that the literature cited by the Government which is the all the record entirely was never even mentioned at the trial, shows clearly that if a laboratory as all good laboratories do sets up the proper standards of zone sizes for the various antibiotics that that laboratory and any other which does that will have no problem with the zone sizes is which seem to trouble the Government so. That is very clear from many of the articles cited by the Government itself. That is true regardless of whether there are certification and it might be added that even under the Government's certification regulations, the claim potency, that is the potency claim on the label of the disc may vary from 67% to 150% in the device itself or the sensitivity disc itself. In other words, you can be from 67% to 150% off and still get these discs certified. In fact, as between the lowest and the highest disc being tested by the Government, you can go as far as 250% off. Now, that kind of system is hardly conducive to the kind of outlaying a fear which the Government wants you. I see my time is up. Earl Warren: Very well, you have a minute or two Mr. Wallace. Lawrence G. Wallace: Thank you. I want to clarify that our position is that under the statute, it would be entirely for to or this if this disc is not a drug whether or not the powders put on the disc were batch-tested. The statute would not require that they be batch-tested. But our position goes beyond that we say that regardless of whether those powders were batch-tested, the disc itself needs to be batch-tested to assure that the proper potency and the proper amount of the powder is impregnated. William J. Brennan, Jr.: (Inaudible) Lawrence G. Wallace: I don't believe I said in fact, but we have to assure that the proper amount is on each of these discs and that it will defuse properly for the test and that the labeling is correct on the disc that would not be accomplished by batch-testing of the powders themselves. William J. Brennan, Jr.: I gather that the Government does not claim that whatever it was use to impregnate was not batch-tested, indeed they may well hold. Lawrence G. Wallace: That maybe. William J. Brennan, Jr.: But that the Government feels nevertheless these should be given other test, is that right? Lawrence G. Wallace: The discs themselves are drugs subject to the batch-testing requirement; that is correct. The paper and which these antibiotics are contained is merely there. The container -- the paper placed no part in the test. It's just a convenient way of getting these antibiotics into the culture that has been drawn from the patient. And I think it should be properly look at that way. We believe that it is correct to interpret this statute functionally so as to afford the public the protections of the statute that are scientifically pertinent to the characteristics of the article at issue and to the medical use for which it is intended. Dr. Turin himself while he could not recall specific example did recall that a number of instances of false result have been brought to his attention by individuals in the Infectious Disease Department. But in addition, there was no challenge made to the record that was developed in the rule making proceedings and which the Food and Drug Administration determined on the basis of complaints from laboratories that the discs had proved unreliable and that there was a medical scientific need for their batch-testing. Thank you. Earl Warren: Very well.

Warren E. Burger: We will hear arguments next in Energy Reserves Group against Kansas Power and Light. Mr. Davis, I think you may proceed whenever you're ready. Gary W. Davis: Thank you, Mr. Chief Justice, and if the Court please: The central issue in this case is whether or not a Kansas statute known by its framers as the Kansas Natural Gas Price Protection Act, is in violation of the contract clause of the United States Constitution. There is no argument in this case that this particular Kansas statute does impair two natural gas purchase and sales contracts between Energy Reserves and Kansas Power and Light Company. There is also no question that this impairment occurs from five to six years, and not only does it incur... not only does it prevent Energy Reserves from receiving a substantial portion of the consideration that they would have received, it also prevents it from receiving its contracted right of termination if it could not receive the money that it was supposed to receive under the contract. Kansas Power and Light Company's answer to this impairment is that it violates... that it is within the reserve police power of the State of Kansas. Underk the decisions of this Court in Home Building and Loan Association v. Blaisdell, United States Trust v. the State of New Jersey, Allied Structural Steel v. Spannaus, this Court set forth certain tests of reasonableness, and also that the statute must be of a character justifying the use of the police power. The points that I want to make are four, and these are that in the first place, these contracts would not have been entered into without these pricing provisions that have been impaired. Secondarily, I want to point out that the impairment to ERG, Energy Reserves, is severe. Thirdly, I'd like to point out that this statute has an extremely narrow focus, is very limited in its application. And the fourth point that I want to make is that this statute serves no broad societal benefit, and in fact, does not solve any emergency or any supposed emergency that it is supposed to solve. The facts in this case are that in September of 1975, after months of negotiations, the parties finally agreed to the terms of these two contracts that are involved. These are what you call long term natural gas contracts. One is for the life of the gas field and the other is for the life of a gas processing plant. They have a duration of 20 to 30 years. The two pricing provisions that are involved, the first one is one that says that in the event that there is a price prescribed for the gas involved that is higher than the price that is being paid under this contract by any governmental authority, then that new price as prescribed by government would be the new price under the contract. The second pricing provision that's involved here is what is known as a pricing redetermination provision. It's in the... and what this does, it's every two years, Energy Reserves is entitled to come to KP&L and say that we want our price redetermined. We want it redetermined on the basis of what is being paid for other gas in the State of Kansas under like contracts. It's a pricing provision that is designed to, during the long term of these contracts, to assure Energy Reserves that it is always receiving a price that is akin to the market price. Sandra Day O'Connor: Mr. Davis, may I ask you whether the prices under the contract here had increased under that second clause before the Kansas legislature passed the act here? Gary W. Davis: Yes, Justice O'Connor it did. The price increased at the first opportunity in 1977, and it increased from $1.52 a million Btu to $1.77 a million Btu. Sandra Day O'Connor: Mm-hmm. And that was when? Gary W. Davis: In 1977. Sandra Day O'Connor: Does the act retroactively apply, the Kansas act, to-- Gary W. Davis: It definitely does retroactively apply, and the Supreme Court of Kansas so held. The other provision in the contract that I'd like to call to the Court's attention is what's known as the intent provision; and this intent provision specifically provides that the point of these two price escalation provisions was to provide ERG during the term of the contract the anticipated increase in the natural gas price. Now, I want to point out also that these price escalation provisions are not automatically imposed upon KP&L. When a price escalation occurs under one of these pricing provisions, then KP&L is obligated to go to the Kansas Corporation Commission and seek its approval to pass through all or a part of any price increase under either one of these provisions. And this KP&L did when the first price increase came around. KP&L then has the obligation if it can't get it passed through, then KP&L can either say we're going to buy this gas and take it out of our profits, or they can tell Energy Reserves we couldn't get approval to pass it through; therefore, we're not going to pay the increased price. And the Energy Reserves is then given an option under the contracts to terminate if it does not receive this increased price. What happened was right after the 1977 or within a year after the 1977 redetermination the Natural Gas Policy Act of 1978 was passed. This act authorized and prescribed a higher price for intrastate gas, which is what's involved here, than the price that was then being paid under the contract. It was that time on December 1, 1978 that Energy Reserves requested an increased price. As I say, the KP&L then applied twice, once in December of '78 and once in February seeking a pass-through. Nothing happened. Things were going on in the legislature about what to do about this. And on May 29, 1979, approximately six months after this first price increase would have been due, this particular act was passed. And what this particular statute does, it prevents either one of these clauses from ever coming into operation; and it also prevents Energy Reserves from exercising the contract right of determination if it doesn't receive one of these price increases. Sandra Day O'Connor: --Mr. Davis, if you were correct and your client were allowed to terminate its contracts, what price could it now charge under the Natural Gas Act, under the NGPA? What section would control the price, if you were right? Gary W. Davis: There would be two possibilities. One would be under this government escalation price which would be the Section 105 price under the Natural Gas Policy Act, which is... Congress when they passed the Natural Gas Policy Act created a special category for intrastate gas that was under contract at the time. The other price provision that would of course control would be this price redetermination provision which is a market price redetermination. John Paul Stevens: Is it clear that Section 109 would not apply? Gary W. Davis: Your Honor, under the Kansas act this is one of the things that they say that makes the statute reasonable is that in lieu of getting the 105 price or the price that we're entitled to under the contract, a market price, that we get the 109 price. This Section 109 price of course is a special category of pricing that was set forth by the Natural Gas Policy Act. It is a substantially different price than the Section 105 price which is prescribed for natural gas, and it's a different price than we would receive under competitive conditions. William J. Brennan, Jr.: By "different" you mean lower? Gary W. Davis: Yes, Your Honor. It definitely is. Byron R. White: Well, if the contract... absent this contract what price could you charge? Gary W. Davis: You mean, Your Honor, if we didn't have a contract? Byron R. White: Yes. Well, suppose that... suppose... suppose the contract was in force and you wanted a price increase, and the utility said sorry, we won't pay it, and you say well, we will then exercise our option to cancel the contract, so no contract. What price then would you-- Gary W. Davis: The price would be the same. It would be-- Byron R. White: --The price would be controlled by the Federal act. Gary W. Davis: --Which would be the Section 105 price. That's exactly right. Byron R. White: And not the 109 price. Gary W. Davis: Not the 109 price. John Paul Stevens: Well, but the Section 105 price applies to gas that's under contract, right? Gary W. Davis: That's correct. John Paul Stevens: But isn't it your position that the gas would not be under contract? Gary W. Davis: Your Honor, it wouldn't make any difference because the market price was precisely the same price as the 105 price. John Paul Stevens: Well, but if it's not under contract and if 105 doesn't apply, clearly 102 would not apply, so wouldn't 109 apply, and if so, wouldn't you get an even lower price? Gary W. Davis: Your Honor, but these contracts were under contract-- John Paul Stevens: Well, but your position, as I understand, in this Court is that the contract doesn't cover this case. Or have I got it backwards? You're arguing that the gas... that the contract does apply, aren't you? Gary W. Davis: --We're arguing that certainly the contracts do apply and that we're entitled to the relief that was afforded to us under the contracts. John Paul Stevens: I see. The maximum relief you could get is be free of the contract. Gary W. Davis: Absolutely, Your Honor. Byron R. White: And so if the utility said sorry, we won't pay the contract prices, your maximum release is to have no contract. Gary W. Davis: Then we could go out and sell our gas in the intra-- Byron R. White: To anybody you wanted to. Gary W. Davis: --To anybody we wanted to. Byron R. White: But would it be subject at all to the Gas Policy Act? Gary W. Davis: No, Your Honor. It would only be subject to the ceiling price as set forth for Section 105 gas. Sandra Day O'Connor: In Section 109, wouldn't it? Well, yes. That's the point. Gary W. Davis: Section 105 applies to gas that was under contract at the time of the Natural Gas Policy Act. This gas was under contract. Byron R. White: You're saying "was under contract". Gary W. Davis: Right. Until KP&L refused to pay the price increases. I want to point out, Your Honor, that the Section 109 price is a vastly different price than this Section 105 price of the market price that would be obtained. As a matter of fact, KP&L at length... testified at length concerning these contracts in 1975 before the Kansas Corporation Commission, and one of the things that they said was that Energy Reserves had a right at that time to alternatively not sell us gas for $1.53 but sell it to the city of Wichita for $2.04. The price that would become effective on December 1-- Warren E. Burger: We'll resume there at 1:00. Gary W. Davis: --Right, Your Honor. Warren E. Burger: You may continue, Mr. Davis. Gary W. Davis: Thank you, Mr. Chief Justice, and if the Court please: On this impairment question I want to just clarify one point, and that is that under Section 105, which is the section that applies to intrastate gas under the Natural Gas Policy Act, what that provides is in effect that you get the Section 102 price, which is a price substantially higher than the 109 price; and it also says that the effective thing is having a contract in existence on the effective date of the act, which was December 1, 1978, and then it also applies to any successor contract. And under Section 101-- Byron R. White: Well, what about the time when there isn't any contract? Gary W. Davis: --Your Honor, I'm sure that there-- Byron R. White: It's irrelevant. If a contract expires, it's irrelevant because it was covered by a contract on the date of the act, is that it? Gary W. Davis: --A... a success... right, Your Honor. A successor contract is a contract that would come on after this contract-- Byron R. White: Yeah. Gary W. Davis: --Was terminated, and it would not need to be between the same parties, for example. Byron R. White: I see. Gary W. Davis: I just... and also on this impairment question I want to point out that the Section 109 price is vastly different from the Section 102 price. It's about a dollar a million BTU right now. In 1978, however, it was approximately 30 cents a million BTU, and it has gone up with inflation. On the question of inducement, a member of the Board of Directors and officer of Kansas Power and Light Company testified at length in 1975 that these contracts would not have been entered into except for these escalation provisions. He also testified that the price of gas was going to increase everywhere, and he also testified concerning the fairness of these contracts, and that he pointed out that Energy Reserves had an option to sell its gas at that time rather than $1.53 at $2.04. The $2.04 price is substantially the same price that existed under the Natural Gas Policy Act in 1978, December 1, 1978. In other words, the price that would be afforded to ERG under its contract with this first price increase that's prevented is substantially the same price that KP&L testified ERG could have sold its gas for three years earlier. This act is also bad and improper from the standpoint that it is extremely narrow in its focus. It covers only six per... something less than six percent of all the gas produced in Kansas. It covers something less than 10 percent of the gas consumed in Kansas. It applies only to contracts that have these type of price escalation provisions which you would find in a long-term contract. In other words, their price where there are indefinite price escalator clauses as opposed to fixed price escalator clauses. A fixed price escalator clause could in fact result in a much higher price, and that is certainly not equitable. And, again, it applies only to contracts that were executed before April 20th, 1977. It applies only to contracts that are of long term. William H. Rehnquist: Well, Mr. Davis, certainly the legislature has some right to target a particular area of perceived danger or problem, doesn't it, without making the rule that adopts for that area applicable right across the board. Gary W. Davis: There can be no reasonable justification, Justice Rehnquist, for just picking out a few contracts having a few types of contract clauses. There's no reasonable distinction that I can think of for picking out these particular contracts and applying it to this particular gas. I think possibly the worst thing about these contracts is that it really doesn't serve the benefit that it's supposed to serve. Who gets the savings from this gas? On the testimony before the committee 69 percent of the gas that KP&L... KP&L buys goes to other utilities; it goes for industrial uses; it goes for sales to themselves for the generation of electricity. And so there is no real finding that any benefit goes to any of the people who are supposed to be benefitted by this act. As... just to quote the majority report that recommended this bill to the legislature, it would provide a modicum relief to some people who have the need for utility use of this gas. It's just extremely limited in nature, and its narrow scope totally condemns it. Byron R. White: Did the Federal act set a ceiling on the price of this gas? Gary W. Davis: Yes, Your Honor, it did, which is-- Byron R. White: And despite any provision in the contract. Gary W. Davis: --That is correct, Your Honor. Byron R. White: And that wouldn't be unconstitutional? You don't claim the Federal act was unconstitutional. Gary W. Davis: No, sir, Your Honor. The contract clause just applies to State action, not to Federal action. Byron R. White: But if there were some... you don't think the Federal act is vulnerable at all under provision of the Constitution. Gary W. Davis: I personally do not, Your Honor. I think it's interesting to contrast the position of what was going on with the Natural Gas Act when the Federal Power Commission was regulating things and this Court, for example, in the Permian Basin Area Rate Cases where the Federal government was regulating price escalation provisions. They pointed out that one of the... one of the things that provided some equity to the matter was the fact that even there where the Federal government was action, the part... Federal government was acting, the parties could terminate the contracts. They didn't have to continue to sell them at these prices. And, of course, this is one thing that makes the impairment in this case. Not only must ERG continue to sell its gas at prices far below what it bargained for, but it can't even terminate the contracts. Byron R. White: Did... did... is there a preemption issue here? Gary W. Davis: Your Honor, the Section 602 of the Natural Gas Policy Act provides that the states may enact lower prices for gas produced in the state than that prescribed by the act. It's not mandatory that they do so, and it's not an invitation that they do so. There is a question... in one of the amicus briefs in quoting the legislative history it was pointed out and believed that this was a ceding of the Interstate Commerce Power, and that this Section 602 not only provided a right in the states to prescribe a rate for intrastate gas but also for interstate gas. Byron R. White: But even if it did, it wouldn't reach the contract clause issue. Gary W. Davis: That is correct, Your Honor. Byron R. White: It just would be a commerce issue. Gary W. Davis: That's exactly right, but that's... that's what... if that's correct, that makes this statute even worse, because we're not talking... it's just that much smaller percentage of the gas that you're regulating. It's just that much smaller of the gas that could be regulated, and it makes it that much more discriminatory; in other words, where you just pick out intrastate gas and then you just pick out a piece of that intrastate gas to regulation. Byron R. White: Well, did the... did the Kansas court rely on the federal act as precluding the operation of these clauses? Gary W. Davis: No, Your Honor, it did not. It was strictly on the Kansas acts, and it's only the Kansas act that precludes the operation of these two price provisions. John Paul Stevens: With respect to your point about kind of chopping up the market and it's just a small part of the market, doesn't the federal scheme work in somewhat the same way by differentiating between new gas and old gas and putting a lower price on the old gas? Gary W. Davis: Your Honor, it also differentiates with regard to intrastate gas. As a matter of fact, under the legislative history of the Natural Gas Policy Act one of the things they were doing was sanctifying the present intrastate contract because there they were dealing with an area where... where, for one, the gas would be covered by contracts that were not regulated. And that's why they set up, in my... set up a special provision for intrastate gas prior to the NGPA and set a price that was comparable to the Section 102 price. I'd just like to say in summary that in this case there has been... there's no question that the parties would not have entered into these contracts but for these price escalation provisions. There is no question that ERG has been substantially impaired by this Kansas statute. There is no question that it is a statute that is extremely limited in scope. And there is no question... and as I say, possibly the worst part of the statute is there is no finding that it really serves any benefit that is supposed to be served. One of the amicus briefs, for example, said for KP&L, was to the effect that they had no way of knowing what relief, if any, was being afforded to the people who might really need some help as a result of increasing prices. Thank you. Warren E. Burger: Mr. Kelsey. Basil W. Kelsey: Mr. Chief Justice, and may it please the Court: The one issue necessarily before the Court in this case today is the constitutionality of state natural gas price controls. The Kansas Natural Gas Price Protection Act amounts to the intrastate corollary of the Natural Gas Policy Act which was signed by the President four years ago today. Before I begin my argument, however, I should like to clear up a question that Justice White put to Mr. Davis. Byron R. White: I hope you're clearing up the question, not the answer. [Laughter] Basil W. Kelsey: Thank you for correcting me, Your Honor. I'll try to give you a clear answer. Byron R. White: Well, that's all right. Basil W. Kelsey: I think Your Honor inquired as to what this gas could receive if it were to be sold in the interstate market upon the expiration of this contract. This gas is in fact controlled by Section 105(b)(1) of the Natural Gas Policy Act so long as this contract remains in effect. When the contract expires by its own terms, it would then be what is known under the NGPA as a rollover contract under Section 106 of the Natural Gas Policy Act. That section provides-- Byron R. White: Would it be known that... would it be classified that way if it expired by cancellation? Basil W. Kelsey: --No, it wouldn't, Your Honor. It would then be known as a successor contract and would be treated under-- Byron R. White: Well, suppose... suppose the... suppose the utility, your client... is that your client, the utility? Basil W. Kelsey: --Yes. The Kansas Power and Light Company. Byron R. White: Yes. Suppose the utility said well, you've purported to increase the price. We just won't pay it. And then the pipeline or the producer or the other side of the contract said we cancel the contract pursuant to its terms. Is that an expiration or-- Basil W. Kelsey: No, it isn't. Then any new contract entered into would be what is called a successor contract which is anything but a rollover contract. Byron R. White: --And what would that... then what would the controlling section be? Basil W. Kelsey: The controlling section would remain 105, and the price that the producer could obtain under the new successor contract would be two different answers: one, assuming the Price Protection Act remains in effect, it would get the maximum the Price Protection Act allowed. If the price protection act is not in effect, the producer could then receive for its gas whatever that former contract would have permitted, whatever its terms would have called for subject to the federal maximum. Speaker: Um-hmm. Basil W. Kelsey: If, as I started out by saying, the contract expired by its own terms and it were a rollover contract, the maximum price the producer could then receive under the terms of Section 106 would be the price being paid during the month in which that contract terminated by its own terms. That would be the ceiling. Your Honors, Energy Reserves must overcome the presumption of constitutional validity to which the Price Protection Act is entitled. The Kansas Power and Light Company will address three issues raised by appellants in this appeal. First, the contracts between the Kansas Power and Light Company and the appellant have not been substantially impaired. Energy Reserves is receiving exactly and precisely what it contracted for. It has no right to rely on anything other than the price federal and state law allows. Therefore, the constitutional inquiry may be ended at this stage. Second, the Price Protection Act serves a legitimate public purpose, and that is the moderation of sudden increases in price for a fuel vital to Kansas agricultural economy and the welfare of its citizens. Energy Reserves has admitted that Kansas may constitutionally set maximum prices to protect its consumers. The thrust of Energy Reserves' argument seems to be its specious claim that the Price Protection Act is somehow special legislation that benefits the Kansas Power and Light Company and other gas distributors. The only beneficiaries of this Price Protection Act are the approximately two million consumers of intrastate gas in Kansas who pay, penny for penny, all costs of the gas they consume. As to the cost of gas paid to producers, utilities are nothing more than a conduit of dollars from the consumer to the producer. In fact, for the 12 months ended September 30, 1982, 91 percent of Kansas Power and Light Company's gas department revenues amounted solely to gas costs paid to consumers, to purchasers. Third, the legitimate public purpose of the Price Protection Act has been achieved on reasonable conditions which have been appropriately tailored to the goal with great deference to producers. The Price Protection Act in fact strikes at 100 percent of the evil perceived by the legislature by imposing prices which have been deemed reasonable by the Congress. Energy Reserves' contracts have not been substantially impaired for two specific reasons. It is receiving exactly what it contracted for, no more and no less; and that is a price controlled by both state and federal regulation. Sections 18 and 20 of these gas supply contracts, respectively, provide that the contracts are expressly subject to and incorporate all future state and federal laws. Thus-- William H. Rehnquist: Well, Mr. Kelsey-- Basil W. Kelsey: --Yes. William H. Rehnquist: --Supposing that in the Allied Structural Steel case the pension contract between Allied Structural Steel and the pension trustees had provided that it was subject to all provisions of state law, or state and federal law... a provision I think is probably not uncommon in most contracts. Do you think that would have resulted in the Allied Structural Steel case coming out differently? Basil W. Kelsey: Your Honor, while I think that this provision is uncommon in gas supply contracts, in answer to your question I think that the Allied Structural Steel would have not had an argument that it contracts had been substantially impaired. It might well have had other arguments, but it could not have argued that having incorporated the state law into its contracts that somehow later then a future state law could impair the terms of that contract which embodied the law. The Price Protection Act and the-- Lewis F. Powell, Jr.: May I ask this question in that connection? The Kansas Commission approved the escalation clause initially, did it not? Basil W. Kelsey: --Yes, it did, Your Honor. Lewis F. Powell, Jr.: But under your assumption of what it could be done, could the Commission now independently of the federal act change its position with respect to the escalation clause and hold it null and void, of no effect? You say that the parties have what they contracted for because the state reserved the right to regulate rates, but having approved this clause could the State of Kansas independently of the federal act have revoked the escalation right? Basil W. Kelsey: Yes, I think, Your Honor, the State of Kansas, either through the legislature or perhaps through the State Corporation Commission, could have purported to have declared these clauses null and void. Lewis F. Powell, Jr.: Well, is there any authority in Kansas on that point? Can the Supreme Court-- Basil W. Kelsey: For the State Corp-- Lewis F. Powell, Jr.: --Yes. Basil W. Kelsey: --For the State Corporation Commission-- Lewis F. Powell, Jr.: Yes. Basil W. Kelsey: --Dealing with the terms of the gas contract and declaring them null and void? Lewis F. Powell, Jr.: Yes. Basil W. Kelsey: No, there isn't, Your Honor, and in fact, the State Corporation Commission when it adopted the order which requires the immediate and automatic pass-through of all natural gas costs paid to consumers, in Docket Number 106-850 said in April of 1977: "Since energy costs are largely outside the control of the utility, they ultimately must be passed through to the consumer, and an appropriately designed clause is the most efficient method to accomplish this pass-through. " So the Commission has not taken it upon itself to... to renegotiate the terms of the contracts between the parties. These very contracts were the subject of an extensive hearing in 1975 before the State Corporation Commission, and the escalator clauses were inquired into extensively in that hearing. And the State Corporation Commission authorized the Kansas Power and Light Company to commence purchases of gas under those contracts, including those terms. So today the law of the State of Kansas is those terms are approved. Your Honors, it is our position that the Natural Gas Policy Act and the Price Protection Act are part of the terms of these contracts. These contracts were executed in an atmosphere of pervasive regulation of natural gas by federal and state governments. Kansas has regulated all aspects of natural gas for more than 75 years. The parties foresaw state and federal law and regulations and incorporated them into their contracts. When a contract incorporates state law, that law by definition is a part of that contract, and the law cannot impair itself. The second specific reason there's been no substantial impairment of these contracts is that Energy Reserves has no right to rely on anything more than Section 105 of the NGPA, and that is a maximum price subject to Kansas' right to limit the operation of the contractual escalator clauses below that maximum price. The Price Protection Act merely represents Kansas' exercise of that specific right. Energy Reserves purports to rely on the NGPA for its claim to higher prices, and yet it claims the Price Protection Act impaired its contracts. We agree that the contracts are subject to the Natural Gas Policy Act. We do not agree, however, that Energy Reserves is subject only to the price limitations of the NGPA it prefers to the exclusion of other, more stringent limitations in that act it does not prefer. Prior to the NGPA there were no limitations on the operation of these indefinite price escalator clauses in the contracts. The sky was the limit. The NGPA placed two specific, separate limitations on the operation of these clauses. First, Section 105 provides that in no event may escalator clauses operate to produce a price in excess of the NGPA Section 102 price. But for this limit, Energy Reserves could today obtain a much higher price for its gas than that Section 102 price. The second limitation intended by Congress in Section 105 is the specific right of Kansas to prescribe more stringent limitations on the operation of these escalator clauses. In response, Kansas, and Oklahoma for that matter, have prescribed modestly more stringent limitations on the operation of these clauses. Energy Reserves has, therefore, no right to cheerfully rely on and in fact unconditionally demand one price limitation set by Congress to the exclusion of the other. That maximum price set by Congress was said to be subject to Kansas' further limitation on those escalator clauses. Energy Reserves' reliance, therefore, on these contracts in the NGPA may not exceed the price permitted by both conditions. Just... they may not, as they would have it, just rely on one condition which would permit it the higher incentive price for its old non-incentive gas. Energy Reserves has no new wells as defined in the NGPA which provides that higher price for new wells. This is all old gas wells drilled in the '50s and '60s primarily. Apparently-- Byron R. White: And it's also intrastate gas. Basil W. Kelsey: --I'm sorry, Your Honor. Byron R. White: It's also intrastate gas. Basil W. Kelsey: It is indeed intrastate gas subject to the terms of Section 105 which say the price of that gas is whatever the price is under the terms of your contract, but in nor than in excess of Section 102 unless the states further limit the operation of those escalator clauses. William H. Rehnquist: Well, are you saying, in effect, that even had Congress not passed this statute, which seems to be the subject of most of the discussion of the case, that Energy Reserves would be in no better position? Basil W. Kelsey: Even if-- William H. Rehnquist: Or say in no worse position? Basil W. Kelsey: --Even if Congress had not passed the statute? William H. Rehnquist: If the Kansas legislature hadn't passed the statute. Basil W. Kelsey: If the Kansas legislature had not passed the statute, then in 1981 in November Energy Reserves' contract under its price redetermination escalator clause that Mr. Davis referred to, its price would have been redetermined to a maximum price of that Section 102 price provided Energy Reserves could have produced three contracts that... in the area that were comparable and met the terms of the contracts that were calling for that price, that were receiving prices. So, in fact, in November of 1981 there was a price redetermination under these contracts. There has been a price increase since-- William H. Rehnquist: Are you saying that the Kansas statute had no effect on what Energy Reserves was entitled to receive? Basil W. Kelsey: --It had no effect on what they were entitled to receive for the reason that I mentioned. It is only entitled to receive what the state law allows it. In specific response to Your Honor's question, it is receiving less in all likelihood than it would have been receiving had the Price Protection Act not been passed. In all likelihood it would today be receiving the NGPA Section 102 price for November of 1981 because these redeterminations occur every two years. But instead, in 1981 in November, of redetermining to that higher 102 price, the parties met, and as the Price Protection Act permits, redetermined to that NGPA Section 109 price. Byron R. White: I thought the 102 applied to new gas. Basil W. Kelsey: 102 does apply to new gas, Your Honor, under the NGPA. Byron R. White: But this is old gas. Basil W. Kelsey: It is old gas, that is correct. And therein lies the sense of the structure of Section 105(b)(1) of the Natural Gas Policy Act. In the intrastate market there were various prices being paid in the gas-producing states, none of them regulated by the states. There were high prices being paid in Texas. We have contracts as low as 25 cents per MCA. Congress simply said the terms of those contracts are the price... is the price that you should be paid. There were some escalator clauses in those contracts, and so Congress said but in no event may those escalator clauses carry you above Section 102; the new gas price is an absolute maximum. William H. Rehnquist: I see. Well, isn't your theory quite different from that of the Kansas Supreme Court? Basil W. Kelsey: On the-- William H. Rehnquist: Isn't the theory you're now arguing different from that in which the Kansas Supreme Court upheld the act, the Kansas act? Basil W. Kelsey: --I don't think so, Your Honor. The Kansas Supreme Court addressed itself to the appropriateness of the terms and the fact that the statute was directed to a public purpose and the like. William H. Rehnquist: Yeah, but the Kansas Supreme Court obviously felt obligated to deal with the Energy Reserves claim of impairment of contract obligation, and it didn't go off on the ground that you now urge that we do, that the contract had a provision that said it would be subject to all state law. It went through a constitutional analysis. I understand from your argument that that really isn't necessary. Basil W. Kelsey: Your Honor, under the case of United States Mortgage v. Matthews it's our understanding that this Court is the court the determines the requirements for applying the constitutional test under the contract clause. And as Allied Structural Steel indicated, if there is no substantial impairment, the inquiry may be ended. In summary, Energy Reserves is receiving everything it contracted for at a price permitted by state and federal law, and having received its legitimate contractual expectations, the contract inquiry... the contract clause inquiry may be ended. John Paul Stevens: What about their argument that they've lost their right to terminate? Basil W. Kelsey: Your Honor, the right to terminate is specifically conditioned in the contract on an increased price. Absent an increased price, there is no right to terminate. It's as clear and simple as that. Byron R. White: You mean a contractually allowed increased price. Basil W. Kelsey: Yes. Byron R. White: And you're saying the contract wouldn't allow an increased price because the state law was to the contrary. Basil W. Kelsey: Exactly, Your Honor. As well as the federal law above 102. Byron R. White: 102, yeah. Basil W. Kelsey: Kansas' right to set natural gas prices is without question. Natural gas is a vital fuel to Kansas. Seventy-five percent of the homes are heated with gas. It is the single most important fuel for irrigation pumping and fertilizer production. Energy Reserves admits that Kansas may set maximum prices for all natural gas to protect its customers, its consumers. This inquiry... this admission should end the constitutional inquiry of public purpose, because the Price Protection Act was intended to and it has the effect of regulating the price to consumers of natural gas produced and consumed in Kansas. Energy Reserves purports to make, however, an argument that the Price Protection Act somehow benefits the Kansas Power and Light Company. The state legislature's conclusions and orders of the State Corporation Commission, as I have indicated, completely belie that conclusion. As the legislature knew and concluded when it enacted this law, utilities cannot benefit economically by an increased or decreased cost of gas. That was the testimony of the chairman of the State Corporation Commission to the legislation. And as I've indicated, we are serving... we are buying gas under these contracts pursuant to the Commission's approval of these pricing clauses. We are passing through in 1981 $137 million of purchased gas cost to producers without adding one shred of interest on the utility's part. Ninety-one percent of our revenues from gas operations are merely purchased gas costs. The legislature, the trial court, and the Kansas Supreme Court all concluded that but for the Price Protection Act, Kansas consumers would pay the higher new gas costs for the old gas they were using. The legislature further concluded that absent the Price Protection Act, the burden of increased costs will be passed on to consumers, and that savings to those consumers is ample reason to support the act. The presence of the State Corporation Commission, the Kansas Legal Services representing persons of low income in Kansas in amici briefs to the court confirmed that the $128 million in gas cost reductions wrought by this law will be received only by the two million persons of the... 2,400,000 people in the state. Sandra Day O'Connor: Mr. Kelsey, what justification is there for the Kansas statute to allow increases under these indefinite escalator clauses for old intrastate gas in contracts executed after April 20, 1977 but not for contracts executed before that date? Basil W. Kelsey: Two specific answers, Your Honor. First, the legislature perceived that for those persons who had intrastate gas to sell and who entered into them after that date, April 20, 1977, when the President announced the national energy plan, the legislature perceived that those persons might have some greater right to rely on a higher price for their gas. Sandra Day O'Connor: Based on the President's speech. Basil W. Kelsey: Yes. On the announcement of that national energy plan. Secondly, if the act covered contracts executed after that date and into the future, producers of intrastate gas in Kansas who had gas to sell could conceivably receive a higher price in the interstate market for that gas, and it would tend to diminish the availability of gas in Kansas. Your Honors, Energy Reserves has complained that the terms and conditions of this statute are unreasonably narrow. Kansas' goal of moderating gas price increases has been achieved on very reasonable conditions, carefully tailored to the goal, with extraordinary deference to these very producers. Of all the gas being consumed in Kansas, only intrastate gas subject to escalator clauses had the potential for sudden increases which concerned the legislature. The Price Protection Act reaches 100 percent of that gas. Yet, Energy Reserves complains that the Price Protection Act reaches an insufficient volume of gas; Mr. Davis says 10 percent of the gas, intrastate gas consumed in Kansas. The facts are that 75 percent of all the gas consumed in Kansas is interstate in origin and beyond the reach of the legislature. Moreover, all that interstate gas is priced, as a result of the NGPA, at or lower than, much lower than in many instances, the maximum price set by Kansas for intrastate gas. Sixty percent of the gas consumed in Kansas which is produced in Kansas is not subject to these escalator clauses. Mr. Davis indicated that fixed price escalator clauses could take the price over 102, and therefore the statute was narrow. The only contracts before the legislature when it considered this legislation were contracts with fixed price escalator clauses of one or two cents a year, one percent a year. Obviously, when we're talking about kinds of increases permitted here, they could never reach the Section 102 price. Moreover, the Natural Gas Policy Act itself in Section 105 has the effect of limiting the price for that intrastate gas not subject to escalator clauses in effect freezing the price to what was being received in real terms on the day the act became a law. So it's only 40 percent of the gas consumed in Kansas that's produced in Kansas which was subject to escalator clauses where the legislature perceived the evil of sudden increases in price. Therefore, the Kansas legislature regulated that, and it regulated 100 percent of that evil. And it did so on very reasonable terms, adopting the pricing scheme of the NGPA. It did so by saying for old non-incentive gas such as the gas under these contracts, we will allow the maximum price if your contracts otherwise call for it... the NGPA 109 price, which happens to be the very same price as the maximum price for old interstate gas as see in Section 104. It did so by saying but for your new gas, any wells the surface drilling of which was commenced on and after February 19, 1977, your contract clauses may escalate the price for that new gas on up to that NGPA Section 102 ceiling in order to encourage exploration. No change. It further said and moreover, for low production or stripper well gas, as defined in the NGPA in Section 103, the Price Protection Act will allow Kansas intrastate producers that very same maximum gas if your contract calls for it. As Energy Reserves concedes, Kansas has the constitutional authority to set maximum prices. Therefore, we submit, the Price Protection Act's much less stringent limitations on prices are constitutional. The legislature was merely deferring to the producers' interest in achieving its goal. Energy Reserves has in fact described the economic policy of the NGPA as reasonable, but when that policy is applied by the Kansas legislature to its contracts, it complains that the scheme is unconstitutionally narrow and constitutes special legislation. The Kansas legislature limited sudden price increases-- Byron R. White: Well, the complaint is that it violates a specific provision of the Constitution limiting state authority. Basil W. Kelsey: --And I'm... and I'm addressing my comments, Your Honor, to if there is in fact a substantial impairment, which we think there is not, that the goal was a clearly legitimate one, as the NGPA's very goal was of limiting sudden price increases for old gas, because it froze the price of old interstate gas. Byron R. White: Well, that just turns the contract clause into a due process limitation. Basil W. Kelsey: It meets the... I'm speaking to the reasonableness with which the state legislature sought to achieve that proper public purpose. It tailored a pricing system. It reached all the gas it could reach. It's of no benefit, none whatsoever, to the Kansas Power and Light Company. your Honors, if the Price... if the contract clause has any flexibility when vital interests are served, as Energy Reserves concedes in its reply brief that it must, a major gas-producing state such as Kansas may impose modest and temporary restrictions on sudden increases in price for natural resource fuel it has regulated for 75 years. Natural gas is absolutely essential to the health and welfare of Kansas people, as well as to the principal industry of the state, and that's agriculture. This position is particularly true when the suppliers of that essential commodity specifically made those state restrictions a part of the contract price terms and when the pricing system embodied in those restrictions is one that Congress has found as reasonable. Thank you. Warren E. Burger: Do you have anything further, Mr. Davis? Gary W. Davis: I just want to make a few points, Your Honor. First off, this is the first time I've ever heard this argument that the Section 105 and the Section 102 price is anything different. Secondarily, there is... until this moment I thought there was no argument that our contracts have been impaired. Looking at page 23A of the Appendix to Jursidictional Statement, which is the Supreme Court of Kansas decision, it says, "The statute obviously was intended to and does impair the rights of ERG under the contracts. " With regard to this applicable laws provision that Mr. Kelsey has talked about, first off, that is a standard provision that you see in almost every contract. Secondarily, I see no way that it can possibly be construed to mean that it means that it's subject to invalid state laws. And furthermore, as just a last point on the intent of the parties under that applicable laws provision, there is the last sentence that says, "In effect, notwithstanding any such applicable laws, such applicable laws shall not prevent Energy Reserves from exercising its right of termination if it did not receive the price increases promised by these two price escalation provisions. " The other provision, throughout this case KP&L has tried to picture itself as a benevolent institution. In the testimony in which they were justifying these contracts before the Kansas Corporation Commission, their vice president and a member of their Board of Directors testified at length. He testified that if KP&L was not entitled to enter into these contracts that they would lose the value of their investment of $3,600,000 because they would lose the value of the gas-gathering facilities. To say that they don't have a financial interest is ridiculous. Secondarily, KP&L doesn't think themselves that they have a right to pass this through. When the price increase was triggered in 1978, what'd they do? They applied to the Kansas Corporation Commission for permission to pass it through. They did the same thing in February of 1979. And they know as well as I do that these price increases are in nowise automatics. I would simply... I would ask the Court to do one other thing, and that is to look at 55-1408. We call it the Section 8 of the act. What that cat authorizes the parties to do is to renegotiate the price provisions to any price they want up to the legal ceiling. Obviously, Energy Reserves wants the price that it contracted to receive. What that means is that the Kansas legislature has delegated to Kansas Power and Light the power and authority to totally avoid all of the price limitations that are contained in this Kansas act. They've turned a bilateral contract into a totally unilateral contract. Thank you. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Earl Warren: John T. Gojack, Petitioner, versus United States. Mr. Maroney. Kevin T. Maroney: Mr. Chief Justice and may it please the Court. Yesterday, I had pointed out certain of the evidence in the case which showed that the Committee, the time the hearings were set for Fort Wayne, had no knowledge of the scheduled election at (Inaudible), but that a continuance was granted when a responsible request for such a continuance was made by petitioner's then counsel. The hearings were continued from February 21 to February 28, which was the time period requested, I think they requested at least a week, and petitioner appeared on the latter date, February 28, in Washington. He testified extensively on February 28 and March 1. He answered a large number of questions concerning his union offices, his military service, his occupations and employment, but he refused to answer questions concerning activities in the Communist Party or connected with the Communist Party challenging the right of the Committee to ask such questions which he alleged were in violation of his First Amendment rights. John M. Harlan II: Did he have a prepared statement? Kevin T. Maroney: Yes, sir, he did. John M. Harlan II: Where is it? Kevin T. Maroney: It's set forth in the record at page 201. The prepared statement was submitted at the outset of the hearings. The petitioner was not the first witness, he was the third witness. The first three witnesses, all were represented by the same counsel and the written statement, which is in the record, was submitted on behalf of those first three witnesses including the petitioner and was submitted to the Committee at the beginning of the hearings. The statement challenges the lack of a legislative purpose. It alleges the purpose of the hearing was to force UE out of business. It alleges that the purpose of breaking a union is not authorized by Public Law 601 and that even if such a purpose were authorized, it would violate the First Amendment and that the basic resolution is unconstitutional and the disclosure of his political beliefs or their political beliefs would violate their First -- First Amendment rights. Felix Frankfurter: Mr. Maroney, does the -- the ground of objections -- the statement of objections to which you've just referred cover the claims of invalidity urged by Mr. Donner or are you claiming that some of the things now urged -- urged in the Court have not been raised at the Committee hearing? Kevin T. Maroney: Well, the first -- the first point in this written statement is that the Committee is not engaged in a legislative investigation for a bona fide legislative purpose. And then, it goes on to -- Felix Frankfurter: I've -- I've read it and I know what's in it. I just want you to tell me whether, in this case as in prior cases, the Government says that some of the points raised in the Court -- in the Court proceedings had not been raised at the hearing. Have we got any such question in this case? Kevin T. Maroney: I think that the -- the general point they raised as to the charges of exposure and union busting would be barely in that general objection made in the written statements, Your Honor. John M. Harlan II: How about pertinency? Kevin T. Maroney: No pertinency objection. No, sir. We -- we think it's clear that at no time has petitioner raised an objection as to pertinency. I think in his brief, now he does, but he didn't do it before -- before the Committee. Earl Warren: Mr. Maroney, may I ask you if it had not been for this caustic telegram that you -- you mentioned yesterday on the question of exposure for exposure's sake, would your position be the same here? Kevin T. Maroney: On -- on the question of exposure, yes, sir. Earl Warren: Yes. You don't -- in other words, you don't rely on that telegram as provocation for the things that were said by the Chairman of the Committee. Kevin T. Maroney: Only -- only on the allegations which they make, and which they have made continuously concerning the fact that the Committee was engaged in union busting. Earl Warren: Yes. Kevin T. Maroney: And, it was -- the discussion at the interview with Mr. Goldstein, who was a Washington representative of the petitioner's union, coupled with a telegram was what gave rise to Congressman Walter's retort to the provocations of the telegram and to the accusations of Mr. Goldstein at that interview, but -- Earl Warren: But the -- Kevin T. Maroney: -- the exposure -- Earl Warren: Yes. Kevin T. Maroney: -- argument, generally, goes beyond that. They go to newspaper clippings which quote “members of the Committee” and to other sources which purport to quote “members of the Committee” on the -- Earl Warren: But, if it were not for that telegram, would your -- would your case be any different here? Kevin T. Maroney: Not -- not on the question of exposure, Your Honor. Earl Warren: Yes. Kevin T. Maroney: On the exposure argument, we rely on this Court's decisions in Watkins and Barenblatt in which the -- substantially the same contentions were made based on similar evidence, statements of members of the Committee and things of that sort, which they urge and show that the Committee was engaged in a pattern of exposure. Earl Warren: Well, I don't suppose, in either of those cases, there was anything like there is here where the Chairman of the Committee says that he feels that his duty to put this union out of business and -- Kevin T. Maroney: Well -- Earl Warren: -- I just wondered if -- if you thought that in, in and of itself would show the purpose of the Committee or whether you consider that that was provoked by the telegram and was, therefore, excusable. Kevin T. Maroney: That particular statement, Your Honor, was made, we think, in -- as a result of the provocation of the telegram and of the accusation made by Mr. Goldstein at the U -- at this interview which was recorded, the statement about putting the union out of business. Moreover, the -- we think that, under the Court's decisions in Watkins and Barenblatt where the Court said that it would not look into -- it could not inquire into the motives of members of the Committee where it appeared from the record that a legislative purpose of the Congress was being served. In -- in the Barenblatt case the Court said in part that so long as Congress acts in pursuance of a -- of its constitutional power, the judiciary lacks authority to intervene on the basis of the motives which spur the exercise of that power. A similar statement was made in Watkins where the Court there said that their motives alone would not vitiate an investigation which had been instituted by a House of Congress if that assembly's legislative purpose is being served. Now, in this case, we think it clear that the record demonstrates that the Committee here was, at the time of these hearings, engaged in a le -- in a proper legislative purpose. The District Court made such a finding and that finding is quoted in the Court of Appeals opinion in the record at page 229. The Court of Appeals made a similar finding that there was a dominant legislative purpose in these hearings and of course, we think that -- that those findings and conclusions of the lower courts are amply supported by the record. At the outset of the hearings at which petitioner testified, the Committee Chairman announced and his part of his opening statement, which is set forth on page 6 of our brief, he stated there will be considered at this hearing testimony relating to Communist Party activities within the field of labor. The methods used by the Communist Party to infiltrate labor organizations and the dissemination of Communist Party propaganda. Similar statements were made during the course of various colloquy with the witness during his interrogation and in connection with questions which he refused to answer made by members of the Committee, urging him to answer and such statements are set forth in our brief at pages 10 and 12, reiterating the interest of the Committee in ascertaining the extent of Communist infiltration of labor unions and his knowledge concerning such activity which the Committee was seeking him to testify. Additionally, the -- there is in the record also the Committee's 1955 annual report which begins in the record at page 126 -- or -- or 128, rather and in that annual report, the Committee refers to the Fort Wayne hearings, the hearings at which this petitioner testified. They -- the Committee reports that documented proof that a Communist dominated union siphons off worker's dues for Communist purposes was produced in the course of Committee investigations and hearings on District 9 of the UE. Committee also reported, and this statement appears on page 131, that these documents which had been introduced contained incontrovertible evidence of the leadership of District 9 had diverted workers' union dues to -- to the support of the Communist Party. Earl Warren: Was that before or after -- that report, before or after the -- the hearing? Kevin T. Maroney: This is after the hearings, Your Honor. This is for the year 1955 at which the Committee was reporting to the Congress in its annual report concerning its activities during the year, and that report makes reference to these hearings and the findings and conclusions that the Committee was making as a result, in part, of the testimony adduced at these hearings. The report -- Earl Warren: Could that be used to support the hearing -- an afterthought in what was written by the Committee a year afterwards? Kevin T. Maroney: Well, the Committee's report, Your Honor, and the legislative recommendations which the Committee also makes in that report is support for the contention that the Committee had a proper legislative purpose at the time of the -- of the hearings here. There is also in the record the -- I think it's Exhibit 7, the Committee's report for the year 1954 which is the preceding year and which refers to the Committee's investigation of Communist activity in the labor field, plus -- Speaker: (Inaudible) Kevin T. Maroney: I'll try to get in a minute, Your Honor. Now, additionally, the Court-- or the Congress has, from time-to-time, as the Court knows, passed legislation which has dealt with the problem of Communist activity in the labor field. The Communist Control Act of 1954, which was a year preceding these hearings, was passed and which added to the two categories of Communist organizations established in the Internal Security Act of 1950, added the third category of a Communist-infiltrated organization which is defined in the statute as an organization do -- as a labor organization dominated and controlled by the Communist Party. The -- the Section 9 (h) of the Taft-Hartley Act, which required affidavits of non-Communist union officers, shows the interest of Congress continuously in the problem of Communist activity in the labor field, and a number of other statutes, the recent repeal of Section 9 (h) and the enactment of the new statute which prohibits members of the Communist Party from holding union offices contemporaneous with being members of the party. Now, in just the -- I think that pretty well sums up our contentions on the legal points made in this case. Your Honor, there's a colloquy concerning the admissibility of Exhibit 7 which begins at page 15 of the record and two extracts are quoted by the Court at page 20 and 21. That -- those extracts or one of them deals with the Communist Party colonization program. Potter Stewart: Mr. Maroney, I don't know how much relevance it is, but just to enlighten my ignorance, Section 9 (h) is -- was repealed in 1959, was it not? Kevin T. Maroney: Yes, sir. Potter Stewart: And what was substituted in its place, could you tell us? Kevin T. Maroney: Your Honor, I'm not sure that it was substituted as a -- as a package -- Potter Stewart: But something else was enacted. Kevin T. Maroney: But at about that same time, there was enacted the statute which is really in two parts. The first part of the statute prohibits individuals convicted of certain -- certain criminal offenses from -- within the preceding five years, I think, from holding jobs in certain union -- Potter Stewart: Union office. Kevin T. Maroney: -- union offices unless, I think, there's a provision whereby the Parole Board can certify that they have been rehabilitated and, therefore, can hold the job. There's a second part to that which prohibits members of the Communist Party from holding certain high level union offices. Potter Stewart: Now, what are the sanctions -- Kevin T. Maroney: It's a criminal offense. Potter Stewart: What is -- what are the present sanctions to enforce those provisions? Kevin T. Maroney: It's -- it's a criminal offense -- Potter Stewart: It's a criminal offense. Kevin T. Maroney: -- for a Communist Party member to hold such a union position. Potter Stewart: On his part. Kevin T. Maroney: On his part. Potter Stewart: Is there any sanction against the union as there was in the provisions of 9 (h)? 9 (h), of course, prevented the -- Kevin T. Maroney: I understand. Potter Stewart: -- took away from the union the protected -- the protection of the -- Kevin T. Maroney: This isn't tied up with any NLRB rights, as I understand it, Your Honor, it is strictly a criminal offense as I recall it and I -- Potter Stewart: Do you recall it? Kevin T. Maroney: I can get the citation and -- Potter Stewart: Well, we're pretty far-field from the issue in this case. Kevin T. Maroney: No. Potter Stewart: But you did mention it and I was curious. Kevin T. Maroney: But -- but it's a criminal offense for a member of the party to hold such a union position. There is a case which has been initiated under that statute in California against, I think, Archie Brown. That case has not yet come to trial. I think they've had preliminary motions on constitutional arguments and so forth, but that is -- John M. Harlan II: Am I right -- Kevin T. Maroney: That is the first case -- John M. Harlan II: Am I right in thinking that there was no Fifth Amendment claim interposed at any stage of this proceeding? Kevin T. Maroney: That's correct, sir.

Warren E. Burger: We'll hear arguments next in Coffy against Republic Steel Corporation. Mr. Horowitz, I think you may proceed when you're ready. Alan I. Horowitz: Mr. Chief Justice and may it please the Court. This case is here on a writ of certiorari to the United States Court of Appeals for the Sixth Circuit. It concerns the proper interpretation of the statutory provisions that guarantee certain reemployment rights to veterans upon their return to employment. These provisions are now codified in 38 U.S.C., 2021. The question here is how those provisions apply to the supplemental unemployment benefits or SUB's that are provided under the collective-bargaining agreement between respondent and the United Steel-workers. Specifically, the question is whether the guarantee against loss of seniority under the Act requires that the time spent by a veteran in the service be included in the time used to compute SUB's. SUB's are payments that are made by the employer to employees who have been laid off. These payments are over and above the unemployment compensation that the employee otherwise receives from the State. Under the SUB plan involved in this case, which is set out beginning at page 17 of the appendix, SUB payments are made on a weekly basis for a period of up to 52 weeks. That period depends upon the number of SUB credits that the employee has accrued. The amount of each weekly payment is determined according to a formula set out in Section 1 of the plan. That formula depends on several factors, including the employee's present salary and his number of dependents and the amount of compensation that he receives from the State. The formula does not depend on the amount of time that the employee has been employed. Therefore, there is no dispute in this case about the amount of each weekly benefit that was received by petitioner. What the dispute in this case does concern, is the length of the time period over which this weekly SUB payments continue. This period is determined by the number of SUB credits. And these credits are earned through the passage of time as described in Section 2 of the SUB plan on page 19. One-half credit is earned per week. An eligible week for which 1/2 credit maybe on, is one and which the employee has any of the following hours; hours worked for the company, hours that are not worked but for which the employee is paid. For example, vacation time or time spend on jury duty and also, certain categories of hours not worked and for which the employee is not paid, where the employee is performing certain duties for the local union or as on a certain specified disability leave. When an employee is laid off and receives weekly payments, he uses up the SUB credits. Finally, under the plan an employee is not eligible to receive SUB payments at all, no matter how many credits he has accrued until he has two years of continuous service with the employer. As an example of how the system works, if an employee begin work for the company and worked or engaged in time of these other eligible activities for continuous period the year and a half and was then laid off he would have accrued 39 SUB credits by that time. That would be at the rate of 1/2 credit per week. However, because he had not reached the 2-year eligibility threshold, he would not receive any SUB payments when he was laid off. In this case the petitioner began working for respondent in 1968. And work for respondent for a period of four-and-half months during that time. He was then laid off and he then left respondent's employment. He had accrued 9 SUB credits during the time that he was employed in 1968. However, because he elected to leave respondent's employment those credits were canceled. He then begun to work for respondent again in late January 1969 and continued to work for respondent until he entered military service in September of 1969. He thus earned approximately 16 SUB periods, excuse me SUB credits during the slight of period. He served in the military unit August 1971 when he was honorably discharged. He was the reinstated to this previous position with respondent. However, because of respondent's economic situation, he was immediately placed in layoff status. He remained layoff for period of 9 1/2 months until July 1972. During the layoff period, petitioner received SUB payments for approximately 16 weeks, corresponding to the 16 SUB credits that he had earned before he entered the service. However, he did not receive any payments for the remaining 5 1/2 months that the layoff continued. Had petitioner not entered military service and continued in respondent's employment, the parties have stipulated that he would have 52 SUB credits at the time of his layoff. Thus, he would have received SUB credits for the, excuse me, SUB payments for the entire duration of his layoff. The question presented in this case then, is simply whether petitioner should have had his military service counted in determining his total SUB credits when he was reinstated following his military service. Petitioner originally brought suit in the District Court for the Northern District of Ohio, alleging that the failure to consider his service time in computing his SUB credits violated his statutory rights. The District Court rejected petitioner's contention, holding that the SUB plan established a bona fide work requirement for the earning of SUB credits. Petitioner appealed and while the case was pending on appeal, this Court handed down its decision in Alabama Power Company v. Davis, holding that pension benefits or perquisite of seniority under the act. The Court of Appeals then vacated the District Court's decision and remanded for reconsideration in light of Alabama Power. The District Court again held for respondent, stating that, “entitlement to SUB benefits requires more than continued status, such as a work requirement to any actual performance on the job”. The Court of Appeals then affirmed for the reason stated by the District Court. The relevant provision of the statute involved here is that portion of 38 U.S.C 2021 (b) (1) that requires veterans to be reinstated without loss of seniority. If this Court finds that SUB payments are perquisite of seniority within the meaning of that section then petitioner must be given credit for his army service time in computing his SUB credits. That is a consequence of two main principles that were established in this Court's decision in Fishgold. First, the escalator principle was established, that is that a veteran who returns to his employment is to be reinstated at the same place, he would have been had he remained in the employment, that is, at the place he would have been on the escalator, that he remained in employment not at the place he got off the escalator when he entered the service. Secondly, Fishgold also established that the provisions of the act ought to be liberally construed for the benefit of the veteran. In this Court's decision in Alabama Power, it established the appropriate analysis for determining whether a particular benefit is indeed a perquisite of seniority. The real nature of the benefit is to be examined. And it is to be determined whether other one hand the benefit is primarily in the nature of a reward for length of service in which case it is a perquisite of seniority or on the other hand whether the benefit is primarily short-term compensation for work performed. Applying this test, severance pay and pension benefits have been held by this Court to be perquisites of seniority. Vacation pay has been held to be primarily in the nature of compensation for work performed. Before I turn to discussion of those factors that we believe indicate that SUB should be treated as a perquisite of seniority, I would like briefly to discuss the notion of a work requirement upon which the District Court and respondent have focused some of their attention. There is no dispute here that SUB credits are primarily earn by employees who are workers. This is naturally true of most benefits that this Court has dealt with whether they are determined by language in the collective-bargaining agreement that refers to work or whether that it is determined by language that refers use of service. Now, in Alabama Power, a contention was made to this Court that any benefit that is determined by work requirement, that is where the collective-bargaining agreement specifies that most of the employees who earn the benefit will be working, should automatically dispose of any contention that the benefit maybe treated as a perquisite of seniority. The Court expressly rejected that contention in Alabama Power and it noted that almost any benefit could be tied to a work requirement such as existed in that case. That would permit the employer himself to decide whether a benefit was a perquisite of seniority and the employer himself to decide whether the veteran was entitled to have his service time credited. However, Congress has not left that decision up to the employer. This is a decision that Congress has made. Now, as far as the work requirement in this case, it is significantly less in the work requirement that this Court rejected in Alabama Power. There, the question was whether the employee was entitled to accredited service time for the time that he spent in the military. Accredited service was defined in terms of full time service at 40 hours per week. Moreover, the limited exceptions in Alabama Power, applied only to employees who are on paid leave not employees who are in certain categories of unpaid leave as in this case. We believe that SUB benefits should be treated as a perquisite of seniority. They serve a purpose that is akin to the most traditional seniority benefit. And this analysis incidentally was made by the Third Circuit in the Foster decision which was later affirmed by this Court. The -- the primary purpose of SUB benefits is to protect employees against economic loss during periods of the diminished employment. It acts as an adjunct to the normal layoff protection that employees get when they accrue seniority benefits. Thus when, there's an economic downturn and the employer is forced to layoff a number of employees, what happens, is those employees that have accrued the most amount of seniority are protected from layoff because of the seniority that they have accrued. Employees who have not accrued enough seniority to be protected from layoff get this more limited protection of the SUB benefits. That is they receive some money to tie them over the period for which they are unemployed and employees who have the least seniority at all will either not be eligible at all for SUB payments or they will receive less because they have accrued fewer credits. William H. Rehnquist: All -- all employees laid off I take it will receive unemployment benefits from the State? Alan I. Horowitz: That's correct. The SUBs are only intended to be a supplement to the unemployment benefits provided by the State and the formula for figuring out how much SUB is to be paid inclusive deduction for the amount of State on employment benefits. And in fact if an employee, for some reason, does not get State unemployment benefits for reason that was within his control if he doesn't apply for them for example, then he will not be eligible to receive SUBs. We think the best analogy to the SUBs is a quite similar benefit of severance pay that this Court held to be a perquisite of seniority in the Accardi case. Severance pay also provides income that ties an employee over a period of unemployment as to SUB's. The difference essentially is that with SUB's layoff is only temporary and severance pay deals with the issue of permanent layoff. As in the Accardi the intent of SUB's, is to provide compensation for the lost of the rights and expectations that the employee has accrued over his period of service. It is not to provide compensation for the work that the employee did in the past. The amount the SUB benefits as the amount of severance pay benefits are not at all tied to the amount of work that was done in the past. Moreover, the provisions of the plan are completely inconsistent with any notion that SUB's are to be treated as compensation for work performed. First of all, SUB credits are forfeitable at anytime if the employee incurs a break in continuous service. Therefore, an employee could work for 20 years and then if he incurred to break in service, he would loss all the SUB credit that he had accrued and if he hadn't been laid off in the time, he never would have received any benefit at all. Potter Stewart: Well he -- but all that he would have accrued in 20 years is the same as he would have accrued in two years, doesn't it? Alan I. Horowitz: That's correct. Speaker: Because there's a maximum of 52. Alan I. Horowitz: There's a maximum 52. Potter Stewart: (Inaudible) after weeks? Alan I. Horowitz: At -- at the time that in this collective-bargaining agreement I said existed at time the petitioner was laid off, yes. Warren E. Burger: And this -- for this particular employee was laid off, well -- was he not? Alan I. Horowitz: He was laid off -- William H. Rehnquist: -- and so he'd started all over again when he went back to work in the process of accruing issue of the benefit? Alan I. Horowitz: No. Potter Stewart: He was -- Alan I. Horowitz: He was -- Potter Stewart: -- he was laid off immediately upon his reinstatement Alan I. Horowitz: That's right. He was laid off as soon as he came back to work -- Potter Stewart: He was reinstated then laid off? Alan I. Horowitz: Right, because, according to his seniority status, they've already passed the -- the time when he was then laid off had he been back before. He still have -- William H. Rehnquist: I thought he -- I thought he quitted. Alan I. Horowitz: Well, he -- he first works for period in 1968, then was laid off and then quit. And at that time he forfeit of all the credits they had. He then came back to work and worked for a period of time which enabled him to accrue 16 more credits and he then entered the service. And he -- when he came back he was given those 16 credits that he accrued before he entered the service. William H. Rehnquist: Was he given -- was he also given the part that he had accrued before he quit? Alan I. Horowitz: Well, when you quit you forfeit the benefits. Now, what -- what happen here is that, the employer actually made a mistake and did give him credit for the benefits that he had accrued even before he quit and made payments upon to that but later on the mistake was realized and petitioner had to repay that money. So in effect, he did not get the credit and we don't contend that he should have gotten credit for that time. Most significantly there is a vesting requirement here before the employee is eligible to receive SUB payments. As in Alabama Power, there was a vesting requirement. Here -- no. if the employee works for any period less than 2 years, he does not receive any SUB payments. Even after, the two-year period comes the payments are still contention upon his being laid off. Now, this is completely inconsistent with any notion of compensation, that the idea of SUB payments was compensation and the employee -- if an employee did a certain amount of work he would be entitled to a certain amount of payment for that work whether or not he was laid off and whether or not he manages to hang around for 2 years. John Paul Stevens: Mr. Horowitz, can I interrupt you there? Alan I. Horowitz: Yes. John Paul Stevens: I -- I'm just was little puzzled. The -- the 2 years is the necessary nor to be eligible for any payments. How -- if -- if you -- your opponent were correct in this case, how would he have met the 2-year requirement? Alan I. Horowitz: Well, respondent was willing to count his military service time for the purposes of the 2-year requirement but it was not. John Paul Stevens: For the eligibility but not for the amount of (Voice Overlap) -- Alan I. Horowitz: That's right. It was treated inconsistently for the two different purposes under the SUB plan. The reason I believe that the respondent felt compelled to give credit for the military time is that, that 2-year requirement is -- is the same requirement that is generally occurs throughout the seniority provisions of the collective-bargaining agreement and it's defined through the same definitional section. And it's clear that for -- the more traditional seniority benefits he would have to have been given credit for his time in the army. So, if respondent had not given him credit for time in army it would – he would have been using same definition in giving him credit under that definition for some purposes and not for other purposes. John Paul Stevens: So they in fact agree that the 2 year -- the eligibility is this an aspect to seniority? Alan I. Horowitz: That's correct. John Paul Stevens: I see. Alan I. Horowitz: Moreover, there is absolutely no correlation between the amount of work that is performed by the employee and the amount of benefits that he accrues. He accrues 1/2 credit per week, no matter how much work he does during that week. Harry A. Blackmun: Yes, but do you – do you -- Alan I. Horowitz: Now -- Harry A. Blackmun: -- not conceded that 32 hours is the rule rather than one hour of the exception? Alan I. Horowitz: One hour is certainly the exception. There are probably no instances of one hour. Respondent put on testimony in the District Court and we accept the District Court's finding that as a general rule most employees work 32 hours in any given week or work none at all. That is only for general rule. It's clear that in some cases and place did not manage to work 32 hours. There is an entire section of the SUB plans, Section 4 that is devoted to the question of what benefits are paid when employee does not work 32 hours. Even a -- even if all employees have worked 32 hours, it should be pointed out that that is not the normal amount of work. The normal amount work is 40 hours per week. Employees who work 32 and employees who work 40 accrue the same amount of SUB benefits. Moreover employees who work overtime also accrue the same amount of SUB benefits. Apart from -- apart from the amount of SUB credit they've accrued, the weekly -- the amount of the weekly benefit, the actual money which is paid to the employee has absolutely no correlation to the work that is performed. It depends upon the number of dependents that he has, it depends upon his salary at the time of layoff, not at the time that the credits are earned and it depends on the amount of money in the fund. Now, in fact the -- the fact that it depends to some extent upon his salary at the time of layoff is an aspect of seniority, if anything in determining the amount for this payment – or these payments. That was discussed by this Court in Alabama Power where as well it was noted at the pension benefits that were paid depended upon the employees compensation at the time that he was -- began to receive pension benefits not at the time that he earned the credits for them. Finally, the specific points that this Court mentioned in Foster as indicating some sort of correlation between the amount of work and the amount of earning a credit are absent in this case. There are two factors that this Court mentioned in Foster. First, that vacation benefit -- more vacation benefits were earned by employees who worked overtime, than employees who did not and there was a special provision that was made for overtime. Here there is no such provision. Secondly, in Foster, employees who did not meet the minimum threshold, there you had to work 25 weeks per year in order to get a vacation. Employee -- certain employees who did not work 25 weeks per year were entitled to pro rata vacation. And here there is no such pro rata requirement. An employee who works all the way up to the 2 years is not entitled to any SUB payments at all. Now, we submit that -- William H. Rehnquist: The employees who work less than 32 hours per week under Section 4 of the collective-bargaining agreement are entitled to some short of pro rata SUB's? Alan I. Horowitz: An employee who works less than 32 hours is entitled to the full one half credit – one-half SUB credit. Now, what Section 4 of the agreement does is that it defines what's called the “short week benefit”. That is if an employee works 24 hours in a week, he is entitled to a benefit that he'll be paid as if he had worked 32. But, and -- and the idea I think of that provision is probably -- it was probably put in mostly the instigation of the union is to encourage the employer to make sure that -- I should say to penalize the employer for not allowing employees to work 32 hours per week. It acts as disincentive to the employer, to schedule employees for less than 32 hours per week. Now, as far as how it fits into the SUB plan, an employee who works less than 32 hours per week does get half in SUB credit no matter how many hours he works he maybe eligible for a benefit under Section 4 of the plan. Again he is not eligible for that benefit unless he's already got 2 years of service under his belt. If he receives a benefit under Section 4, he would still accrue 1/2 SUB credit for that time but -- but because he's receiving a benefit he would also have to give up one SUB -- excuse me 1/2 SUB credit for that time. So, he would end up in not accruing additional credits if he was actually receiving a benefit. Petitioner in this case left his employment and went to serve in the military. When he return from his employment he was disadvantage as compared to those other employees who began employment on the same day that he did. Had he remained in a civilian employment, he would have had 52 SUB credits and would have received payments for an additional 22 weeks. Having served in the military he was denied these payments. We believe that this is precisely the result that Congress was intending to avoid when it passed the Veterans' Re-employment Rights Act statute and we submit that this Court should -- should hold that SUB benefits are perquisite of seniority and the petitioner was entitled to his credits. If there are no further questions I'd like to reserve the remainder of my time. Warren E. Burger: Mr. Nims. Michael A. Nims: Mr. Chief and may it pleases the Court. I think that when one understands the supplemental unemployment benefit plan that the Court is considering, one will realize that if anything it has exactly a reverse relationship to seniority rather than being a perquisite of seniority. In the first place, the principle benefit of seniority obviously in a layoff situation is layoff preference and the more seniority the employee accumulates the less likely it is, that he will in fact be laid off, that the layoff will reach his seniority date. The employees -- Harry A. Blackmun: (Inaudible) seniority plan? Michael A. Nims: Pardon Your Honor. Harry A. Blackmun: Isn't that always true of a seniority plan? Michael A. Nims: Yes. Harry A. Blackmun: But this one is so significant -- Michael A. Nims: That's always true of the seniority plan. That's the point I'm making Your Honor that the supplemental unemployment benefit which is the benefit we're talking about here is actually a benefit which is most often used by people with lesser seniority than people with greater seniority. It's more important to people with lesser seniority than people with greater seniority and the point I'm making is rather than being a perquisite of seniority, it indeed operates in a reverse relationship with seniority. John Paul Stevens: But Mr. Nims, aren't there really three classes of -- of seniority that people who are senior enough not to be laid off, people who were in kind of a middle category who gets these benefits, and then the very, very junior people who don't even get this benefit and then the very, very junior people who don't even get these benefits. Michael A. Nims: That's true Your Honor, but that's true with almost any benefit. Indeed I believe it was true with the vacation benefit before the Court in Foster that there, there was a one-year requirement before you became eligible for vacation, you got entitlement to the vacation in the second year by virtue of having worked 25 weeks in the first year. And I -- I don't think that that analysis would make this benefit or the vacation benefit in Foster a perquisite of seniority or it would make every benefit of perquisite of seniority -- John Paul Stevens: No, all I was suggesting was the fact that people who have even greater seniority gets some greater benefit doesn't necessarily take this benefit out of the category of benefits that are affected by the length of service. Michael A. Nims: No, I agree that it doesn't necessarily do that. But the point being that greater seniority once you pass the eligibility threshold so that you're entitled to the benefit, greater seniority does not have any effect on the benefit at all in a positive way. The 2-year man who is eligible to receive a payment will get a benefit as well the 15-year man if the layoff happens to reach his level of seniority and the 5th year – 15-year man will not have any greater benefit, any advantage over being a 15-year man. John Paul Stevens: Well, are you saying that every person who meets the 2 year requirement always gets 52 units? Michael A. Nims: No. It depends upon from the work requirement. John Paul Stevens: Well then, even with among those who were eligible, seniority has an effect on the amount of the number of units and therefore the number of (Voice Overlap) -- Michael A. Nims: No, not seniority Your Honor, working day up to accumulating the maximum of 52 credit units if you haven't worked in 2 years and accumulated the 52 maximum credit units, yes the fact that you haven't done that work may result when you're having a lesser number of benefits. But once you have work in 2 years and accumulated 52 credit units not only increased seniority will not give a greater benefit, increase work won't give you a greater benefit. Further, the amount of the benefit represented by each credit unit also bears a reverse relationship to seniority if it bears any relationship to seniority. The plan provides that the amount of benefit that you'll receive in the event that you ever receive supplemental unemployment benefits is affected by four factors. Number one, the wage rate of your job classification, that wage rate is established by the collective-bargaining agreement for each job classification and has nothing to do with seniority other than in the sense that in some jobs preference is a factor of seniority, and your ability to hold a particular job maybe depended upon seniority. But the actual wage rate for that job classification will be the same whether the individual holding that is a 2 year man or a 5-year man or a 10-year man or a 20-year man. The second factor in the amount to the benefit is the number of dependents that the employee has, obviously that has no relationship to seniority with the company. The third factor in determining the amount of the benefit for each credit unit was the amount of state unemployment compensation which the employee receives from what ever state programs exists in that particular State. That has no involvement with sen -- with seniority and finally, the fourth factor that influences the amount of benefit is the amount of money remaining in the plan as whole. The obligation if the industry is to fund the plan with a finite number of dollars agreed to in the collective-bargaining process then as the plan is exhausted through the layoffs once it reaches a sufficient diminution to key in that part of the formula, the amount of benefit represented by each credit unit drops. So that you actually have the anomalous situation if you're focusing on seniority that the 3-year man is much more likely to have his benefit be 100% of the possible benefit than the 20-year man because if a layoff in fact gets severe enough to reach the 20-year man, you'll likely to have the fund substantially depleted by the previous payments made to persons of lesser seniorities so that the 20 year man in fact finds he's getting a lesser benefit if his seniority number is in fact reached during the layoff. But we don't believe that that kind of a benefit should be classified to be a perquisite of seniority and indeed the -- the testimony in the record below is clear that it's -- it's not thought certainly by the industry and the by the people who negotiated it to be in any sense of perquisite of seniority. Rather it is based upon the formula which is governed by the actual practical realities of the steel industry which found that prior to 1960 they actual had a SUB plan which had a very precise relationship, between how many hours you worked and the accumulation of credit units, and they determined that that wasn't necessary. It created an administrative headache that they didn't need because in point of fact people who are working at least 32 hours, if they worked at all because of the existence of the short-week benefit. And the short-week benefit provides that if you call an employee in during a week and have him worked less than 32 hours, essentially you're going to have to pay him for 32 hours anyway and so naturally your try not to call an employee at all unless you actually have 32 hours of week for him. So the SUB plan and the formula for the earning of credit units in the SUB plan is tied to a formula which in the industry and the practical reality is based upon at least 32 hours of work achieving the earning of the entire -- of entitlement to 1/2 credit unit. Now, whether or not that ever translates into a benefit, of course, depends upon whether the employee has to get laid off and that admittedly is a factor of his seniority, but the benefit as suppose to the layoff is not a factor of seniority. Indeed it -- if it has any relationship with seniority it's a reverse relationship. One of the arguments that the Government has made in this case is that in trying to analogize to other benefits which have been before the Court, the closest benefit according to the Government is the severance pay that was before the Court in Accardi. Respondent believes that that analogy is faulty. Severance pay is normally and was in Accardi very much a factor of seniority. Somebody who had worked for that particular railroad 19 years and the 20-year people were not subject to the discharge but it was people with less than 20-year seniority, somebody who had worked for the railroad for 19 years was entitled to a larger amount of severance pay than somebody who had worked for 18 years and 17 years, and 16 years and back down the line. And that we submit was key to this Court's analysis of severance pay being a long-term benefit which really the notion of compensated service before the Court in the Accardi case really measuring only time on the role as an employee, but the SUB benefit is very different. The 15-year man has no advantage whatsoever over the 2-year man so long as each have accumulated the maximum number credit units available are 52 and indeed as we've shown it might happen to work out that the 15-year man is at a disadvantage because of the diminution in the money in the fund should layoff reach his level of seniority. So we don't feel that the SUB benefit can possibly be analogy -- analogized properly or fairly to a severance benefit. The Government has -- has argued this morning that in a sense the steel industry is acting in an inconsistent fashion in treating the 2-year continuous service requirement as seniority and crediting the veteran for that, but not crediting him with the time in the military for purposes of accruing credit units. We don't feel that's inconsistent at all. In the first place, the applicable bargaining agreements and plans expressly provide for both of those situations. They expressly provide that service in the military will not break continuous service in the company and they expressly provide that there will be no accrual of credit units for the individual during the period of time he's in the military, so they're certainly consistent with the underlying contractual documents, but more important, they're consistent with what the industry regards as the law being as interpreted by this Court and other courts throughout the last several years. Continuous service as that is defined in the pension program has indeed notions of seniority, notion of simply being on the rules as an employee and the industry recognizes that and does not break continuous service for pension purposes, for SUB purposes, for any benefit purposes when the veteran leaves the civilian employee and then comes back within the permitted statutory period. But that's no different than the situation that was in front of this Court in the Foster v. Dravo case in which this Court considered vacation entitlement and this Court pointed out in a footnote that while you have to work in the required number of weeks in order to earn vacation eligibility for any particular year, if in fact a 5-year man has two weeks vacation and a 10-year man has 3 weeks vacation, and a 20-year man has 4 weeks vacation, in that sense under the plan in front of the Court in Dravo, the -- the defendant there, the company there did credit time and service for purposes of determining the maximum amount of vacation eligibility which an individual employee would have, and the Court noted that in its footnote. But that doesn't mean that earning that four weeks vacation that you may have the potential entitlement to is also a factor of seniority, the Court found that it was not. It found that it was conditioned upon a bona fide work requirement that a traditional notion of a vacation is a short-term reward for work actually rendered. And that wasn't changed by the fact that also it's traditional that the amount of vacation you can earn a reward for is a factor of your total service over a large number of -- of years, and therefore a 20-year man may get four weeks vacation while a 15-year man get three. That didn't change the actual earning of vacation in any particular year as being key to a bona fide work requirement, as being reasonably key to such a requirement, that didn't change the traditional notion of vacation in this work site. We think that the same is true with the SUB plan. There is a minimum vesting period of 2 years, but it also should be understood that that period relates only to the actual entitlement to payment of a benefit. It does not relate to the earning of the credit unit, so that the first week in which the individual employee works, he accumulates 1/2 credit unit. He merely has a 2-year eligibility requirement before he can receive a benefit in the event of layoff, but that's -- that's no different than with lots of other benefits which don't kick in until an employee has had some minimum period of time with the company. That's true in many companies of hospitalization benefits or sick pay of many other kinds of benefits which I think the Court would readily agree that if the focus is on the real nature of the benefit, those benefits are thought to be short-term compensation benefits rather perquisite of seniority, but they still may have an eligibility requirement that you be with the company 1 or 2 years before the company starts to fund those benefits for you and we don't think that that changes every benefit that may exist into a perquisite of seniority. We don't think the Court found that in the Foster v. Dravo decision. So in summing up, unless the Court has other questions, we think that the District Court in this case wrote two very detailed opinions. He wrote the first opinion before he had the benefit of this Court's guidance in Alabama Power in which he analyzed why the industry had the work requirement it had, why it had the formula it had, how the benefit was applied and as he interpreted the Court's decisions up to that point in time, he wrote a -- we believe very detailed opinion as to why the SUB benefit was not a perquisite of seniority and why the plan should be administered according to its terms. Following this Court's decision in Alabama Power, he wrote another detailed opinion focusing precisely on the real nature of the benefit and concluding based upon the record made in front of him, that the real nature of the benefit with short-term compensation was substitute for wages in areas where wages had traditionally been paid. We believe those two decisions correctly interpret the plan and the law. We believe the affirmance by the Sixth Circuit Court of Appeals was proper. Would -- we would say one thing, there is of course a conflict between the Courts in this case and the United States Court of Appeals for the Third Circuit which also had the steel industry plan in front it and it's decision in Hoffman v. Bethlehem Steel, but that decision and Your Honors I'm sure we'll read it carefully, was rendered in 1973 prior to either the opinion of this Court in Foster v. Dravo or the opinion of this Court -- of this Court in Alabama Power v. Davis. And the focus of the Third Circuit Court of Appeals in Hoffman was that since it was theoretically possible to earn a 1/2 credit unit with as little as one hour work in a week, the Third Circuit felt that the same bizarre result which this Court had mention in Accardi was possible. But this Court has indicated in its decision in Foster v. Dravo and its decision in Alabama Power v. Davis that that bizarre result theoretical though it maybe is not the appropriate analysis. Harry A. Blackmun: That is theoretical -- Michael A. Nims: It's very theoretical particular in this -- particularly in this case in which there's been testimony as to these industry's that need under its own agreements to bring an individual in for 32 hours if it brings him in for one hour during the week. Thank you. Warren E. Burger: Do you have anything further, Mr. Horowitz? Alan I. Horowitz: I do have a couple points I would like to make Mr. Chief Justice. First, in regard of the comment about the bizarre results, as Mr. Justice Blackmun pointed out, that is merely a theoretical analysis and I'm sure it was theoretical in Accardi as well. The Court there was just using the bizarre results to indicate that the plan in no way attempted to compensate for the amount of work performed. The same is true here. There was absolutely nothing in this plan that indicates that SUB benefits are intended to be compensation. Respondent has noted the four factors that go into determining the amount of the weekly payment that is made, not one of those factors has anything to do with compensation for work. The only work requirement that is involved in this case is the fact that most of the employees who earn this benefits work. There is not a requirement that all employees work. As I discussed in setting out the plan, there are several categories of employees who are not working who can also receive benefits. And essentially the only difference between the work requirement here and the work requirement in any case were there is just a period of service that is required to accrue a benefit, for example, in the most standard seniority situation, is that respondent has seen fit to exclude certain categories of employees on leaves of -- who are on leaves of absence from receiving these SUB benefits. Now, our contention is that, these rights are guaranteed by Congress and the fact that respondent chooses to exclude certain employees who are leaves of absence does not mean that veterans can be excluded from these benefits. I'd also like to discuss the point about whether this is a seniority benefit simply because employees who have 20 years of service and employees who have 15 years of service will receive the same benefit. That's clear that at the lower levels of the seniority ladder there is a seniority distinction made based on length of service. Employees who have more service are eligible for the benefits, employees who have less than 2 years or not, employees who have more service may get up to the 52 credit maximum -- Byron R. White: But how long does it take to accumulate the 52, 2 years? Alan I. Horowitz: It takes 2 years, yes. Byron R. White: So that once you've worked 2 years and accumulated your 52 credits from then on length of service doesn't count, or how much you worked doesn't count? Alan I. Horowitz: That's correct. That's correct Your Honor. Byron R. White: Any (Voice Overlap) -- Alan I. Horowitz: Unless -- unless -- Byron R. White: (Voice Overlap) anytime from 2 years on just no -- just no difference, but up to that time -- Alan I. Horowitz: Up till that time there is a difference. And we submit that that -- Byron R. White: And that's the – then that's the advantage that's being claimed here. Alan I. Horowitz: That's right. There's – it's as of no significance of petitioner that everyone -- whether everyone above him had 52 units or whether some of them had 52 and some of them had 200 and some then had 300. Potter Stewart: But no -- no -- Alan I. Horowitz: That wouldn't have –- Potter Stewart: -- nobody can have more than 52? Alan I. Horowitz: That's right. Nobody can have more that 52. Potter Stewart: So nobody can have 200 or 300? Alan I. Horowitz: No, but -- it wouldn't make any difference in this case if someone could have 200 or 300. Byron R. White: But you can have less? Alan I. Horowitz: Yes, you can have less and petitioner had less. Byron R. White: -- and then -- (Voice Overlap) says he was given less and he was entitle to the 52. Alan I. Horowitz: That's correct. Potter Stewart: An employee for the first 2 years is totally ineligible therefore he doesn't acquire any SUB's -- Alan I. Horowitz: He -- he acquires credits. Potter Stewart: -- but -- but then (Voice Overlap) – Alan I. Horowitz: That they're not good for his -- Potter Stewart: -- on the first day of the -- of his third year if he's worked at least 32 hours every week in the first 2 years? Alan I. Horowitz: He would have -- Potter Stewart: Does he immediately get 52? Alan I. Horowitz: Well, -- no, he gets -- he gets 1/2 per week so after a year he has 26. Potter Stewart: Yes. Alan I. Horowitz: He has -- he has some writ and allege of 26 but they're not good for anything. If he's laid off, he can't collect any payments. Potter Stewart: But my question was -- Alan I. Horowitz: So -- Potter Stewart: -- after on the first day of the third year -- Alan I. Horowitz: Right. He would then have 52 -- Potter Stewart: -- if he's worked at least 32 hours -- Alan I. Horowitz: That's correct. Potter Stewart: -- a week for each of two -- of the previous 2-year, does he immediately have 52 SUBs? Alan I. Horowitz: That's -- that's right. He would have -- he would -- Potter Stewart: (Inaudible) Alan I. Horowitz: 52 by that, yes. Potter Stewart: Yes, right. John Paul Stevens: Mr. Horowitz, other than the interrupted service because of military duty, could a man get -- satisfy the 2-year requirement without also accumulating the 52 units? Alan I. Horowitz: Yes, if he was on some leave of absence during the 2 years that -- John Paul Stevens: Any other leave of absence -- Alan I. Horowitz: -- was not eligible -- John Paul Stevens: -- he could still be accumulating his 2 years with earning any credits? Alan I. Horowitz: That's correct and if he was on layoff status as well he would be accumulating his 2 years. And I just like to briefly allude to the Foster decision which respondent has cited. In Foster as this Court explained in Alabama Power, the Court relied on the fact that vacation benefits are understood to be directly related to work, that there are (Inaudible) for worked performed. And that there the Court did not find that there was any reason to diverge from that understanding but here where there's clearly a seniority aspect to this benefit as we've just discussed. The question then is whether the benefit is to be characterized a short-term compensation for worked performed and we submit that there is no -- Byron R. White: This is a -- this is a factor to seniority and one just pointing the 2 year eligibility -- Alan I. Horowitz: And for the number credits. Byron R. White: And the -- and also the work credit. Alan I. Horowitz: The number of credits aren't, correct -- Byron R. White: Well -- Alan I. Horowitz: -- whether by work or by some other -- Byron R. White: -- you say that he – if he hadn't been away, he had been working and would -- would -- would not only have been satisfying his 2 year eligibility requirement but also accumulating credit. Alan I. Horowitz: That's correct. It stipulated that had he remained in employment he would have had 52 credits at the time. If there is no further question, thank you. Warren E. Burger: Thank you gentlemen the case is submitted.

Warren E. Burger: We’ll hear arguments next in Number 120, Ehlert against the United States. Mr. Halvonik, you may proceed whenever you’re ready. Paul N. Halvonik: Mr. Chief Justice, may it please the Court. The petition in this case is a conscientious objector, being such, he quite naturally refused to submit to induction, he was tried for that offense, failure to submit to induction, he’s found guilty -- Warren E. Burger: Would you keep your voice slightly higher? Paul N. Halvonik: Yes, Your Honor. He was found guilty and sentenced to two years in prison. I observed that it was a conscientious objector, however, that claim has never been passed upon by his local board and the reason for that is he did not become a conscientious objector until after he received his notice to report for induction. He couldn’t apply for the status before he was conscientious objector and at the time he became a conscientious objector, according to the local board, it no longer had jurisdiction to review his claim and that the Government contends is correct reading of the selective service regulations and the selective service law so that an objector such as Ehlert can never have his claim heard. We think the Government’s risk misreading the regulation because there is a regulation that provides for reopening of classifications, reconsiderations by the local board, if after an order of Court for induction has been mailed, there has been a change in the registrant’s status resulting from circumstances over which the registrant had no control. We contend that that regulation is applicable here. Warren E. Burger: You mean has changed in attitude or something over which he had no control? Paul N. Halvonik: Yes Your Honor but the Second Circuit and other Circuits following the jury decision have called it crystallization of conscience. When that moment arrives, when he decides that he can do nothing else but not participate in war, when that moment comes, its crystallization is the circumstance over which he has no control and which -- Warren E. Burger: Well, is it – do they say in those cases that the circumstance was one over they hadn't approached or he had no control or the time or both? Paul N. Halvonik: Well, it comes at a time which is after the order report for induction. The cases to which I refer all say that the reopening occurs under 1625.2 and that language in that regulation is that you have a reopening if there were circumstances over which the registrant had no control. The theory of the majority below in the Ninth Circuit here that one does have control over his conscience and for that reason the registrant wouldn’t come within the regulation. I don’t think the Government is currently, at least not being enthusiastically supporting that view. The Government seems to say now that this isn’t a circumstance within the meaning of the statute, they cite no authority for that and they seem to claim that a circumstance has to be some sort of external event that’s verifiable. I think that -- confused with the circumstances within the meaning of the regulation, the circumstance I assume the regulation means its approximate circumstance. That is to say, if when after he receives a notice to report for induction, should be struck by an automobile have a leg broken, the circumstance that results in the reopening is not being struck by an automobile but having a broken leg. It’s not the external event if you will but personal -- Speaker: Some of us on this end of the bench are having great difficulty in hearing you. Paul N. Halvonik: I’ll try to speak up, Mr. Justice Harlan. Speaker: Would you please. Paul N. Halvonik: Another analogy might be since the Government seems to be saying that has to the event that’s externally verifiable should a man after receiving an order to report for induction become mentally incompetent. I think we would say that there had been a circumstance for which he had no control which should intervene and which required reclassification. Now, there would be nothing outside the man that we’d look to that, we would call a circumstance and yet without torturing the language at all, we would say that some circumstance had occurred that changed the status. He was no longer competent, he was no longer a person who fitted in to the scheme of the manpower pool for selective service system. Potter Stewart: I suppose it’s clear that if he -- when on an automobile accident that cut his leg off, so would that under the regulation you and the Government would agree would there be a circumstance beyond his control that would clearly affect his status on the selective service, but that if he enrolled as a bonafide student and as an undergraduate and a bonafide at college, after receiving an induction notice that would clearly be something within his control and would not justify reopening, you would both be agreed on those two appointed position according to the regulation? Paul N. Halvonik: In both agree in both of those cases. Potter Stewart: And the question is here whether a status of conscientious objection which my hypothesis crystallized or occurred after the induction notice falls under the one category or the other, is that what this case is about? Paul N. Halvonik: That’s partially what this case is about. I think that that’s the -- the principal controversy at the moment, it seems to me there’s another problem here. If this sort of case involving a conscientious objector -- if we should conclude that this is not a circumstance within the Government’s theory, that this isn’t the sort of case where this regulation applies, then perhaps the regulation isn’t authorized by Congress because Congress has said that nothing contained in this title shall require a conscientious objector to serve and the conscientious -- Potter Stewart: What's Congress said about divinity students for instance? Paul N. Halvonik: I’m not sure precisely if that is the same provision, nothing but it would still be different, I would get to the different point with any other classification other than a conscientious objector could take advantage as the Government suggests of getting out once he gets in the army and that would apply to divinity students I suppose as well but a conscientious objector -- Potter Stewart: I’m saying about a person who enrolled in a divinity school, after receiving his induction notice and the regulation as it is written would not allow him to -- Paul N. Halvonik: That’s true, that’s something over which he definitely would have some control. Potter Stewart: Would have control although a divinity student as I thought was expressly exempted by Congress from being inducted. Paul N. Halvonik: But what you’re suggesting there I think is that -- my interest here was not whether he had control or not and that he can control the circumstances perhaps, get out and perhaps it wouldn’t be authorized to the divinity student neither, I’m not sure that there isn’t a real problem with cutting off any of these late maturing claims, but it seems to me clearly, the regulation itself contemplates a reopening when the claim is one that couldn’t have been made before and over which the man had no control and that’s the precise case that we have here. At least we have that facially in his application, he’s made a prima facie case that he had late crystallization that was conscientious objector I believe and additionally has made a prima facie case that he is a conscientious objector, and in that situation we contend there should be a reopening. And that we just point out to emphasize additionally that if the regulation isn’t read that way, there is no form for this man. The Government at certain points in the brief seems to suggest that he’s been dilatory but this isn’t just a late claim, this is a late maturing claim, he couldn’t have made the claim before he received the order to report for induction because he was not to his conscience and his mind the conscientious objector at that time. Potter Stewart: I gather that there’s a good deal of difference of view between you and your brothers on the other side as to whether or not there is a forum for this man. I understood you to say there’s no forum whatsoever if you don’t prevail in this case and I understand it from the Government’s brief that they concede and tell us, advise us that his forum would be after induction when he asserts his claim of his conscientious objector in the army, that the army has basically the same standards as does the selective service law with respect to conscientious objectors? Paul N. Halvonik: But the difficulty with that -- Potter Stewart: Have I misunderstood the Government’s brief? Paul N. Halvonik: I think you understand it precisely and the difficulty with that position is this Court noted in the United States -- in the Malloy case in the footnote quotation from United States v Freeman in footnote six, there are conscientious objectors in Mr. Ehlert’s who cannot submit to induction, so that’s the form they can’t reach and their objection is to any participation with -- Potter Stewart: With regards to statute doesn’t protect those who cannot submit to induction, maybe the Constitution does but the statute talks about service doesn’t it? Paul N. Halvonik: Yes, but the -- Potter Stewart: Not induction? Paul N. Halvonik: -- the statutory scheme is to permit a man to follow his conscience and not submit to -- Potter Stewart: Yes but what’s the statute? Paul N. Halvonik: -- not participate in the service at all. Potter Stewart: But would the Congress write -- it didn’t say that they’re exempted from being inducted, did it? Paul N. Halvonik: With Congress, they have to do alternative service that’s true. Potter Stewart: Yes. Paul N. Halvonik: But they’re exempted from being inducted into the armed forces, yes. Potter Stewart: Inducted? Does it say so? You’re talking about the words that’s not in here. Paul N. Halvonik: Well, they can’t be subjected to combatant training and service in the armed forces of the United States. But once one is abducted, that’s what occurs. Potter Stewart: Not if he immediately files a conscientious objector application, is he? Paul N. Halvonik: The conscientious objector, however, in the conscientious objector such as Ehlert cannot submit to induction into the armed forces. Potter Stewart: Well, that’s a (Inaudible) but the -- even if his objection had been -- Paul N. Halvonik: We pointed out in our brief Mr. Justice -- Potter Stewart: My point is that Congress doesn’t protect the conscientious objector from being inducted? Paul N. Halvonik: I think it does Your Honor, we -- Potter Stewart: In which words? Paul N. Halvonik: And we pointed out -- Potter Stewart: The word that the Congress used. Paul N. Halvonik: We pointed out in our brief, in our closing brief here that the legislative history of the 1967 Act shows that there was originally a provision in that Act to provide the conscientious objector, first submitted to induction and that was specifically removed and the point was made in the debates on the floor that there are people who cannot submit at all and that’s what their conscience is about, and this -- Warren E. Burger: Had not the army -- has not the military service allowed conscientious objector claimed to be made within that framework even after they’re in a combat zone? Return them to the United States for that to process them? Paul N. Halvonik: Military will of course, that’s the claim that matures after you're in the army. There’s another problem with going to the army for them. Warren E. Burger: That's I though what Mr. Justice Stewart was probing at that there is another remedy available to him? Paul N. Halvonik: But he can’t reach the remedy because he can’t submit to induction. His conscience won’t permit him to, but even if he did, we still are not sure whether that would be the case because the army regulation is designed to provide a remedy for those who become conscientious objectors after they enter the service and this man became one before the time for induction came. Harry A. Blackmun: Mr. Halvonik, I would like to join Mr. Justice Harlan’s remark, do try to keep your voice up, it’s hard to hear you over here. Paul N. Halvonik: Very good, I shall try again Mr. Justice Blackmun. The only argument that I can see, the Government essentially says that circumstances should not mean these kind of circumstances, I cannot see any reason for that and we’ve tried to meet that in the brief and I’ve tried to meet it here. The only other argument that the Government has made in favor of its construction is that it makes for efficiency and I think that’s wrong. It may result in less burdens on the Local Selective Service Board but that inefficiency are not coterminous, they’re not synonymous, in fact sometimes they’re antagonistic. If the Selective Service doesn’t want to look at conscientious objector claims at all, and then just ignores them all, the local boards won’t have any hearings. I suppose that it makes life easier for them but that doesn’t make them more efficient in their job, because it’s their task to remove from the manpower pool those people who Congress says are not to serve, and that’s their job, and the construction, the petitioner seeks in this regulation promotes they’re doing that job and promotes assuring that a man such as Ehlert doesn’t get to the induction center, doesn’t have to refuse and make for inefficiency throughout the governmental system because the congressional scheme is to keep conscientious objectors out before that point, so that they’re not prosecuted and they’re not going to jail. I mean, that place is the burden, shifts the burden if adopt the Government’s theory from the local boards. Speaker: Would you say, Congress, the straight forward regulation was passed and (Inaudible) claimed by the administration, all conscientious objector claims had to be filed before a notice of injunction first? Paul N. Halvonik: Well, that essentially is what the Government is saying the regulation says, and I would say that such a regulation would not be authorized by Congress because it provides, because the Congress says conscientious objectors shall not be required to submit and subject to combatant training in service. Speaker: Why? Paul N. Halvonik: Now, it's quite different from the Government regulation that says if you’re a conscientious objector, before you receive an order to report for induction and you don’t tell us until after that you’re cut off that slept on your rights, that would raise some interesting questions but that’s not this case, he didn’t sleep on his rights. He wasn’t a conscientious objector until he receives an order to report for induction. Congress has said conscientious objectors should be exempted. I don’t see how they can adopt to regulation that flies in the facie, the congressional -- Thurgood Marshall: Suppose Congress said that when you receive the order of induction, you are inducted? Paul N. Halvonik: I’m not sure I understand but you mean that you wouldn’t have to go a station somewhere, that you’re inducted as soon as you receive the order to report for induction? Thurgood Marshall: What would happen to this case? Paul N. Halvonik: Well, the difference in that I suppose would be that his claim wouldn’t have crystallized and it’s early been induct after the point of induction if that were the case and then I think the forum would still have to be provided for him and the service would provide such a forum. Thurgood Marshall: What forum? In the service or in army? Paul N. Halvonik: Well, would have to be in the service because as you define it, he is already inducted as soon as soon as he gets the notice, so he’s immediately in the army but I don’t think Congress was liable to adopt such as system because nobody can refuse to submit to induction under that period. Thurgood Marshall: If this so, you’re applying to take a position that he didn’t voluntarily get inducted or so? Paul N. Halvonik: I think that would probably be the case, yes. Thurgood Marshall: My big problem is they’re suddenly (Inaudible) and taking the old one. Paul N. Halvonik: Well, I think we find that in all kinds of experiences in life particularly in those where it’s a combination of cognitive fact of this and emotional fact to this to draw a romantic analogy, I don’t think you’re will yourself into love with somebody whom you know, it may come for a moment and then even you can’t detach yourself very easily from it either, even though everything rational on a cognitive. Thurgood Marshall: My point is not that he is a conscientious objector, he can’t even take the oath in order to dedicate in, rather than trying to taking the oath to engage in war, is that his position? Paul N. Halvonik: Well, his position was that he would not submit to induction Your Honor. Thurgood Marshall: Regardless if nothing happen afterwards? Paul N. Halvonik: Did anything happen after he refused to submit? Thurgood Marshall: Only if he was inducted and started to see all the vicinity of the army and stayed right there in the camp and litigated and all, he couldn’t go through that? Paul N. Halvonik: He couldn’t become a member of the armed forces now. Thurgood Marshall: Yes, just couldn’t? Paul N. Halvonik: Just couldn’t and that’s not only Mr. Ehlert, that’s -- there are a lot of religious sects, a number of religious sects that also adopt that philosophy. Thurgood Marshall: Which religious sects -- Paul N. Halvonik: Jehovah’s Witnesses as far as I know. Thurgood Marshall: Which religious sect says that when you get your induction notice you don’t like war? Which sect is that? Paul N. Halvonik: Well, that was a different point from the one I was trying to make Mr. Justice Marshall. I was just saying that there are religious sects that cannot submit to induction. There’s no religious sects that says that when you decide at the last moment, you don’t go to war, that that’s part of the philosophy but it does happen, I might point out the United States Court of Appeals for the Seventh Circuit on January 5, adopted the construction of -- we advanced here in the Nordlof case, they reverse their previous position and joined the Second Circuit, and other circuits that have adopted the construction we contend for and that case involved the Jehovah’s Witness. A man who married a Jehovah’s Witness before he receive his order to report for induction and went to through a period of talking with his wife and her parents and hadn't decided he was a Jehovah’s Witness yet and really it didn’t put it all together until after he’d received the notice to report for induction and then he talks some more and he finally concluded that he was indeed a conscientious objector and he didn’t raise it until he got down to the induction center and that’s when he raised the point and the Seventh Circuit held a very scholarly opinion that this man was entitled for benefit of regulation Section 1625.2. William O. Douglas: What is the name of that case? Paul N. Halvonik: It’s United State v. Nordlof, Mr. Justice Douglas, it was decided on January 5. William O. Douglas: Nord? Paul N. Halvonik: Nordlof, N O R D L O F. Potter Stewart: And he hadn’t communicated with his Selective Service Board at all until he got to the induction? Paul N. Halvonik: Until he got to the induction center. Potter Stewart: Is the induction center an army establishment or is in a selective service establishment? Paul N. Halvonik: In this context, the two circuits that had faced the question have decided that it’s an extension of selective service. Potter Stewart: It’s run by the United States Army? Paul N. Halvonik: Well, that maybe but of course the Government contented for years that it was an exhaustion of remedies that always occurred there if you didn’t go through physical or something of that nature and so that it was really an extension of selective service and that both the Second Circuit in Stanford, now the Seventh Circuit in Nordlof have come to the conclusion that they are extensions of Selective Service System for the purposes of re-openings where a change has occurred after the notice to report for induction and that’s not so strange because it happens all the time in physicals, you know, physical examinations if its determined down there. Even though the application had been made before if its determined that the selective service induction center that the man isn’t physically fit, if there’s been a change, he’s taken out of the -- he is given a one Y or four F and he’s not inducted. But anyway, I was saying that I don’t think that our construction at all produces any problems as far as the efficiency of the selective service system that the construction that we seek in this regulation would result the Selective Service System doing what its job is and not having conscientious objectors in jails where none of the purposes of penology are served. And on the other side, the construction that we seek provides nothing but a forum for those who have late maturing claims. And one thing they have to establish is that their claim is late maturing under the construction we seek. A man who’d been dilatory or slept on his rights wouldn’t get the advantage of the rule that we are seeking here, we don’t foreclose that possibility but as far as Ehlert’s concerned, his was a late maturing claim, he’s made a prima facie case and that ought to be enough and there is no reason and no suggestion by Congress that conscientious objector are to be treated differently from other people who are deferred or exempted under the draft and yet that is what happens if we accept the Government’s construction, because persons with other sorts of claims, other sorts of change of status for example, somebody becoming a sole surviving son after a order to report for induction, even the Government concedes that their cases can be reopened. There’s no reason to think that the conscientious objector shouldn’t be reopened, the congressional history is clear that a conscientious objector is supposed to be given the same sort of treatment as every other person exempted or deferred. Potter Stewart: Well, on the other hand, you concede that a bonafide undergraduate college student could not get a reopening, if he went to college after his induction notice, don’t you think? Paul N. Halvonik: Well, but that as a matter is not beyond his control, that’s what we’re talking about. Potter Stewart: But you’re talking -- you just told us that the conscientious objectors are the only ones except for military service who were treated this way. Certainly, the college student who goes to college after his induction notice is treated this way. Paul N. Halvonik: But he’s treated that way because it isn’t the matter beyond his control but everybody else was something -- Potter Stewart: But here the question -- Paul N. Halvonik: But that’s the reason he’s not treated the same. If students were drafted to colleges and a man received his draft notice to school after he received this draft notice report for induction, I would assume that he would be exempted. It doesn’t happen that way but it does happen that way with conscientious objectors, there is a moment in time -- Potter Stewart: Drafted by his conscience or -- Paul N. Halvonik: Yes. Potter Stewart: -- or by the almighty or whatever. Paul N. Halvonik: Precisely, of course that’s the analogy that the Jehovah’s Witnesses use. Potter Stewart: The Second Circuit has -- Paul N. Halvonik: The Second Circuit has Your Honor -- Potter Stewart: I don’t quite understand. Paul N. Halvonik: It’s about evenly divided. Now, the Government said the way to the circuits was with them but I think it’s even now because with the seven switching. May I say that the contrary construction goes back by countering in the Government’s construction goes back to United States v. Shobel of the Seventh Circuit, that’s where they all began and that case is now overruled in the Seventh Circuit and one other point I should make about the Nordlof case is that relates to the decision by three members of the panel in the Seventh Circuit. There’s a notation in the footnote that it was circulated among all the members and majority agree with inclusion that Shobel should be expressly overruled. If there are no further questions, I’d like to reserve the rest of my time for rebuttal. Warren E. Burger: Very well, Mr. Halvonik. Paul N. Halvonik: Thank you, Mr. Chief Justice. Warren E. Burger: Mr. Rehnquist? William H. Rehnquist: Mr. Chief Justice and may it please the Court. Let me advert very briefly to the facts as they appear to the Government to bear on the appropriate decision of this case. On July 24, 1961, the petitioner registered for the draft because he reached age 18. On January 17, 1964, the petitioner returned his classification questionnaire to the local board making no assertion of claim to conscientious objection. On April 15, 1964, petitioner was ordered to report for a physical examination on May 26, 1964. In June 16, 1965, the petitioner’s induction notice was mailed to him directing him to report for induction on July 14, 1965. One day before the date scheduled for his induction, on July 13, 1965, the petitioner mailed a letter to his local draft board asserting that he was a conscientious objector. The petitioner was tried for violation of the applicable statute convicted by the District Court and the judgment was upheld by the Ninth Circuit in a split of eight to five in that Court. The questions raised by the petitioner go to the proper interpretation of the regulation whether the regulation as interpreted by the court below was consistent with the statute. The regulation as is set forth in the briefs, the critical language is that reclassification after mailing of induction notice is cut off in all cases unless it is based on a claim of “change in the registrant’s status resulting from circumstances over which the registrant has no control, and the regulation as construed by the court below is designed to exclude all post notice of induction claims subject only to a very narrow exception and the exception is -- requires two facets, one must meet both facets to come within the exception. The first is that it be a non-volitional change and the second is that it be a change resulting from circumstances over which the registrant had no control. Now, there were two opinion, three opinions in the court below agreeing with the result of affirmance of the conviction. Judge Kilkenny writing the court’s majority opinion stressed the volitional nature of a change in conscientious belief. Judge Donahue with the concurrence of three of the other judges of the panel who also concurred with Judge Kilkenny stressed the common sense in dictionary definition of the word circumstances in the context used in the regulation concluding that as used the term referred to some event external or extraneous to the registrant and therefore that it was unnecessary to engage in the debate that had gone on between the other circuits which had considered this matter as to whether a change in conscience was volitional or not since regardless of that, such a change was not a circumstance as used in those regulations. Both Judge Kilkenny and Judge Donahue relied also on the serious practical consequences of a contrary construction as expounded by Judge Merrill for the dissenters in reaching the result that they did. Potter Stewart: How has the selective service system as to regulations bring the ambiguity? William H. Rehnquist: I can’t answer that Your Honor. There’s no doubt that this thing is something that can reasonably argued either way. I think that -- I beg your pardon? Potter Stewart: I say there’s no question as to its ambiguity? William H. Rehnquist: I can’t -- Potter Stewart: Splits the circuit intramurally split between circuits You read either way? William H. Rehnquist: I do know that the selective service system is presently in the process of a complete overhaul of its regulations and hopefully this type of thing will be ultimately eliminated and I think also that you know, not just in this situation but in others, something that when you write it appears perfectly clear, you get a particular fact situation to apply it to and all of a sudden there’s an ambiguity you didn’t notice there when you were writing. Potter Stewart: What was it made, the sentences are -- William H. Rehnquist: Gearey was, the first Gearey case was 364 F.2d which would place it I suppose four or five years ago. Potter Stewart: (Inaudible) William H. Rehnquist: (Inaudible) was back in the 50s I think. But I think -- I believe Gearey was the first case that went the other way though I’m not positive about that. Harry A. Blackmun: Mr. Rehnquist, may I ask you a question? To what extent do you rely on the so called Department of Defense directive? William H. Rehnquist: Well, we think it’s an important factor in this case, Mr. Justice Blackmun. We have not only set forth the DOD regulation, we have checked within the past week with the Office of the General Counsel of the Army and received his assurance that this type of claim that was not considered on the merits by the Selective Service System is considered when raised under the army system -- Harry A. Blackmun: You know, perhaps you can straighten me out as to the DOD directive. The first sentence speaks of federal courts upheld that a claim to exception must be interposed prior to notice of induction and failure to make timely claim constitutes a waiver, this I take it is the Government’s position here. Now, the second sentence seems to me to be internally inconsistent. It says a request for discharge after entering military service base solely on conscientious objection which existed but was not claimed not prior to notice but prior to induction. Is it internally inconsistent? William H. Rehnquist: If read literally, I suppose it is. I think taken in context with the first sentence, Mr. Justice Blackmun that the focus is notice of induction rather than induction and that’s the interpretation that the general counsel of the army places on. Harry A. Blackmun: Certainly, it doesn’t say that, does it? William H. Rehnquist: It doesn’t say it in so many words, no. As you commented Mr. Justice Stewart in the cutting of a claim for a purely voluntary reason, the case of a teacher who becomes a teacher after notice for induction. Now, that’s been upheld by the Third Circuit this past year in case called Clark versus Volatile which is the same case that in September went the same way as the Second Circuit had gone in Gearey. So to say as petitioner does that we treat conscientious objectors in some invidious way that we don’t treat any other kind of claims for a change in registration just isn’t so. In fact, -- Potter Stewart: Well, it depends really. I think on whether you accept the proposition that a conscientious objector whose objection crystallized or post induction of it is somebody who comes under the regulation. If he is, if he is then you treat him differently from the way you do the man who was hit by an automobile had his leg cut off. If on the other hand, you don’t accept the fact that he comes under the definition then you’re quite right that you treat him no different from the way you treat a man who goes to divinity school after his -- after his notice of induction was sent. William H. Rehnquist: Yes, and certainly if we -- Potter Stewart: Is that it? William H. Rehnquist: If we treat him contrary to the way the regulation says we should treat him, you don’t need any further argument, I suppose, to conclude that we’re doing wrong by it but we say the regulation construed perfectly consistently with its language does cut off not just conscientious claims but any claim that maybe result from volition and of course before notice to report for induction, there are any number of things that one may do volitionally to obtain exemption. One may go to school, one may enter the ministry, one may become a teacher, these are barred and there has been no suggestion in any Court that’s considered the point that they may not be barred post induction notice. So, the unifying theme of the regulation is the notion that not only is volitional move to obtain exemption totally cut off with the mailing of the induction notice but that only those non-volitional types of claims which are capable of ready verification by the local board consisting as it does of laymen meeting irregularly. The sole surviving son exemption, a brother shot down in a plane of something like that that can be verified with a letter or a phone call is something that can clearly be disposed off by the board one way or the other between the time of notice of induction and the time of reporting for induction which is near as I can tell from these cases seems to have run during this period of time of -- from between three and four weeks. A claim to a change in ones conscience, a change in conscientious status requiring as it does both the ascertainment of a present state of mind and a determination of whether or not that is a change of the state of mind one held prior to induction is a factual and of extraordinary difficulty and even had this petitioner mailed his claim the day after he received his induction notice, a local board would have had great difficulty passing on it, prior to the time of induction deciding it one way or the other and certainly when he mails it on the day before he is scheduled to report for induction, he assures the absolute impossibility of the board being able to pass on it. In short, he assures himself regardless of the merits of his claim, regardless of the merits of his conscientious objector claim or of his claim to a change of mind of getting a postponement in the date set for induction. And in effect, somebody else who had a higher lottery number who is not being called that month is put into the manpower pool to replace him while his case remains in limbo for some un-ascertainable period of time while the local board makes the determination if you follow the Gearey procedure and we’re to adopt Gearey as to whether in fact there has been a change of status or not. Potter Stewart: Mr. Rehnquist, you don’t necessary do it now at all but I hope that you will before you finish your argument, state as clearly as you can if you can the Government’s position with respect to assuming the bonafides on this conscientious objector status just where and when can he assert the claim and how would it be processed? I don’t mean in your own order but I hope you will explain. William H. Rehnquist: Yes, well, let me address it right now if I may. The DOD directive which we cite and the assurances we have from the general counsel of the army as of this past week are that a registrant whose claim is not passed upon on its merits because -- it arises post induction notice isn’t passed on by under merits by the Selective Service Board maybe offered and considered under the army regulations as soon as the registrant is inducted. Potter Stewart: That would be before any combatant training or service? William H. Rehnquist: My understanding is that as soon as that kind of a claim is made in the army, the man gets what is in effect a desk job in a situation where he is not further processed into the military system until there has been a disposition one way or the other of his claim. Speaker: If he prevails he gets discharged? William H. Rehnquist: If he prevails he gets discharged. The petitioner claims that since under his view of the statute, it confers a right of exemption on the conscientious objector and doesn’t expressly authorize any regulation which may limit the time in which that claim can be asserted, that the regulation is here applied by the court below as inconsistent with the statute and therefore unauthorized. I think this claim proves too much and would cite at least two points in support of that observation. There is no expressed statutory authority in 6 (j) for barring the assertion of conscientious objector claims which have existed previous to induction notice but haven’t been asserted and yet even the Court’s which have gone the Gearey route have said that this is a proper function of the regulation that the man who was always a conscientious objector but fails to assert it until the time he receives the induction notice can validly be barred and yet there’s no statutory authority for that. It’s simply the application of a procedural rule that is fairly designed to both permit reasonable processing of these claims and to effectuate a necessary ultimate cut off date and change it. Potter Stewart: Well, that’s waiver I suppose and after all you can even -- you can waive even constitutional rights? I suppose that could be misunderstood in terms of waiver, you had an objection but you didn’t make it? William H. Rehnquist: Well, but Mr. Justice Stewart, his waiver is so significantly different from a procedural cut off, neither of them are expressly authorized by statute, both of them are well recognized in almost any system of procedural adjudication. Perhaps waiver because it is -- you know, something that every lawyer responds to almost instinctively with an affirmative notion, maybe waiver is different but I don’t think it that -- it’s completely different and I think the type of procedural thing we’re talking about here is by no means completely distinguishable. The same Section 6 (j) of the Act that confers the right of conscientious objector exemption also confers in unqualified terms a right of appeal and although this precise language is this, “Any person claiming exemption from combatant training and service because of such conscientious objection shall if such claim is not sustained by the local board, be entitled to an appeal to the appropriate appeal board”, and yet I suspect even petitioner wouldn’t contend that the president under his general authority to promulgate rules isn’t entitled to set some time limit as within which an appeal from an adverse decision of a local board must be taken to the appeal board. Surely, on the day before you need to report for the induction, you can’t come in and say, “Well, I’ve decided to appeal to the appeal board from the local board’s adverse ruling two years ago, that I wasn’t a conscientious objector.” So, it simply is an overly simplistic to use an overly used word. Construction of the statute to say that because it confers a right of conscientious objection, there may be no procedural regulations governing how that right is to be set forth or how it is to be processed, and as occurred earlier in the colloquy between counsel and I believe Mr. Justice Stewart. If you parse the sections sentence by sentence, the only unqualified right conferred, even if you take a literal reading is the right to be exempt from combatant training and service. The right to be exempt from induction is conferred only upon those who are found by their local boards to be conscientious objectors. I don’t think you can read either one of those statutes’ sense as literally to the exclusion of the others. I think that the overall result that you get from a fair reading of the section is that there is a substantive right of conscientious objection and that reasonable rules are permissible so long as they serve a legitimate and to the Selective Service System and its administration and don’t unreasonably restrict the right of the conscientious objector claimant to assert his claim in that forum. Speaker: Are there any figures available, Mr. Rehnquist, as to the number of the supposed induction that changes your judgment claim? William H. Rehnquist: Mr. Justice Harlan, there are and I regret to say that the Selective Service System in past years not only may have been guilty of writing ambiguous regulations. It has been guilty of not keeping as much statistical information as it should. What we have is figures for August, September, October and November of 1970 and this is the first time selective service nationally began keeping these figures. During this four month period, there was a total manpower call of 42,000. During the same four month period, the total number of registrants who asserted post notice conscientious objector claims was 2695. In other words, the very statement of petitioner in his brief that the service will be easily able to adjust to this insignificant insubstantial burden is squarely at odds with these facts. 6.42% of the total manpower call in the last four months is asserting post notice conscientious objector claims. Hugo L. Black: Not just conscientious? William H. Rehnquist: Not just conscientious objector claims but post notice conscientious objector claims and if you take the states with large metropolitan jurisdictions, the facts are even more startling. California which leads the nation had a draft call during this period of time of 4191 total men called into service. During that period, in California, 490 persons asserted post notice conscientious objection claims. If you take the 10 states with the highest rate of post notice conscientious objector claims, the average rate of those claims is 11.22% of the total men called to the service in those states. Now, -- Hugo L. Black: You have those 10 states in your brief? William H. Rehnquist: Mr. Justice Black, I apologies to say we didn’t even have this figures at the time we wrote the brief. The brief was submitted the first of -- Hugo L. Black: What State had the most? Do you know? William H. Rehnquist: California had the most, New York next, Michigan, Massachusetts, Washington, Connecticut, Colorado, Oregon, Rhode Island and the District of Colombia in that order. Speaker: Would you submit those? William H. Rehnquist: Yes, we would be happy to Mr. Justice Harlan, prepare perhaps a more detailed summary of the figures that I have given here orally and file them with the Court as soon as possible. Potter Stewart: One other thing Mr. Rehnquist to go back when I asked you about the forum available to men situated as this petitioner is and you told us about the army practice. Did I understand you to say that should have a communication from the army within the last 10 days or so? William H. Rehnquist: Yes. Potter Stewart: If unless that’s confidential or for some other reason, could you make that available. William H. Rehnquist: It certainly isn’t confidential Mr. Justice Stewart and we will see to it with the Court’s permission that we incorporate that in the same submission in which we incorporate the statistics. Byron R. White: What is the procedure Mr. Rehnquist which the army would follow if immediately perhaps (Inaudible) was presented to the army? William H. Rehnquist: My understanding Mr. Justice White is that as soon as the claim is presented, the man is given what is generally foretold as a desk job or a headquarters type job, so that he will be available in the area of the either army center or in -- Byron R. White: So, he isn’t sent to training or anything? William H. Rehnquist: No, the training is as I understand it is differed completely until the mans claim -- Byron R. White: What we’re arguing about here then is whether there can -- whether the Government may validly under the statute force a change of venue or a change of forum for the hearing of the conscientious objector claim? William H. Rehnquist: Whether the affording of the army forum rather than the local board forum under the circumstances presented here is consistent with the statute and regulation. Byron R. White: Well, there’s no claim that the forum -- there’s any difference between the forum, is there? William H. Rehnquist: I know of no such claim. Byron R. White: I mean in terms of fairness or anything like that, it’s just a question of whether you have to inducted before you get your claim heard? William H. Rehnquist: So, far as I know that that’s the only difference. Thurgood Marshall: It’s a military? William H. Rehnquist: It’s a military forum, yes Mr. Justice Marshall. Thurgood Marshall: I assume that they’re really doing different? William H. Rehnquist: But I think the issues are the same and -- Potter Stewart: Same criteria, same standards? William H. Rehnquist: So far as I know, it’s the same criteria and -- Potter Stewart: Welsh against the United States? William H. Rehnquist: And the same as far as I know from reading their most recent directive that they are well aware of Welsh versus the United States. William J. Brennan, Jr.: And by whom in the military is the claim considered the -- William H. Rehnquist: There -- I can’t give a real accurate answer, Mr. Justice Brennan. I believe it’s a series of interviews and then there’s an army board which evaluates the material gained and in effect holds a hearing. I’m not as confident as I should be in the correctness of that response. William J. Brennan, Jr.: I suppose you could let us know that too? William H. Rehnquist: I would be happy too, if I might submit that along with the other two management Mr. -- William J. Brennan, Jr.: Could a claim that as soon as he’s inducted after the board refuses to hear his late maturing CO claim, that a claimant immediately filed petition for habeas corpus? William H. Rehnquist: I think he’d have to exhaust his administrative remedy. William J. Brennan, Jr.: If there is one. William H. Rehnquist: Yes, I’ve been going in the assumption that -- William J. Brennan, Jr.: I was just saying if – it's one way or the other, either there’s administrative remedy or there isn’t, if there isn’t he could go to federal habeas. William H. Rehnquist: What you say make sense to me but I haven’t examined that branch of the law and don’t -- Potter Stewart: I mean if the -- if the board has refused to consider his claim on the ground that has late matured and has now passed beyond their jurisdiction. William H. Rehnquist: Well, -- Potter Stewart: -- he ought to be able to present it somewhere? William H. Rehnquist: Yes, but look at the man who does not, who is a conscientious objector in 1964 gets an induction notice in 1965, has never had his -- has never presented his claim. Now, the local board won’t hear his claim. Potter Stewart: That’s right. William H. Rehnquist: Yet I have -- I’m not at all sure that when he’s inducted, he can necessarily resort to federal habeas corpus. Potter Stewart: Well, I’m not talking about him. I’m talking about the late maturing delay in that. William H. Rehnquist: Well, I should think that he could resort to federal habeas corpus. Potter Stewart: Thank you Mr. Rehnquist. Mr. Halvonik, you have about seven minutes left. Paul N. Halvonik: Thank you Mr. Chief Justice. Let me first talk about these figures because I hadn’t heard them before either. I noticed they were -- Potter Stewart: By the way Mr. Halvonik, you’ll have an opportunity to submit any response in the way of commentary on the material that Mr. Rehnquist presented. Paul N. Halvonik: Very good, let me -- if I can also just comment on some initial thoughts which is that these figures referred to post notice claims, again, the Government hasn’t made the distinction between dilatory claims and late maturing claims and the Government has continued throughout this litigation to ignore that distinction and apparently it has in gathering its statistics too, so they’re not very helpful, but the most remarkable thing I found about them was that California is a place where they have the largest number of these claims, California where Ehlert’s the law not New York where Gearey is the Law. Now, if that tells us anything then at least means that the rule, the petitioner is asking for does not encourage late claims. It doesn’t seem to have any effect on the number of them, they’re going to be there anyway and they’re going to have to be dealt with and they’ll have to be dealt with either by prosecutors or the army or the Selective Service System. Potter Stewart: Oh I gather the Government isn’t now claiming that a gentleman who doesn’t present his claim because it matured late isn’t going to get his claim heard. Paul N. Halvonik: Well, he’s not going to get it heard if he can’t submit to induction, the Government does admit to that. Potter Stewart: Oh yes, oh yes. Paul N. Halvonik: And let me quote from footnote six in Malloy where this Court said, quoting approvingly from the Seventh Circuit decision, “A sincere claimant for conscientious objector status cannot turn to the habeas corpus remedy to challenge the legality of his classification because this religious belief prevents him from accepting induction under any circumstances.” It’s a previously recognized principle of this Court. Potter Stewart: While we’re talking about footnotes, I have a question about footnote 53 in your brief. I was puzzled and rather intrigued to find that despite the decision in this very case of your client William Ward Ehlert, you tell us that State headquarters of the Selective Service System at Sacramento California has what you describe as a procedure for having conscientious objections claims in the manner urged by you and footnote 53 on page 28, is there an explanation for that? Paul N. Halvonik: That’s true. We found this particular memorandum and we used it to demonstrate but it didn’t look like things were going to get too disrupted. It wasn’t applicable in Ehlert’s case because of course, this occurred before the memorandum was issued. Whether -- Potter Stewart: Which memorandum? This memorandum came -- was promulgated well after the decision in this case wasn’t it? Paul N. Halvonik: That’s true. Potter Stewart: Any explanation for that? Paul N. Halvonik: I can’t (Voice Overlap) Potter Stewart: Puzzled me very much and I just wondered -- Paul N. Halvonik: It puzzles me too and we just found it and included it but I don’t know. Potter Stewart: The California Selective Service apparently state wise is doing exactly what you say a selective service ought to do and it's doing it despite the decision of this case in the Ninth Circuit? Paul N. Halvonik: That’s true. Potter Stewart: This California law that I knew about it. Paul N. Halvonik: That’s the way we understand it but I have no explanation for it and I assume the local boards are following the directive but I can’t be absolutely sure. Let me again be -- on the habeas corpus and besides the client not being able to reach it in this case, there certainly are conscientious objectors who can submit to induction, we know that from the number of habeas petitions but there are these difficulties and first of all, that’s not the efficient way to handle it. The Government keeps talking about efficiency but the proper forum for these kinds of questions is the local board. The Government office tells us about the merits of the local board, the Weller case they told the Court that you have these people who are from your area that are expert on passing on these questions and they do it in a non-adversary manner and how fine it is. Well, if it’s that way then the petitioner ought to have the opportunity to go to that forum, that’s the forum Congress wants it in. We also in our brief quoted and grant it its from another context but we think the principle is applicable here from O'Callahan says, “Unlike Courts, it is the primary business of armies and navies to fight or be ready to fight war should the occasion arise but trial of soldiers to maintain discipline is merely incidental to an army’s primary fighting function, to the extent that those responsible for performance of this primary function are diverted from it by the necessity of trying cases, the basic fighting purposes of armies is not served.” How is the army served by taking these 2000 cases or however they many -- many they may be and providing that sort of remedy, granted there won’t be that many because there were group that are going to go to jail, the Courts will be providing the forum and they’ll off to jail but they will be getting some. How are they better equipped to handle it? Why is it more efficient for them to handle it? And what about the Courts, we’re talking about California and the number of late claims there. Let’s assume some of those are late maturing claims and should be reopened and some men aren’t going to submit to induction. Believe me, the California federal courts don’t need any more selective service prosecutions and you can’t avoid them here, you certainly can avoid it where it’s a question of conscience. Byron R. White: I suppose if you prevailed in this case, the remaining issues and let’s go back on remand as to the validity of this claim both with respect to late maturation, sincerity, and etcetera. Paul N. Halvonik: Well, we have to go back to the board. I would assume the conviction would be reversed and Judge Zirpoli indicated at the trial that if -- Byron R. White: We wouldn’t decide any of those questions, I’m very sure. Paul N. Halvonik: ell, I should think that with the conviction ought to be reversed because he has made a prima facie claim, -- Byron R. White: Yes. Paul N. Halvonik: They ought to go back to the board right for determination but the -- Potter Stewart: The Government not in oral argument that I’ve heard but in its brief urges this of course that the conviction can be and should be affirmed even if we accept your procedural theory, your procedural and constitutional theory on the basis -- Paul N. Halvonik: I agree with the Government that he has to make a prima facie claim where we disagree with the Government is that we think he has made the prima facie showing. We think clearly under Welsh, he made the showing. The Government emphasized throughout that he kept saying today but he was talking about a nuclear age not a nuclear war and to go back to this Court’s decision in Sicurella case, this Court used today throughout, it is the kind of wars we fight today, what we’re talking about. That’s the kind of war that my client can’t fight and a war that would happen after 1945, a war that would happen since he has been two or three years old. Under his theory, it wouldn’t have been a conscientious objector before he was three but since then he wouldn’t and for all time, it would be a conscientious objector. Byron R. White: Because of the atomic bomb? Paul N. Halvonik: Because of the atomic bomb. He’s not saying he won’t participate in nuclear war, he is saying he won’t participate in war in a nuclear age and unfortunately, he is not going to get a chance at any other age. Warren E. Burger: Thank you, Mr. Halvonik. Paul N. Halvonik: Thank you very much, Mr. Chief Justice. Warren E. Burger: Thank you Mr. Rehnquist. The case is submitted.

John G. Roberts, Jr.: We'll hear argument first this morning in Case 14-1146, Tyson Foods v. Bouaphakeo. Mr. Phillips. Carter G. Phillips: Thank you, Mr. Chief Justice, and may it please the Court: This Court has made clear that class actions are only appropriate when the plaintiff's proof is tailored to their specific theory of liability in a way that allows class-wide injury to be determined in one stroke, and that the lower courts must engage in a rigorous analysis in order to demonstrate that fact. In this Federal Fair Labor Standards Act, the plaintiffs were allowed to pursue a class of more than 3300 employees who occupied job -- more than 400 jobs which required widely differing amounts of time to perform their donning, doffing, and washing tasks. Ruth Bader Ginsburg: Well, is that so? Because as far as I understand this, there was some donning and doffing that was common, that is, there was some sanitation and some protective gear that they all had to wear. And then there was a difference between the night -- knife wielders and the others, but they weren't all that different. So in one case, one wore mesh aprons, and in the other case, rubber aprons. It didn't seem to be that wide disparity. Carter G. Phillips: Well, there -- there are a number of answers to that, Justice Ginsburg. First of all, if you -- if you just look at the activities that Dr. Mericle specifically testified about, for certain activities, he found some employees who take 30 seconds to get dressed and others who took more than 10 minutes to get dressed -- Anthony M. Kennedy: Well, but you didn't -- Carter G. Phillips: -- in certain circumstances in -- Anthony M. Kennedy: -- the statistical mechanism of your own, you didn't have a Daubert objection to the testimony, and you suggest in your brief that uninjured plaintiffs are included in aggregate damages, but you were the one that objected to the bifurcated trial. And so far as uninjured plaintiffs recovering, that has to be determined on remand anyway. I -- I just don't understand your arguments. Carter G. Phillips: There are a number of questions embedded in there, Justice Kennedy. The -- the first one is -- and we objected all along to having this class certified on the basis that there were a wide range of -- Anthony M. Kennedy: Yeah, but once you lose that, you have also other defenses: Your own expert, a Daubert objection, et cetera. Carter G. Phillips: But Justice Kennedy, we don't have to bring forward an expert. What we did in this case is we -- we cross-examined both their -- the named plaintiffs, the four named plaintiffs who testified, and demonstrated two things about that. One, that in general, they way overestimated their own time; and two, none of their times were remotely the same as Dr. Mericle's time. So we proved that. Second, we cross-examined Dr. Mericle about his testimony and demonstrated again that his methods were completely haphazard and scattered, and therefore couldn't demonstrate. And this notion that you patch over the entirety of these problems simply by averaging all of the times of all of these employees is simply the kind of shortcut this Court has -- has rejected in the past in both Comcast and Wal-Mart. I'm sorry, Justice. Sonia Sotomayor: Mr. Phillips, I'm completely at a loss as to what you're complaining about. That's exactly what you did. And what this expert did -- I mean, as far as I could tell, between your expert that you used to calculate "gang time" and "K-time" did exactly the same thing this expert did. You came out with a lower number, but you used fewer people. At least their expert used hundreds of people instead of the few that you did. I'm -- I'm just completely at a loss. Would you suggest that if one plaintiff came into court, that he could not use the -- this expert to prove his case circumstantially to show that in fact, the average is this, and he doesn't really know how much time he took? When he does it now, it may be 12 minutes instead of 10? Carter G. Phillips: Justice Sotomayor, I would -- I would -- yes. I would categorically reject that, because that's no more different than Employee A coming into court and saying I don't know what I worked, but Employee B, who does vastly different activities -- Sonia Sotomayor: Oh, no, no. But they know what they worked. They know that people were working over 40 hours because there were time records with respect to that. What you're basically saying is that Mt. Clemens is completely wrong. You can't estimate your time when the employer doesn't keep records. Carter G. Phillips: We -- we don't have any quarrel with Mt. Clemens the way it was written. The Mt. Clemens made -- makes a very clear divide between what needs to be proven, what the plaintiff's burden is to demonstrate that he or she has worked beyond the 40-hour work week, and then what happens if that's proof -- Sonia Sotomayor: There were time records to that effect here. Carter G. Phillips: Right. But there were a lot of people who didn't work beyond the 40 hours. Sonia Sotomayor: No. There were 200-and-something-odd people that their expert showed didn't work above 40 hours. The jury knew about those. Carter G. Phillips: And -- and the jury rejected Dr. Mericle's averaging of -- of 18 -- 18 and 20 -- 18 and a half and 21 minutes, and we don't know what the impact of that is. What we do know is that Fox calculated that a mere three minutes' departure from Mericle's numbers dropped the damages award by $1.41 million, and dropped the number of plaintiffs out by close to 125. So Justice Kennedy, the small differences make a big difference in -- in this particular case. Ruth Bader Ginsburg: Can we go back to Justice Sotomayor's basic question, that is, when the government sued Tyson or Tyson's predecessor and got an injunction -- Carter G. Phillips: Right. Ruth Bader Ginsburg: -- what Tyson's did, it had its own industrial engineer observe the workers as they were donning and doffing their gear, and that expert averaged the times that they spent. And it seems to me that the plaintiff's expert here is doing exactly the same thing that Tyson's expert did when the government was bringing -- Carter G. Phillips: And in some ways, Justice Ginsburg, that explains why we didn't bring the Daubert motion that Justice Kennedy asked about because the methodology isn't inherently flawed. The problem with the methodology is it's applied to the theory of liability in this case. It's one thing for an employer to say, look, we're entitled under the Department of Labor regulations to average, as a mechanism for trying to avoid the kind of picayune details and discrepancies that the Court identified in Mt. Clemens and said those can be disregarded as mere trifles, we're allowed to do that. And the effect of what we, in fact, did hear was to round up in order to provide more time to people than they might otherwise have gotten. And indeed, if you go to the pre-2007 period when you're talking about the people who just put on the normal sanitary clothing, they were -- they were all given four minutes of K-time when they -- it took them all of about 30 seconds to do that. So the idea that we could overcompensate somebody using those kinds of data is one thing, but that's a vast difference from saying that in order to -- to maintain as -- under a rigorous analysis the idea that this can proceed as a class when all you've got is averaging across the widest imaginable range of -- of employees performing different tasks with different requirements, and indeed, although I don't think -- Elena Kagan: Mr. Phillips, you say the question is whether it can proceed as a class. But it seems as though that's really not the question in this case because of Mt. Clemens; that what Mt. Clemens does is to suggest that certain kinds of statistical evidence are completely appropriate in FLSA cases generally, even if they're brought by the government, or even if they're brought by a single person. And so the question that you really are putting before us is not a Rule 23 question, it's a question of whether this sort of evidence complies with the Mt. Clemens standard; isn't that right? Carter G. Phillips: No. I would go -- I would actually go at it the other way. I would say that the first question is: Can you use this kind of averaging in a -- in a run mine-case period under Rule 23? And it seems to me the answer to that has to be no, that this -- this simply papers over the problems of the class. Elena Kagan: But the Rule 23 inquiry, Mr. Phillips, is always dependent on what the substantive law is. Carter G. Phillips: Right. And then the question is -- Elena Kagan: That was true in Halliburton where we said, look, if we didn't have the basic presumption, we would think of this as very individualized. Carter G. Phillips: Right. Elena Kagan: But we have the basic presumption, so the proof is not individualized. And the same thing, it seems to me, is true here because of the Mt. Clemens inquiry. Carter G. Phillips: Right. Elena Kagan: Where it says if the employer hasn't kept the appropriate records, even a single plaintiff can prove the amount of work done through the use of statistical -- Carter G. Phillips: That's not what Mt. Clemens says, Justice Kagan. Mt. Clemens says that it's the burden on the employee to demonstrate that he or she worked the requisite hours in order to get past 40. Once you got past 40 in determining exactly what the damages would be, at that point it was reasonable because we hadn't -- because -- because Mt. Clemens hadn't maintained records to go ahead and give the plaintiff a pass. It's the same -- it's the Story parchments test all over again. Elena Kagan: I can't see how that account of Mt. Clemens would make most -- much sense. You're suggesting that a person past 40 can produce the statistical evidence, but if I worked 39 1/2 hours and all of this overtime is going to push me over 40, the Mt. Clemens presumption wouldn't be available to me? Carter G. Phillips: I think that's exactly the line the Court drew in Mt. Clemens. It's the line that the Court has consistently drawn in antitrust cases, from parchment. Anthony M. Kennedy: But you've changed your theory. Question 2, as you presented in the petition for certiorari, whether the class may be certified if members were not injured. Then you changed that. Page 49 of your brief, you say that the plaintiff must demonstrate a mechanism to show that. So now you're talking about -- about the mechanism. So the -- so the case has been argued on different theories at -- at many points, and it seems to me Justice Kagan is precisely right. You said, well, I want to start first with class action. She said, no, no. The point is we start with Mt. Clemens. That's the substantive law for FSLA. Carter G. Phillips: To be sure. I mean, you can go at it either way. But at the end of the day, obviously, what -- as I started -- as I started my remarks, is -- is that the Court -- is that the plaintiffs are obliged to demonstrate that a class works on the basis of the substantive liability that they have to -- burden that they have to -- Stephen G. Breyer: Right. So Mt. Clemens says exactly this. I'll read it. I think it's correct. "Where" -- "Where an employee's records of time worked are inaccurate or inadequate" -- that's your case, right? -- "then the employee attempting to bring a claim can show time worked by producing sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference." That's what it says to do. Carter G. Phillips: Right. Stephen G. Breyer: And then it says the employer can't complain that the damages lack the exactness and precision of measurement that would be possible had he kept records. But he didn't. So they used some statistics to show it. What's wrong with that? Carter G. Phillips: There are two answers to that. The premise -- the first part of that sentence is, if he proves that he has, in fact, performed work for which he was improperly compensated. Stephen G. Breyer: Yeah. Carter G. Phillips: None of these employee -- a huge number of these employees have not made that showing. Stephen G. Breyer: Well, they did through statistics. I mean -- Carter G. Phillips: No. They -- Stephen G. Breyer: I mean, you say an antitrust case. Okay. Let's imagine an antitrust case. There's an agreement among sneaker manufacturers to use shoddy material. And large customers, distributors buy these shoddy materials. They're hurt. How much are they hurt? It depends on how many sneakers their employees used and when and so forth. There is no way people don't keep sneaker records, so what we do is we hire a statistician to use sampling. And if he's a good statistician and uses sampling correctly, we have probably a better measure than if we asked the employees to go back and remember how many sneakers they wore and what days and what hours 50 years ago. Carter G. Phillips: But Justice Breyer, your -- your entire hypothetical is premised on the fact that they had already shown that they were injured in the first -- Stephen G. Breyer: Well, some of them, it might turn out, actually did not wear sneakers during the period of time that the conspiracy has been shown to exist. But we didn't know that at the beginning because we thought we could prove a conspiracy from January to December, but we only ended up proving it from January until June. Now, there we have it. We put them in the class to begin with because we thought we could prove injury. As it turns out, we can't. Now, I -- I've never heard that you had to be able to know exactly how you're going to win your case when you form the class action because you don't know quite what the proof will be. I mean, isn't that how class actions work? Carter G. Phillips: No, because -- Stephen G. Breyer: Why not? Carter G. Phillips: -- because there's a -- I mean, the class certification decision is still open until the final -- until a judgment is rendered by the district court. So the district court has a continuing responsibility in the face of challenges to the class certification to consider decertifying the class. And we raised -- and we raised that issue right after Wal-Mart. Stephen G. Breyer: But why decertify the class? If we've shown or we do show the conspiracy lasted from January until June, not through December? Some people will recover; other people will not recover. Can't we wait until the evidence is presented before we tell the people who didn't -- Carter G. Phillips: But see, the problem -- Stephen G. Breyer: -- buy the sneakers, then you don't recover? Carter G. Phillips: The -- the problem with this -- and this would raise exactly the same Comcast problem -- is my guess is your expert testified about the conspiracy that lasted through the entire period. And for whatever reason the jury rejected it, just as it rejected Mericle in this case. And now you're stuck in a situation where you've got this huge judgment where we knew there were 200 and some people who -- but now we know there are more than a thousand plaintiffs. And -- and Justice Kennedy, we didn't shift the -- the answer. Our answer was this is invalid because there are so many defendant -- plaintiffs -- who are -- Sonia Sotomayor: I'm sorry. I'm having difficulty understanding your point. There are records, aren't there, of how many hours they worked without donning and doffing the equipment at issue, correct? Carter G. Phillips: Yes, there are. Sonia Sotomayor: All right. So I thought that Dr. Mericle's using those actual records figured out how many people worked over 40 hours. Carter G. Phillips: But -- but only because -- she didn't do that to say who's over 40. I mean, she obviously identified some who weren't. But she took Mericle's average numbers, 18 1/2 and 21 and -- and slotted them in when nobody worked 18 1/2 and 21 minutes. Sonia Sotomayor: Well, you didn't have an expert to say that? Carter G. Phillips: We didn't need an expert to say that. We had our industrial engineer who said -- and the -- and the Federal government's industrial engineer said the same thing for four minutes. Sonia Sotomayor: Is there any -- there any -- reject -- Samuel A. Alito, Jr.: Is there any way at this point to determine which employees were actually injured and which ones were not? Because I -- I gathered because the jury rejected the full verdict that was requested by the plaintiffs, they did not accept Dr. Mericle's testimony regarding the amount of time needed to don and doff for employees in various categories. And without knowing that, I don't see how you can at this point -- I'll -- I'll ask Mr. Frederick the same question -- how you can separate the employees who were injured from the employees who were not injured. Carter G. Phillips: It -- it's impossible to do that. And -- and Fox, who was their expert who testified on the damages, was very clear about that because it's not linear. So that if -- if it turns out that some period of time drops, the number of employees who fall below the 40-hour threshold plus the -- plus the K-code time will drop. Anthony M. Kennedy: But the briefs are like two ships passing in the night on this point. The Respondent is going to say this is for remand, or am I wrong about that? Carter G. Phillips: I would be shocked if he's prepared to accept a remand. I mean, I'm delighted if he wants that. Anthony M. Kennedy: Aren't there further proceedings? Carter G. Phillips: I don't -- Anthony M. Kennedy: Aren't there further proceedings in this case? Ruth Bader Ginsburg: It -- it was a lump sum. Carter G. Phillips: It was a lump sum judgment, Your Honor. Elena Kagan: And now that has to be distributed. So there are going to be further proceedings to distribute that lump sum judgment. Carter G. Phillips: It is far from clear how it's going to be -- how it's going to be dealt with at this point other than on a pro rata basis. That's what Judge -- Anthony M. Kennedy: But that has to be determined in the trial court. Carter G. Phillips: I'm sorry? Anthony M. Kennedy: But that has to be determined in the trial court. Carter G. Phillips: It's far from clear what the trial court -- Elena Kagan: Mr. Phillips -- Carter G. Phillips: -- if the trial court has any intention to do anything with this other than to accept the check. Antonin Scalia: I don't understand. You -- you can get a class certified, some of whom have not been injured at all, and wait until the conclusion of the trial for the trial court to determine who has not been injured? Carter G. Phillips: Well, you can't do that. And the truth -- I mean, no. I mean, the answer to that is no; and second, you couldn't do it anyway. Antonin Scalia: -- class to begin with. Carter G. Phillips: But you can't -- you can't unscramble this egg at this point. It's impossible. You've got to -- Ruth Bader Ginsburg: You have conceded that the initial certification was okay because at that time, we didn't know which ones -- Carter G. Phillips: Well, I wouldn't say we conceded that. Obviously, we -- we filed an opposition to their motion to certify, and we brought forth dozens of supervisors who testified about the -- the myriad jobs and the -- and the wide range of donning and doffing requirements for them, and said that under the circumstances, this is not an appropriate case to proceed as a class. Ruth Bader Ginsburg: But didn't you say that in general, a class could be certified going in, even though at that point, we don't know? Carter G. Phillips: No. No. We -- I mean, we -- in general, we say classes can be certified. I mean, I think you could have certified a walking time class in this case. Stephen G. Breyer: I'm still having the same problem. When I heard Justice Scalia's question, I thought the answer is of course you can put in your class people whom, it will turn out, are not hurt. I have a class of people who were hurt by a price-fixing conspiracy that lasted from January to December. That's what I said. I have good reason to think it. But I prove it only lasted until June. That's a failure of proof. Half of them were not hurt, okay? So we don't pay them. Carter G. Phillips: But the -- Stephen G. Breyer: I thought that's the most common thing in the world. Am I wrong? Carter G. Phillips: But the problem is -- yes, you are, Justice Breyer, because the problem there is the expert who testified to the conspiracy would have assumed that the conspiracy covered the entire time of -- Stephen G. Breyer: That's right. Carter G. Phillips: -- proof. And, therefore, the damages number that that expert will put forward will be a vastly larger number than what the jury comes back in based on the -- on the finding that there was a shorter conspiracy. Stephen G. Breyer: Yes. Carter G. Phillips: And there's no way to know who was injured in that context and who was not injured in that context. Elena Kagan: But there -- Carter G. Phillips: You can't identify the people to pay. Elena Kagan: But, Mr. Phillips, there is a way. John G. Roberts, Jr.: Justice Sotomayor. Sonia Sotomayor: Why do you have standing? I mean -- Carter G. Phillips: Because -- Sonia Sotomayor: -- the jury, obviously, rejected something. It obviously was told to exclude people who were not entitled, and it did it. You didn't object to a -- the failure to have -- you objected to proposing interrogatories. So this has invited errors; it sounds like invited error. But, finally, how do you have standing -- Carter G. Phillips: Respondent didn't raise that. Sonia Sotomayor: -- to argue that the issue of who gets part of that money? Carter G. Phillips: Phillips Petroleum says we clearly have standing to do that because -- Sonia Sotomayor: Why? Carter G. Phillips: Because our concern is that we -- that -- that the class be bound by whatever judgment comes out of this. And if it turns out that this class has been improperly treated so that there are a substantial number of -- Sonia Sotomayor: You tell me, except for those people -- Carter G. Phillips: Plaintiffs. Sonia Sotomayor: -- who opted out, there are people who opted in? Carter G. Phillips: The Fair Labor Standards Act people opted in, yes, Your Honor. Sonia Sotomayor: Opted in. So you know all of the people who are bound, all the people who've opt -- who were -- who opted in. Carter G. Phillips: No, no. Sonia Sotomayor: So why do you have to know whether -- there can't be more. Carter G. Phillips: No, no, no, no, no. It's -- it's quite possible that there are people who have been -- who have been undercompensated because of this particular scheme, and who could claim that because they weren't allowed to participate, their due process rights were violated -- Sonia Sotomayor: They were allowed to participate; they just didn't opt in. Carter G. Phillips: Well others -- but others didn't -- that's -- that's true, but the -- but the bottom line here remains the same, which is, they are absent class members whose interests were -- may -- may have not been fully protected, and the only question there is do we have standing to raise this issue, which -- Sonia Sotomayor: I've never heard of a case where absent class members are somehow bound by a judgment in this case, when they didn't opt in. I hope that -- I thought that was the whole purpose of not opting in, so you're not bound by this judgment. Carter G. Phillips: If it's a class judgment and you -- and you didn't opt out -- I mean, there are two different classes here, right? There is a 23(b)(3) class, and there's the FSLA collective action, which have now been merged in on the judgment. So there's no reason to look at this as anything other than a 23(b)(3) class of individuals. And, you know -- and their -- so that means there are literally thousands of absent class members whose -- who are -- who are either entitled to or not entitled to damages without any ability to know whether they were or were not injured. And therefore, under those circumstances, what this Court said in Phillips Petroleum is that the defendant has a right to be sure that the mechanism by which the judgment ultimately is entered across the entire class is such that it -- that it protects us as a collateral estoppel -- John G. Roberts, Jr.: Mr. Phillips, do you have -- do you have a theory as to why the jury awarded less than half of the damages that were requested? Did they -- I take it they didn't identify particular workers. Carter G. Phillips: They did not identify particular workers. John G. Roberts, Jr.: Did they -- did they disagree with the 18 minutes, 21 minutes? Carter G. Phillips: They had to have disagreed with it, and there was good reason to do that because if you -- if you take the testimony of the four named plaintiffs, they -- they were significantly different than the -- than the 18 and 21 minute times. And so the -- the best evidence was, is that Mericle, by this method of sort of -- of nonrandom observations of self-selected employees, came up with widely -- wildly extravagant numbers, and the jury rejected them. And it was the plaintiffs' decision to go for the -- for the entirety of the claim rather than take a more narrow approach of maybe seeking walking time where the conduct of the individual plaintiffs is much more homogenous. The problem with this is that it's very -- it's a vast -- I'm sorry. Elena Kagan: If I could go back to Justice Kennedy's question at the start, because it really was your decision not to have a bifurcated proceeding, where it would have been clear -- it would have been proved separately in a highly ministerial way which employees worked over 40 hours. And having made that decision, you're in a position now where you're saying, oh, there's one sum -- there's one lump judgment; we don't know what to do with it. But, in -- in essence, what's going to happen is that it's going to go back in remand, and the judge is going to do something that looks an awful like -- lot like the bifurcation that you rejected, which is, the Court will say, now we figure out in this highly ministerial way who worked more than 40 hours, and so who is entitled to share in the judgment. Carter G. Phillips: The -- the bifurcation that the plaintiffs proposed, two things to say about that. First of all, they took it off the table themselves, not us. We did object, but that wasn't -- it wasn't rejected because we -- we objected to it. They -- they pulled bifurcation off the table. So I don't think you can put the burden on us. But, second of all, the -- the bifurcation they proposed was that first you were going to decide whether Mericle is right or not, and that means whether 18 and a half and 21 can be averaged across your class. And then the second part was going to be Fox testifying about how to slot that in. Well, that's not -- that's not going to -- it may help with respect to the -- to the uninjured -- to the injured class members, but it would not have remotely helped with the more fundamental question of the inadequacy of this as a class action device where you patch over the problems of this -- of this class by simply averaging everything together. Elena Kagan: But it -- it absolutely helps with the question, your second question presented, which is this point that you are making that there might be some people who didn't work 40 hours, who would nonetheless get money. And it absolutely helps for that. It takes care of the entire problem. That leaves you with only your first question presented -- Carter G. Phillips: Right. Elena Kagan: -- which is this question about was the class too varied. And on that, I have to go back to this -- to this issue of, it's not a class issue. It's an FLSA issue under Mt. Clemens as to whether this kind of statistical evidence could have been presented. Carter G. Phillips: And -- and my answer to the Mt. Clemens one, which, obviously, I'm not persuading you on, is that if -- the way I read Mt. Clemens, it says, you don't go to fair and reasonable inference on -- on the liability phase. You only do that on the damages phase. And I would still argue here that even if you use Mt. -- the fair and reasonable inference standard, it won't be satisfied by what Mericle did here, because it's one thing to -- to do some kind of sampling. It's another thing to say, I'm going to take wildly different, 30 seconds versus 10 minutes and average everybody across the plant without any effort to be more tailored in our approach than that, Your Honors. I would like to reserve the balance of my time. John G. Roberts, Jr.: Thank you, counsel. Mr. Frederick. David C. Frederick: Thank you, Mr. Chief Justice, and may it please the Court: Let me start with your question, Justice Kennedy, because there absolutely will be remand proceedings on the presumption that you affirm the judgment of the Eighth Circuit so that the money can be allocated, and we know the names of every single person who would be entitled to an award based on a very long spreadsheet that Dr. Fox compiled in conjunction with Dr. Mericle's analysis. And so you're right, Justice Kagan, that there is a pot of money based on the jury verdict that will be allocated, assuming that the Court affirms the class certification judgment. Samuel A. Alito, Jr.: Well, there is no question the money can be divided up. The question is whether it can be divided up between those who were actually injured and those who were not actually injured. So suppose you have -- if you have three employees, one worked -- one was -- one was given credit for working 39 hours a week, one was given credit for working 38 hours a week, one was given credit for working 37 hours a week. Without knowing how much additional time the -- each employee is entitled to, you can't tell which one of those, which, if any, of them was injured, and you can't tell how much additional time the employees were entitled to without knowing what the jury did with Dr. Mericle's statistics. So that's why I -- I don't see how this can be done in other than a very slap-dash fashion. David C. Frederick: Well, there are two ways, and I would submit that they -- neither is slap-dash. Ordinarily, we would defer to jury verdicts, and we would say that if the jury evaluated the evidence within the realm of what was presented at trial, that is going to get special deference in our legal system. So when those monies get allocated, ordinarily a district judge is going to do so on a basis either of pro rata for all of those -- all of those plaintiffs who were found to be injured, and the 212 who were identified by name, by Dr. Fox, Tyson knew about them before trial, did not move for summary judgment as to those 212, could have easily severed them right out before this case went to the jury. The second way is that Dr. Fox did an analysis using Mericle's averages and then added them to the number of minutes worked by the particular employee, and so based on that, a vast number got above the 40-hour threshold. Now, the evidence at trial that it came in by Tyson's own witnesses was that the average worker worked 48 hours per week before you even got to any of the counting of the donning and doffing, and that the plant ran on Saturdays 60 percent of the time, which would be a 6-day work week. And so the evidence as the jury considered it found the vast majority of the class members were already going to be in overtime status, and that's why the fulcrum of the case came down to whether putting on this gear, which was standard sanitary gear for every single worker in the class, was compensable or not. John G. Roberts, Jr.: Counsel, we don't know why the jury reduced the requested damages by -- gave less than half. I mean, it could have been because they thought the evidence on the ones who just put on smocks or whatever as opposed to the ones who had the mesh Armour -- you see, I don't believe what you said about the ones who don't put on the mesh Armour, so we're going to give zero dollars on that. But I believe the -- the validity of your -- the experts' testimony on the ones who put on the mesh Armour, so we're going to award that. Or maybe they thought, you know, they would just discount the whole thing, or -- you know, we don't know why. So because they used average statistics over varying jobs with -- even your expert admitted varying times, depending upon the classes, there's no way to tell whether everybody who's going to get money was injured or not. David C. Frederick: Well, and Tyson had an opportunity to ask for more specific instructions. In fact, their instructions were the ones that ended up governing the trial. So to the extent that they had a complaint -- John G. Roberts, Jr.: Well, if you have -- you have -- I understand that, but you have a substantive answer because it's one thing for us to write an opinion saying this is a horrible problem, but they didn't ask for instructions, so don't worry about it. David C. Frederick: Well, I don't -- John G. Roberts, Jr.: That's another thing. We need to know whether we should address the -- the mechanism by which this was presented to the jury, and then we can deal separately with the waiver issue. David C. Frederick: Yeah. Well, on the substantive part, Mr. Chief Justice, let me say this. That in all these instances where there is a challenge between an aggregation or something where you could ask the jury for a more particularized decision, there's always a tactical and a strategic decision that the counsel on both sides were making and the parties on both sides. John G. Roberts, Jr.: That sounds like the same answer you gave before. David C. Frederick: No, but -- but -- John G. Roberts, Jr.: Is there a substantive? Yes. We could say, okay, the problem is they didn't ask for a special verdict. They didn't divide it between the people who were engaged in different functions than the killers, stunners. David C. Frederick: Substantively, the way this is handled typically is that you would do a pro rata distribution of the jury proceeds to the members who are found to have been injured. That's the substantive answer. We have it the way -- Stephen G. Breyer: But I'm actually puzzled by the same thing. So put yourself in my puzzlement. The -- there is a green room, a yellow room, and a blue room, all right? Now, we discover with our statistical experts that in the green room, doffing and donning, those people on average -- some more, some less -- but the sampling shows it's half an hour. In the blue room, it's 20 minutes. In the yellow room, it's 10 minutes. So, we add those three numbers on to green room, yellow room, and blue room people. And we get a number. Now, that number in individual cases will be wrong, but that's what averaging is about. And if there is no other proof in the case, well, is that good enough? David C. Frederick: Well, let me -- let me address that question in this way because I do want to -- Stephen G. Breyer: Is that the substantive issue? David C. Frederick: I -- I think it is not. Stephen G. Breyer: Okay. David C. Frederick: Because we -- Stephen G. Breyer: Then skip it. (Laughter.) David C. Frederick: Because we had additional information testimony. And Mr. Chief Justice, on the variations, I think it's important to take into account what actually is going on with these Dr. Mericle observations about the 30 seconds versus the 10 minutes. What Dr. Mericle observed using the videotape in the men's locker room was that some of the men put their gear on in the locker room, and then they went down to the line. That might take them 10 minutes to do. Some of the men put on part of the equipment, and then they carried the rest. And they put it on while they were walking to the production line or while they were on the production line itself. And they were not counted. John G. Roberts, Jr.: And I suppose some of them like to chat while they're putting on the equipment, and others are more down to, you know, let's get this on as quickly as possible. And -- and some of them have different sorts of jobs that require different sorts of equipment. David C. Frederick: And that's what the district court rejected. The district court said there was not evidence to support that, that the -- John G. Roberts, Jr.: Well, there was not evidence to support that they'd have different equipment that they put on? David C. Frederick: It was minimal. What the district court and what the court of appeals found was that the differences in equipment were -- were minimal, and that they would not drive the difference. And what Dr. Mericle testified -- and this is at 340- -- 346 to 350 of the Joint Appendix -- he explained that the donning and doffing was occurring in different places and that what they argued about this 30-second-to-10-minute difference was, in fact, not an accurate depiction of the actual time that it took. Because the time clustered around the average; that was his testimony. And that if you took into account the fact that they might be doing it in different places, you then see why averaging works. And the reason averaging works is because the workers were rotating among different assignments. Some of them might start the day in a non-knife capacity, and so putting on all the protective gear before they started their shift didn't make sense. They would carry it to the production line. They would be pulled off the production line, told you're going to be in a knife capacity, get your gear on. They would put their gear on at that time. So when Dr. Mericle is observing in the locker room how long it takes for people to put their gear on and take it off, he's not counting, he's not -- he's not counting -- he's not taking into account the variations in the work style mandated by the company. John G. Roberts, Jr.: So -- so your -- your submission is that, in fact -- well, what -- what about 18 and 21? You must have thought there was some difference. David C. Frederick: Well, they were walking to a different part, and they were divided into -- they did have additional equipment in that one. But we divided them by departments, and we can identify the employees in the two different departments. John G. Roberts, Jr.: So -- so the variation that is -- at least troubled some of us, 30 seconds, 10 minutes, you're saying it's not because the 30-second person is actually going to spend 9 1/2 minutes at the end of the walk, and the 10-minute person spent all the time at the beginning of the walk, and there's no difference between the people who clean up and the people who actually slaughter the hogs because the clean-up people are going to slaughter the hogs at four hours at the end of the shift. And the -- David C. Frederick: There was rotation among -- and their own witness testified to that effect. That's at JA 236. He said they rotated quite frequently. And what he was explaining was that you might start on a particular assignment -- and -- and Dr. Mericle is taking a two-day snapshot, right? He's looking at video. And the -- the workers themselves were testifying that the actual donning and doffing basically clustered around the average. That's what Dr. Mericle observed. John G. Roberts, Jr.: So -- so we should -- again, there's a -- a basic issue that's presented, but you're saying in addition to avoiding it because of the objection is their lack of objections at all, we should not be reaching the substantive issue because, in fact, there was no variation in the time? David C. Frederick: That's what the -- both courts below found. And -- and so when you are based with a factual record here that comes up here with both courts below, the ordinary presumption, particularly in a jury context, is you're going to interpret the facts in the light most supportive -- Anthony M. Kennedy: Is it an argument that if the employer wants to be quite conscientious about complying with FLSA, the employer has to take some averages. It has to say, we're going to give X minutes for donning and doffing on this line, X minutes -- and the second part of that question is, how much of this case turns on the fact that the employer did not keep adequate records? David C. Frederick: Well, had this -- had the employer kept records, this would be a completely easy case for class certification purposes because every single issue would be done by common proof. Anthony M. Kennedy: Can the employer be charged with not keeping adequate records by not following every single person every part of that person's day? You spend four hours on this line, four hours on that line. You have to -- you have to put on a certain kind of doffing. Can the employer really keep records for every single employee? David C. Frederick: It's actually simpler than that, Justice Kennedy. It's where you place the time clock. Had they put the punch clock right outside the locker room so that the workers, as soon as they went in the locker room, punched in, this problem would have been eliminated. Because at that point, when they were putting on the protective gear, the sanitary gear, and then they are walking -- and the walking is uniform for all class members. The sanitary gear is all uniform for all class workers. So when they're putting on their equipment in the locker room, if they punched in, the company has satisfied the FLSA and this problem goes away. And then the question is, is the walking and donning and doffing work? And that's what the trial was all about. Antonin Scalia: Many workers put on gear other than sanitary gear. What you say is true: The sanitary gear is the same for all workers. But some of them wear, what, chain mail to protect them from the knives, right? And -- and some of them wear other protective gear. And that's what is claimed to create the discrepancy. David C. Frederick: Right. But if you take the sanitary -- I'm just saying, if you -- for the question of commonality and predominance, which I'm trying to address the first question -- the sanitary gear is all the same for everybody. The walking is all the same for everybody. And then the question is, can you use averaging because of the peculiarities of the fact that the doffing of this -- basically, the same gear was occurring in three different places: in the locker room, walking down to the production line, and on the production line itself. Antonin Scalia: I don't -- I don't think your -- your friend will agree that it's basically the same gear. David C. Frederick: Well, I wouldn't expect that. Antonin Scalia: I think that's his -- his point, that it's quite different gear. David C. Frederick: But the -- what the district court found, and they didn't show -- look, we're talking about a difference between a Kevlar belly guard and a Plexiglas belly guard or a mesh, metal mesh belly guard. We're talking about the same basic kinds of gear. We're talking about different kinds of gloves. But those variations were presented to the jury, found to be minor. And the district court concluded that they were minor differences. Antonin Scalia: Well, the difference -- the question is not whether they're -- whether one protective gear is different from another, but it's whether protective gear is different from sanitary gear. That's the question. David C. Frederick: Well, the question is -- Ruth Bader Ginsburg: Wasn't there -- wasn't there -- for all of the workers, there was certain basic equipment. There was basic sanitary gear, but there was also basic protective gear. So the only difference comes up with the protective gear for the knife weld. David C. Frederick: That's -- that's -- Ruth Bader Ginsburg: The basic protective gear was the same for everybody. David C. Frederick: That's correct. And the knife issue was solved -- Anthony M. Kennedy: What was that? What was that basic protective gear that everybody -- Ruth Bader Ginsburg: Hard hats, ear plugs or ear muffs, and boots. David C. Frederick: Thank you, Justice Ginsburg. John G. Roberts, Jr.: What was it? (Laughter.) John G. Roberts, Jr.: Let's see if you remember what she said. What was it? (Laughter.) David C. Frederick: Hard hats, ear plugs, hair nets, beard nets, and basic smocks. John G. Roberts, Jr.: And -- but the -- Ruth Bader Ginsburg: And boots. David C. Frederick: And boots. Sorry. I forgot boots. John G. Roberts, Jr.: You left boots out. (Laughter.) John G. Roberts, Jr.: But -- but the knife wielders had a lot more than that. David C. Frederick: Right. But the point was, Mr. Chief Justice, that if you were on knife duty at a particular point in time, you were going to rotate frequently during the course of a day or from one day to the next, and so you were charged always to have your gear ready to be put on if you were put in a knife-wielding capacity. Anthony M. Kennedy: It seems -- it seems to me that you might concede that if this were simply a class action under 23, that these problems might be a barrier to certification, but that under Mt. Clemens you have a special rule; is that -- David C. Frederick: We certainly -- Anthony M. Kennedy: Is that correct? Do you -- do you concede that there is a strong possibility you might not be -- have this class certified under section -- under Rule 23, absent Mt. Clemens? David C. Frederick: Well, Justice Kennedy, I think Mt. Clemens answers the question in this case. I think that, given the way the evidence came in, the averages here are reasonable ones. So even if there was not a special Mt. Clemens rule where there's a burden-shifting framework, the answer should be the same. Stephen G. Breyer: Okay. So that's exactly, perhaps, what I -- I read the question, the first question. I'm taking it literally. It said, "Whether differences among individual class members may be ignored, liability and damages will be determined with statistical techniques that assume everyone is like the average." Now, I thought the answer to that question is yes, and it depends, of course; you have to be reasonable. I mean, that's why you use the four rooms. We don't know everybody in the room. What we do is we take an average in the room. If it's a good statistical average, why not? Now, I want -- I don't want you to agree with that if that isn't the law, but I don't see why it isn't. David C. Frederick: Well, Justice Breyer, we do agree with that position, but we also agree with Justice Kennedy that, because of the Mt. Clemens framework overlay for Fair Labor Standards Act, this is an easier case than a case in which there was not that substantive law difference. Because if you were to take one individual and you were to use the same evidence, it would be representative proof; you'd have the same burden-shifting framework. That's why all these arguments about Dr. Mericle really are merits questions, they're not class-certifying questions. Sonia Sotomayor: Mr. Frederick, I -- I'm not sure that you've answered the -- the two substantive questions that I see my colleagues asking, okay? With respect to whether you're a knife wielder or not, if you are assigned to -- to bear a knife during the day, you're going to be paid for that time anyway because you're on the start-to-end day, okay? So you're not going to get FSLA for that. So it's only the people who start out the day being required to don those outfits. David C. Frederick: Well, actually, Justice Sotomayor, that's where I would disagree with you, because -- Sonia Sotomayor: All right. David C. Frederick: -- if -- if the worker, through habit, convenience, is doffing while walking, our study didn't double count. Our study only took into account the walking time. So he's not going to get credit for the fact that he's doing work by putting on the gear while he happens to be walking. If he is pulled off the line during gang-time while the hogs are going along, he does not get extra minutes because his supervisor says, we need you with knife so go put your gear on. He's counted as part of gang-time at that point. And so -- Samuel A. Alito, Jr.: Could I just ask you to clarify something before your time runs out, because it -- it's unclear to me from what you've said in your argument. Why did Dr. Mericle come up with one figure for employees on the processing floor and another figure for employees on the slaughter floor if, as I understand you to have said this morning, all of the employees basically do both of those tasks and spend an equal amount of time on them, so they can all be considered together? David C. Frederick: I didn't say that, and if I did, I was -- I misspoke. Samuel A. Alito, Jr.: Well, that was the impression I got from what you said. David C. Frederick: Within the department, they would perform different tasks, some of which would require knife and some which didn't. And it was within the department that the averages that were being observed we believe are fair averages, in light of the fact that we're looking back in time, and we're trying to recreate what happened in a -- in a three-year period that, you know, was -- where there are no records. And so within the department, what the Court found was that there was consistency, and that the differences were minimal. The reason why there's a three-minute difference is because one is longer. It's a longer distance for walking to get to it, and there is, you know, more to be done. But I want to make clear that we -- we broke this down into the two different departments because we could discern those. But I would submit that the -- Anthony M. Kennedy: Let me ask you this: If the Court is writing an opinion of reaching the result you want, what is the standard we put? Representative evidence? Average evidence of injury is sufficient if? What -- what do we write? David C. Frederick: I think what you write, Justice Kennedy, is that in this context, where there was an expert who said that the averages -- they clustered around the averages, and that based on observations where the work activity, the donning and doffing that is contested here is occurring in three different places, it's fair to treat the employers because the FLSA is a remedial statute that is designed to protect workers who can't keep these kinds of records. That's why -- Anthony M. Kennedy: And that's -- that's a little bit too specific for the broad standard that I'm looking for. An average is possible if what, there's no other way to do it? If it's an FSLA case and has a special policy? Neither of those seem quite satisfactory to me. David C. Frederick: Well, I think every case is going to be different, as we would all candidly recognize, that an antitrust case is going to be different from a labor case. And that will be different from -- I think you do have to look at the substantive context in which the averaging is going to occur so that any deviations at least are explicable. Here -- Antonin Scalia: Don't you also have to say that the jury accepted the averaging? And that doesn't seem to have happened here. David C. Frederick: Well -- Antonin Scalia: When the jury comes in with -- with less than half of -- of what the averaging would have produced, how can we say that there has been averaging? David C. Frederick: The averaging, I think you should infer from the jury's award of damages to the injured -- and it was instructed not to give damages to the uninjured workers, and was faithfully charged with that. The fact that it awards a lesser amount may be based on its own doubts about the number of minutes or the quantity. But those kinds of calculations, I submit, Justice Scalia, we have always deferred to juries in the way these kinds of damages are calculated. John G. Roberts, Jr.: Thank you, counsel. Ms. Prelogar. Elizabeth Prelogar: Mr. Chief Justice, and may it please the Court: Justice Kennedy, I'd like to begin with your question about the proper standard to apply here. The government thinks it's the standard that the jury was instructed on, and this appears at JA 471 to 472. The jury was told in this case that they could only rely on representative evidence if all of the employees performed substantially similar activities, and that substantial similarity is what we think is the proper standard to determine whether an inference here would be just and reasonable. John G. Roberts, Jr.: Do you think -- how do you know they relied on the representative evidence? The number was -- was more than 50 percent of what was asked. The expert was cross-examined. We don't know, for example -- they rejected the 18 minutes but accepted the 21 minutes. The fact that the jury did not give you the damages sought seems to me to call into question the significance of the statistics. Elizabeth Prelogar: Well, I think it calls into question whether the jury agreed with the actual time estimates, but I don't think it undermines the conclusion that they found that there was proper representative evidence here because they were instructed that they couldn't award a recovery to the class until all of the nontestifying employees, unless they were convinced that they all performed substantially similar activities. So I think we have to infer that the jury found that all of these activities were similar, that there were not material differences of the kind that Mr. Phillips has referred to today, because the jury was instructed that that was the only way they could award class-wide -- find a -- a finding here of class-wide liability. John G. Roberts, Jr.: Well, but they -- they saw the evidence on which the calculations were based, right? Elizabeth Prelogar: That's correct. John G. Roberts, Jr.: They saw the donning and doffing of the sanitary gear and the protective gear. Couldn't they have made judgments based on those actual differences to reject some of the representative statistics? Elizabeth Prelogar: I don't think they would have had any basis to do so. And at the end of the jury instruction on representative evidence, which was an instruction that Tyson requested, the jury was told, quote, "The representative evidence, as a whole, must demonstrate that the class is entitled to recover. And I think that there was an ample evidentiary basis here for the jury to conclude that there weren't substantial -- substantial dissimilarity among the tasks that were being performed in these donning and doffing activities. It's useful, I think, to review that record evidence. For example, Dr. Mericle testified that the times clustered around the averages. He had 744 videotaped observations. As well, there was the testimony that employees frequently rotated between positions, including between those jobs that used a knife and those that didn't. The employees who testified at trial had times that came in very close to Dr. Mericle's averages. And I'll just refer you to Mr. Logan, who testified at JA 260 and 265, 17 to 19 minutes. Mr. Bulbaris said 18 to 22 minutes. Mr. Montes said around 20 minutes. As well, Tyson itself didn't think that there were these material variations when it was calculating the K-Code time using a study that was very similar to the study that Dr. Mericle employed here and used essentially the same methodology. In that circumstance, Tyson thought that it would be appropriate to treat all employees in a uniform way. So I think it's critical here that we have a jury determination upon a proper instruction about representative evidence that there weren't these kinds of dissimilarities that would warrant -- John G. Roberts, Jr.: And maybe you don't know because you're the -- in an amicus posture, but was the person who normally is, like, hosing down the floor paid as much as the person who performs the most intricate knifing operation? Elizabeth Prelogar: No. My understanding is that there were differences in what you were paid depending on your position. John G. Roberts, Jr.: And yet, your -- both you and your -- your friend are telling me that, well, we shouldn't treat those jobs differently because they often switched back and forth. Elizabeth Prelogar: Well, the jury concluded here that those jobs didn't require materially different gear. So I think that the pay rate, which was evident from Tyson's own records here and could be calculated through these kind of mechanical damages calculations, doesn't signal that there was different gear. It might signal that the work being performed on the job was somewhat different and required different levels of skill. But I think it's clear, based on the jury verdict in this case, that the plaintiffs were able to prove their claim with class-wide evidence. And at this juncture, it's something of the reverse of what this Court has confronted in other cases, where the Court has recognized that sometimes the certification decision overlaps with the merits of the claim, and you have to consider at the outset whether the plaintiffs will be able to prove their claim with class-wide proof. Anthony M. Kennedy: Do you concede that if this were a Rule 23 action and the FSLA were not involved that it would be a much closer, much more difficult case? Elizabeth Prelogar: Yes. I think it would be much closer. And -- and here, I think that this really gets to the point that the dispute here doesn't turn on a freestanding Rule 23 requirement. It stands on -- it -- it turns on the Mt. Clemens standard. And Mt. Clemens does adopt a special rule tailored to the fact that there is a recordkeeping violation in this case that prevents the employees from being able to prove their claims with more precise evidence. We think -- John G. Roberts, Jr.: You -- you agree it would be an extension of Mt. Clemens to apply it at the liability stage as opposed to the damages stage, right? Elizabeth Prelogar: I think there's a way to read Mt. Clemens where the -- this -- where it would not be an extension. But to the extent that you think it would be, we think it's a perfectly logical one and one that's consistent with the rationale in Mt. Clemens. Mt. Clemens said that when the recordkeeping violation prevents a determination of the amount of time spent on these activities, then you should be able to come forward with a just and reasonable inference and not put the burden on the employees to prove that time with precision. And when that exact same fact is relevant to liability insofar as it's necessary to prove that the employee is pushed over the 40-hour-per-week threshold, then we think that all of the rationales that animated Mt. Clemens would equally apply to the determination of that particular fact in that context. But we think the Mt. Clemens itself signaled that this might be an appropriate determination at the liability phase because it recognized at the outset that the burden of proving that you have performed work for which you were not properly compensated shouldn't be an impossible burden. That was the language that was used in the opinion. And so I think that whether or not Mt. Clemens decided it, certainly it -- it's true that it should be applied in this context to the particular fact that was relevant there. Sonia Sotomayor: I'm -- I'm going to try to phrase what I understand the question my colleagues have been posing that I don't think either counsel has sort of gotten at, or maybe it's so obvious that we're missing it, okay? Clearly, the expert here, Dr. Joy, said -- I'm using a hypothetical -- there's 10 minutes of overtime. And the figure that comes out with 10 minutes of overtime is a million dollars. Now the jury comes back with half a million dollars. How do you know that what they said is -- I half the time -- five minutes, or the jury said, I think it's eight minutes or -- for slaughterhouse and three for production line people. So it averages out to five now, okay? How do we know what -- how the jury calculated that half million? Elizabeth Prelogar: The answer is that we don't know for sure, Justice Sotomayor. Sonia Sotomayor: That's what my colleagues are saying. So the question is, your adversary is claiming that there might be some people on the three-minute side who are going to come and collect a pro rata share who really weren't injured because they had worked 39 hours and 57 -- 56 minutes, something like that. So why is it that it's fair to distribute this -- this award pro rata? Elizabeth Prelogar: Well, I think that it's not clear yet exactly how the award will be allocated, and those will be left to the district court's discretion when the case returns for allocation. At that point, Tyson can come in and it can make these arguments if it thinks it's unfair. The district court will be well-positioned to determine whether Tyson waived the claims by actually asking for a lump sum verdict here and whether Tyson even has a stake in this issue given that its own liability won't increase. Ruth Bader Ginsburg: Why would -- why would Tyson's care? They have to pay the same amount of dollars. Elizabeth Prelogar: Exactly, Justice Ginsburg, and I think that that shows that Tyson might not have the requisite stake here to be able to challenge the allocation. But I think the overarching point to keep in mind is that the -- the issues with allocating this award were not the inevitable result of the class action mechanism. They don't reveal some defect in that mechanism. There were any number of ways to account for this problem. The trial could have been bifurcated between liability and damages, as Justice Kagan noted. That would have solved this problem entirely, but Tyson opposed it. Or Tyson could have sought judgment against the 212 class members who had no right to recover under the plaintiffs' evidence. It didn't do that. Tyson could have asked for a special verdict that would have allocated the damages by the jury; but instead, it asked for a lump sum verdict. Or it could have asked for the class definition to be altered in this case to exclude those individuals who weren't working the requisite number of times. Ultimately, there are any number of mechanisms that could account for this issue, and none of them demonstrate that this class action was improper. They went unutilized only because of Tyson's own litigation strategy here. Ruth Bader Ginsburg: What happened to the -- the government's action? I mean, the government started this against Tyson's or its predecessor and got an injunction. And then the government said that the solution that the -- the K -- whatever it was -- that Tyson's came up with wasn't good enough. And then nothing. What happened to the government's -- Elizabeth Prelogar: Well, ultimately, the government ended up settling the claims in that prior enforcement action. But then the -- the government issued an opinion letter to the industry, saying that it was clear that you had to pay for actual time worked. And, of course, the secretary has limited resources and can't conduct enforcement actions for every violation of the FLSA. But it is the Department of Labor's position here that Tyson was in violation of the FLSA, both by not keeping the actual records and by not fully compensating the employees for the time worked in this case. Samuel A. Alito, Jr.: What do you think an employer -- John G. Roberts, Jr.: No. Go ahead. Samuel A. Alito, Jr.: What do you think an employer should do about recordkeeping when the employer believes that certain activities need not be counted under the FLSA? So is the employer -- it may be that the employer is stuck with the choice that it makes, the legal judgment it makes. But is it supposed to keep two sets of -- of records so the amount of time that it thinks the employee is entitled to compensation for, and then this additional amount of time, that it might be argued that the employee is entitled to compensation for? Elizabeth Prelogar: Well, Mt. Clemens does make clear that the employer is stuck with its mistake because it said even when the failure to keep records grows out of a bona fide mistake about whether the time should be compensable whether it was work, that still the burden-shifting framework applies. But I would also note here that I think there was no legitimate argument here that this wasn't work. These activities, I think -- it was clear with the wake of Alvarez -- were required to be compensated. John G. Roberts, Jr.: Thank you, counsel. Mr. Phillips, you have five minutes. Carter G. Phillips: Thank you, Mr. Chief Justice. Let me answer Justice Alito's point and the -- and the observation where -- I mean, the reality is, is that in the Reich litigation, we were told that the -- the ordinary sanitary equipment was not -- was not within the donning and doffing requirements, and never a problem. And so as a consequence of that, frankly, we didn't monitor this. That's not a complete defense, but it at least explains the sort of the equities of the -- of the situation. Second, my good friend tells you that the district court here found that all of these things are very similar. The reality is, is that at Pet. App. 87A, the first time this issue came up with the class certification, the district court said there are some very big factual differences among all these employees. And the basic -- and the only reason the district court didn't agree to certify it at that time was because he thought that the gang-time was somehow the -- the tie that binds this all together. Well, the gang-time was nothing in this -- in this litigation, and the reality is he made a mistake then, and every time we came back to decertify this class, based on more and more information about the inadequacies of Mericle's evidence as applied by Fox, who was -- who was essentially just wiped away, saying, well, this is distinguishable from the Supreme Court's cases here, and it's distinguishable from the Supreme Court's cases there. Justice Kennedy, the answer to your question -- Antonin Scalia: Yeah, but you're -- you're saying the district court made a finding that there were great dissimilarities. Carter G. Phillips: Yes, Your Honor, it did. Ruth Bader Ginsburg: Where is that? Carter G. Phillips: That's on page 87A of the appendix to the petition. Justice, that's in the first certification decision. Justice Kennedy, to answer your question about how do you write an opinion, and when is it close enough? Averaging is a permissible way of going about it when the evidence is clear that the -- that the basic activity is homogenous, and that would have been true for walking time. There was -- there was literally no difference -- Anthony M. Kennedy: Basic activity is -- Carter G. Phillips: Homogenous. And here when you're talking about 30 seconds and 10 minutes, and we're talking about wildly different activities, what you can't do is just simply say, okay, we're just going to patch over all that and average it. Sonia Sotomayor: Didn't they standardize walking time? That's what I thought they used. Carter G. Phillips: Yes, and that's why -- Sonia Sotomayor: There's a standardized walking time because some people are faster than others, correct? Carter G. Phillips: Right. But my point here is, is that in general, everybody agrees that's a reasonable way to proceed. That's my point. Here we're not talking about homogenized because there are vast differences, and the evidence is absolutely unsalable on that. And with respect to Mt. Clemens, in the first place, I -- I don't think Mt. Clemens should be extended to -- to make the fair and reasonable inference standard of the presumption apply at the liability phase, and I think the court was extremely clear in not wanting to go down that path. But second, even if you thought the presumption should be applied here, I would argue that Mericle's evidence, as -- as, you know, through cross-examination and examination of others, demonstrates that this is not a fair and reasonable inference. And on that score, it seems to me there are two quotations I would offer up. One comes from this Court's decision in Wal-Mart, "when an expert's testimony does nothing to advance a party's case, the Court can safely disregard what he says." And then what Judge Posner said in a very similar FLSA case, "What cannot support an inference about the work time of thousands of employees is evidence of a small, unrepresentative sample of them," and that is precisely what we have in this particular case. With respect to remand, we would be happy for a remand to -- for allocation if that's permissible, but as I read, the final judgment of the district court is judgment of about $6 million to these named plaintiffs, and that was affirmed. There is nothing in there about how this is going to be allocated under these circumstances. So if the Court believes there's got to be a separate proceeding of allocation, the Court hopefully would order that, although I think there is a more fundamental decision the Court would have to reach. And then finally, with respect to who has the burden of dealing with this problem, it is the plaintiffs' burden to sustain the justification for a class all throughout the proceedings until a final judgment is entered. And we came to the court four times asking them not to certify this. So to come back in at the end and say, well, since we were able to try this without any ability to put forward any of our individual defenses with respect to any of these individual employees, except for the four who actually testified, is exactly what this Court said in Wal-Mart and Comcast is an impermissible way to define the class. The Court should reverse in this case, declare the class decertified. If there are no further questions, Your Honor, thank you. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

Earl Warren: Number 137, Lurton Lewis Heflin, Petitioner, versus United States of America. Mr. Cooper, you may proceed with your argument. Jerome A. Cooper: Thank you, sir. If the Court pleases, at the close of the day yesterday, I think the Court was giving some attention to the argument which the Government has suggested that our case is premature under Section 2255 and late, under Rule 35 of the Criminal Rules. We did not argue this in our brief. We were not at -- in the preparation of that brief, aware of the tenacity of the Government on this point. We thought, and I think with good reason, that that matter was sufficiently at rest. We drew some comfort from the fact that the argument was made at length in opposition to the petition for certiorari, which was granted over that opposition. We realized that Gore against the United States had proceeded as a case under 2255 and had been entertained although custody under successive sentences there was precisely involved. And finally, we relied on what the statute itself says that it may be -- that relief under it may be sought at anytime. Charles E. Whittaker: That's the rule. Jerome A. Cooper: Both the statute and the rule provides substantially the same, Mr. Justice. Of course -- Felix Frankfurter: The statute, you mean 2255? Jerome A. Cooper: 2255, yes, sir. And I think there's one Court of Appeals, I believe, it's the District Court of -- the Court of Appeals of the District of Columbia in -- in the Holloway case, I think, which doesn't involve the problem we have here but saw fit to comment that under Rule 35 of the Criminal Rules and under 2255, the party concerned was entitled to seek relief at any time, and that that's what Congress meant when it used those words anytime. Now, I think we have trouble with Rule 35 if this is precisely -- if this is only a proceeding in the original criminal case, then we are probably caught by the Rule 22, as I recall, of this Court. However, I don't think that Rule 35 of the Criminal Rules, although it appears in that section of -- of the rule, should be dealt with as only a -- a provision for further proceedings in the original criminal case. I -- I think there's a good reason and some authority to say that that rule, just like 2255, invites a collateral inquiry into a criminal judgment. And collateral inquiry into a criminal judgment traditionally by habeas corpus has always been considered in the nature of -- of a civil proceeding, not a criminal proceeding. And so, I think we're -- we're -- actually we are here in a something like a civil proceeding and therefore, we should not be caught by Rule 22 of this Court, if that is the Government's contention. And I think certainly, that we are not premature under the statute. I think it's the most harsh suggestion on the part of the Government that this statute that obviously was designed to create benefits and to make it easier and more simple for people under sentence to obtain relief against illegal and incorrect and invalid sentences. It's the most harsh thing for the Government to say that before you get that benefit, you've got to serve part of the illegal sentence that this statute was designed to relieve against. So as I say, we -- Potter Stewart: Isn't it a mere suggestion though, isn't it, on the part of the Government? Isn't that -- hasn't that been the square holding of, at least, some of the Courts of Appeals? Jerome A. Cooper: I don't think so. I could be in error about that. I think -- Potter Stewart: (Voice Overlap) -- Jerome A. Cooper: -- for instance, the language of this Court recently in Ladner indicates certainly that this type of thing is not jurisdictional. And if the Government doesn't see -- see fit to raise it below, it's -- the Government, itself, is untimely in making the argument that our case is premature because we are not as yet serving time under the consecutive sentence that we ought to -- Tom C. Clark: How many -- how long is it served? Jerome A. Cooper: I think the -- there was a temporary commitment. The trial was 1954. And I think there was a temporary commitment then -- and -- and as far as I can determine from the record, approximately four and a half or possibly five years, Mr. Justice. Felix Frankfurter: Is it -- Tom C. Clark: (Inaudible) basis, you had served a couple more months. Jerome A. Cooper: Yes, sir, we are getting close to the -- Tom C. Clark: (Inaudible)[Laughter] Felix Frankfurter: Mr. Cooper, I -- I think you do well to take the vigorous line that you are taking on this point. On the other hand, on the other hand, in view of the still cloudy condition in which the construction or the scope of 2255 remains, what this Court said and what it didn't say in Hayman, etcetera, etcetera, the only way of -- of, perhaps, getting a rationale and a clear system for practice or ruling in this deal is for the Government to raise these questions instead of leaving it all to -- to laxity and to oversight or -- etcetera, etcetera. Jerome A. Cooper: Yes, sir. I -- I will say that I have the impression from reading the record that neither the District Judge, who is a -- an able and experienced District Judge, neither he nor the parties nor the Court of Appeals were troubled by the thing. Felix Frankfurter: People aren't troubled if the trouble isn't put before them, you know. Jerome A. Cooper: That's correct. Of course, I think that I can agree with you that the Government ought to explore these problems -- Felix Frankfurter: Yes. Jerome A. Cooper: -- so we'll know, at least so that other parties will now. Tom C. Clark: What was the time when it -- the time lapse on the serve? Jerome A. Cooper: Sir? Tom C. Clark: The time lapse on the serve? How many? Jerome A. Cooper: It was not within 30 days, as I recall, so that we would be caught under Rule 22 if we -- Tom C. Clark: (Inaudible) Jerome A. Cooper: It was within the several time. There's no question about that. And the petition was prepared, as I understand, by the individual, himself, in prison. And he was proceeding as I read it on the assumption that he was timely and I think he was correct certainly sufficiently filed first. The -- there is another matter suggested, I think, yesterday by counsel for the Government relative to this statute which he has finally found. That was 18 U.S.C. 101 at 35 Stat. which he -- he suggests then some support to his contention that Congress can, when it sees fit, use very definitive language about who is a receiver and who is not. With all due respect to my colleague here, I -- I think that this is almost a reminder of the devil quoting scripture. They finally have found a -- a statute which was obscure up -- in this case up until just now, which they suggest may lend some help to them. Actually, however, I -- I heard they ran that statute down. And I think it's interesting to know that -- that the 1946 edition of the Code was amended in 1948. And that Section, which was 101, became 18 U.S.C. 641. And in 18 U.S.C. 641 in 1948, the draftsmen dropped out this little phrase about which has theretofore been stolen by any other person. And they did something else. They -- they combined in 1948, they combined prior sections of the Code which had dealt with the principal robbers or thieves who dealt with government property. So that after 1948, the Code, in one Section, deals with the receipt of stolen property and also, the stealing of property. And it only uses the phrase "receiver of stolen property". It doesn't say a receiver of stolen property stolen by another person. Now, no one paid much attention, apparently, to the dropping out of that phrase. And I'm sure that prosecutions have -- have continued on to the amended section just as they did under the old Section 101, which -- to which reference was made. But it does indicate to me something, I think, that is helpful in trying to find out if we can what Congress was doing. In that in 1948, the Code was further amended to provide a separate section which is under the heading of "Arraignment, Pleas and Trial" that reads, “Receiver of stolen property triable before or after principal”. Now, that is now 18 U.S.C. 3435 and it reads, “A person charged with receiving or concealing stolen property may be tried either before or after the trial of the principal offender.” Now, the interesting thing about that is that there was a provision like that in old 101 which would have been limited to the receiver that dealt with. But now, we have a general statute under Federal Criminal Procedure, Arraignment, Pleas and Trial that indicates that at least procedurally, Congress knows how to deal separately with the receiver and with the principal offender. And that Congress all along has meant to do so, I think, is the only logical deduction you can make from the history of that little statute which they found and -- and cited to the Court yesterday. One other matter that was somewhat newly stressed in argument is the reference to the decisions in the lower federal court under the Dyer Act and under the Stolen Property Act prior, as I recall, to 1940, I think, was the date the Government was considering. I didn't -- I was unable to run all of those down but I did take another look at the two that are cited in the Government's brief. One of them is Johnson against Zerbst in the Tenth Circuit. And what that case held sometime ago was that an individual may be convicted and sentenced under two counts, one, for transporting a stolen automobile and two, for receiving and concealing that same automobile as part of a single transaction. So that, actually, if I understand the Government's position now that is authority for a type of situation to which they would not even apply the statute in its present form. In other words, that Court said that although you have a -- a transporting of a car and the receipt of a car simultaneously in one transaction, that Court, the Tenth Circuit thought consecutive sentences could be imposed under that -- under the Dyer Act. I don't think that's very helpful in -- in trying to ascribe a purpose to Congress to read an undisclosed knowledge of the Attorney General that at the time of the passage of the 1940 amendment, section (c) in the statue now with which we are concerned, there had been some consideration of the problem by lower courts. Neither do I think we are aided very much by the other case cited in the Government's brief which is a Sixth Circuit case. New York against the United States in 199 Federal because there, a man tried somewhat, it seems to me, as the petitioner here was tired, was found to have been denied the type of complete trial. The Court of Appeals thought he was entitled to and his conviction was reversed, a conviction based primarily on the testimony of an accomplice and -- and in which the Court of Appeals found the District Court had injected himself a little bit too much into the trial of the case in order to let the conviction stand. And the conviction was reversed. And then by way of advice, the Court of Appeals in its opinion at page 780 said, "We note by word of caution our disagreement with the Court and counsel that a verdict of guilty on one of the two counts is inconsistent with a similar verdict on the other." In other words, there was some confusion even in that case between the District Court and the Court of Appeals as to whether or not you could convict a man for both -- and sentence a man for both transporting and receiving an automobile that had been stolen, transporting in interstate commerce. Felix Frankfurter: Of course, if -- if the cases don't bear out, as I understood to be the Government's claim, that it had been the settled construction of the Dyer Act that a thief, that he is also through an independent act of concealment, not inherent in (Inaudible) be punished, subject to punishment if the cases don't bear that out as -- as fact. Jerome A. Cooper: That's -- Felix Frankfurter: But if they -- if they do, then there's a very serious question, as least to my mind, when the Attorney General makes a suggestion, asks Congress to pass a statute based on other statutes derived from a series of rulings, although he doesn't disclose it, he would say undisclosed, one knows how the Attorney General and particularly this one operated. This is a suggestion that was made to him by the Criminal Division of the Department. They refer to past statutes, any lawyer except a stupid or a lax one, in dealing with a statute would consider the instructions given to that statute and therefore, there is a gloss put on it by prior decisions. Now, if there is no such gloss, then -- then you are all right. Jerome A. Cooper: Well, I think -- I think still that the best evidence of what the Congress was doing in 1940 is what it -- what the Senate Committee's Report said in its caption, that they were dealing with receivers of stolen property from bank robbers. And I think that's considerably more persuasive. Then the long jump, the long double jump that you have to make, one that Congress was giving any attention to the Attorney General's thoughts at all -- Felix Frankfurter: It's argumentatively -- it's argumentatively persuasive but the fact is that captions of legislation very often only give one part of the subject matter of the statute -- Jerome A. Cooper: But it's -- Felix Frankfurter: -- as you well -- Jerome A. Cooper: -- the most definitive part of this particular report I think. Tom C. Clark: Do you think the fact that they -- he didn't get the money until after (Inaudible) Jerome A. Cooper: Well, he got it simultaneously with the division according to the record, Mr. Justice. Tom C. Clark: (Inaudible) Jerome A. Cooper: No, sir, I don't think so. The -- the robbery was his act. They were all confederates. He was convicted and -- and tried as a bank robber because, of course, he was part of the bank robbery. And I -- I think he as much -- if -- if the verdict stands, he is as much a robber whether he actually holds the hand of the man that's carrying the loot out of the bank or whether he is just one of them in the party committing the robbery. I -- I don't see any distinction there at all. William J. Brennan, Jr.: Mr. Cooper, does it appear that the -- a bill was prepared by the Attorney General? Jerome A. Cooper: No, sir, it does not. I -- William J. Brennan, Jr.: You don't whether -- Jerome A. Cooper: -- but I maybe wrong. I don't remember exactly what his letter said. I believe his letter said that a -- that it could have said, "I'd have to -- I don't trust my memory that a bill was accompanied it when he sent the letter -- William J. Brennan, Jr.: That's the issue. Jerome A. Cooper: I -- I believe it probably did. William J. Brennan, Jr.: Well, if it did, then perhaps, this caption that you rely upon was supplied by the Attorney General. Jerome A. Cooper: The caption is on the report, Mr. Justice. William J. Brennan, Jr.: On the report. Jerome A. Cooper: Yes, sir. William J. Brennan, Jr.: Not on the bill. Jerome A. Cooper: No, sir. That -- that caption was put on by the draftsman of the report. William J. Brennan, Jr.: I see. Tom C. Clark: Attorney General (Inaudible) Jerome A. Cooper: Yes, sir. Well, this -- Felix Frankfurter: (Inaudible) Jerome A. Cooper: Well, as I say, I don't think the two cases, which have been cited, are very helpful. And I don't think they hold or establish any concert in the courts below prior to 1940 whatsoever. I think that we are left with the situation that apparently, if the Government's view is correct, the Court and the prosecutor and the interested parties must guess when the bank robbery has reached a sufficient point in time or in nature that it becomes a second transaction. And I submit that if you've got to guess about that sort of thing as to when a second transaction occurs or when a second impulse arises to commit a criminal act, that you've got the most typical -- the most questionable type of ambiguity in a statute. If you -- if -- if, as they now admit, that the actual receipt immediately on the commission of the bank robbery is not a second offense, then everytime the statue is applied, somebody is going to have to guess, have they carried the bank robbery far enough away from the bank to justify the imposition of a second sentence. We think that -- Potter Stewart: That's not unlike factual issues that juries are called upon everyday to determine, is it? Jerome A. Cooper: Well, it's unlike most factual issues, I think, that a jury should have to determine under a statute, which is a criminal statute. I think criminal statues are required to have a sufficient definiteness so that it -- it we can understand in advance. Someone can understand in advance -- Potter Stewart: Well -- Jerome A. Cooper: -- reasonably whether the crime has been committed. Potter Stewart: -- we can understand what the legal test is under the statute and then leave it to the jury to find out what the facts are. Jerome A. Cooper: That may be, but you're going to have the result that in one trial of a -- of a bank robbery, punishment may result from two sentences whereas in almost identical circumstances in another trial, you'll have one sentence or three or four. And I think the -- you'd -- you'd be almost -- you'd be running a pretty good risk that the uniformity of punishment that -- that Congress must have intended, we think, would just be impossible of accomplishment. And I think you run one other risk -- Potter Stewart: And in another case, you might get an acquittal and there would be no punishment at all.That happens every day, doesn't it? Jerome A. Cooper: I don't know, sir, I assume it does. But the problem is not what -- what do you do for the man who had been acquitted, the problem is -- we have two problems, what do you do with the man who is charged before trial, what are -- what can he reasonably expect and two, what do you do with the man who has been found guilty under two counts and then you have to decide, do those two counts actually relate to sufficiently separate sets of facts to be valid, one under the statute and two, to be constitutional as not imposing -- not violative of the provision against double jeopardy? And I don't -- I am serious -- we were serious in our brief that you can have a problem of double jeopardy if a mistake is made, and two sentences are imposed when, in fact, there should only have been one. I would like to close with reminding the Court, if I may, that, at least, in our case, there isn't much question about what the set of facts was. The Court of Appeals on the first appeal had this to say about it. This is in the first appeal, 223 F.2d 374, on January 23rd, the robbery was executed according to plan, the getaway was made and the loot divided, all at one time. That's the situation they dealt with. And then, on this appeal, on our motion presently before the Court, the Fifth Circuit Court of Appeal repeated again what it had decided on the first appeal, its opinion that receiving stolen money and conspiracy are offenses separate from bank robber. And the only proof that ties this petitioner to that stolen money was, as we've outlined previously, namely, the he is charged with being in the bank and was shortly thereafter receiving his share of the loot. There isn't a word of evidence in this record after that, that he ever had anything whatsoever to do with the money, that he disposed of it, sold it or concealed it. And I think it's an unwarranted position of the Government to say that the mere fact that there is an isolated statement in the record that the money had not been recovered, creates some kind of presumption that this man, thereafter, had committed culpable acts. Earl Warren: Mr. Cooper on behalf of the Court, I would like to express our thanks for the services that you have rendered in this particular case. We know it took some sacrifice to you. And I -- I can't help thinking of the fact that, as I stated in an earlier case, that in this week's argument, there are four people who are unable to come to this Court, although they are totally without means because of the public spiritedness of lawyers who are willing without compensation that the assignment of this in other courts to conduct their defenses for them, and we are deeply grateful for it. Thank you. And thank you, Mr. Gilinsky, for your able representation of the Government in this matter. Speaker: Chief Justice, could I ask a question? Earl Warren: Yes, indeed. Speaker: Do I take it now that the transcript, the trial transcript by agreement is part of this record before us? Jerome A. Cooper: Yes, sir, we have noted that we have no objection here.

William H. Rehnquist: We'll hear argument first Number 92-603, the Federal Communications Commission and the United States v. Beach Communications, Inc.-- Mr. Manning. John F. Manning: Thank you, Mr. Chief Justice, and may it please the Court: A divided panel of the D.C. Circuit took the extraordinary step of invalidating a portion of an act of Congress, the Cable Act of 1984, on rational basis grounds under the Fifth Amendment. In particular, the court rejected Congress' judgment that there is less reason for imposing a franchise requirement when cable facilities serve only commonly owned, controlled, or managed multiple-unit dwellings. Instead, the court concluded that the only rational dividing line between franchised and unfranchised facilities in the use of public rights-of-way. We submit that the court of appeals erred in redrafting the reasonable line drawn by Congress in defining the term, 1984. The crux of the issue in this case is the proper classification of satellite master antenna television, or SMATV. Unlike traditional cable systems, which pick up distant signals at a remote antenna and transmit them to the community through wires running under or over the city streets, an SMATV facility typically sets up a rooftop antenna and then transmits programming by wire to units in a building or group of buildings. In enacting the Cable Act of 1984, Congress had to decide whether and when an SMATV system should be treated like a traditional cable facility and made subject to franchise requirements. Contrary to the court of appeals' decision, the line drawn by congress was a reasonable one: an SMATV system is exempt from any franchise requirement if the system serves only multiple-unit dwellings under common ownership, control, or management, and uses no public rights of way. Anthony M. Kennedy: Are they generally free from FCC regulations, as well? John F. Manning: Well, the crux of this case is what a cable system is, and a cable system determines... one's status as a cable system determines whether one is subject to franchise requirements, but there are also other Federal requirements that apply to cable systems as well, such as-- Anthony M. Kennedy: There are other-- John F. Manning: --There are-- Anthony M. Kennedy: --Requirements that these cable operators, that these small cable operators are subject to. John F. Manning: --That's right. There are, for example, technical requirements dealing with signal interference, with the quality of the signal, and there are other requirements pertaining to rate regulation and so forth that apply to cable systems, but the only thing that's at issue here is whether it's constitutional to impose a franchise requirement on an SMATV facility that serves only commonly-owned buildings. In enacting the so-called private cable exemption with its common-ownership requirement, Congress made the judgment that it did not want to impose franchise requirements on a building owner or condominium association that decides to put a satellite antenna on the building and provide cable television to its residents, perhaps as an amenity. William H. Rehnquist: Mr. Mann, when you are talking about a franchise requirement, are you talking about a requirement imposed by Congress, or a requirement that... franchise that allows local governments to impose? John F. Manning: Under 47 U.S.C. section 541, Congress has provided that with the exception of facilities that are grandfathered under subsection (b) of that section, a cable operator... that is, a person who operates a cable system... must obtain a franchise before beginning to provide cable service. William H. Rehnquist: And a franchise from the Federal Government. John F. Manning: Franchise... a franchising authority... it's not clear what they mean by franchise. The act describes a franchise authority as a Federal, State, or local authority that has power to issue a license, but in practice what it means is a State or local franchise, not a Federal franchise, Your Honor. William H. Rehnquist: So although the act may not be clear, that is in practice what happens. If you're subject to this requirement you must get a franchise from a State or local government. John F. Manning: That's correct. That's correct, it's a State or local... in practice a State or local franchise requirement, and what Congress decided was that if a building owner or a condo association decides to put a satellite dish on the roof of the building and provide cable service to its tenants, then that would not be subject to a local franchise requirement. Similarly, if the same building owner or condo association ran a couple of buildings, or ran a building complex and put a satellite antenna on the roof to provide cable television to all the residents in the complex, that also would not be subject to a local franchise requirement. But where a satellite antenna is set up to serve multiple, separately-owned buildings, or if its wires run over or under the city streets, Congress made the determination that the facility looks more like a traditional cable system and should be subject to franchise requirements accordingly. Antonin Scalia: Mr. Manning, is that the right-of-way criterion, whether it goes over city streets? John F. Manning: That's correct, Your Honor. Antonin Scalia: So in New York City, you could wire up an entire city block without using city rights-of-way. John F. Manning: That's correct, and it could be... as your question suggests-- Antonin Scalia: Which is a lot of people. John F. Manning: --It could be quite a number of people, and the judgment that Congress made, that the common-ownership requirement in addition to the right-of-way requirement was a rational basis for distinguishing between franchised and unfranchised facilities, was a reasonable line. The essence of the rational-basis test is that debatable policy judgments are left to Congress, not the Federal courts, and as this Court explained most recently in Sullivan v. Stroop, a classification in a piece of socioeconomic legislation must be sustained if any state of facts may reasonably be conceived to justify it. Under that standard, the line-drawn by Congress in this case easily passes constitutional muster. If a satellite antenna serves only a commonly owned building or set of buildings, a plausible legislator could think that it is more likely that the service is being provided as part of the package of services that management provides to its residents, that it's an incident of residency. Equivalently, a reasonable legislator could conclude that the service provided by such a satellite antenna would be less likely to be run in the nature of an independent business venture, but even if you take a building complex-- William H. Rehnquist: What would be the virtue of that conclusion, that it would be less likely to be run as an independent business venture? John F. Manning: --Well, you would think that if you were an owner of a building and you were putting up a satellite dish and providing the service to your tenants, that your primary interest would be in keeping your tenants happy, because you are making a lot more money from their rent, or from their condo fee, than you are from providing them with cable service. So in that situation, you could conclude that there would be less need to interpose a franchising authority to provide consumer protection, when the building itself is really the provider of the service. But even if you have a situation where the building is making a contract with an outside SMATV company to set up a satellite antenna on the building, to run the wires, own the wires, service the building, arrange for the programming, and bill the tenants separately, that company is still accountable to one set of owners for the service that it provides from that dish. Every subscriber who gets service off of that satellite antenna can voice his or her complaints or desires to a single set of owners, and the ownership has a strong incentive to keep the subscribers happy, since there is a substantial interest in keeping the rental fees and the condo fees flowing. David H. Souter: Mr. Manning, is it correct, I guess almost as a matter of definition, that on the scenario you're just describing, every unit of buildings is going to have to have its own complete system? I mean, there's going to have to be an antenna, and so on, so the... what I'm getting at is the investment is going to be much greater in the cases subject to the exception and the cancellation of the business would consequently be far more disastrous. John F. Manning: That's correct, Justice Souter. I mean, it wouldn't necessarily be a single business, but it would be a single... a single building... I'm sorry, a single building, but it would be a building or building complex. And what you would do is, you would... it would involve the construction of a satellite head end, and it may or may not involve wiring the buildings, because a lot of these buildings have the old mater antenna television system wiring already in place, so you might or might not be able to use that. So there is a substantial investment in building the satellite head end facility, and if you were serving a single set of buildings, and the ownership cancels that contract, then you've lost out a lot. David H. Souter: You simply have more at stake in keeping them happy. John F. Manning: Right, whereas if you're serving 10 different buildings, then no one owner has that degree of leverage over your service. And what's more, if a satellite antenna is not limited to serving commonly owned buildings, as Justice Scalia pointed out, it may well be expected, or a reasonable legislature could at least think that you would tend to have more subscribers served by that satellite antenna, because you could wire an entire city block in New York by running a wire from building to building. In that case-- Antonin Scalia: And the owner would have real monopoly power over that... at least over all the people within that block. John F. Manning: --The owner would have substantial leverage, because the alternative for any of the buildings on that block-- Speaker: Is to put up-- John F. Manning: --Would be to build your own system. Antonin Scalia: --Right. John F. Manning: And now, I would like to-- Antonin Scalia: And therefore greater need for rate regulation, which the franchising authority would do. John F. Manning: --That's exactly right, and you could have... a franchise authority with consumer protection jurisdiction could more profitably exercise control over the rates and consumer service of a satellite antenna that serves separately owned buildings. And what's more, if you assume, as a reasonable legislator could, that the size of the market served by that facility, served by that head end satellite antenna equipment, is larger if the common-ownership requirement is not met, then the costs of franchising could be spread among a greater number of consumers, and so Congress could have reasoned that the cost-benefit ratio of imposing a franchise requirement on a facility that serves separately owned buildings would be more favorable. Antonin Scalia: There's a lot of reasons you can think of, aren't there? I mean... but none of these really appears, as far as we know, in any of the debates. John F. Manning: Well, Your Honor, this Court has made perfectly clear in a number of cases, most recently Nordlinger v. Hahn, but perhaps most clearly in the case of Railroad Retirement Board v. Fritz, that the rationale for a piece of legislation does not have to appear in the legislative history or even in purposes articulated on the face of the statute. That issue was raised very clearly in the Fritz case, where the dissent said that the evidence in that case involved a question of line-drawing between those who would be eligible for dual benefits under the social security system and the railroad retirement system and those who would not be eligible for that double-dipping, and Congress drew a line based on whether one was serving in the... to summarize very sketchily, whether one was serving in the railroad industry or had a current connection in 1974. The dissent said that that line disserved the purposes of the statute as expressed in the legislative history because it didn't provide all of the people who had vested railroad retirement benefits with their ultimate benefits, and this Court said that the purposes of a statute for purposes of the rational-basis test did not have to be reflected in the legislative history, and that it was "constitutionally irrelevant whether the rational basis was articulated by the legislature at all. " The Court also stated that the best evidence of the legislative purpose is the text of the statute itself. William H. Rehnquist: Well, lots of times a bill starts out intending to do one thing and amendments are tacked on, so there may be several different purposes not necessarily consistent with one another. John F. Manning: That's exactly right, Mr. Chief Justice. It's very difficult... as this Court has explained many times, it's very difficult to know precisely why a legislator is moved to vote for or against a particular piece of legislation, and if the rationality of a statute were measured in terms of the reasons suggested by some legislators on the floor or by a committee in a report, it would be very difficult indeed to sustain the validity of much legislation, and it would be quite an impingement on the independence of the legislative branch. In rejecting the rational justification, what we call the consumer welfare rationale, the court of appeals offered very little explanation in this case. Consumer welfare rationale was suggested by Judge Mikva, Chief Judge Mikva in his concurring opinion, and endorsed by the FCC on remand. Rather than addressing the substance of that justification, the court of appeals merely dismissed it by saying, we have no basis for assuming its validity, and by calling it a FCC has wholly failed to flesh out. John Paul Stevens: Mr. Manning, can I ask you a question about the... I'm not quite sure I entirely understand your rationale. Are you sort of assuming that one of these singly owned complexes is a separate market? John F. Manning: That's correct. John Paul Stevens: But aren't they... aren't there a lot of these condominium associations in a big city like Washington, or New York? John F. Manning: There are a number of these condominium associations, but-- John Paul Stevens: Do they each negotiate separately, or is there a rate that generally applies to all of them? John F. Manning: --That I'm not certain of, Your Honor. John Paul Stevens: But if they're just part of a market, why are they a different part of a larger market if 10 buildings are owned by one person on the one hand and they're all owned by 10 separate people on the other? John F. Manning: Well, I think the thing that makes them a market is that what you're talking about when you're talking about a facility, which is the unit that you use to measure whether something's a cable system, you're talking about the hardware, the satellite antenna system, and as Justice Scalia pointed out, if you have a building, you have a satellite antenna that's placed on a building, then the people who own that building and-- John Paul Stevens: Well, if it's just one building, I guess it doesn't matter, because if it's one building it would be owned by one person or one association, but isn't the only... doesn't the problem only arise when you've got a complex of buildings on the one hand owned by a single owner and on the other hand by separate owners? John F. Manning: --I'm sorry, I'm not sure what you're asking. If you have a complex of buildings... if you have the same 10 buildings, and in one case it's owned by a single owner-- John Paul Stevens: Right. John F. Manning: --You have a satellite dish on building 1. It serves all 10 buildings. John Paul Stevens: Right. John F. Manning: The same set of 10 buildings are all separately owned. You have the satellite dish on building 1 and a wire is run among all 10. John Paul Stevens: Right. John F. Manning: Why... that is the same market in each case, but-- John Paul Stevens: Then let's assume that there are 100 parallels throughout the city. 50 of them are singly owned, and 50 of them are owned by the 10 separate owners. Now, you're saying that if you don't have regulation, they would all get different rates. John F. Manning: --Well, I think that it stands to reason... now, the record does not reflect what the actual practice is. John Paul Stevens: No, but your theory is that this is what Congress must have thought. John F. Manning: The theory is that Congress must have thought that when you're putting the satellite dish on your own buildings-- John Paul Stevens: That units that are economically identical would receive different treatment in an unregulated market. John F. Manning: --That would have to be the theory, yes, Your Honor. John Paul Stevens: Do you think that's sound? John F. Manning: I think that it's debatable, which is the only thing that's required under the rational-basis test. I mean, you and I may disagree just as the-- John Paul Stevens: Is there any economic support for that hypothesis at all? John F. Manning: --Well, the support is common sense and the way the world works. I mean, we may differ in what we think the right answer is to whether you'll get a better deal if you're served by a satellite antenna that only serves people in your building or if you're served by a satellite antenna that serves you and 10 other buildings, and we may disagree over whether the person in building 1 has more leverage because it's part of a collection of 10 buildings that negotiate as one for the service as opposed to 10 separate negotiators for the same service-- John Paul Stevens: Well, there are no brokers, there are no people that represent owners in dealing with the franchise companies in this-- John F. Manning: --Again, the record is not clear, and the crux of the rational-basis test is that Congress is not disabled from legislating unless it can... it is not disabled from legislating at the risk of not being able to prove that its policy judgments are empirically justifiable or even correct. That is the very clear import-- John Paul Stevens: --Or have any scholarly support whatsoever for them. John F. Manning: --Well, I mean, if you just take a case like Railway Express Agency v. New York, in that case New York City passed an ordinance, and the ordinance provided that there was to be a ban on advertising on trucks, but the ordinance also exempted self-advertisements on the same trucks. The court said... the court upheld that classification on the ground that a legislator may well assume that those who advertise their own wares present less of a traffic safety concern given the nature and extent of the advertisements on their trucks. There was no record support for that. They didn't cite any scholarly treatises, they didn't cite any traffic reports, any economic textbooks. What the court did was, it indulged in the democratic process by accepting plausible although unverified assumptions about the way the world works. Anthony M. Kennedy: Is it your position that it's plausible in the situation put by Justice Stevens to say that in the case where there's single ownership there is more leverage and therefore the market is different? John F. Manning: We think it's very plausible to think that. We think that a reasonable legislator certainly could assume that when you have a satellite dish that's being put on a building that a) it's more likely that the satellite service is being offered as an amenity to the tenants, that it may not even be a separate market where the SMATV company comes in, puts on the satellite, bills the tenants and runs it separately. But secondly, we think it's much more likely that when you have the negotiation focused between one set of owners for use of this very expensive piece of hardware and a satellite company, even if it runs a hundred of these satellite dishes around town, that the people who live within that building are more likely to have leverage over the product consumed than if you have the same company putting a dish on and running it to 10 buildings. Not only is the accountability more focused, but if a satellite dish can only serve multiple-unit dwellings, it is more likely that you are going to have fewer subscribers, and that means that each subscriber is going to have more leverage over the product produced, and that the cost of franchising will be more significant for... per subscriber for subscribers who live in buildings under common ownership. Anthony M. Kennedy: Now, Mr. Manning, if you prevail on this argument, and in this case it's your position that we should remand to the court of appeals for the determination of whether or not some other more rigorous standard applies? John F. Manning: That's correct, Your Honor. The court of appeals raised the question whether a fundamental rights equal protection analysis should be applied, but the court did not reach that question, and we believe that the Court should leave it for the court of appeals in first... in the first-- Anthony M. Kennedy: Does the FCC have a position as to what standard applies if there is content significance to the regulations? John F. Manning: --Well, the... this Court's cases suggest that... no, we... actually, we have not taken a position in that case, and we would prefer that the Court not address that issue because it has not been addressed by the court of appeals and we think it would be preferable to leave it for consideration by the court of appeals on remand. Anthony M. Kennedy: Well, two answers... number 1, it would be preferable, and number 2, you don't have a position. John F. Manning: We don't have a position, no. In... we believe that the court of appeals' error in this case stemmed largely from the fact that it perceived that the line drawn by Congress was different than the line traditionally applied by the administrative agency in deciding whether the franchise requirement should be applied... namely, the crossing of public rights-of-way. The FCC's traditional basis for imposing franchise requirements on cable facilities, however, is irrelevant to the constitutional question before this Court. Congress has no constitutional duty to adhere to agency precedent or even to give a reasoned explanation for departing from it. In any case, it is wrong to say that the only dividing line for franchise requirements had been the use of public rights-of-way. Under FCC regulations in the 1970's, a facility that did not satisfy the common-ownership requirement could be classified as a cable system and thus made subject to franchise requirements whether or not it crossed public rights-of-way. That ruling is reflected in the FCC's Bayhead decision which is cited in footnote 26 of our brief. In addition, the FCC's 1983 Earth Satellite decision confirms that the Commission never preempted franchise requirements for the type of facility at issue here... SMATV facilities that serve separately owned buildings by wire. John Paul Stevens: May I ask one other question about the common-ownership requirement? John F. Manning: Certainly. John Paul Stevens: What is it that must be commonly owned? A condominium, for example, each person living in the building owns his or her own apartment, but what is it they have a... just the satellite dish, or-- John F. Manning: The common-ownership requirement we use as a shorthand for common-ownership control or management, so that a condominium association that had multiple units that were under the control or management of a condo association would satisfy the common-ownership requirement, as we call it. John Paul Stevens: --What if a group of neighbors had an association to manage their satellite dish, with-- John F. Manning: If they had an association-- John Paul Stevens: --Common ownership of the satellite dish? That would not count. John F. Manning: --I think it probably would not count. I think that what... it's not clear from the FCC's precedents, but I would think that an organization that was formed simply to, in effect, evade the franchise requirement would be insufficient to do so under the FCC's regulations. John Paul Stevens: Well, to perform all the management functions that the management of the condominium association performs when it's handling television matters. John F. Manning: Yes, but the common ownership control and management requirement generally means that you have a bunch of units that are joined by a common economic link, that the management is providing a number of services. It collects garbage, it may provide plumbing services, it may provide an answering service at the front desk that serves all these units. So there is an integrated economic unit. There's something that holds these units together, and when that's the case, I think that what the common-ownership requirement does is, it gives some assurance the cable system is simply-- John Paul Stevens: But common ownership of the television-related facilities would not be sufficient. John F. Manning: --Well, if it's simply another incident of a number of services that are provided by the same group in common-- John Paul Stevens: Well, say you have a neighborhood association that handles the collection of garbage for all the homes on the block, and handles some private security force... some neighborhoods have that... and maybe has... and then decides also to buy a satellite dish. John F. Manning: --Well, the more... I mean, the question is, when do you have something under common management for purposes of the rule, and certainly the more services that you add on that are handled in common, the more that it looks as if these buildings are under common management for some purposes. I'm not-- John Paul Stevens: What if you just have garbage, security protection, protest of tax bills, and management of the satellite dish? John F. Manning: --I'm not-- John Paul Stevens: Is that enough? John F. Manning: --Your Honor, I'm not sure exactly where the line would be drawn, but I think the proper test would be whether one could say that, apart from the cable television services, that there is a substantial and bona fide common management or control of the buildings. Anthony M. Kennedy: With leverage in the marketplace. I don't see how that fits with your rationale that people that are watching the television have diffused control where there's single ownership. John F. Manning: Well-- Anthony M. Kennedy: If they get together and they have single control, isn't that precisely-- John F. Manning: --When the-- Anthony M. Kennedy: --The goal that the Government is trying to reach? John F. Manning: --Well, I mean the question is not the constitutional question here but the question of how to interpret the regulation, and it's true that perhaps a group of people could get together and in some cases negotiate together to provide for cable services. But Congress doesn't have to draw perfect classifications, and what it decided was that it was going to use common ownership control and management in general as a proxy for those situations when all the tenants together have sufficient focus and accountability and bargaining power to get the services they want with the proper consumer responsiveness. If there are no further-- Byron R. White: Did this definition just date from '88, 1988? John F. Manning: --No, Your Honor. The definition goes back to 1965. In the first set of cable rules, there was what was called an apartment house exception that went through some changes that are not material here. Along the way, they had a common ownership-- Byron R. White: Were there satellite dishes in those days? John F. Manning: --In those days, the exception applied mainly to what's known as master antenna television, which was an antenna that was put on the roof and wired to buildings to get broadcast signals so that you wouldn't have a forest of antennas. Satellite antenna... satellite master antenna television was developed in the late 1970's, but in the Earth Satellite decision in 1983 the Commission made very clear that the common ownership exemption clause-- Byron R. White: Is this case the first time the distinction has been challenged in court? John F. Manning: --There were two other cases that raised statutory questions of whether an SMATV facility would be a cable system. Those were two district court cases which are cited in the FCC opinion. This is the first constitutional challenge to that distinction. Byron R. White: And the Congress has revisited this area several times since '65, I take it. John F. Manning: Congress passed the Cable Act of 1984, in which it adopted the common ownership exception, and in 1992 it passed another Cable Act in which it left the exemption unchanged. Byron R. White: Where there was testimony before the committees opposing this distinction. John F. Manning: The FCC report on remand says that the matter in this case was brought to the attention of the committee, but I'm aware of no testimony that relates to the question whether to retain the common exemption. Byron R. White: Did the Commission have a position on it? John F. Manning: The Commission initially took the position in interpreting the 19... you mean in the 1992 legislation? Byron R. White: No. The first time this distinction appears you said was in 1964. John F. Manning: 1965, in the Commission's first set of rules, yes. Byron R. White: '65. Did the Commission have a position then, or did they propose it? John F. Manning: They... I'm not sure, Your Honor. If there are no further questions-- William H. Rehnquist: Thank you, Mr. Manning. Ms. Costlow, we'll hear from you. Deborah C. Costlow: Mr. Chief Justice, and may it please the Court: Of all interstate media of communications not using the public streets and rights-of-way to deliver their signal, only a single media... that is, an SMATV facility serving separately owned and managed multiple dwelling units by wire has to obtain a franchise from a municipality in order to enter the market and is subjected to treatment as a cable system. No franchise is required of an SMATV facility serving a single multiple-unit dwelling. No franchise is required for that same SMATV operator to install a series of separate satellite dishes in order to serve the exact same apartment dwellings throughout the municipality. No franchise is required if an SMATV operator wishes to interconnect separately owned or managed buildings by means of an 18-gigahertz microwave link. No franchise is required of an SMATV facility who seeks to interconnect those same separately owned or managed multiple dwelling units by means of an infrared link. William H. Rehnquist: Ms. Costlow, what are the practical consequences when a franchise is required? Does that mean that a cable operator will be subject to price regulation by the State or local government? Deborah C. Costlow: The burdens that would be imposed upon an SMATV facility that would have to obtain a franchise would be the same burdens that would be imposed upon traditional cable operators, but those burdens would not apply to any other interstate media of communications. Those burdens would include, for example, having to get a license to speak at all. If the license is denied, then you cannot speak. Those burdens would include, on the local level, typically a requirement to wire the entire municipality, not simply to obtain a franchise to interconnect the particular separately owned multiple-unit dwellings that the operator wishes to interconnect. It would also include-- William H. Rehnquist: It would include some sort of the price regulation. Deborah C. Costlow: --Yes, it would include price regulation as a result of the '92 act, depending upon whether or not under the statute that particular market and the players within that market are subject to effective competition. They would always be subject to potential regulation on the Federal level by treatment as a cable system because, as a result of the '92 act, any subscriber can bring a complaint to the Federal Communications Commission that the rates of the particular operator are unreasonable, and that kind of price and rate regulation is not imposed upon SMATV facilities serving a single building, serving commonly owned or managed buildings, serving those same buildings by means of microwave or an infrared link, leasing telephone company lines, for example, in order to interconnect those buildings, because you don't have to obtain a franchise to do that. In other words, the only time a franchise is required to interconnect separately owned and managed buildings is when those separately owned and managed buildings are interconnected by a simple piece of wire, so the exact distinction here is that you cannot cross a public... a private property boundary line in order to serve separately owned or managed buildings by means of a wire, but you can cross that same private property boundary line to interconnect those same separately owned and managed multiple-unit dwellings by means of a wireless facility. Antonin Scalia: It's a lot more expensive to... both to install and operate, isn't it? I mean, you get a wire for a couple of dollars. Deborah C. Costlow: It is obviously interconnecting separately owned or managed buildings by means of a piece of cable will be cheaper in all instances for any-- Antonin Scalia: Virtually costless. Deborah C. Costlow: --I think it's 6 or 12 cents a foot, Your Honor, depending on how much cable is used. The distinguishing characteristics here between the media who are subject to franchising requirements and the media who are not subject to franchising requirements, I do not believe that you should focus simply on an SMATV facility versus another SMATV facility, but must look at the entire interstate media that is potentially regulated as a result of the Communications Act and the Cable Television Acts which were a part of that act. Antonin Scalia: Well, do you think a State can choose to regulate telephones without regulating cable? Deborah C. Costlow: Telephone companies, Your Honor. Antonin Scalia: Yes. Yes, I-- Deborah C. Costlow: There are incidences of telephone companies that are both intrastate and interstate service, and so there has been a dual regulatory scheme adopted for telephones-- Antonin Scalia: --No, but I-- Deborah C. Costlow: --Precisely because of that. Antonin Scalia: --Well, let me use another example. You think that a State or the Federal Government could choose to regulate wire communications without regulating nonwire communications. Deborah C. Costlow: I believe that the Feds and the... the Federal Government or the State government cannot discriminate in the circumstances in which they regulate particular speakers. In other words, if there are no distinguishing characteristics between the various interstate media of communications, then I submit that it is impermissible to apply a particular set of burdens and to single out-- Antonin Scalia: Are you going to answer my question? Are you going to get to the answer to my question? Deborah C. Costlow: --I'm sorry, Your Honor, I thought that I was answering your question. Antonin Scalia: I don't know-- Deborah C. Costlow: I must be misunderstanding your question. Antonin Scalia: --Well, if you have, I don't know whether it's yes or no. Can a State or the Federal Government choose to regulate wire communications and not regulate nonwire communications, or vice versa? Can it distinguish between the two media, yes or no? Deborah C. Costlow: Yes, but may I offer an explanation? Antonin Scalia: Okay, sure. Deborah C. Costlow: The explanation is that they can distinguish between those two media only if there are distinguishing characteristics that provide a justification for distinguishing between those media. Antonin Scalia: One's over the air, one isn't over the air. One's in wire, the other isn't in wire. Deborah C. Costlow: But that is a distinction without a difference. Whether you are operating a multipoint, multichannel distribution service or whether or not you are operating an SMATV service, you are offering news, entertainment, and information on a multichannel system. You could have exactly the same programming services offered to subscribers, and I submit that the fact that you choose a particular technology, meaning a wire, versus a particular technology, which is microwave, to deliver those exact same services to consumers, is a distinction without a difference. William H. Rehnquist: How about the line of cases from this Court that say that the legislature can confront evils one step at a time and you know, make exceptions if it wants to? It doesn't have to sweep every piece off the chessboard when it tries. Deborah C. Costlow: Your Honor, it is true that Congress can act one step at a time, but if you look at the particular background and history and context of this particular regulation, the... neither the Federal Government nor Congress have ever subjected interstate media of communications operating by wireless, for example, to local franchising regulation. They have not subjected to local franchising regulation SMATV facilities serving multiple-unit dwellings either singly or under common ownership management or control, so the step here... there is no indication that Congress is moving one step at a time to subject each of these interstate media to some sort of local franchising regulation. The step is in the opposite direction. All interstate media have typically been exempt from local regulation and exclusively under Federal jurisdiction and control, and only in a very rare instance has the Federal Government conceded or permitted local jurisdiction and control over an interstate media of communications. William H. Rehnquist: Well, maybe this... maybe Congress is in the process of changing its mind and is beginning to go the other way. Deborah C. Costlow: Your Honor, the FCC has never done so. The FCC's Orth-O-Vision decision was issued in 1978, which specifically preempted local regulation and control-- William H. Rehnquist: Yes, but Congress isn't bound by previous FCC decisions. I mean, Congress may have decided, look, maybe we want to get the States and local governments into some regulation. Let's try it out in this area and see how it works. Deborah C. Costlow: --Your Honor, Congress in 1984 chose to adopt the Orth-O-Vision decision and exempt wireless from regulation. They just the 1992 Cable Act, and in that act they again did not subject any sort of wireless facilities to local franchising regulation, so that over the course of the entire history of when each of these media have come into the marketplace, Congress has not determined to impose local franchising regulation unless such facilities used a public street or right-of-way, except in this one, single instance. Byron R. White: Counsel, I take it there's just no evidence in the legislative history as to what Congress thought the justification was for this distinction. Deborah C. Costlow: No, Your Honor, there is not. I must admit that there is evidence that the... at least in the context, that the... that Congress' reason for exempting SMATV's facilities serving commonly owned, the exemption itself serving commonly owned or managed facilities was not system size, that the reason for-- Byron R. White: Was not what? Deborah C. Costlow: --Was not system size, which is the rationale presented by the Government. What the rationale was is that was based on a decision issued by the Federal Communications Commission, the Earth Satellite decision, directly prior to the passage of the 1984 Cable Act. And that decision exempted these types of facilities because they did not use a public street or right-of-way, they were indistinguishable from wireless, they were there to promote the open entry and the unfettered development of interstate satellite signals, and the Federal Communications Commission made a specific finding that local franchising jurisdiction and control acted as a barrier and chilled entry and therefore thwarted the FCC's policy in the unfettered development of interstate satellite signals. Congress in the... that was a 1983 decision. Byron R. White: Do you think that decision was also irrational? Deborah C. Costlow: I don't think the decision to exempt SMATV facilities serving commonly owned or managed buildings was irrational. The FCC did not reach... it specifically did not reach whether or not it would at some point exempt also facilities serving separately owned and managed dwellings. They didn't say that they couldn't. They just didn't reach it, and in '84 Congress adopted that same exemption-- Byron R. White: So you just think... you think Congress was just thoughtless when they... they just cribbed this out of a Commission decision. Deborah C. Costlow: --That is certainly likely, Your Honor. The other presumption would be that it is irrational simply because those same interests in which they-- Byron R. White: You would think that at some point since 1965 there would have been some considerable objections to this discrimination. Deborah C. Costlow: --Your Honor, the first time Congres legislated in this area was '84, so when we were speaking of the definition being in existence since 1965-- Byron R. White: I thought counsel on the other side said this distinction first came on the books in '65. Deborah C. Costlow: --At the Federal Communications Commission level, not on the congressional level. The first time Congress legislated was in '84. When it came up at the FCC level, Your Honor, SMATV facilities did not exist. What existed were master antenna television facilities. Byron R. White: Yes. Deborah C. Costlow: SMATV did not really come into existence-- Byron R. White: Well, when... has there ever been objections made to Congress in their hearings since '84, because they certainly have been back in this area. Deborah C. Costlow: --There's nothing to show anything on the record in the legislative history. In 1984, this is the first time that Congres legislated this particular distinction. When Congress was reconsidering the Cable Act in 1992, that is the time at which the lower court here issued its opinion. That was made known to Congress. In fact, it was made known that they were considering issuing that opinion, and then after the opinion was issued, that opinion was also made known to Congress, and we would submit, Your Honor, that the fact that Congress in 1992 knew of the decision here and chose to do nothing about it means that in essence that they have adopted the district court ruling here, but there is nothing on the record that explicitly says that. David H. Souter: Even when that ruling was subject to appeal. Deborah C. Costlow: Your Honor, I find it implausible that if Congress truly wanted to keep this distinction, and this distinction had been held unconstitutional by the district of columbia circuit, that Congress would have gambled on the fact-- David H. Souter: On us. Deborah C. Costlow: --That this Court was grant cert-- David H. Souter: Would have gambled on us getting it right? [Laughter] Deborah C. Costlow: --No... I'm sure they would have gambled on this Court getting it right, and I submit that getting it right is affirming the decision below, but I don't think that if Congress felt strongly about this, they would have gambled on this Court potentially denying cert and therefore not reaching the issue. Antonin Scalia: Ms. Costlow, what does an SMATV company do? They construct the dish, and then they continue... they decide what programming goes through the dish. Deborah C. Costlow: It is incorrect to assume that satellite master antenna television systems are always landlord-provided. In fact, in practice, that is less then 10 percent of the SMATV facilities that are out there. These are independent suppliers of cable television services and what they do is exactly the same thing that traditional cable does, that multipoint, multichannel distribution services do, that 18-gigahertz services do-- Antonin Scalia: Are they competitive? Deborah C. Costlow: --Yes, they are competitive. Antonin Scalia: Are there a number of competitors that come to buildings and say, we'd like to run an SMATV service? Deborah C. Costlow: And I tell you how they compete. They compete at the property line. The property owner looks out in the marketplace and says, I can receive services from traditional cable, I can receive them from SMATV, I can receive them from MMDS. Antonin Scalia: Okay. Now, if I'm a property owner that owns a whole square block... I own all the buildings in the block... I would assume I have pretty good bargaining power with the various SMATV companies, right? I can pretty much say, you know, I'd like to get it at such-and-such a price, I assume, if I have a whole city block in New York, who's all commonly owned, I control a whole block. Deborah C. Costlow: That property owner has the same bargaining power whether it's a traditional cable, or SMATV, or MMDS. Whatever bargaining power the owner has-- Antonin Scalia: Sure, that's true, but now let's assume that the block is not all owned by one person. There are a hundred different buildings on the block. One of the buildings signs up with a particular SMATV company. Do you think that there's any chance that the remaining 99 buildings on the block will have a realistic choice which SMATV company they can use? I mean, doesn't the SMATV company that signs up the first building have a lock on all other 99, because it costs a couple of bucks to just join the next building with a cable? How can any of the other SMATV companies hope to compete within that block? Deborah C. Costlow: --Are we speaking of separately owned buildings, or commonly owned buildings? Antonin Scalia: I'm talking now of separately owned buildings. Deborah C. Costlow: Your Honor-- Antonin Scalia: If they were commonly owned, as I say, there'd be some bargaining power at the outset, but one building gets the system. How can any of the other companies hope to compete for the other 99? Your company, if you're the one that gets the first one, you have a lock on the other 99 buildings. It costs you a couple of feet of cable, that's all. Deborah C. Costlow: --If you can interconnect by wire-- Antonin Scalia: Sure. Deborah C. Costlow: --That may be potentially true, but I don't think that it gives you a lot more than the traditional cable operator. The traditional cable operator has already installed its facilities in the public streets or rights-of-way. All it has to do is run the same cable to serve these buildings. Antonin Scalia: Well, that's right, but he's-- Deborah C. Costlow: So their entry costs are no greater than the entry costs-- Antonin Scalia: --But he's regulated. Deborah C. Costlow: --Of an SMATV provider. Antonin Scalia: But he's regulated-- Deborah C. Costlow: He's regulated-- Antonin Scalia: --And that's all they're trying to do here... regulate the SMATV provider. Deborah C. Costlow: --Your Honor, everyone in the market has the potential to serve a separately owned building. They have only regulated SMATV operators who operate on private property serving a separately owned building. A wireless operator can serve a separately owned building without becoming regulated on the local level. An 18-gigahertz operator can serve a separately owned building without being regulated on the local level, so the fact-- Antonin Scalia: It's a lot more expensive. The monopoly differential is not as great. It costs them, to serve each additional building, a lot more energy, whereas you just buy a couple of feet of wire and you've got the new building. Deborah C. Costlow: --A wireless cable operator can install service to a multiple dwelling unit for somewhere around $300. I don't see that as a significant entry barrier, so that in competition between a wireless cable operator meeting a multichannel, multipoint distribution service operator competing for access to that building-- Antonin Scalia: Well, that may be, ma'am, but you see, now, I didn't know that, and maybe a reasonably informed legislator wouldn't know that, and would think, gee, if I'm... you know, if I'm a company trying to compete with another company who's gotten one building in the block, I'm just out of competition, because they only have to... I can see a legislator thinking that and saying, that's sort of a monopoly situation that we ought to allow to be regulated. I may be wrong, but I can't say that it's off the scope. Deborah C. Costlow: --Your Honor, the purposes... I would submit that the purposes of the '84 act as confirmed in the 1992 cable act are a deregulatory purpose, and the purpose of... set forth and the objectives set forth in both those acts by Congress are that they sought to promote competition by free entry, not to impose regulations on system or entry barriers to system. And I would submit that Congress could not have sought to promote competition in these acts by means of singling out only a particular medium for this kind of regulation as opposed to applying whatever justifies regulation of us justifies regulation of other like-situated media. The system size rationale is the rationale that's relied upon by the Government here, and I would submit that that system size rationale was expressly rejected by Congress when it adopted the 1984 act. Prior to the 1984 act-- David H. Souter: Well, excuse me, the Government's relying on a leverage rationale, not a crude size rationale, isn't that clear? Deborah C. Costlow: --The Government is relying upon the fact that Congress intended to regulate systems of larger size, because systems of smaller size would somehow be more subject to consumer control. David H. Souter: Well, it's resting on the assumption that certain systems will more likely be small and other systems will likely be larger, but the rationale ultimately on those assumptions is based on leverage, not a mere crude size cut-off, isn't that correct? Deborah C. Costlow: That is the Government's position, you are correct. I would submit, however, that a consumer has as much leverage over the owner of that building, whether that owner of that building... I mean, owns one building or three buildings. David H. Souter: That may be so, but that's a different argument. I mean, that is not an argument that Congress expressly rejected, and you started out by arguing that in rejecting the size rationale it had rejected the Government's argument, and I'm saying it's not quite that clear. Deborah C. Costlow: The distinctions between different media and who does and does not have to have a franchise, they did not determine that larger systems such as MMDS or DBS or any of the other private property systems would be subject to local franchising regulation. I would submit that if Congress were concerned that larger, multichannel video programming distributors serving separately owned buildings because there would be less consumer leverage should be subject to local jurisdiction and control, that they would have subjected all larger systems to such regulation and not simply singled out this particular media. The Government does not respond to that argument. The Government says, well, what they meant to do there was simply encourage SMATV facilities, these kinds of SMATV facilities, to migrate to wireless spectrum, and I would submit, Your Honor, that it has never been telecommunications policy to encourage migration to scarce frequencies. Rather, the policy has been to encourage migration away from such scarce frequencies, and the Government has never, in my mind, submitted a justification for the discriminatory classification between wired facilities and wireless facilities, and I submit that basing that on a migration to wireless spectrum analysis simply is implausible. Antonin Scalia: With wireless, I guess you can... can you get... does wireless use the public right-of-way if you shoot it across a street? Is that considered to be using the public right-of-way? It's not really using it. Deborah C. Costlow: That's exactly my point. None of the facilities at issue here use a public street or right-of-way. Neither do these SMATV facilities. Antonin Scalia: Why isn't the distinction between wireless and cable simply the distinction that it cost more, that you do not... the single system that has sold its service to one building on the block has... if it can connect by wire, it has a monopoly over all the other buildings on the block. Other cable systems cannot... other SMATV systems can't hope to get their business. If, on the other hand, you made them do it by wireless, the other systems might well come in. Isn't that enough of a distinction? Deborah C. Costlow: I find the fact that Congress would have intended to only harm the market entry and growth of SMATV facilities and not somehow... that they just... they wanted to advance and promote some technologies over others, or some speakers over others, not to be a plausible reason for Congress' actions here, because if you assume that Congress meant to impose, on purpose, greater cost on SMATV facilities that they did not mean to impose on other like-situated media, Your Honor, I have problems with that. I do not believe that Congress meant to impose additional costs, and if, in fact, what Congress' objective was here was to ensure that these particular SMATV facilities had to be regulated if they got larger, then I submit they haven't achieved their purpose, because everyone can evade that regulation, including these SMATV facilities. It may cost them to evade that regulation, but they can evade it, and they can get as large as they want, and it just simply doesn't make sense to me that if Congress had meant to subject larger systems to franchising regulation, that they wouldn't have subjected all larger systems to franchising regulation, and it wouldn't come down to the ownership of the building served, which isn't even a characteristic of those various interstate media, and it wouldn't have come down to whether or not it's interconnected by wire over a private property boundary line. To me, that is an impermissible distinction, an impermissible line-drawing between like media of interstate communications. That line was drawn with respect to traditional cable prior to the Cable Act because of cable's unique use and burden upon the public streets and rights-of-way. What does a franchise get an SMATV facility here, Your Honor? A franchise does not give them the right to speak on private property. All that a franchise does is give them the right to install facilities in public streets and rights-of-way. They do not seek to install facilities in public streets and rights-of-way. They do not seek governmental benefits. All they seek to do is install facilities on private streets and rights-of-way, so the franchise that Congress has dictated that these facilities must obtain does not even give them the right which they seek, which is to speak on private property. What gives them the right to speak on private property is the private property owner. Now, let's say the franchise-- Antonin Scalia: I suppose you could... there is such a thing as franchising the ownership of television sets. I mean, the way public television is supported in England is by... you have to get a franchise to own a television set. I mean, I don't know that there's any necessary connection between franchising and public property. You can franchise things that occur only on private property. You can franchise certain businesses. You can't run a certain business on private property. Deborah C. Costlow: --But when you franchise those businesses, that gives them the right to enter the market. When... if you... when you franchise an SMATV operator here, that alone does not give the SMATV operator the right to enter the market. The SMATV operator-- Antonin Scalia: Yes, it does. It gives you the right to connect other buildings that aren't owned by the same... by common control to connect other buildings with a little piece of cable. Deborah C. Costlow: --Not without the permission of the private property owner. That is an additional act that must occur, so that even if I went and got a franchise which enabled me to interconnect separately owned and managed dwellings, that alone would not give me the right to enter the market. Antonin Scalia: You can say the same thing about any private business that is franchised. It doesn't give him the power to sell something. He has to find somebody who's willing to buy it. Deborah C. Costlow: But why-- Antonin Scalia: I mean, of course that's a condition of a franchise. Deborah C. Costlow: --But why only harm the competitive entry of a particular interstate media? Why not place similar franchising entry burdens on all interstate media of communications similarly situated? Antonin Scalia: I agree. I think it may be a very bad idea, but one... that isn't the issue, is it? Deborah C. Costlow: Well, the issue is whether or not there is some objective here that Congress sought to achieve that this particular regulatory or discriminatory classification actually serves. John Paul Stevens: May I ask you a factual question just to help me? When a local community grants the franchise that you're saying they should not have the right to grant, do they grant a general franchise to interconnect all the units in the city, or do they grant them on particular installation by installation? Deborah C. Costlow: Typically, in practice, a local franchise grants a franchise to extend cable facilities to extend cable facilities throughout the public streets and rights-of-way in the franchise area, which is usually equivalent to the individual municipality, the boundaries of the individual municipality. John Paul Stevens: So there isn't a case-by-case determination about whether the... your bargaining power's been abused in a particular apartment complex, or anything like that. Deborah C. Costlow: Exactly not, Your Honor. All that it does is determine that on an overall community basis, and in fact the danger posed here, after passage of the '92 act, Congress in the '92 act tried to eliminate or correct the past franchising practices of municipalities, which were to grant a single franchise for an entire municipality. Congress realized, or at least found in the Cable Act that that had created undue market power for particular providers of these services in the marketplace. William H. Rehnquist: Ms. Costlow, has your client applied for a franchise? Deborah C. Costlow: Your Honor, until the FCC's decision below... the FCC after passage of the '84 act had determined that... had interpreted the language such that we would not have to obtain a franchise. William H. Rehnquist: So your answer is no, it has not. Deborah C. Costlow: I'm sorry, Your Honor-- William H. Rehnquist: Is that correct? Deborah C. Costlow: --My answer is no, it has not, and may I offer an explanation? William H. Rehnquist: Well, no, I don't see that you should have to explain... I mean, if it hasn't, it hasn't. My point is that you really don't know, then, what requirements any particular franchise you applied for might be... might subject you to. Deborah C. Costlow: In the '92 act, which is what I was about to explain-- William H. Rehnquist: I... any... I mean, where does your client want to have its services? I mean, what geographical area? Deborah C. Costlow: --The clients in front of this Court have these particular installations throughout the United States. The... Pacific Cablevision, for example, has one in San Diego, California. William H. Rehnquist: Do you know without having applied for a franchise in San Diego what sort of requirements you would be subject to by that franchise? Deborah C. Costlow: Yes, Your Honor. A State statute in California says to Pacific Cablevision that if you are going to obtain a franchise in San Diego, your franchise has to be the same as the first franchise, which would mean that Pacific Cablevision would have to provide universal service throughout the entire municipality. William H. Rehnquist: How about the other 49 States in which you might want to do business? Deborah C. Costlow: There are... with respect to a uniform franchise statute, Your Honor, I believe that there are about nine or ten of those in various States throughout the country. William H. Rehnquist: Thank you. The case is submitted.

William H. Rehnquist: We'll hear argument first this morning in No. 88-1932, United States against German Munoz-Flores. Mr. Bryson. William C. Bryson: Thank you, Mr. Chief Justice, and may it please the Court: The issue in this case is whether the Federal Special Assessment Statute must be struck down on the ground that it is contrary to the Origination Clause of the United States Constitution. There are two subsidiary questions here. First, whether questions regarding inconsistency of the federal statute with the Origination Clause present nonjusticiable political questions. And second, assuming that the question is justiciable, whether in fact there was a violation of the Origination Clause in this case. Harry A. Blackmun: Did your office raise the justiciability question in its petition for certiorari? William C. Bryson: Not directly, Your Honor. We argued-- Harry A. Blackmun: But then you don't think much of it, I take it. William C. Bryson: --Well, Your Honor, we felt that the issue on which there was a conflict among the lower courts at the time we filed the petition and a conflict among the circuits at the time we... this Court addressed the petition, was the... on the merits. There was no conflict on the justiciability question. Now, we did advert in the petition to the issue of justiciability suggesting that at minimum the question of... on the merits should be addressed with an eye towards the problems with justiciability and, therefore, that the merits should be viewed with... by extending great discretion to the... to the House in deciding whether an Origination Clause violation had occurred. But, no, we didn't directly raise... raise the point. We... we do think, however, that the point does have merit. And since the Court has directed the parties to address the question, we... we have done so and we believe that... that would be a perfectly legitimate ground for a decision in this case. And... at... at bottom what... what this issue presents, the whole political question doctrine is summed up, I think, well in a quote from Coleman against Miller which was reiterated in Baker against Carr. And that is it deals with the appropriateness of attributing finality to the action of the political departments. There are a lot of different kinds of political questions, as the Court discussed in Baker against Carr. There are political questions in which there is a textual commitment of the issue to one branch. There are cases in which there are strong prudential reasons for the court's not becoming involved in a particular question. Issues involving foreign affairs figure prominently in that list. This case is a somewhat different case. It doesn't... there is no direct textual commitment in the Constitution of this issue to the legislature. But we believe that when you look at all the factors bearing on the question of justiciability of Origination Clause questions, that you conclude that indeed it is not appropriate for the Court to interfere with the judgment that was made by the House and by the legislature as a whole that there was not Origination Clause problem in this case. This is as Alexander Hamilton-- William H. Rehnquist: But, Mr. Bryson, does that mean in some other case one would not defer? William C. Bryson: --No. Our position is that with respect to the Origination Clause challenges, that they are subject to political question doctrine across the board. Now, one could say, and this is a backup argument that we make, that certain kinds of Origination Clause questions are simply not for this Court to second-guess the House on. And only if there is a very clear obvious Original Clause violation should the Court interfere. That would be somewhat analogous to the position the Court has taken in cases involving the question of whether a particular person is a member of an Indian tribe or recognizing an Indian tribe, an area that was discussed in Baker against Carr. But our initial position is that Origination Clause questions as a whole are nonjusticiable. Byron R. White: I take it that... that the House has always got a remedy, hasn't it? William C. Bryson: Exactly. And that... that-- Byron R. White: And we... no... no court would ever be asked to review a... to review the House's decision that... not to... not to pass a bill it... it thought should have originated there and didn't. William C. Bryson: --That's exactly right. Or if in... in any event, if any court where so asked, they would quickly dismiss the complaint. The... the statute will not come up for review unless the House is happy and the Senate is happy-- Byron R. White: That's right. William C. Bryson: --with the procedure and with the substance. And-- Byron R. White: And the President is too. William C. Bryson: --And the President is too, exactly. The House... I think Alexander Hamilton put this well when he said in The Federalist that the Origination Clause question is essentially the exclusive privilege of originating money bills which belongs to the House of Representatives. If the House of Representatives is satisfied that the Origination Clause privilege has not been violated, then it can pass the bill that is sent to it by the Senate and the President can sign it and that's the end of the matter. That should be, we think, the end of the matter with respect to questions of court review of that statute. Antonin Scalia: Could you say the same thing, Mr. Bryson, for the legislative veto? William C. Bryson: No. Antonin Scalia: Why not? I mean, so long as the President... you could say so long as the thing only comes up if... suppose the President's entirely happy with the legislation he gets that he wouldn't otherwise have gotten that contains a legislative veto and he is perfectly willing to implement it that way to give away his powers. We wouldn't let him do that, would we? William C. Bryson: No, we wouldn't... you wouldn't. Antonin Scalia: Well, why should we let the House do it? William C. Bryson: Because the House is not really, we think, giving away a power here. What's really... this is not an intra inter-branch dispute over the creation of an animal that the Constitution doesn't recognize. Antonin Scalia: It's an inter-House dispute which is just as important as far as separation of the various powers of the government is concerned. Isn't that significant? William C. Bryson: Your Honor, we... we think it is not. We think it is... is a matter of sequence not a matter of the creation of a non-constitutional animal. What happened in the legislative veto cases was that we had something that purported to be legislation which simply wasn't because it was simply the views of the House of Representatives, not concurred in by the Senate and not presented and concurred to... and concurred in by the President. In this case, all that's involved is a matter of sequence in which a bill, which is clearly a bill, arguably did not originate in the House-- Antonin Scalia: Well, that... but that's just demeaning the importance of the constitutional provision. You may be quite right that it's not very important but that's not for us to judge. It was written there... just the sequence requirement is written there just as clearly as the bicameral requirement. Why... why shouldn't we give full effect to the one just as the other? William C. Bryson: --I think you give full effect, Your Honor, by allowing the House to decide whether there has been an Origination Clause violation. I'm not suggesting-- Antonin Scalia: Just as could allow the President to decide whether the... the bill veto clause has been... has been offended. But we don't. William C. Bryson: --You don't and I think the difference is because in the legislative veto case you... you're talking about the presentation to the court of something that simply is not a statute. This is not a case in which something arrives to the court and which you can fairly say this is not a statute. Antonin Scalia: But that... but that begs the question. It is not a statute if it hasn't complied with the requirements for a statute. William C. Bryson: Well, Your Honor, let-- Antonin Scalia: And if one of those requirements is... is this sequence, then it's not a statute, just as something that is passed without both Houses is not a statute. William C. Bryson: --Well, I... I would disagree, Your Honor, because... to take the next clause that appears in the Constitution after the Origination Clause, the Presentment Clause requires when a bill is sent to the President, that if the President decides not to approve the bill, he sends it back to the House from which it originated. Now, suppose that he sends to the wrong House and it originated in the House and he sends to the Senate. The Senate then acts on the bill and overrides the veto and sends it to House and the House then overrides the veto. It cannot be the case, I submit, that this Court would then strike down the statute on the ground that it was sent to the wrong House. It becomes simply a matter of sequence. Now, one could argue that that is not a bill, not an act, because the provisions set up in the Constitution were violated. But, of course, that can't be because a President who wanted his veto sustained would obviously always send it to the wrong House. Antonin Scalia: xxx is that what you are saying? William C. Bryson: Not... not really. I think it's a matter of-- Antonin Scalia: That all these sequential things don't... don't amount to much. Maybe... maybe you're right. William C. Bryson: --No. Antonin Scalia: I... don't want to say that. William C. Bryson: No, I think it's a matter of constitutional remedy. It's a question of-- John Paul Stevens: Well, Mr. Bryson, are you... are you relying on the... when you cite us to the second paragraph of Section 7 of the express language that if a bill passes both Houses and is signed by the President, even after a veto, it shall become law? That's a little different than the provision in the executive veto case. William C. Bryson: --Well, that certainly is support for the position that we are taking that... that once the House is satisfied that the Origination Clause has been fulfilled, that-- John Paul Stevens: Well, couldn't one argue that the entire Section 7 has been satisfied if the second paragraph has been satisfied? William C. Bryson: --One certainly could. I mean, one has to argue to the contrary-- John Paul Stevens: Which one couldn't argue in the executive veto case. William C. Bryson: --That's right. That's correct. To make the contrary argument, one would have to say you have to satisfy each and every clause and each and every clause has to be fulfilled with respect... and that anyone could come in and enforce... insist on... compliance with that clause and that noncompliance results in the invalidation of the statute. And we submit that both the... the history of the Origination Clause and looking at the second clause as well suggest that that can't be the case. Now, the... it's important, I think, in focusing on the question of justiciability what the costs and benefits are of striking down statutes when in fact both the House and Senate, and indeed the President, have agreed that the statute is valid and have passed it. The benefit of striking down a statute to a citizen is virtually negligible. The House could, if it were presented with a bill that it believed came from the Senate and was a revenue bill, could always simply put a House number on the top of it, pass it and send it back to the Senate. Where there is an Origination Clause violation alleged, all that has happened is that the House has failed to do that ministerial task. Probably, and in most cases, because the House has failed to recognize the bill as a Origination Clause problem. It has failed to-- Anthony M. Kennedy: Well, of course, all of your comments to the effect that this is just ministerial and it seems to be rather a minor matter are quite inconsistent with the other prong of your argument in which you tell us the House has been very jealous to guard this prerogative. William C. Bryson: --Your Honor,-- Anthony M. Kennedy: I would assume that this is a very important prerogative for the House. And I would also assume that it might be that there is a majority of one party in the Senate and very slim majority of the same party in the House and that the minority members in the House would have a very great interest in the preservation of this... of this provision and not just supinely surrendering it. William C. Bryson: --Exactly. They do... it is an important House prerogative. But I think when you... when you say that what you are saying is this is something for the House to exercise. It demeans, in some senses, the House's prerogative if the courts are sitting behind the House and second-guessing the House. It is the very importance of the prerogative for the House to enforce that in part cuts against judicial review after the House has decided that the prerogative is not applicable in a particular case. And... and the example is, I think, what would happen in a case like this, if in fact the Court started actively to review Origination Clause questions, if the House had even recognized this as an Origination Clause question, and it seems to me in light of the fact that this didn't look like what... what anyone has considered revenue bills in the past, it would be perfectly understandable why the court did not... why the House did not recognize this as... as presenting an Origination Clause question. But suppose it had, it recognized it as a potential problem for Origination Clause, instead of simply deciding finally and for once that this was not in the House's view an Origination Clause problem, they would have had to go through the exercise of taking the statute that had been presented to them by the Senate and putting another House number on the top of it and sending it back to the Senate simply to ensure that that statute would be invulnerable to constitutional attack in the courts. We submit that that really demeans the House's role and doesn't enhance it. And it is an important prerogative. It's one which the House has guarded jealously. But it's also guarded it very well. It's important, I think, to point out that in two hundred years there's only been one statute which has ever been struck down on Origination Clause grounds. That was struck down by a district court and the opinion in that case, I think, is manifestly incorrect. So that the sum total of... of the contribution of the judiciary in this area over... over two hundred years in second-guessing the House, to the extent that there has been any second guessing, has been one incorrect decision. William H. Rehnquist: Mr. Bryson, in Buckley against Valeo the court held that the provision in the Federal Election Commission Act providing for appointments violated the President's authority under the Appointments Clause. Now, the President signed that bill and we did not treat that as a waiver or kind of an expression of general satisfaction. I think he might have made a signing statement. I don't remember. So it seems to me that... that if... if you're going to rely here on the kind of the general satisfaction of everybody involved with what went on, you have to say that conflicts between the House and the Senate, or possible conflicts, do not amount to the same thing as inter-branch conflicts. William C. Bryson: I think that's certainly an important feature of our argument. That what you are dealing with is not an inter-branch conflict when you are dealing with something that does not create, as I was trying to make the point with Justice Scalia... an animal that does not exist in the Constitution-- Byron R. White: Well, you know, they're just not going to... [inaudible] will never be here. William C. Bryson: --That's certainly true. But it will be here only if you allow an individual to come into court and claim that in spite of the satisfaction on the part of both entities of the House... of the-- Byron R. White: Well, that isn't conflict between the two Houses, that's a conflict between-- William C. Bryson: --Within-- Byron R. White: --some other person and both of the Houses. William C. Bryson: --That's right. That's the nature of the animal and that's what we have here. Anthony M. Kennedy: Would you agree that bicameralism is one of the most important structural components of the Constitution insofar as The Federalist papers and Framers were concerned? William C. Bryson: I would. I certainly would. Antonin Scalia: Mr. Bryson, I... I will... I will remind the Solicitor General of the argument you are making today at the time when the House and the Senate decide that it would be much more efficient to conduct all of their business through joint committees. William C. Bryson: Well, I-- Antonin Scalia: And... and at that point I... I will say that the Justice Department seems to have taken the position that after all this is... this is a family affair, it's just an internal dispute within the Legislative Branch and that's really not as important as disputes between the separate branches. William C. Bryson: --Well, I think... without trying to give a global answer to all of these questions, I think it is wise to look at the language that the court used in Baker against Carr when the court said that it is necessary to make a discriminating inquiry into the precise facts and postures... posture of each particular case and the impossibility of resolution by semantic cataloguing. I think one of... the wisdom of that point may be presented by this case in that you have to look at these things on a very narrow... on a very narrow basis. You can't simply make sweeping assertions that perhaps by-- Antonin Scalia: Precisely my point, Mr. Bryson. William C. Bryson: --The... on the merits, if I can turn to the merits now. The first question presented is whether the bill in this case that's at issue was a bill for raising revenue within the meaning of this Court's precedence. We submit that if you look at the Nebeker case... that's the Twin City Bank against Nebeker... and the Millard case... Millard against Roberts... it is absolutely clear that this is not a bill for raising revenue within the meaning of the Court's precedence. Those cases establish the proposition that if a statute sets up a program and arranges a means to pay for that program within the statute, that the means to pay for the program do not constitute the bill... a bill for raising revenue within the meaning of the Origination Clause even if the means for paying for the program turn out to be taxes and even if the money that's assessed goes into the general treasury. This was certainly the case in the Nebeker case, the Twin City Bank against Nebeker, where the Congress imposed on national banking associations the costs of setting up a national currency system in which... which was, as the court explained it, to benefit all the people. These were, as described by the court, taxes on the national banking association. They went into the general treasury. But they were, as the court explained, for the purpose of paying for the program which the Congress had set up. This case follows a fortiori from that one because in this case these were not denominated taxes and the payments in this case go not into the general treasury but into a special fund for victims. Now, there are certain limited circumstances in which these funds may go into the general treasury. But they are only in the rare case. And the... the general structure of the statute is that the funds that are collected for the special assessments will go into a special fund for victims. Sandra Day O'Connor: Well, it's your position then that if the government decided we needed a new national network of roads or needed to massively expend money to repair those we have and enacted an income tax increase for that purpose and put the money in the general revenue with the idea that it wanted to support the road building, no Origination Clause problem if the bill originates in the Senate. William C. Bryson: That's... that's correct, Your Honor, and I think the Millard case is almost... almost on point with that. In Millard there was a project to do railroad construction in the District of Columbia which the Congress said, here's the railroad construction project and we're going to impose a property tax within the District of Columbia to pay for it. This Court said no Origination Clause problem. Now, I think in that case the House might very well argue that this should have originated in the House and would very possibly reject the Senate's effort to originate that kind of legislation. But this Court's precedence would suggest that if the decision is for this Court to make, this Court would say no Origination Clause. Sandra Day O'Connor: Well, that's a pretty extreme position. I'm not sure you have to reiterate that kind of doctrine to resolve this case. William C. Bryson: Well, you don't because this case, I think, is a good deal easier than that and I am just trying to lay out what the limits of the Court's doctrine had... have been. And I think in part what the Court is doing by setting the limits very broadly for what is going to be permitted in this area... what the Court is doing is responding in part to the... the difficulty... the... the... the reluctance to interfere with the resolution by the House and Senate of Origination Clause problems. They are, in a sense, deferring very broadly without actually calling the question a political question. That is why, I think you get decisions like Nebeker and Millard against Roberts which say that as long as you have a program which is being paid for in the same statute, that's it. You don't have to inquire any further. Now, the... the response-- Speaker: Even if the tax that's going to finance a project hits everybody? William C. Bryson: --Even if it hits everybody. That's right. Which is the case in Millard, everybody within the District of Columbia. There's no reason to distinguish between a tax on everybody in the District of Columbia than a tax on everybody in the District of Columbia and a tax on everybody in the country for purposes of analysis. Now, the Respondents argue that there is a difference between this case and some of the other Supreme Court cases that we have relied on. And that is, they say, that in those cases there was a quid pro quo, the person who was paying the tax was getting a benefit. First of all, we think that's not so. If you look at the Nebeker case, for example, there's no direct benefit, no quid pro quo for the national banking associations that were picking up the bill for the creation of a national currency system that was to benefit everybody. But, in any event, there's a more basic objection to that point, which is that a... there is no logical difference between a tax that is a... or a fee that is imposed to... for which one pays for a benefit and a fee that one pays in order to compensate the government for a cost that one has imposed on the government. Let me give you an example that I think illustrates this point. Suppose there is a $100 fee for using the Yellowstone National Park because of a littering problem and the $100 fee is to be used to pick up the litter. It can't make a difference in the constitutionality of that statute as to whether it is deemed to be a fee which is a benefit to a person going into the park so that he will enjoy the park's litter-free aspect versus a case in which he is being charged a fee because of what he may have contributed, or members of his class may have contributed, to the costs of picking up the litter. It's the same thing. It is just two sides of the same coin. In this case you have a class of people... people who have committed crimes... who, as a class, have imposed costs on others... the victims of crime... and Congress has decided to impose on that class, the people who have committed crimes, the costs, or some of the costs of that event, which have been suffered by... by victims. There is a one-for-one, quid pro quo of sorts... a negative quid pro quo that's perfectly consistent with the Respondent's argument except that isn't a so-called benefit to the... to the member of the class that's paying the fee. Finally, on origination, I would point out that this statute passes almost any test you could possibly imagine for origination. The House was the first chamber to propose special assessments in the form that they first passed. It was the first to pass the precise language that finds its... that found its way into the Special Assessments Act. It was... the House introduced the bill in which that language was ultimately found. Antonin Scalia: What if the... what if the Senate is the first one to conceive of... of the bill on... on that theory? I mean, let's assume that a Senate Committee had first devised the notion, then the Senate would have originated the bill, right? William C. Bryson: I don't think so. Our position, Your Honor, is that there are any number of different ways that a bill can be deemed to have originated in the House. The fact that there are... there are... that the Senate may have thought of the bill first, doesn't foreclose the House from considering that it has originated the bill if it first passes-- Antonin Scalia: The fact that the House thought of it first means that it originated in the House, but the fact that the Senate thought of it first does not mean that it originated in the Senate. William C. Bryson: --It sounds... it sounds odd, but I think that-- Speaker: Yes, it does. William C. Bryson: --that's the answer. Because otherwise-- Antonin Scalia: It has to be the answer or you lose. William C. Bryson: --Well, I... not necessarily, Your Honor. But... because in this case I think there are any number of different tests which are perfectly presentable, all of which come out the same way, as House originated. Now, the only test that points in the direction of Senate origination is one which we think is an invalid test and that is the argument that Respondent makes that it is the House that first puts the final language into the package that has the number that finally passes. The only thing the Senate did in this case with respect to the Victim Protection Act, was to take a House bill that had that Act in it and had been passed by the House, and stick it on to another House bill which did not have that language into it and then pass it and send it back to the House. The only thing the Senate contributed to this case, and it says, was a staple, stapling the two bills together. And yet this is deemed to be dispositive in favor of saying it was Senate originated. That can't be. If the House... if the Senate had taken the two bills and turned them upside down so that the bill that had the Victim Act in it had... that bill's number was the bill number that passed, then even Respondent would say this originated in the House. John Paul Stevens: Yes, but you would say it originated in the House if the converse happened, wouldn't you? William C. Bryson: Yes, we would. Because we say that any number of different ways that... of conceiving origination will satisfy the Origination Clause. They aren't necessarily-- John Paul Stevens: The test is heads I win, tails you lose. William C. Bryson: --It is... that... it is a heads we win, tails we lose because of the difference-- Antonin Scalia: Why? I mean-- William C. Bryson: --Because... because otherwise you get into the-- Antonin Scalia: --Because otherwise you lose. [Laughter] William C. Bryson: --No. Otherwise the House loses, Your Honor. [Laughter] Otherwise the House loses. I think the House is deprived of its right to make a determination that this is sufficient to satisfy the origination interests. Harry A. Blackmun: General Bryson, I suppose we don't have to get to this issue if you prevail on the other one, whether it's a bill for raising revenue. William C. Bryson: That's right. Thank you. William H. Rehnquist: Thank you, Mr. Bryson. Ms. Clarke. Judy Clare Clarke: Mr. Chief Justice, and may it please the Court: The basic theme of the government's brief and the government's argument really is who cares. Munoz pays an assessment and he complains about the constitutionality of the assessment simply because of the sequence in which the bill passed the Congress. Who cares other than the House of Representatives about the sequence of bills. And in this case, who cares because in fact the language of the House was passed by the Senate and sent back to the House. So the bottom line question is why are we here and who cares. And in reality, what the government's argument does is overlook the significance of the Origination Clause. I submit to this Court that the Framers did not see it as a matter of parliamentary procedure. They did not see it as simply a matter of sequence. They saw it as something that deserved the merit of going into the Constitution. They brought it basically from England where it was a matter of practice that the most democratic House controlled the purse strings. In fact, in the states in this country at the time of the Constitutional Convention, it was a matter of practice in the States. Antonin Scalia: But... but in England, the... the House of Lords could not amend the bill. Once you say... I mean, as this thing came out of the Convention, it was compromise between those who wanted to follow the English practice, which said it had to originate in the lower House, and no amendment was permitted in the upper House, and those who didn't want that provision. So what they adopted was... was this compromise in which it has to start in the House but once it starts there, the Senate can do anything it wants to it. Which... you've got to admit there's not a whole... very sharp teeth to that provision at all. Judy Clare Clarke: It lost some strength in the compromise. There's no question. And the people... the Framers who were very supportive of the Origination Clause were very angry about that and in fact did not sign off on the Constitution, in part, because of their dissatisfaction with the watering down of what they viewed as this very most important clause. But the fact remains is that it did remain in the Constitution. It was part of the great compromise of the Framers in the debate between the small and the large states, the power between those states. The small states wanted an equal vote in the Senate and the large states said, well, we want the power to originate money bills, to originate revenue bills, because we are representative of the people. Now the government has suggested in the briefing that popular elections of the Senators has decreased again, watered down even further the Origination Clause, when in reality it has not. The House remains the most democratic body. It's elected and unelected, if it were, every two years. The people of the United States can boot out the entire House every two years if they are dissatisfied with the way the... they're being taxed, with the way the government is operating, with the size of the government. The Senate, the people tend to forget, it's a six-year turnaround and we cannot as easily get rid of those Senators. The Senate, the same two Senators from Nevada have an equal vote as the same two Senators from California. The California Senators represent probably eleven or twelve or fifteen million people. Whereas, the Senators from Nevada represent what 350,000 to 500,000 people. So the fact of popular elections has not diminished the clause at all. It was the power-- Antonin Scalia: Ms. Clarke, another clause of the Constitution says that a majority of each House shall constitute a quorum to do business. It's my understanding that unless there is a quorum call on the floor, it is quite common for bills to be passed when there is not a majority of the House present. Is that litigable in court? Could you object to the... to the statute that comes out of that process because there was not a quorum on the floor? Judy Clare Clarke: --I would object to that. I... I think that before getting into a detailed discussion of that, we'd have to look at the significance the Framers gave to it. However, under the precedence of this Court, I think that the enrolled bill doctrine may operate to stop consideration of what went into the bill and how many people were there at the time that it was voted. There is some... some degree of a presumption of... of... of appropriateness when a bill comes out of the Congress. I think for the Origination Clause you would have to look at... you would have to be able to look at the amendment of the Senate in order to give the clause any strength. But yes, I believe that a litigant could come before this Court and say there was not a quorum present at the time the bill was voted on and, therefore, the bill is not valid if the Court changed-- Speaker: Wow. Judy Clare Clarke: --the history of its precedence. But to this point, the Court has said you don't really look behind the bill. In those kinds of circumstances, you assume that the seal of the clerk counted the adequate number of yeas and nays and that the-- Antonin Scalia: Why don't we assume the same here? Judy Clare Clarke: --Because you destroy the clause. Antonin Scalia: Just as you destroy the Quorum Clause. Judy Clare Clarke: Well... and, again, I say before we could get into the meat of that clause, we would have to look at the significance of the clause. If in fact, the Quorum Clause-- Antonin Scalia: The Quorum Clause is a lot more significant than this clause. This clause just... just does not have that many teeth. Judy Clare Clarke: --Well, as I say, I believe that a litigant could come before this Court and say there was not a quorum, the bill was invalid. Antonin Scalia: Well, I think you'd probably have to say-- Judy Clare Clarke: I think both of us have to say probably several things. [Laughter] The who cares argument really wraps very easily and very appropriately into the political question issue. And the government acknowledges, I think, as it has to, that this Court has... has addressed the clause four times, that there is no textual commitment, and that in reality by finding a political question here, the Court would be writing itself out of separation of powers litigation completely. As has been pointed out this morning, the President gave up the presentment right in Chadha when he signed the Immigration and Nationality Act. The President gave up the appointment right in Buckley v. Valeo when... when the President signed the Federal Election Campaign Act. And if the Court decides that the House gave up the prerogative of origination when it passed the bill, then the Court in reality would be writing itself out of political... out of separation of powers cases. And I think that would be a very dangerous step for the Court and... and one that is not necessary at all. The government's position is that in reality the Court would be showing a lack of respect for the House. Not at all. Any time the Court strikes a statute as unconstitutional, that's, I suppose, a lack of respect for the House and the Senate because they've passed the bill in fact. The House has never assumed that it has the sole power over the... enforcing the Origination Clause. And in fact in the briefs... throughout the briefs there's a debate throughout the history of the House and Senate about what the Court would say and what the Court would do and that the Court has the final control over constitutionality. That the Court... that the House has the ability to enforce the Origination Clause is really irrelevant. The House has the ability not to pass unconstitutional laws. The House has the ability and, in fact, has the constitutional obligation to enforce the Constitution and to act in a manner that it believes is constitutionally appropriate. The significant thing here that distinguishes this case is that the House simply didn't discuss it. The Court may be in a little bit more different situation or in a deferential situation perhaps, if in fact the House had debated the clause or the applicability of the clause. But you don't have that here. The government argues that there are a lack of judicially manageable standards. Its definitions, its legislative history, its... the circuits have addressed the Origination Clause most recently really in the TEFRA litigation, the Tax Equity and Fiscal Responsibility Act. The states routinely address their own origination clauses and, in fact, this Court has... has addressed the clause. To the merits. Is this a bill for raising revenue? I, of course-- Byron R. White: --What has been the... what has been the view of the House with respect to court authority to adjudicate Origination Clause cases? Judy Clare Clarke: --Well, the-- Byron R. White: Has... has there been any clear view? Judy Clare Clarke: --I don't know that there has been any clear view except for the fact that the House... members of the House have debated what the Court would do with this piece of litigation if they don't take care of the origination problem themselves. I know in the District of Columbia case-- Byron R. White: Have they relied on prior cases as to whether or not this one kind of a bill or another? Judy Clare Clarke: --Yes. There's been great discussion of the Nebeker and Norton and Miller cases in the debates of the Congress over the... over the clause. And, in fact members of the House attempted to bring a lawsuit in the District of Columbia over TEFRA, to stop the TEFRA bill from... from passing out of... out of a concern that it was violating the Origination Clause. So there has been some concern of the House and an acknowledgment that the Court is actively involved. But, to the merits. Is it a bill for raising revenue? We agree, as would be expected, with the Ninth Circuit's position on that. There is nothing on the face of the assessments provision that says what it is except that it stands alone as a part of Title 18, not within the penalty provisions of Title 18 but it stands alone as a mandatory assessment provision. If you look to the legislative history, the legislative history says basically that it will generate needed income to offset the cost of the victim's fund and will constitute new income for the federal government. There is a cap on the size of the fund. Now, Congress has raised that cap since 1984 from, I think it started at $100 million and now it is up to $150 million. And there is an end to the life of that fund. Originally 1988 was to end the fund. Now 1994 is to end the fund. So there is a time where the monies going into that fund will stop going into that fund and will go into the general treasury. In... in fact in fiscal year 1986, a report of the Attorney General indicates that out of a concern over the budget deficit, $3.2 million of that assessment money was held... or, of the fund money was held from the fund to assist with deficit problems. So, we agree with the Ninth Circuit that in fact the bill was one for raising revenue. William H. Rehnquist: How do you distinguish the Nebeker case on that point, Ms. Clarke? Judy Clare Clarke: With the National Banking Act. Nebeker and Norton and Roberts, the three cases really to deal more directly with the issue, were situations where you pay and you get. There is a direct relationship between the person paying the tax and the person receiving the benefit in Nebeker, the National Banking Act. Those banks that chose to become part of the national currency system paid the fee and they got the direct benefit in return. The same thing happened in... in Norton with the postal money order system. William H. Rehnquist: What... what was the direct benefit that the banks got in Nebeker? Judy Clare Clarke: An ability to become... to participate in the... in the currency system and to have their currency freely traded among all of the banks. The banks could choose not to go into the national... become part of the National Banking Act. They could choose not to pay that fee and not to participate in the system. But the... the Act was really set up to encourage the banks to become part of this system because they would in the long run stand to make money and to do better if they participated in the system. But they paid and they got. In Norton, the postal money order system, you pay, you get. You pay for the postal money orders, you get the benefit of using the postal money orders. There was a direct relationship. Now I agree the that the Court has never really in those three cases discussed the fact of the direct relationship. But I think a reading of those three cases compels the conclusion that it's a pay as you go. I pay. I get. And in this case the incidental revenue test simply doesn't work unless it's a you pay, you get. Because in reality, the question that Justice O'Connor asked, could happen. The Senate could originate special purpose legislation, identify a class of people to be taxed, identify a purpose and avoid the origination requirement. We could write the Origination Clause out of the Constitution, if the incidental revenue test is read in any manner other than to compel a direct relationship between the person paying and the person receiving. The government, in order to defeat the revenue raising argument, has also argued that the clause... that the assessment provision is in reality a penalty, a criminal sanction and they point really to two... two identifiable things. One, the assessment is a consequence of a criminal conviction. Yes, it is. Two, the amount of the assessment differs between a felony and a misdemeanor. Yes, it does. But that is where the similarity with penalties stops entirely. It is not in the sentencing provisions of Title 18. It is not identified in the statute in Title 18 that identifies sentencing options... probation, fine, imprisonment, notice to victims, forfeiture and restitution. It is not one of the identified sentencing options. It is not in any way connected to the defendant. It is not in any way connected to the harm caused by the defendant which traditional sentencing, even under the Sentencing Reform Act, is connected... the harm is connected to the... to the penalty. It is not like a fine except in the manner in which it's collected, because in imposing a fine the Court is statutorily mandated to consider the ability of the defendant to pay, the burdens on the defendant's family should he or she have to pay a fine, the amount of the illegal gain to the defendant. There are statutorily defined considerations in imposing a fine. Antonin Scalia: For the... for the quantity of it. But above... below the minimum you have to impose the minimum. Judy Clare Clarke: I'm sorry. Antonin Scalia: If the... if the statute provides for a fine in a certain range, the discretion only extends up from the minimum. Judy Clare Clarke: To my knowledge, there are no statute that... that require a minimum payment of a fine. I think they would run into severe equal protection problems and I think that probably is why the statutes don't. Now, there are statutes that require a minimum in term of imprisonment minimum... a minimum and then there's a maximum range. But to my knowledge, there are no criminal statutes that require the minimum imposition of a fine. Now, the sentencing guidelines superimpose on top of the... of the criminal code. But the guidelines also themselves say look to the ability of the defendant to pay and do not impose a fine unless the court finds that the defendant has the ability to pay. So it's a different situation. Also in the... in the failure to pay a fine. That can be a revocation of probation. You can be resentenced for failing to pay a fine and you can be prosecuted for the willful failure to pay a fine. These assessments are treated completely differently. They are simply collected bureaucratically in the same way that... that a fine is collected. The argument that the government makes today on where did the bill originate, when you get right down to it, what the government seeks to do is to have... is to shield from scrutiny a Senate amendment of a House bill. The government in reality says the House passed a bill 648, the joint resolution, and the House passed 5690 and the House sent 648 over to the Senate and then the House sends 5690 over to the Senate and by means of a staple, the Senate packs the two together and sends them back to the House. That's not what happened. 648 passes, 5690... we need to look at what 648 was. It was the continuing appropriations for fiscal year 1985, it was us running the government basically. And the House tacked onto that the Senate crime bill, S. 1762, that the Senate had passed in February, This is September. So the House chose to take the Senate crime bill together with the appropriations bill and send it to the Senate. 5690 was the House anti-crime bill. Many of the provisions were similar to S. 1762 that had already gone. They passed 5690 and sent it over to the Senate. What the Senate does is take language from 5690. They don't by means of a staple, tack 5690 on to 648. They take language from 5690 and send it back to the House. William H. Rehnquist: Ms. Clarke, was there any substantial opposition to either of these bills? Judy Clare Clarke: Well, no. And you have to look at... at the way these bills have raced through the Congress. William H. Rehnquist: Well... the reason for my question is... we're really talking about a fairly technical violation of the clause in question here, the... the Origination Clause. It... it doesn't look as if the Senate were trying to strong-arm the House or something like that. Judy Clare Clarke: By... by its very nature, the Origination Clause is talking about who passes it first and... and by its very nature, you can always say, well, the House passed it ultimately. Who cares? It was a techaical violation. You can say that about the search warrant that the police officer could have gotten but didn't. William H. Rehnquist: Yes... yes, but somehow the search warrant that the police officer could have gotten but didn't doesn't seem quite the same to me in terms of... of what we're talking about as a practical matter. And I realize its in the Constitution and perhaps it should be enforced just as rigorously as any other provision. But it... it just does not seem that it amounts to much more within the technicality of this particular case. Judy Clare Clarke: Well, here's the problem. It calls upon the Court to evaluate the test for origination and the government suggests there can be a variety of ways to originate bills. Origination indicates, by its very language, that you originate once. If the language test is the test adopted by the Court, then this Court would completely topsy-turvy the existing procedures of the House which this case, from Respondent's point of view, does not require the Court to do. Right now, if the Senate passes a revenue bill and sends it to the House and the House is now considering a revenue bill and it's the same revenue bill, let's say. It is the same language. The staffers have talked and the Senate just gets their bill over to the House first. The House will not simply insert its own language after the enacting clause. They will set the Senate bill aside. They will table the Senate bill and they will pass the same bill with a House number on it and send it back to the Senate. If the language test is the test for origination, it will stop that procedure from happening because the Senate would have passed the language first. But you don't understand. The language test only applies when the result is to say that it did originate in the House. Then the language test applies. The language does not apply-- --Well, that's exactly right. That's the problem. That's exactly... could we trade places for just a moment? [Laughter] That's exactly right. A further problem with the language test is the context in which the language comes from and gets stuck into. We've had cases, arguments, hours and hours over commas and semicolons, capital letters and breaks in sentences. So the language test could throw us into an enormous problem with... with the Origination Clause and it would also stop the House from doing precisely what it's done for hundreds of years. And that is take Senate language and turn it into a House bill. The clause does not say all language raising revenue. It says all bills raising revenue. We're not talking about language, we're talking about bills. John Paul Stevens: May I ask you perhaps a stupid question? When in your view did this piece of legislation first earn the title of being a bill for raising revenue? At what stage in the legislative process did it become a bill? Was there a bill for raising revenue that was later enacted? Judy Clare Clarke: It was always a bill for raising revenue because of-- John Paul Stevens: Well, what do you-- Judy Clare Clarke: --because of the arguments-- John Paul Stevens: --mean by always because you have got both Senate and House and... at what point in time would you say this bill originated, the bill for raising revenue? Judy Clare Clarke: --When the Senate stuck it into the bill that passed. When the Senate stuck it-- John Paul Stevens: In other words, when the two... when the two pieces previously passed by the House were stapled together as your opponent described. Judy Clare Clarke: --It was not a stapling together-- John Paul Stevens: Well, but whenever that happened-- Judy Clare Clarke: --Yes, in the Senate. John Paul Stevens: --And then... and the Senate gave it a new number at that time? Judy Clare Clarke: No. It went back as H.J. Res. 648. It was still part of the House bill. It was... in reality what we've got is an amendment to the House bill. And the question is... then becomes, can the Senate amend a House appropriation and crime bill. And we get to really the final argument of... of the case. The government wants the Court to-- John Paul Stevens: Well, just be sure... I want to be sure I haven't lost your answer. I don't mean to interrupt, but you're saying when the Senate passed the amended version of H.J. 648, that was when it was first a bill for raising revenue? Judy Clare Clarke: --That was when it originated. John Paul Stevens: When it originated. Judy Clare Clarke: Yes. Speaker: Thank you. Judy Clare Clarke: The amendment process-- John Paul Stevens: Of course, there's... there's a textual problem with that because it couldn't be in the language of Section 7 a bill for raising revenue unless it originated in the House. Judy Clare Clarke: --Well, that... that would be the tail chasing the cat. John Paul Stevens: Well, that's what the Constitution says. Judy Clare Clarke: It's-- John Paul Stevens: One of the requirements for it to be a bill for raising revenue is that it must have originated in the House. Judy Clare Clarke: --Well, no, I think that is backwards... that bills for raising revenue must originate in the House, not just because they originate in the House they are bills for raising revenue. That-- John Paul Stevens: Well, it can be a bill even though it did not... it can be a bill... well, I understand what you're saying but I'm not sure it squares with the text. Judy Clare Clarke: --All bills for raising revenue must originate in the House of Representatives. Speaker: And so-- Judy Clare Clarke: Therefore, if it originates in the House-- John Paul Stevens: --Ergo something that doesn't originate in the House is not a bill for raising revenue. [Laughter] Judy Clare Clarke: --Well, then I could never be here. You're right. If... if the case is decided that way, we might as well go off on political-- Speaker: --not justicial because the House can always cure it. Judy Clare Clarke: --There you go. That's what I was going to say. We could just go off-- John Paul Stevens: No, your argument then would be... let me... let me trade places with you for a minute-- [Laughter] Judy Clare Clarke: --Happily. John Paul Stevens: Your argument then would be that when it became a bill for raising revenue... when it first passed the House and it never subsequently passed the Senate. Judy Clare Clarke: It became a bill for raising revenue when it first passed the House. When the House passed the bill it didn't have revenue in it. John Paul Stevens: No. I'm saying when it went to the House... the House later passed it didn't it? Judy Clare Clarke: That's right. But the House didn't-- John Paul Stevens: But if that's the first time it became a bill for raising revenue, did the Senate pass it a second time-- Judy Clare Clarke: --You never had the question. Speaker: --and the answer is no. Judy Clare Clarke: Yes, the Senate passed it a second time. But it originated in the Senate. You would never have the question if you have that kind of circularity. Thurgood Marshall: Yes, you would. Don't you need some-- --You would never have to be here. Judy Clare Clarke: Thank you, Mr. Justice White. Thurgood Marshall: Don't you need some-- --And you would lose. --additional language that-- Judy Clare Clarke: No, we don't want that. Thurgood Marshall: --language like bills and amendments must originate in the House? Judy Clare Clarke: Well, in reality we do have that because the... but the Senate may propose or concur with amendments as on other bills as has been read to me-- Thurgood Marshall: I'm talking about the one phrase... all revenue bills must originate in the House. Judy Clare Clarke: --That's correct. Thurgood Marshall: If it said all bills and amendments must originate in the House, you'd be pretty-- Judy Clare Clarke: It doesn't say that. But it-- Thurgood Marshall: --It sure doesn't. Judy Clare Clarke: --No, it doesn't. Thurgood Marshall: And that is your problem. Judy Clare Clarke: No, I don't think that's... that's my problem at all. That would be more the... the government's problem. Because the Senate can amend a House revenue bill, but the bill, as it comes to the Senate, must be a revenue bill and 648 was not a revenue bill. Now, that's where we get into the final argument basically and that is can the Senate amend a House appropriations bill? I say we don't have to reach that in this case because, as the district court found, and the government didn't complain and, as the court of appeals found, the amendment was to crime control. And you don't even have to go beyond and look at the appropriations. And if you do go beyond and look at the entirety of the bill, nothing in 648... I don't think this Court has to address the appropriation context, but nothing in 648, either the appropriations portion or the crime portion, were revenue raising. And that's the bottom line. If there are not further questions. Antonin Scalia: Well, I'm... I'm curious... I assume it's... I assume it's the same answer you gave to the quorum provision. But what about the horrible that the government put forward, and that is the President returns a vetoed bill to the wrong House-- Judy Clare Clarke: I think that-- Antonin Scalia: --and... and then they proceed to override but in the wrong sequence? Judy Clare Clarke: --I think that they could simply redo the bill and repass it to the President. Oh, I know that they could, but they didn't. They did it in the wrong order and the bill is then promulgated and there is a lawsuit and you-- --I think there's a problem with that. I think I have to say that. William H. Rehnquist: Thank you, Ms. Clarke. Mr. Bryson, you have three minutes remaining. William C. Bryson: Thank you. Briefly, on the question of Nebeker and whether this was a voluntary contribution as it was characterized, I think, by the Respondent. Sure, the national banks associations could have stop being national banking associations and wouldn't have had to pay the tax that was imposed on them. But I could avoid the income tax by quitting my job. The fact is that as long as they wanted to remain in the national bank system, they were required to pay the tax for a benefit which the Court specifically described as being for all the people. So this isn't a quid pro quo. And in any event, this case satisfies the test... the very test that Respondent argues for which is, and I think I am quoting... "a direct relationship between the person paying and the person receiving. " The person paying here is the person who is engaged in crime. The person receiving is a person who is a victim of crime. This was very specifically acknowledged by Congress to be a direct relationship between the person who caused the injury and the person who suffered the injury. So it does satisfy the quid pro quo. It's a negative quid pro quo. Antonin Scalia: No, but it's not the government giving and... and the taxpayer receiving. I mean, it's quite a different thing. William C. Bryson: No, because the government is acting as a stakeholder for the-- Antonin Scalia: And in a sense you say, no, it's for the benefit of all the people. Well, every statute is for the benefit of all the people. The government doesn't pass any statute that isn't purportedly for the... for the common good, not for the-- William C. Bryson: --Well, it is-- Speaker: --Right? William C. Bryson: --It was deemed to be the common good to benefit this particular class of individuals. It was the class that was unknowable in advance. Antonin Scalia: That's all that she was saying about the earlier cases that... that, sure, they... they benefitted all the people ultimately but proximately they benefitted the banks. William C. Bryson: Well, but proximately, we submit that... that it didn't benefit the banks. The banks happened to achieve a general benefit of being able to participate in a more efficient system. But it was not a case in which they were getting something for which they were paying and getting full value for what they were paying. They were supporting a system that was a nationwide currency system that was having some marginal benefit to them no doubt. But basically it was for the purpose of benefitting all the people. Anthony M. Kennedy: You... you cannot characterize this as using the courts to aid victims? William C. Bryson: It is in a sense using the courts to aid victims in that the courts are one of the agencies that collects the money that ultimately goes to the victim. But it is Congress that has set up a system under which the victims are to be the beneficiaries and the defendants are to be the people who are supporting, in part, this program. Anthony M. Kennedy: So this is not like a user fee... the use of the courts, even though it's involuntary. It's somewhat twisted-- William C. Bryson: I think not good use of the courts. It is a fee imposed on people who impose costs on others just as in my example, the fee charged to people who use the national park in order to clean up the litter that they have left. The sunset provisions of the Act were designed, as the legislative history makes clear, not to allow all this money to go into the treasury at the end of X period of time, but to enforce... to force Congress to reconsider the statute. William H. Rehnquist: Thank you. Mr. Bryson. The case is submitted.

Warren E. Burger: We will hear arguments first this morning in 75-5444, Coker v. Georgia. Mr. Kendall, you may proceed whenever you are ready. David E. Kendall: Mr. Chief Justice and May it please the court. I am David Kendall and I represent petitioner Erlich Anthony Coker who has been condemned by the State of Georgia to be electrocuted for the crime of rape. This case presents for review a question explicitly reserved in last term’s Gregg v. Georgia decision: whether the taking of a criminal’s life is a proportionate sanction where no victim has been deprived of life, for example, when capital punishment has been imposed for rape that does not result in the death of any human being. Now, on September 2, 1974, petitioner Coker was incarcerated for murder, rape, kidnapping and aggravated assault at the Ware Correctional Institution in Southern Georgia. During an Alcoholics Anonymous meeting he was attending that night, a group of prisoners seized two guards and in the ensuing disturbance, petitioner Coker escaped through the roof of the building the meeting was being held in. At about 11 pm that evening, petitioner appeared at the home of Allen and Alita Carver in nearby Waycross, Georgia. Brandishing a board, he had Allan Carver tied up in the bathroom and moved the Carvers’ three-weeks old sleeping baby in the bassinette into the bathroom with Carver. He secured a kitchen knife with a four-inch blade and took $20.30 from Allan Carter’s billfold which was lying on a dresser. He had Mrs. Carver change into her street clothes in order to show him how to start the family car. After she had undressed, he raped her and then clothed himself in Allan Carver’s clothes. During the rape, the knife lay on a nearby dresser, within petitioner’s reach. He told Allan Carver that he was taking Mrs. Carver with him and that he would release her unharmed, but if stopped by the police, he would kill her. After they left, Allan Carver was able to free himself and call the police. Within the hour, the police arrested petitioner, who had parked with Mrs. Carver on a dirt road to evade a police road block. Mrs. Carver was released, nervous, shaken but physically unharmed apart from the rape itself. A counsel was appointed to represent petitioner and he was subsequently indicted for rape, armed robbery, kidnapping, motor vehicle theft and escape. A special plea of insanity was filed which, under Georgia law, sets up present competence to be tried and on November 19th, 1974, the jury returned a verdict finding petitioner competent. Now, the case was tried on all five counts of the indictment under the procedures that this Court has reviewed in Gregg v. Georgia. At the conclusion of the first stage of the trial, the jury returned a verdict of guilty on all five counts. At the second stage, a proceeding was then held to determine sentence on the two punitive capital counts of the indictment, the rape and the armed robbery. Now, at this point the State introduced evidence of petitioner’s prior capital felony convictions. This record consisted of three two-count indictments involving crimes against two victims. With one Philip Ecoles, petitioner had been convicted in the Clayton County Superior Court for the December 5th, 1971 murder of one Sue Ann Wick, the rape and murder of Sue Ann Wick, and had received consecutive sentences of life imprisonment and twenty years imprisonment. With one Glen Harlen Stacey, he had been convicted after trial in the Richmond County Superior Court for the July 29, 1972 rape and kidnapping of one Susan Laureen Jones and for these crimes he received consecutive sentences of life imprisonment and twenty years imprisonment. Finally, petitioner had pleaded guilty in the Tolliver County Superior Court to another July 29, 1972 rape of Susan Laureen Jones for which he received a sentence of life imprisonment. The State introduced the indictment and the sentences for these crimes and presented witnesses who identified petitioner as the person named in these indictments and sentences, but details of these prior convictions or the factual circumstances of the prior convictions were not adduced. Petitioner presented no evidence. The trial court instructed the jury that as to the rape conviction, it could find two aggravating circumstances, which under the Georgia statute, justify the imposition of the death penalty. The court instructed that the jury could find that the rape was committed by a person with a prior capital felony conviction and it instructed that the jury could find the rape committed by a person during the commission of another capital felony, to wit, the armed robbery of $20.30 from Allan Carver. Now, the trial court did not define particular mitigating circumstances because none are defined in the statute, but it did instruct that in litigation, the jury could recognize anything which in fairness or mercy could justify extenuation of the degree of punishment. Warren E. Burger: Do you suggest there are some extenuating circumstances here on this record? David E. Kendall: Well, Mr. Chief Justice, we believe that the evidence of petitioner’s sanity, insanity, of his alcoholism do indeed constitute mitigating circumstances. Those have been presented to the jury at the first stage of the trial, this was essentially a trifercated trial. There was a trial on the issue of sanity which preceded the trial of guilt or innocence. The jury found both aggravating circumstances to exist beyond the reasonable doubt and sentenced petitioner to be electrocuted for the rape. It imposed a sentence of life imprisonment for the armed robbery conviction. An appeal was subsequently taken to the Georgia Supreme Court and that court, with one justice dissenting, affirmed petitioner’s sentences and convictions. A certiorari petition was subsequently filed in this Court and on October 4th of last year, the Court granted certiorari limited to the single question whether the death penalty may be constitutionally exacted for a rape where the life of a victim is not taken. While the court’s decision is of literally vital significance to Erlich Coker, it will not have much of an impact on the criminal justice system, whichever way the Court decides this case because the death penalty for non-homicide crimes has been almost totally repudiated by this society, in fact. Of the 345 people who are now on death row in this country, six are on death row for non-homicide crimes or crimes that do not involve the death of the victim. Georgia is the only American state and virtually the only jurisdiction in the civilized world that now authorizes the death penalty for the rape of an adult woman. Potter Stewart: Georgia also authorizes the death penalty, you have already told us, for armed robbery, does it not? David E. Kendall: Yes, Mr. Justice Stewart. Potter Stewart: And for kidnapping, does it not? David E. Kendall: For kidnapping, when the victim is harmed or ransom secured, it authorizes the death penalty for six capital offenses after Gregg. It also authorizes the death penalty for treason, for murder and for aircraft hijacking. Potter Stewart: So in non-homicide cases, the death penalty can be imposed for five different offenses under Georgia law? David E. Kendall: Four, because the Georgia Supreme Court in the Gregg case held that the death penalty could not be constitutionally imposed for armed robbery. Potter Stewart: Despite the statute? David E. Kendall: Despite the statute, it was a statutory holding, it was not a constitutional holding. Indeed, after Furman v. Georgia, the states enacted 16 non-homicide death penalties. Georgia enacted five of those. William H. Rehnquist: You said the Georgia Supreme Court’s ruling that death could not be imposed for armed robbery was a statutory ruling? David E. Kendall: Yes, Mr. Justice Rehnquist. There is a cruel and unusual punishments clause in the Georgia Constitution, but that clause was not relied on in the Gregg case. There is a provision for review of a sentence that is disproportionate or excessive and the Georgia Supreme Court held that a death penalty for armed robbery was such an illegal sentence. William H. Rehnquist: Was it the holding that would apply to all future convictions for armed robbery? David E. Kendall: Yes, yes it was. The Court has vacated since that time two other death sentences for armed robbery. In each case an armed robbery death sentence has been imposed, it has been imposed with a murder death sentence, so just one death sentence was vacated of each defendant. Even in Georgia, only a small arbitrarily selected fraction of eligible defendants are condemned for rape. Finally, the death penalty for rape comes to this Court with a notorious and unsavory reputation for racial discrimination. Now, petitioner Coker is white and the Court did not grant an equal protection claim in this case, but part of our Eighth Amendment submission on behalf of petitioner Coker is that the origin of the death penalty for rape and such continuing acceptance as it demonstrates is really founded in invidious racial discrimination. Ninety percent of the people executed for this crime, the 455 people executed for this crime since 1930, have been black. In Georgia itself in this period, 58 blacks have been executed and three whites have been executed. Now, our submission on behalf of petitioner Coker is essentially two-fold. First, that the death penalty for rape constitutes an excessive and disproportionate punishment for a crime where the life of the victim has not been taken when judged by relevant contemporary standards and second, quite apart from this first claim, that the present pattern of imposition of the death penalty for rape in Georgia shows the same arbitrariness, infrequency and capriciousness of application that this Court held violated the Eighth Amendment in Furman v. Georgia. Now, that punishment should somehow be proportioned to the offense was first recognized by this Court in Weems v. United States. It was again recognized in last July’s capital punishment decisions. In those cases, the Court held that the death penalty for homicides intentionally committed by a defendant did not violate the Eighth Amendment, was not a disproportionate sanction, but the Court reserved the constitutionality of a death penalty where the life of the victim was not taken. Now, certainly rape is a serious offense like aggravated assault, maim, child torture, aggravated sodomy or attempted murder. The question here, however, is whether rape will be punished by the ultimate penalty that the criminal justice system can dispense. In Woodson, the plurality recognized that the death penalty is different in kind from a sentence of imprisonment, however long. It said that death is qualitatively different from imprisonment. Last Tuesday, the plurality in Gardner v. Florida stated that the death penalty is different from imprisonment in both severity and finality, that it differs dramatically from any other legitimate state action and the question posed here is not whether rape will be stringently punished. Indeed, Georgia authorizes a sentence of life imprisonment for rape. The question is really whether it could be punished by the unique and irreversible punishment of death. Now in the Gregg plurality opinion, the Court stated that in applying the proportionality test, the Court would not look to subjective standards, but would instead look to what it called objective indicia of contemporary attitudes towards a given sanction. It recognized three of these objective indicia: legislative enactments, jury verdicts and what the Court called history and traditional usage. We submit by the unanimous concurrence of these indicators, the death penalty is cruel and unusual punishment today. Now, as far as legislative enactments go, as I have mentioned, Georgia Code annotated 26-2001 is literally unique in the United States. No other American jurisdiction now authorizes the death penalty for the rape of an adult woman. In 1926, there were 20 United States jurisdictions that authorized a discretionary death penalty for the rape of an adult woman. Even before this court’s decision in Furman v. Georgia, there was a trend toward abolition. Delaware abolished the penalty in 1958. West Virginia abolished it in 1965. The District of Columbia abolished it in 1970. On the eve of Furman, therefore, 17 states had a discretionary death penalty for the rape of an adult woman. The 11 states of the Confederacy, four border states; Kentucky, Maryland, Missouri, Oklahoma, plus Nevada where there was severe bodily injury and the United States. Now, Furman wiped these statutes off the books because all were discretionary. Potter Stewart: But surely you do not suggest that this court’s Furman decision represents a community consensus that would be the same as if those 17 states had themselves repealed the statute, so you? David E. Kendall: Well, I submit that the court’s Furman decision does reflect the desuetude into which the death penalty had fallen in many cases, both murder and rape. We really, as an indicator of contemporary standards, rely on the legislative reaction to Furman, and to Gregg for that matter because when the legislatures had to take another look at the crime of rape, only six states enacted any kind of death penalty for a rape offense after Furman. Now, three of these states; Tennessee, Florida and Mississippi enacted a death penalty for the rape of a child under 12 or in the case of Florida, under 11. North Carolina and Louisiana enacted a very narrow death penalty, mandatory death penalty for the rape of an adult woman where there was serious bodily injury or where a weapon was used. Only Georgia enacted a death penalty that would punish any rape of an adult woman with death. So we think that the reaction to Furman does manifest that legislative repudiation and indeed, there is a further reaction because, since Gregg, this court’s decisions in Roberts and Woodson had the effect of invalidating mandatory death penalty statutes. So that invalidated Tennessee’s death penalty statute, Louisiana’s, North Carolina’s and Mississippi’s. Now, if you look at -- Potter Stewart: How long in time do you give them to react under your standard of -- David E. Kendall: Well, I think probably with those states, it is too short to be sure, but we do know that for example, Louisiana has enacted within a month of this court’s Roberts decision, enacted a death penalty for homicide, for certain kinds of homicide. It defeated a death penalty for aggravated rape. So I think that Louisiana, we can check off. Tennessee, the only other legislative activity that I am aware of is in the state of Tennessee where a death penalty for homicide has cleared the judiciary committees of both houses and the death penalty for rape bills have been defeated within those committees. So I am not suggesting that there is enough time since Gregg to fully assess it, but we do know that there have been four death penalties for homicide statutes passed since Gregg. None of those states have enacted a death penalty for rape and there are three other states which we note in our reply brief where both houses of the legislature have enacted a death penalty bill for homicide and those are awaiting the governor’s signature in Maryland, New Jersey and Virginia and the houses of legislature have not enacted a death penalty for rape. Warren E. Burger: You have mentioned the irreversibility of the death penalty as one of the bases for its infirmity, constitutionally. I wonder if you would expand a little on that. How does that enter in this case in any different way from in any other capital case? David E. Kendall: Mr. Chief Justice, I did not mean to suggest that that was the only reason for its unconstitutionality in this case. What I did mean to suggest was that it was a reason for applying an exceptionally high standard of review and justification and I think the death penalty is different in one respect because it is irreversible. I think that means that this higher standard of review has to be applied to the justifications advanced by the state and also to the consideration whether a particular death penalty for a non-homicide offense is consonant with contemporary values. Warren E. Burger: You have two concepts there really, have you not, the generality applying to the penalty in all cases and its application to the particular case? Now, irreversibility is usually advanced to us as an argument because of the possibility of error in the judgment and do you argue that in this particular case? David E. Kendall: Yes, we do. We think that in one sense, the execution of petitioner Coker or Ebrahart or Hooks or anybody else on death row for rape, would be error not in the sense I think error is usually meant, but in the sense that it is an erroneous execution because society has broadly repudiated it. Warren E. Burger: I did not mean error in that sense. I meant I was directing my observation about error to the argument usually advanced here that the death penalty is obviously irreversible and you might execute the wrong person that is a person is not guilty. David E. Kendall: Well, there are certainly other collateral claims presented in this case, which the Court did not grant certiorari on the basis of that would be pursued in collateral proceedings which might demonstrate that because of insanity or some other reason, this death penalty was erroneous. So in that sense, we do have that claim of factual error in this case. Lewis F. Powell, Jr.: Mr. Kendall, before you proceed, if we have a prison inmate who has been convicted of aggravated rape and sentenced to life, a mandatory life sentence under the statute that forbids parole and the inmate escapes and commits another aggravated rape, what punishment do you think would be appropriate? David E. Kendall: That, of course, is not the case presented here. Lewis F. Powell, Jr.: I understand that. David E. Kendall: But it seems to me that in the circumstances of that case, imprisonment would be an appropriate punishment when judged by what society does to essentially all other people who are convicted of that crime. Lewis F. Powell, Jr.: Would that be any punishment for that individual? David E. Kendall: Certainly, he would have the stigma of another rape conviction. Society would be protected since it would have kept him incarcerated. Lewis F. Powell, Jr.: The same way it was protected on the first go-around. I say it would be protected to the same extent that it had been protected after his first conviction for rape. David E. Kendall: Yes, Mr. Justice Powell, that is -- Lewis F. Powell, Jr.: Yet he escaped. David E. Kendall: That is correct. Of course, petitioner Coker was incarcerated -- Lewis F. Powell, Jr.: I am not talking about Coker, I was asking your view as to whether or not there could ever be a situation where absent any other punishment, capital punishment would be appropriate for repetitive crimes of rape. David E. Kendall: Well, we think that the objective indicators that the Court pointed to in Gregg would indicate that society, where a life has not been taken, the death penalty is inappropriate to protect a value other than life. Lewis F. Powell, Jr.: What deterrents would exist in the circumstances I described? David E. Kendall: I think that the deterrence connotes protection from society it seems to me in that case. I think that certainly if there is a life without parole statute, adding a sentence would not in and of itself impose more punishment. But insofar as deterrence is a question that relates to the general public, I think the usual safeguards that can be applied to prevent escapes would adequately protect the public, because it is interesting that in both the Coker and the Coley case, which are two, the Coley case is very similar to this case in many ways. These were prisoners who escaped from a correctional facility and committed rape. Neither of those prisoners was incarcerated in a maximum security facility. The state of Georgia can take more steps than it has taken in these cases to protect society. Also, the state of Georgia can enact, as it has not yet enacted, some longer term of mandatory imprisonment for repeated crimes, whatever those crimes are. In Georgia, under Georgia Code annotated 77-525, a prisoner comes up for parole in seven years, regardless of what his sentence is. Now, Georgia could extend that time, if it wished to do so. Potter Stewart: Of course, anybody who is serving a life sentence without a hope of pardon or parole who escapes can with practical impunity commit any offense, including whether it would be petty larceny or jaywalking or shoplifting, unless you decide that the only way to give him additional punishment is to put him to death for jaywalking or shoplifting or petty larceny. David E. Kendall: Well, this case was really not tried on a recidivism theory. The jury was not instructed that Coker’s repeated crimes could justify imposition of the death penalty. He had capital felonies other than rape. The Georgia Supreme Court did not review it on a recidivist theory. In fact, its proportionality review consisted entirely in the statement that the death penalty here is not excessive or disproportionate. As we point out, in comparison to the Coley case, although Coley was an armed robbery recidivist, the two factual circumstances are almost identical. In fact if anything, the Coley case is a little more aggravated on the facts. But many states have opposed or many groups have opposed life without parole statutes because it deprives the corrections authority of all control over inmates who hope at some point to be paroled. Speaker: Have any study been made of what happens in the states that long since abolished capital punishment? Like Maine, for example, what did they do? David E. Kendall: Well, the only study I know of is a study by Professor Bailey that appears in the 1976 book, Capital Punishment in the United States, he did a regression analysis which indicated that (a) rape rates in abolition states were lower than in retentionist states and also that the death penalty, its execution in retentionist states bore no inverse relation to the rape rates. That would suggest that there is no deterrent effect of the death penalty, but Bailey also I think in fairness, observed that the death penalty was simply too sporadically imposed to really run a good regression analysis. It is very seldom imposed. It also constituted no threat, he said, to the white rapist. So, he did no really say that his study was at all conclusive, but the data is so bad that it is difficult to get a conclusory study. So I mentioned that petitioner with Messrs, Hooks, Ebrahart, Shue, Hughs and Boyer are the members of an exclusive, but hapless fraternity. They are the only people now on death row. There are a couple of ways to measure their uniqueness. First of all, the uniform crime reports indicate that about 1200 forcible rapes occur every year in Georgia. That would be about 4800 rape offenses committed under the new statute. The other thing, as we point in our brief and reply brief, is that the Georgia Supreme Court has reviewed 59 cases in which life or less has been imposed as a punishment for a crime. Not all rape convictions certainly were appealed to the Georgia Supreme Court, but we do know that at least 59 non-capital rapes have been reviewed. I think I have said enough to indicate what our Furman submission is. It is simply that without reaching the question whether the death penalty is disproportionate for the crime of rape, the pattern of imposition here is precisely that observed in Furman. The death penalty is an extraordinarily rare punishment for the crime of rape. I would like, if I may, to reserve the remainder of my time for rebuttal. Warren E. Burger: Very well, Mr. Kendall. Mr. Grindle? B. Dean Grindle, Jr.: Mr. Chief Justice and May it please the court. We have essentially three points that we wish to make this morning. First is that the Constitution does not define what is and what is not a capital crime. Secondly, we submit that condemning death for rape under any and all circumstances would have far-reaching consequences over and beyond this particular case, and over and beyond the question vis-à-vis rape, that is, capital punishment vis-à-vis rape. Our third point that we would wish to stress is recidivism and violent crime. The Court has noted that the wisdom of capital punishment is generally a matter for the legislative forum. We submit that this reflects the wisdom of the framers of the Constitution and that the legislative judgment is bound primarily in this area by the Eighth Amendment. Now, the Court in the Gregg series of opinions has held that death for murder is not unconstitutional regardless of the offense, regardless of the offender and regardless of the procedure involved. It is difficult for us to fathom how a constitutional distinction can be drawn between rape and murder. Speaker: You do concede, I suppose, General Grindle, do you not, that dsproportionality is one of the criteria, one of the ingredients in a constitutional determination of whether a punishment is cruel or unusual. In other words, you would concede, I suppose, that the imposition of the penalty of death for running though a red light would be a cruel and unusual punishment, would you not? B. Dean Grindle, Jr.: I would concede that. I would submit -- Speaker: So that is conceding that disproportionality can be a dispositive ingredient in the determination of what is cruel and unusual punishment, is it not? B. Dean Grindle, Jr.: On the basis of the plurality in Gregg and the concurrences, I think I would be forced to concede. Speaker: Well, you would, would you not? You would concede, would you not that the death penalty for stealing ten cents is cruel and unusual punishment? B. Dean Grindle, Jr.: Yes I would, and for purposes of this case. Speaker: Regardless of anything this Court has held, would you not as a constitutional lawyer concede that? B. Dean Grindle, Jr.: Yes and for purposes of this case, we have in effect conceded that disproportionality is a measure of constitutional review in this type of case. The point that I wish to draw in terms of murder and rape is that the statutes are not designed to execute all murderers. For the same reason, the statute is certainly not designed to execute all rapists. The point is that some rapes can be viewed, not only can be but are viewed, by society just as serious and calling for severe sanctions, just as many murders are. In fact some rapes, depending on the circumstances of the offense, the character of the offender, would call for more public condonation than many murders, based on the fact that many, many murders occur among friends, amongst family members and rape of course seldom involves that situation, not to say that it does not occur, but it is generally a situation where the victim is a stranger to the offender. Speaker: Mr. Attorney General, does Georgia a distinction in its law between rape and aggravated rape? Do you have two separate statutes? B. Dean Grindle, Jr.: The crime of rape is not defined in terms of rape and aggravated rape. We simply have one definition. Speaker: The statute that is in the brief, is this the only rape statute in Georgia? B. Dean Grindle, Jr.: Yes, defined as -- Speaker: But no statutory definition of aggravated rape? B. Dean Grindle, Jr.: There is not. We have just simple rape and statutory rape. However, by virtue of the fact that the General Assembly authorizes death as a permissible penalty for rape written into the capital punishment statute, is in effect an aggravating element and that we have to read both together and to that extent, although we do not have degrees of rape, just in terms of defining the crime as a matter of practice before a death penalty would be authorized in any particular rape case. It would be in the nature of some type of aggravated crime. Potter Stewart: Does this not leave the jury at large to impose the death penalty in any rape, depending upon their own reaction to the evidence, unguided by any instructions on standards of the kind of justice that probably was probing at? B. Dean Grindle, Jr.: To the extent that the jury could always refuse to return a death verdict, that may well be true, but it would also be true in a murder case. The jury is always free to ignore the instructions. In the general case, the aggravating circumstances would be charged to the jury and they would pass on those. Potter Stewart: The jury has to find at least one or more statutory aggravating circumstances in order to impose the death penalty in Georgia, is it not? B. Dean Grindle, Jr.: That is correct. Potter Stewart: For a rape case or murder case or any other -- B. Dean Grindle, Jr.: Any capital -- Potter Stewart: Well, in this case, for example, an aggravating circumstance would be a previous conviction for a punitive capital felony. So that would be an aggravating circumstance even if the rape found were that of a jilted boyfriend and a former girlfriend, people who were not strangers but who knew each other. B. Dean Grindle, Jr.: That is correct, Mr. Justice Stewart. However, I should point out and it is important that this point be noted and that is the mere fact that a particular aggravating circumstance is present does not mean that that death sentence will be affirmed. In other words, the presence of the aggravating circumstance is a mere pre-requisite to even considering the imposition of the supreme penalty, and not -- Thurgood Marshall: General Grindle, is there any statute or anything else that says what standard shall be used to decide whether it is aggravated or not? B. Dean Grindle, Jr.: The circumstances, the aggravating circumstances themselves, we submit, provide the standards. Now, one or more – Thurgood Marshall: You say defy the statutes? B. Dean Grindle, Jr.: The aggravating circumstances in effect define the standards. They are the standards, in other words. Thurgood Marshall: What are they in Georgia? Where can you point me to them where I can read them? B. Dean Grindle, Jr.: The aggravating circumstances, Mr. Justice Marshall, appear in our code at Section 27-2534.1. Thurgood Marshall: Where is that? Warren E. Burger: What are you reading from? B. Dean Grindle, Jr.: I am reading from our code annotated. Warren E. Burger: Well, can you give us a page in your brief? Potter Stewart: Page 8 of the petitioner’s brief. B. Dean Grindle, Jr.: Yes, that is at page 8 of the petitioner’s brief and particularly it is on page 9. The 10 aggravating circumstances are listed. Thurgood Marshall: Those are for murder. Speaker: No, they are for any offense. Thurgood Marshall: Where is that, we have been -- where is it, 27-2537? Speaker: Numbers 1, 2 and 7 apply to rape. B. Dean Grindle, Jr.: In this particular case, the aggravating circumstances were, number one: the prior record of convictions for a capital felony and number two, the petitioner was also engaged -- Thurgood Marshall: Number seven is more specific. B. Dean Grindle, Jr.: Pardon? Thurgood Marshall: Seven is more specific for you, is it not? B. Dean Grindle, Jr.: That one perhaps has been the occasion for more litigation and argument than the others. That is not present in this case. That circumstance was not charged and of course it was not found. Numbers one and two were charged and were found. Thurgood Marshall: And the others were not even charged, if you remembered? B. Dean Grindle, Jr.: I believe there was a charge on armed robbery, but the jury did not find that. The petitioner has submitted that this case would not have or that is a decision in his favor would not have much impact beyond his case, we disagree. We disagree for this reason. The recourse available to society, if society determines that certain non-homicidal crimes must be punished and deterred and that terms of imprisonment are not sufficient, the alternative is to amend the Constitution, assuming that the Court has ruled in the petitioner’s favor. And that would be because we submit the case would be construed as having consequences beyond just a crime of rape, specifically the exception noted in the Gregg opinion were crimes where the offender has not taken the life of the victim. Although the opinion here would obviously be concerned with rape, it would be construed, we submit much more broadly and that constitutional amendment would be the only conceivable recourse. And that as a practical matter would be very difficult and revision in light of future experience would be very difficult. Now, we do not know -- Potter Stewart: Your argument is that a decision in favor of the petitioner in this case, holding that it is constitutionally impermissible to sentence somebody to death for the commission of the offense of rape not involving a homicide would have broad implications because it would be understood as holding that the imposition of the death penalty for any non-homicidal offense would be constitutionally impermissible, is that your argument? B. Dean Grindle, Jr.: That is my argument Mr. Justice Stewart. Potter Stewart: What other non-homicidal offenses do you suggest would be or should be held to be constitutionally permissible so far as the infliction of the death penalty is concerned? B. Dean Grindle, Jr.: I have two categories in mind and that is in effect concerning yourself, that is society concerning itself with the violent recidivist, regardless of the nature of his crime. Potter Stewart: Even though it is just repeated cases of assault and battery, for example? B. Dean Grindle, Jr.: Not necessarily. Potter Stewart: That has violence. B. Dean Grindle, Jr.: Well, it is hard to be drawing a line as to say where or who would draw the line. I think that would be a legislative judgment, but I would look for the recidivist who has committed prior capital crimes such as we have in our statute. If he has killed, if he has maimed and continues to do so, then society needs to protect itself from that individual. Potter Stewart: Well, if he has committed murder and this court has in the Gregg case has given you the answer on that. B. Dean Grindle, Jr.: I am not responding really to the particular crime where he does kill the victim. Certainly, if he has killed before and he attempts to kill again, if he commits another armed robbery or has killed or has seriously maimed the victim, if he has this type of record and he commits another armed robbery, it should be permissible to deter that specific individual from further such acts. Now, in terms of general crimes -- Potter Stewart: Well, it would certainly deter him. Generally, deterrence is considered with a somewhat different meaning that is to deter others because of the example you make of him. B. Dean Grindle, Jr.: I want to move to what I call specific deterrence as opposed to general deterrence or incapacitation, I was referring to incapacitation in terms of that individual. Also before I move on to that point, other crimes that may come to the forefront in the years to come or perhaps in this day in time are just in the formative stages and the past 10 years we have seen aircraft hijacking become somewhat of an everyday occurrence in the newspapers. Fortunately, it has been curbed in recent years and also in a similar vein, hostage taking has become very popular. In future years, terrorism of that sort may continue to increase and when we have hostages taken, if we have injuries to those hostages, the disruption of the governmental process that is the type of thing that we cannot be sure of. And of course, if those hostages or the acts engaged in result in death, that would be permissible to execute them there if they are prosecuted for murder. Harry A. Blackmun: Mr. Grindle, what is your attitude about espionage and treason? These are older ones, and -- B. Dean Grindle, Jr.: Yes, that, Mr. Justice Blackmun, goes to the integrity of your democracy. I think that is a justification, perhaps. We put our freedom and our form of government on a pedestal and although that is historically been a capital crime, I have not given much thought to the point because of its fortunate rarity. Potter Stewart: Has anybody ever been sentenced to death in Georgia for espionage or treason? B. Dean Grindle, Jr.: Not to my knowledge. Warren E. Burger: Is espionage a crime in Georgia? B. Dean Grindle, Jr.: Mr. Chief Justice, to my knowledge, treason is a crime. I am not sure if we have a separate crime of espionage and in my lifetime I cannot recall anyone being tried for treason. William H. Rehnquist: Mr. Grindle, how do you read the plurality opinion in Gregg as applying to the Rosenberg case assuming that the facts were all properly found in that case and if they were guilty, what they were charged with? Speaker: In that connection, I asked the other question not because Georgia might or might not have the statute relating to espionage or treason, but because the decision in this case would certainly bear upon federal crimes or federal treatment of those crimes and Justice Rehnquist’s question is similarly directed. B. Dean Grindle, Jr.: In response to that Your Honors, as I understand the question, what impact the plurality in Gregg would have on the case such as the Rosenberg Spy trial? Did I understand it correctly, Your Honor? As I have read the plurality in Gregg, there must be a two-step process. First is the crime served or does the punishment serve any legitimate government interest, not necessarily that this would be the best punishment and number two, is it disproportionate and if the impact is to say that capital punishment is unconstitutional if a life is not taken, it reverts us to a contemporary form of the eye-for-an-eye, for instance. We submit that society should not be relegated to such a simplistic formula that in many instances, the need to deter such crimes that would go to the very foundation of your government would be the sufficient justification to promote the taking of a life when none has in fact been taken, that is none have been taken directly. Potter Stewart: Was that legislative policy, the legislative policy reflected in this Georgia statute? It means that a person can commit murder with impunity if one wants to put it that way, after committing a rape, an assailant could think, well I might as well kill the victim because the punishment would be no greater, am I correct? B. Dean Grindle, Jr.: I would disagree with that, Your Honor. I think the logic behind that question would perhaps be sound if we had a mandatory system where the offender would be executed just for committing the rape, would absolutely be executed. Potter Stewart: Well, it is not mandatory for either, is it? B. Dean Grindle, Jr.: Well, in the mandatory systems that Woodson in effect, threw out, that point would have more validity. In the discretionary system, I do not feel that it has much validity. Number one, our statute gives the rapist the incentive not to harm. If he does murder, the likelihood of the chances that he will receive a death verdict are increased tremendously and if the fear of capital punishment deters in the sense of saving victims’ lives, we submit that it would also have a fall-down effect. In other words, that if life taking is deterred that the tendency to harm the victim would also be deterred somewhat, such as the armed robber who goes into the convenience store for the stick-up, he would be deterred from taking a gun perhaps into the store, fearing that he would commit murder in the course of the armed robbery. If he chooses not to take his gun into the store, perhaps he will not even commit the armed robbery at all. Therefore, in our system, the incentive is not to harm your rape victim. If you do, that still does not mean that you will be executed. Our third point is recidivism and violent crime and I have touched on that briefly before and the question is simply what is society to do with the incorrigible recidivist who has not only demonstrated that he will rape again, but also demonstrated that he will likely kill or seriously injure those whom he rapes. Now, the petitioner has stated that he was not tried under a recidivist theory. Well, we disagree with that completely. First, the aggravating circumstance under which he was found guilty that we noted before is the prior conviction of a capital felony and we submit that that is the basis for such an aggravating circumstance or that the theory underlying that specific aggravating circumstance is specific deterrence that is to deter, to preclude that particular individual from committing further violent crimes to incapacitate that particular criminal and that has been recognized in many of the so-called mandatory statutes. In fact in Texas, it is required that it be determined that the offender will likely engage in further serious violent crime. That was the basis of this aggravating circumstance. It was relied on heavily by the state and we submit that was the primary basis upon which he was tried as a recidivist. When we look at the specific crimes involved here, we see three prior rapes, two pertaining to the same victim. One victim was severely injured. The other victim was killed. Now, the particular victim in this case was not harmed over and beyond the rape itself, but we submit that, to deter those who demonstrate their recidivism such as this petitioner, the question of the constitutionality of punishing death for rape should not hinge on the fact that he did not harm his most recent victim. In fact, the quickness with which he was apprehended perhaps saved this victim from a fate similar to her predecessors. Speaker: If the death penalty is not imposed on this man, did I understand you to say he will be eligible for a statutory release arbitrarily at some point? B. Dean Grindle, Jr.: Our parole board will review a life sentence or we will review one serving a life sentence after seven years and Mr. Coker would be sentenced to life, if his death sentence is vacated. I would like to conclude with the observation that Mr. Justice White made in Roberts and that is that death finally forecloses the possibility that a prisoner will commit further crimes, whereas life imprisonment does not. Thank you. Warren E. Burger: Do you have anything further, Mr. Kendall? David E. Kendall: Yes, Mr. Chief Justice, just a few points. The need to protect society really has more than one facet and I commend to the court’s attention the Amicus Curiae brief filed by a number of women’s rights organizations. They make the point that, for their constituents, the death penalty for rape is counter-productive. It discourages prosecutions, may lead to jury nullification and gives the criminal in a state where homicide is punishable by death an incentive to kill the victim. So as far as they are concerned, I do not think anybody can tax them with insensitivity to rape victims, the death penalty for rape is counter-productive. Now, the second thing that I would like to say is about the use of the death penalty for other crimes. As I pointed out earlier, in the four years since Furman, nobody has been condemned to die for some non-homicide and only six people have been condemned to die for rape. I think this underlines the wisdom of the Court’s traditional (Inaudible) the principles in not confronting this case until it has to. A decision in the rape case will not necessarily decide those cases and those cases may simply be moot because the death sentences under these other crimes may never come to the court. As far as the racial history of the death penalty in Georgia goes, I think it is interesting that in the respondent’s brief, there is not one syllable of exculpation of the history of the death penalty for rape in Georgia. We have set forth the legislative history. It appears to be designed after the Civil War to punish black defendants who commit the crime of rape against white victims. That is what observers have concluded and that is what statistics seem to show. So this penalty does not come to this Court with a even-handed history of application. I have mentioned that the case was not tried on a recidivist theory. What I meant by that was that the jury was not instructed in any way as to Coker’s future dangerousness. Now, we have attacked this statute on its face, but we also feel that even if there are some rapes which may be capitally punished, this statute does not draw a defensible line. It may be that there is some kind of dangerousness test or harm to the victim test. This case was not tried on that. It also was not tried on a theory of what a petitioner was likely to do in the future. Thurgood Marshall: Was not the jury charged on Sections 1 and 2 of that statute? David E. Kendall: Yes, Mr. Justice Marshall they were, but they were charged on the capital felonies of armed robbery, murder and rape. They were charged on the petitioner’s past record, but insofar as he constituted a threat in the future, there was nothing like the Texas capital punishment statute’s instruction to the jury to consider future harm. Finally, the point about the Lex Stallones; this has always been a principle, a harsh retributive principle, but historically it has been used to limit the punishment and we submit that part of the reason for the repudiation of the death penalty may be simply a popular perception that, where life is not taken, life should not be forfeited. Thank you very much. Warren E. Burger: Thank you gentlemen. The case is submitted.

William H. Rehnquist: We'll hear argument next in Number 93-1631, Lloyd Bentsen v. The Coors Brewing Company. Mr. Kneedler. Edwin S. Kneedler: Mr. Chief Justice and may it please the Court: The court of appeals in this case held unconstitutional a provision in section 5(e) of the Federal Alcohol Administration Act that has regulated the interstate sale of malt beverages for almost 60 years. Specifically, paragraph (2) of section 5(e) prohibits statements of alcohol content on the labels of malt beverages unless such statements are required by State law. That provision was enacted soon after adoption of the Twenty-First Amendment, and was designed to implement it, and it reflected a considered judgment by Congress, as stated in the House committee report, that malt beverages should not be sold on the basis of alcohol content. This restriction serves the substantial governmental interest of not facilitating or encouraging the purchase or consumption of malt beverages for the purpose of getting intoxicated. Sandra Day O'Connor: Mr. Kneedler-- Edwin S. Kneedler: Yes. Sandra Day O'Connor: --there is both an advertising ban and a labeling ban-- Edwin S. Kneedler: Yes. Sandra Day O'Connor: --for malt beverages? Edwin S. Kneedler: Yes. Sandra Day O'Connor: But as I understand it, the advertising ban applies only in States that have imposed similar restrictions. Edwin S. Kneedler: That's correct. Sandra Day O'Connor: But the labeling ban applies unless States affirmatively require disclosure. Edwin S. Kneedler: That's correct. By virtue of the way the Bureau of Alcohol, Tobacco and Firearms has construed it, the parenthetical clause in section 5(e)(2) specifically addresses the interaction of State and Federal law. Sandra Day O'Connor: Well, that leads to a very curious result, because in a majority of States, then, it seems to me that the statute would leave the brewers free to advertise alcohol content on malt beverages but not to place that information on the labels, and that just seems a very odd scheme to me. Edwin S. Kneedler: Well, I-- Sandra Day O'Connor: Am I correct? Edwin S. Kneedler: --There can be that difference in those States, but first of all, I... Congress could reasonably conclude that having the alcohol content on the bottle, on the very product that is the subject of the commercial transaction, would enable... facilitate impulse buying at the point of sale, so at the very time the consumer is going to buy-- Sandra Day O'Connor: Well, I thought the defense was something about encouraging price wars, or something, and I would have thought that advertising it would be much more likely to result in the problem-- Edwin S. Kneedler: --Right. Sandra Day O'Connor: --that the Government is concerned about than would putting a truthful piece of information on a label. Edwin S. Kneedler: Well, thus far, although I think the materials suggest that we're beginning to see some movement into traditional advertising, that has not been a problem, and perhaps because advertising is often at a national level, particularly media advertising, so that advertising, if it's not lawful everywhere, for instance, in network TV, that it wouldn't be placed because it wouldn't be lawful in a number of States into which it would go. And of course, if the States perceive a problem in this area, they may enact laws addressing that. Sandra Day O'Connor: But it certainly weakens the Government's position with regard to the justification for the labeling ban. Edwin S. Kneedler: No, I think it... first of all, the point you're raising I think would only go to the application, in any event, to the labeling ban in those States that allow advertising but don't require the labeling, and thus far in this case respondent has not challenged the application of the labeling requirement on a State-by-State basis in that manner, and again, the substantial governmental interest here includes the interest in accommodating State regulations, so the labeling restriction applies unless a State strikes a different balance. Now, if in those States that have not prohibited advertising the Federal regulation on labeling were thought to be somewhat undermined, that would be a problem only in those States. But again, that has not been the burden of respondent's argument in this case. Respondent's submission of its labels to ATF was across the board and, in fact, at page 61 of the Joint Appendix respondent asks, specifically asks ATF to consider its submission as a package, as a program, including, in fact, both advertising and labeling restrictions. ATF denied it except in those States that allowed it in the manner that you've described, and then respondent brought this suit under the APA to challenge ATF's restriction across the board. If it... if... an as-applied, or a State-by-State challenge of the sort you're describing, would be a different lawsuit. William H. Rehnquist: Well, Mr. Kneedler, am I right in thinking that the advertising ban is not being challenged here? Edwin S. Kneedler: That is correct. The advertising ban was sustained by the district court, and respondent has not challenged that. In fact, it's interesting, at page 35 of the appendix to the petition, where the district court's decision on remand is set forth, the district court specifically acknowledges in the first paragraph on page 35a, I agree after hearing the evidence that attempts to market alcohol content as a product attribute are not legitimate attempts. They are contrary to substantial governmental policy. That is precisely the judgment that was set forth in the House report in 1935. The district court accepted that very judgment with respect to advertising, but then inconsistently, in our view, declined to accept and recognize the very same purpose as it applies in labeling. As this Court-- John Paul Stevens: Of course, labeling isn't always for promotive purposes. Sometimes you have warning labels. What if they said, warning, you have 4 percent alcohol in this stuff, that's dangerous? Edwin S. Kneedler: --That is one type of labeling, but that is not the sort of labeling that respondent is promoting here. It's signif-- John Paul Stevens: Well, they say it is. They say they want to inform the consumer about how much alcohol is in the beer. Edwin S. Kneedler: --Well, with all respect, it seems quite clear from the record in this case that respondent's very purpose in challenging the labeling restriction was-- Ruth Bader Ginsburg: Mr. Kneedler, are we to look at the purpose? This is a flat ban. It says, thou shall not put the content of alcohol on the label. Is the constitutionality dependent on the motive of the particular challenger, when all that's at issue is whether there can be a flat ban? Edwin S. Kneedler: --No. It's relevant in this precise... in this particular sense, and it's a sense that was recognized by this Court in both Posadas and in Central Hudson, and that is that a restriction such as this rests on the common sense judgment that a dampening of advertising or promotion will dampen the demand for the product, and in this case the restriction of the demand on the basis of this particular attribute, alcohol content, would dampen the demand to buy the product for the purpose of getting intoxicated on the basis of that attribute. In Posadas and Central Hudson-- Antonin Scalia: Is it common sense to allow that to be put on billboards but not on the label, and is it common sense not to allow the percentage to be shown, but to allow it to be called on the label and in advertising malt liquor, or I suppose supermalt liquor? Edwin S. Kneedler: --With respect to malt liquor, in particular, last... in the spring of 1993, ATF solicited public comments on precisely the use of malt liquor. Historically malt liquor... now, malt liquor is understood as a category of malt beverage that has a higher alcohol content, but historically malt liquor was a term that encompassed the entire category of malt beverages, and this is an understanding that goes way back, so when those labels were first approved in the early sixties, ATF presumably concluded that malt liquor did not have a particular-- Antonin Scalia: Had it changed its meaning by the early sixties? You don't think when it came out as malt liquor in the early sixties that wasn't known to-- Edwin S. Kneedler: --Apparently... apparently ATF does not have an explanation in its records for why they were approved, but this is now being considered. But again, if malt liquor is thought to be a particular problem, then that's something that ATF can address under what respondent concedes to be its powers under the other labeling provisions, and ATF is considering precisely that. Antonin Scalia: --Well, one step at a time is a fine thing when you're not in the First Amendment area, but it seems to me we demand a higher level of rationality when you're prohibiting the conveying of information, and I think it is, it seems to me, quite irrational to allow the notion that this beverage contains a higher than ordinary alcoholic content to be conveyed in all other ways but not by saying it has 4 percent alcohol. Edwin S. Kneedler: To reiterate, Justice Scalia, that rationale would apply only in those particular States where advertising was permitted and the labeling restriction applied. Much like Edge Broadcasting, this statute furthers the additional interest of accommodating-- Antonin Scalia: Oh, I disagree. You can say malt liquor on the can. Edwin S. Kneedler: --Oh, I'm sorry, but with respect to malt liquor, well, that... that was not the basis of the district court, or court of appeals judgment in this case, and I think there is a question whether, I suppose a legislative judgment for ATF to make in the first instance whether malt liquor in fact conveys that sense. Ruth Bader Ginsburg: Is it true that ATF itself is giving out the alcohol content? If someone calls and says, I'd like to know the alcohol content of Coors Beer, or some other beer, the ATF-- Edwin S. Kneedler: Yes, one of the ATF witnesses at trial said that, but again, that I think furthers... highlights that this is not a blanket prohibition on any public utterance or information about alcohol content. Ruth Bader Ginsburg: --But if the Government is giving out the information for the asking, what sense does it make to prohibit that information on the label so that the consumer will be saved a telephone call? Edwin S. Kneedler: Well, what it is, Justice Ginsburg, is the difference between making information available for consumers who want to look to that information if they should want to compare on the basis of selecting on the basis of low alcohol content, for example, on the one hand, and on the other hand making, not allowing brewers and others to use precisely the alcohol content of the beverage for purposes of promoting it, and this-- Anthony M. Kennedy: It seems to me, Mr. Kneedler, that if you were to prevail in this case and one of us was assigned the majority opinion, we'd begin by saying, the Government has a legitimate interest in ensuring that consumers are not fully informed, and then after that the opinion would get rather difficult, it seems to me. [Laughter] Edwin S. Kneedler: --Well, with all respect, Justice Kennedy, in 1935, when Congress looked at this precise question, and in fact before that in 1934, when the Federal Alcohol Control Administration looked at this question, there was virtually unanimous agreement among the brewing industry itself that competition on the basis of alcohol content specifically including the labeling was-- John Paul Stevens: Well, there probably was unanimous agreement that all competition was undesirable, too, in that time. Edwin S. Kneedler: --Well, but... but-- [Laughter] John Paul Stevens: That was a pretty rigid industry in 1933. Edwin S. Kneedler: Well, but first of all in the-- John Paul Stevens: One of the classic examples, the antitrust enforcement throughout this industry, at that period. Edwin S. Kneedler: --Well, but the Twenty-First Amendment, which had just been adopted, recognizes that there can often be a very substantial governmental interest in not promoting competition on the basis of, in particular, alcohol-- John Paul Stevens: On the basis of alcohol content for this rather limited product, but what about everything else, like wine, and whiskey, and other alcoholic beverages? Why doesn't the same interest work there? Edwin S. Kneedler: --Well, the problem that Congress had before it in 1934-- John Paul Stevens: As the industry presented it. Edwin S. Kneedler: --was one specifically related to malt beverage and the behavior of brewers in the malt beverage industry that in fact had promoted beer as an intoxicant rather than as a beverage or as a food type beverage. In Posadas, for example, the Court recognized that Puerto Rico had not prohibited advertising concerning all forms of gambling, but had focused on the particular form of gambling that had led to the particular social ill that was being addressed, in that case casino gambling, and this case, in our view, is exactly like Posadas and in fact-- Ruth Bader Ginsburg: But Mr. Kneedler, one thing we know about Posadas is fairly recent, so the legislature could have taken into account that commercial advertising is subject to a First Amendment check. Isn't it true that back in 1935 there was no notion that commercial advertising was within the First Amendment-- Edwin S. Kneedler: --I-- Ruth Bader Ginsburg: --so that wasn't the attitude to this kind of legislation more or less anything goes? Edwin S. Kneedler: --Well, I think the point you're making in fact cuts the other way. This statute was passed in the immediate wake of the Twenty-First Amendment, which conferred on the States what this Court has recognized as an extra measure of power to regulate in the area of alcohol production and sale and, in fact, traditionally the alcohol industry has been subject to perhaps the most stringent regulations of any area for... and principally to regulate access to the product. Ruth Bader Ginsburg: There was once a case in this Court of a statute that regulated the sale of, in fact, a malt beverage, and the law was defended... this was the law that said boys couldn't buy 3.2 beer until they are 21, girls could at 18. Edwin S. Kneedler: Right. Ruth Bader Ginsburg: The defense was, boys drive more, drink more, commit more alcohol-related offenses. All of that was true. That was shown to be true, and yet this Court held the law unconstitutional despite the Twenty-First Amendment, so I don't buy your argument that because we're in Twenty-First Amendment territory, therefore the constitutional checks on Government action are so diluted that we don't have to worry about them. Edwin S. Kneedler: I... our submission is not that the First Amendment is inapplicable in this context, and in the case you're speaking of, that was a situation where the State was operating in an area where class-based stereotypes were simply not... were not permissible. In this case, first of all in the First Amendment speech case, both before and after Craig v. Boren, this Court has recognized in California v. LaRue and subsequent cases that the First Amendment in connection with the sale of alcohol has to be accommodated or the State government may properly accommodate the First Amendment to the compelling governmental interest in regulating alcohol. And in LaRue, in fact, the Court deferred to what it termed the reasonable judgment by the California legislature that nude dancing should not take place where alcohol is sold even though it was alleged that the conduct there should have been examined under the O'Brien test, and the Court said that the O'Brien test was unnecessary precisely because the State was operating in an area governed by the Twenty-First Amendment. And we think that if that rationale applied in LaRue, it applies a fortiori here because what we were talking-- Ruth Bader Ginsburg: Even though you don't have a nude dancer. [Laughter] Edwin S. Kneedler: --But what we do have is, we think, something even more compelling, and that is that this Court has recognized that commercial speech is subject to regulation precisely because it is closely related to commercial transactions. Anthony M. Kennedy: Mr. Kneedler, what do we do if we have a case in which Congress has a legitimate and sustainable interest in restricting commercial speech when it passes a statute, but then because of the passage of time and changes in marketing and changes in consumer habits, that interest is quite evidently, let's assume, no longer legitimate, no longer compelling? Is the statute then subject to attack, do you think, or can you defend it on the grounds that at the time it was enacted there was a legitimate interest? Edwin S. Kneedler: Oh, I think the statute carries with it a strong presumption that the circumstances that gave rise to it continue to obtain, and I do... and I think it's important that what is being alleged here are changes in the market, or changes in consumer preferences, which are themselves subject to change and, in fact, one thing that respondent doesn't acknowledge is that the very consumer preferences that respondent is suggesting are happening... a push toward low alcohol beer... are undoubtedly influenced in large part by the very restrictions that respondent is challenging in this case. Anthony M. Kennedy: So you cast it something in terms of a presumption and indicate that perhaps consumer tastes being fickle would change in the near future and this statute would again-- Edwin S. Kneedler: Yes, but I also think that what... where the governmental regulation is directed to market influences, that the fact that the market might change doesn't alter the fact that there is an inherent possibility that a certain type of advertising will promote the conduct, and so-- Antonin Scalia: --Mr. Kneedler, what evidence does the Government have, what hard evidence, that there will be a war of brewers fighting to put in more expensive alcohol into their beer when this... what hard evidence is there? Edwin S. Kneedler: --Well-- Antonin Scalia: I have friends who consume hard whiskey, and they tell me that the alcoholic content of that has gone down over the years, to their great disappointment, from 90-- [Laughter] From 90 to 86 to 80. Edwin S. Kneedler: --Well, first of all, even if some segments of the market, on average, the alcohol content is going down, that doesn't mean that the governmental purpose here is not directly advanced as to those portions of the market where there would be promotion on the basis of high content. Antonin Scalia: If there's any evidence that there would be a price... that there would be a, you know, an alcoholic content war. Edwin S. Kneedler: Well, there is... there is-- Antonin Scalia: What evidence is there such a thing would happen? Edwin S. Kneedler: --Several things I would point to. First of all was the very substantial evidence in 1934 and 1935 when this was first adopted by the Federal Alcohol Control Administration and by Congress, and then today, with respect to the malt beverage... excuse me, the malt liquor segment of the market, which is a market that I think there's general acknowledgement it's a higher alcohol content beer, or malt beverage, and it is promoted on the basis of its alcoholic content. And also, again, with respect to Coors, the record contains cards that were handed out by Coors, and in fact Coors entered into a settlement with ATF, or at least handed out by a distributor, identifying the alcohol content of Coors beverages as compared to other beers within various price ranges. John Paul Stevens: Mr. Kneedler, supposing that the market is consumed of a variety of consumers, some of whom want to get drunk as fast as they can, and they're the people you're concerned about, and others of whom would like to be careful and moderate in their drinking and be able to drive without violating the statutes and so forth. They have an interest in knowing how much alcohol is in the beer, not for that purpose but for a good, legitimate purpose of safety, and health, and all the rest. Do we weigh their interest in the balance, or is it sufficient to sustain the statute to say, well, maybe the 15, 20 percent of the people are hard drinkers and want to get drunk, and we're going to focus on them and ignore the others? Is that a sufficient justification for sustaining the statute? Edwin S. Kneedler: For the most part, yes. I mean, the Court made this point in Central Hudson, for example, in... where the Court said it was up to the agency to balance the judgment as to whether the off-peak and on-peak electric demand would go up or down depending on what sort of advertising would take place, and we think a similar point is true here. What there is, there may be competing interest with respect to whether disclosure of the content would actually further... would, on balance, be preferable, or whether not allowing promotion of the product on the basis of the precise attribute that the Twenty-First Amendment addresses, whether prohibiting that is, on balance, the preferable approach. Ruth Bader Ginsburg: Is there any other example in all of food and drug labeling law where knowledge is prohibited, knowledge of the content of what one is ingesting is prohibited on the label? Edwin S. Kneedler: Well, I suppose in this sense, that if the Food & Drug Administration prescribes a certain list of ingredients that shall be on there and nothing else-- Ruth Bader Ginsburg: Is there a law? Here we're dealing with a statute passed by Congress. Has Congress said in any... for any other food or drug, there shalt not tell the public what's in this commodity? Edwin S. Kneedler: --Not that I'm aware of, but again, going back to Justice Stevens' point, it really is a question of striking a balance, and what this statute does, for example, is to allow the States in the exercise of their Twenty-First Amendment power to strike a different balance and perhaps conclude that the interest in disclosure outweighs the concerns about promoting the product for the purposes of getting intoxicated, and in... on page 16a of-- John Paul Stevens: But supposing the market is equally divided between the two kinds of people I described, does the First Amendment require us to give preference to one interest rather than the other? Edwin S. Kneedler: --I don't believe so. I think as long as-- John Paul Stevens: The First Amendment is neutral on whether there should be disclosure and public knowledge of important information. Edwin S. Kneedler: --I think as long as the legislature could reasonably conclude-- John Paul Stevens: That half the people would benefit from a paternalistic denial of information-- Edwin S. Kneedler: --Well, half the people might benefit, but the risks associated with the other half getting the information might be far worse. This Court has recognized in the past the dangers associated with alcohol consumption, and it's precisely the people most prone to use alcohol... young people, for example, unsafe driving on the highway, who would be attracted to the alcohol because of its higher content. Sandra Day O'Connor: --Mr. Kneedler, what test or standard do you suggest that we apply in testing this ban on commercial speech? Ordinarily, we would apply the Central Hudson test, but it seems you are urging us not even to employ that standard. Edwin S. Kneedler: We think the statute satisfies the Central Hudson test for the reasons I've explained. It directly advances the goal of not promoting alcohol consumption for the purpose of getting intoxicated, and it's tailored to that end by focusing on that attribute, but we do think it's significant that this regulation takes place in the context of what this Court recognized in Posadas as socially harmful activities. Although Posadas involved gambling, it also specifically identified alcohol consumption as another socially harmful activity, and like gambling, it can have adverse consequences on third parties. It's not simply the individual himself or herself who might want the information, but it may have-- Antonin Scalia: The Government can look over the vast range of activities that are lawful, that are not wicked enough to be made unlawful, and say, well, some of them are questionable enough that we don't want the people to have information about them. I mean, that has great possibility. What about automobiles? I guess car manufacturers can be prohibited from advertising how fast a car can go. Edwin S. Kneedler: --No, we think that-- Antonin Scalia: Perhaps even how many horsepower the engine has. Edwin S. Kneedler: --We think the-- Antonin Scalia: People tend to drive too fast. Edwin S. Kneedler: --We think the activities identified in Posadas are ones in which there is a tradition in history of... of considerable social ill, of governmental concern, and a history of stringent regulation. Antonin Scalia: That's not so with driving automobiles? Edwin S. Kneedler: It may-- Antonin Scalia: It's hard to think of what's more heavily regulated than that. Edwin S. Kneedler: --But the... I suppose one could identify the categories associated with morality or vice, but in this case it's not even necessary to identify what the category might be in the abstract on the basis of Posadas. Here, in-- John Paul Stevens: But even in Posadas, with gambling, that was advertising that was justified, not refusal of labeling. That wouldn't justify a statute that said that the black jack table can't post the actual odds of winning or losing, or something like that, would it? Edwin S. Kneedler: --But in this Court's decision in Kordel it recognized that labeling is a form of advertising, but what I-- John Paul Stevens: You think anything that you can prohibit in terms of advertising you can also prohibit in labeling. That's your solution? Edwin S. Kneedler: --At least with respect to alcohol, and we think in this case there's no need to consider what the parameters of the Posadas category might be, because the Twenty-First Amendment embodies in the Constitution itself the compelling governmental interest in regulating that category of commercial activity. William H. Rehnquist: But the Twenty-First Amendment, Mr. Kneedler, conferred authority on the States, not on the Federal Government. Edwin S. Kneedler: Yes, but this statute among other things advances the State interest because States... a number of States, in fact almost every State, either by operation of this statute or their own statutes, have a restriction on labeling. But my point is that the Twenty-First Amendment, while conferring authority directly on the States, does recognize in the Constitution itself the important governmental interest in regulating alcohol. Anthony M. Kennedy: Do you think that if we rule in favor of Coors that the State statutes would necessarily be invalid too, State antilabeling? Edwin S. Kneedler: It would at least call them into question, and it doesn't seem to us that the governmental interest in this should necessarily depend upon a State-by-State examination of the interest. Anthony M. Kennedy: Well, then it would seem to me to follow from that that the State statutes would be invalid as well. Edwin S. Kneedler: Well, I think the States should not be precluded from demonstrating what their interests are and what information has been... has been gathered, and on what basis they acted. Anthony M. Kennedy: What interests would the States have that you have not been able to identify and adduce in your brief? Edwin S. Kneedler: Well, if the Court were to conclude, contrary to our submission, that there had to be broader factual findings, we wouldn't think that the States should be foreclosed from doing that. But again, the Twenty-First Amendment we think empowers the States to nip in the bud the potential for promotion of alcohol on the basis of alcohol content. They should not have to wait for the damaging effects. If I could reserve the balance of my time. William H. Rehnquist: Very well, Mr. Kneedler. Mr. Ennis. Bruce J. Ennis, Jr.: Mr. Chief Justice, and may it please the Court: The labeling prohibition bans factual information that is concededly truthful, accurate, and not misleading. The Government's assertion that Congress wanted to ban even accurate information in order to deter strength wars finds no support in the text of the act, in the committee reports, the Senate report or the House report, in the floor debates, or in the congressional testimony. Congress' articulated and only concern was the prevention of false or misleading speech. In any event, two courts have found that there is no evidence that accurate disclosure of alcohol content on beer labels would result in strength wars. To the contrary. They found that the vast majority of consumers would use that information to choose moderate or low strength beers. William H. Rehnquist: Well, Mr. Ennis, how do we treat that here? Is it an appropriate function for, say, a district court to say that, well, we know that Congress thought there were going to be strength wars but we don't think there will be, therefore the statute that Congress passed is invalid? Bruce J. Ennis, Jr.: Well, Chief Justice Rehnquist, even if it were clear that Congress thought there would be strength wars, and I'll return to that in a moment, because there's no reason to think Congress did, it's still the requirement under the Central Hudson test for the Court to determine, based on the evidence, whether the means chosen by Congress would actually advance, directly and materially, that goal. In this case, applying the central Hudson test, both district courts found there was no evidence that, even if that was the congressional goal, this labeling ban would further it. William H. Rehnquist: And no deference is given to the congressional determination that it was? Bruce J. Ennis, Jr.: Your Honor, there could be some degree of deference to congressional findings that there would be strength wars, but in this case there were no congressional findings whatsoever, and if you look at the legislative history of the act, and even the legislative history of the precursor FACA regulations, you will find no reason to believe that Congress was the least bit concerned with strength wars. Antonin Scalia: I'm sorry, you think a statute survives judicial attack if Congress makes findings which it would not survive if Congress didn't, so we're telling Congress to legislate in a certain fashion? Bruce J. Ennis, Jr.: No, no, not at all, Justice Scalia. Antonin Scalia: Don't we assume that the necessary findings sustain any congressional statute? Isn't that the assumption? Bruce J. Ennis, Jr.: No, Justice Scalia, it's not. As this Court pointed out in the Sable case, it was precisely the absence of any congressional findings of fact that resulted in the striking down of that law under the First Amendment. The only point I'm trying to make is that in terms of deference-- Antonin Scalia: This would be valid if there were findings of fact-- Bruce J. Ennis, Jr.: --No. Antonin Scalia: --but since Congress did not make findings of fact it's invalid? Bruce J. Ennis, Jr.: No. If Congress had made findings of fact, then there would be an argument that the courts should show some deference to those congressional findings of fact. It should never-- Antonin Scalia: But otherwise a statute could be valid, could be invalid, we don't assume that the findings were there? Bruce J. Ennis, Jr.: --You simply apply the Central Hudson test. There's no congressional finding to which the Court should defer. Antonin Scalia: That's not my understanding. I think every piece of legislation comes to us with a presumption of validity, with a presumption that the... it's not a conclusive presumption, but certainly we take it that going in, Congress did its job. Bruce J. Ennis, Jr.: That's why statutes are subjected to judicial review under the Central Hudson test, and on applying the Central Hudson test, the Court found there was no evidence... no evidence that in fact accurate disclosure of alcohol content on beer labels would result in strength wars. And to return to your question, Chief Justice Rehnquist, those concurrent findings of fact by two lower courts should be binding here. The Government is inappropriately attempting to reargue the very same evidence it argued in the lower courts. William H. Rehnquist: That's the sort of finding just as if two lower courts had made a finding in a diversity accident case that the stop light was green rather than red? Bruce J. Ennis, Jr.: Your Honor, essentially the answer to that question is yes. I realize this is a First Amendment case, but the Court's special rule for de novo review of lower court findings of fact in First Amendment cases has always been applied in cases where the lower court findings of fact were against the First Amendment-- William H. Rehnquist: Is this truly a finding of fact when you're challenging what is thought to be a legislative premise? Bruce J. Ennis, Jr.: --It is truly a finding of fact, Your Honor. There were witnesses and testimony and studies and hearings on the empirical question of whether disclosure of alcohol content would result in strength wars, and the evidence-- William H. Rehnquist: As of 1934? Bruce J. Ennis, Jr.: --As of the present time, Your Honor. William H. Rehnquist: Well, how could that contradict a congressional determination as of 1934? Bruce J. Ennis, Jr.: There was no congressional determination in 1934. William H. Rehnquist: Well, how could it contradict a congressional presumption? Bruce J. Ennis, Jr.: There was no congressional presumption in 1934. The point-- William H. Rehnquist: What if... just to isolate this particular issue, what if there had been? What if... let's say, assuming for the sake of argument, that it was clear that Congress thought there would be strength wars in 1934, could a finding by a district court in 1992 that in 1992 there was no danger of a strength war, could that upset a congressional determination in 1934? Bruce J. Ennis, Jr.: --Yes, absolutely, Your Honor, it could. That's not this case, and we don't need to show that in this case, because in this case there were no such findings in 1934. If you'll look at the congressional hearings and the FACA hearings, you'll find that the sole and exclusive concern was that beer... unlike wine and spirits, beer should not be sold on the basis of alcohol content because at that time technologically it was impossible to determine accurately the alcohol content of beer, so a statement that this beer contains 3 percent, 4 percent, 5 percent, was inherently likely to be false and misleading. That was not true with respect to wine and spirits. Structurally, the fact that the same law prohibits disclosure of alcohol content of beer but permits and, in fact, requires alcohol content of wine and spirits, cannot be explained if strength wars was the objective, but can be explained if preventing misleading speech was the objective. Ruth Bader Ginsburg: So Mr. Ennis, you are conceding that in 1934, '35, there was a legitimate documented purpose for this statute. That is, one could not accurately gauge the percentage of alcohol in malt beverages? Bruce J. Ennis, Jr.: That's correct, Justice Ginsburg, we do concede that, but the Government conceded in this case that the information at issue in this case is accurate. Technology has changed. It is now as possible for producers of beer to determine the alcohol content of the products precisely, as it is for producers of wines and spirits, and therefore the Government has conceded that this ban cannot be defended on the traditional ground for defending restrictions on commercial speech, namely that the speech would be false or misleading. Antonin Scalia: Mr. Ennis, surely there are different classes of consumers of liquor, wine, and beer. I mean, one doesn't find high school students hanging around the street corner drinking rose wine, and if that's the class of consumer one is worried about, it makes sense to have a different rule for beer than one might have for hard liquor or wine. I don't know that that's irrational. Bruce J. Ennis, Jr.: Well, Your Honor, first of all, hopefully the high school students wouldn't be drinking anything. That should be prohibited under the general law. Antonin Scalia: But that happens, and that is the kind of thing that the law may well be concerned with. Bruce J. Ennis, Jr.: There was actually evidence in this case, Your Honor, and the agency itself agrees, that there is a substantial market overlap in the markets for beer, wine, and spirits. That is why, when the agency, after the court decisions below, issued regulations requiring or permitting the statement of alcohol content on beer labels, it required that it be stated as a percentage of volume precisely so that consumers could compare like with like, could compare with wine and spirits. If I could turn for a moment to the House report, which Mr. Kneedler began by discussing, that passage from the House report to which he referred is, in my opinion, taken entirely out of context. The House report does say-- William H. Rehnquist: Are you reading from somewhere that we can look at? Bruce J. Ennis, Jr.: --Yes. I'm reading from the actual House report itself, which is page 143 of the House report. William H. Rehnquist: Is that somewhere in the briefs, or-- --No, Your Honor, I'm afraid it is not, except that isolated passage. Bruce J. Ennis, Jr.: The House report states, quote, malt beverages... malt beverages should not be sold on the basis of alcohol content because "attempts to sell beer and other malt beverages on the basis of alcoholic content are attempts to take advantage of the ignorance of the consumer. " Now, if you will look at the... that House report was under the chairmanship of Representative Cullen. When Representative Cullen introduced this bill on the floor of the House, at the Congressional Record for 1935, page 11715, he explained precisely what that meant. He said, quote, that the bill was designed "to prevent the unfair trade activities of those in the industry who chisel and take advantage of the ignorance of the consumer by dishonest labeling and advertising. " He went on to say that the provisions of the act were designed-- Antonin Scalia: --Well, he may not have meant that. I mean, that sounds good. That's how I would market the bill, too. Bruce J. Ennis, Jr.: He surely meant that, Your Honor, because-- Antonin Scalia: Was it... do we know how many people were there when he said that? I mean, maybe nobody heard him. [Laughter] Bruce J. Ennis, Jr.: --We don't even need to know how many people were there when he said that, Your Honor, because the House report itself, and the Senate report itself, say that the purpose of the bill is to prevent fraud and deception. And the reason for that was there was unrebutted testimony... everyone agreed that in 1935 you could not accurately determine the content of malt beverages, but you could of wine and spirits. That is structurally why Congress prohibited disclosure of alcohol content for beer but required it for wine and spirits. William H. Rehnquist: When, between 1934 and the present, did it become possible to measure the alcoholic content of beer, because I remember in the service, all you could buy in PX's was something called 3.2 beer, so apparently by 1943 they at least thought they had learned to measure the content of beer. Bruce J. Ennis, Jr.: Well, that's a good question, Chief Justice Rehnquist. I don't know the answer, and it's not in the record when that became possible, but it is undisputed that it is possible, and that this ban cannot be defended on the ground of preventing false and misleading speech. Anthony M. Kennedy: I take it the Government could defend its statute on the grounds that even though there was no legitimate purpose at the time of its enactment, a legitimate purpose has arisen since. Bruce J. Ennis, Jr.: Well, that's correct, Justice Kennedy, and the Government has attempted to do that by asserting in the lower courts the strength wars interest, and now asserting in this Court the Twenty-First Amendment interest, and let me turn to those. As I've noted, empirically the lower courts found there's no evidence that the labeling ban would further the strength war interest. David H. Souter: But you concede that at least as an interest on the first prong, or, I guess, the second prong, Central Hudson, that's a perfectly legitimate interest for the Government to have, so your attack here goes simply to whether it furthers, and whether it fits? Bruce J. Ennis, Jr.: Your Honor, I do not dispute for purposes of this case that the Government could have a legitimate interest in deterring strength wars if that means deterring people from continually increasing the alcoholic content of their benefits. I do not dispute-- David H. Souter: But the way you pose your... put your answer, I assume you are implicitly claiming that the Government doesn't really entertain that interest. Bruce J. Ennis, Jr.: --I think it clearly doesn't really entertain that interest, because if it did-- David H. Souter: Well, why don't we take the Government's statement, the statement of the Government's lawyer, as representing the Government's position on its interest and then see whether in fact there is a furtherance and there is a fit? Bruce J. Ennis, Jr.: --Well, the reason we don't, Your Honor, is that structurally, if that were the Government's interest, why would Congress not have prevented disclosure of alcohol content on wines and spirits, which are much higher content? Second, if that were the Government's interest-- David H. Souter: Well, maybe the Government doesn't have a good argument in support of its interest in the sense that it should have had an interest in doing more than it did. Bruce J. Ennis, Jr.: --Oh, I understand your question now, Justice Souter. Let me be clear, then. I do not dispute that the Government, namely the executive branch, is today asserting a strength war interest. I take that as given. What I do dispute is that Congress in 1935 had a strength war interest in mind. David H. Souter: Oh, agreed, but your answer to Justice Kennedy, I thought, was that in fact the Government interest could change over time, and I thought it was implicit in what you said that the Government doesn't have to reenact the statute for the purpose of manifesting a new interest that could legitimately be considered under Central Hudson. Bruce J. Ennis, Jr.: I agree with that-- David H. Souter: Okay. Bruce J. Ennis, Jr.: --Justice Souter. In this case, that interest, the strength war interest, was subjected to a trial, and empirically was found that the evidence, the labeling ban, did not further the Government's interest. In fact, overall, the overall effect of the labeling ban is actually to disserve the Government's asserted interest in strength wars. Antonin Scalia: Isn't that a strange determination for judges to make? I mean, it seems to me that it's Congress and the other political branch that judges what means are most appropriate to certain ends. Do you really think a Federal district judge can sit in judgment on whether, Nationwide, this particular interest is furthered or not? Bruce J. Ennis, Jr.: Your Honor, I think that's what district judges are required to do under the Central Hudson test, and appropriately so, because we're talking about a ban on speech which is concededly truthful, accurate, not misleading, and important to consumers. Let me turn, though, to the question... to the point your question suggests. Even assuming that this law did marginally advance the Government's strength war interest, it is certainly not reasonably tailored, under the fourth prong of the Central Hudson test. In fact, it is completely unnecessary. The Government could directly and more effectively achieve both its strength war interests and its Twenty-First Amendment interest simply by limiting the alcohol content of beer except in States that permit a higher limit. The Government has actually conceded in this case that its strength war objective could be fully satisfied by a Federal alcohol content limit. It lamely argues, however, that such a Federal limit would be inconsistent with its Twenty-First Amendment interest. That is plainly not so. Simply by providing the same kind of State override for a Federal alcohol limit that the law already provides for the labeling ban, the Government could directly and more effectively achieve both of its asserted interests, so even if the law marginally advanced the Government's interest, it surely fails the reasonably tailored prong. Stephen G. Breyer: Can I go back for a second? I need some help on this point, which may be just a technical point, but it is one I need some help on. Suppose that... I think, divide the States into two categories, States that have an advertising ban, and States that don't. All right, as to the second group of States, I don't know what interest this fulfills, this labeling ban, so I guess I agree with you on that one. But as to the first, what about their argument that this helps... this helps the States enforce their Twenty-First Amendment right to get rid of all these trade wars and so forth, and suppose I thought that. Then what should we do? And suppose I'd also thought that they've got the interpretation of the statute wrong, that that word require doesn't mean that you distinguish between (e) and (f), but rather the second part of (f) sweeps both, and it was just a little overkill, that word require. Suppose I thought all those things. I'm not saying I do, but suppose I did, then what would you do? Bruce J. Ennis, Jr.: Well, Justice Breyer, you've asked two questions. Let me try to answer them. Stephen G. Breyer: Probably about four. Bruce J. Ennis, Jr.: First, the Government has described the first question you asked basically as its border-crossing argument. The argument is that by banning labeling or advertising in States, that will facilitate the interests of those 11 States who choose a State law to limit the alcohol content of beverages. That totally ignores the fact that in two-thirds of the country, State law permits advertising. Stephen G. Breyer: All right, so that I'm thinking of those 11. Now, suppose you interpreted the statute to mean that what they had in mind was the advertising and labeling bans are supposed to exist only where there are State advertising and labeling bans. Why wouldn't I interpret the statute that way? Bruce J. Ennis, Jr.: Your Honor-- Stephen G. Breyer: Because there certainly is strong language supporting that. And then if you do interpret the statute that way, then why wouldn't it be constitutional as an effort to simply prevent what at that time they thought would have been shipping from out-of-State a label that would have violated the State law? That's what I think of that argument as being. Bruce J. Ennis, Jr.: --Justice Breyer, we have not challenged the interpretation of the statute. Stephen G. Breyer: I know. No one has. That's why... we're supposed to uphold statutes as constitutional if they can be so upheld, reasonably-- Bruce J. Ennis, Jr.: We... we-- Stephen G. Breyer: --and that's why I'm uncertain, as a technical matter, what one is supposed to do in this case-- Bruce J. Ennis, Jr.: --We-- Stephen G. Breyer: --if... with that kind of an argument. That's why I'm asking you. Bruce J. Ennis, Jr.: --We do agree, however, with Your Honor, and we said in our brief, that in our view the proper interpretation of the statute is that both the labeling ban and the advertising ban only apply in States that themselves independently prohibit labeling or prohibit advertising. We think that's the proper construction of the statute, though we haven't challenged the contrary construction. But even if we're talking about a law that parallels State law, it would still be unconstitutional. Stephen G. Breyer: Why? Bruce J. Ennis, Jr.: Because if the State wanted to prohibit accurate, truthful information on beer labels for the same strength war objective, then on the record in this case, because it would not advance that objective whatsoever, that would violate the First Amendment. Stephen G. Breyer: Or they have much more power, I take it, a State, under the Twenty-First Amendment, or some more power than if that Twenty-First Amendment weren't there, and suppose that we thought, or I thought, suppose I thought that it just squeaks within that, therefore a State can ban this, then what happens? Bruce J. Ennis, Jr.: Well first, Justice Breyer, as Chief Justice Rehnquist noted in one of his questions, this is a Federal law, and the Twenty-First Amendment gives no affirmative power whatsoever. Stephen G. Breyer: But does it not give power? That's my question, really. Might it not, or does it or does it not give power to the Federal Government to reinforce the State ban by passing a law federally necessary-- Bruce J. Ennis, Jr.: Let me turn-- Stephen G. Breyer: --to make that State ban effective? Bruce J. Ennis, Jr.: --Let me turn to that. First of all, it's not necessary, but even if it were, then the question would be, could a State for these same reasons ban labeling on beer, and the answer is no, because the First Amendment would prohibit it. The Twenty-First Amendment, as this Court ruled in Crisp, is primarily a limitation on the Federal Government's power under the Commerce Clause. In Crisp, this Court said the Twenty-First Amendment does not authorize the States to ignore their obligations under the other provisions of the Constitution. In Craig v. Boren, this Court ruled that the intermediate scrutiny test under the Fourteenth Amendment, which is virtually indistinguishable from the commercial speech test under Central Hudson, was not lowered or lessened even in a State case because of the presence of the Fourteenth... of the Twenty-First Amendment. It would be astonishing if this Court were to rule that for some reason the standard of review under the Fourteenth Amendment is not lowered because of the Twenty-First, but the standard of review under the First Amendment is. In fact, turning to the First Amendment, in Larkin v. Grendel's Den, this Court has already held that the Twenty-First Amendment does not lower the standard of review under the Establishment Clause of the First Amendment-- William H. Rehnquist: Well-- Bruce J. Ennis, Jr.: --and there's no reason why it should lower the standard of review under the Free Speech Clause of the same First Amendment. William H. Rehnquist: --Well, Mr. Ennis, perhaps conceding that, could a State simply ban liquor advertising? Bruce J. Ennis, Jr.: Well, Chief Justice Rehnquist, that raises a much more difficult and quite different question. I know, as Your Honor wrote in Posadas, that it has often been thought there is a common sense link, without the need for evidence, between promotional advertising that is designed to increase demand, and a likelihood that it will increase demand, but it's a vastly different situation here. We're not talking about promotional advertising, we're talking about-- William H. Rehnquist: But I think you should respond to hypothetical questions, even though they're not necessarily involved in your case. Bruce J. Ennis, Jr.: --I'm happy to do that. I'm happy to do that, Your Honor. It's a complicated answer. First of all, it depends on whether you're dealing with a mature market or not. There's a great deal of empirical evidence that in a mature market, such as the beer market, the only purpose, the only effect of advertising is not to increase overall demand but to shift brand loyalties. But putting that aside for the moment, we're talking here about a particular product trait, alcohol strength. There is no common sense reason to believe that advertising a particular product trait will increase consumer demand for the underlying product. That depends on whether consumers want that trend or not. William H. Rehnquist: Well, my question was not what you're answering. Maybe I should repeat my question. Bruce J. Ennis, Jr.: I'm sorry. William H. Rehnquist: My question was, could a State ban liquor advertising, ban all advertising for alcoholic beverages? Bruce J. Ennis, Jr.: I don't know the answer to that question, Your Honor. I do know that there are decisions of this Court saying that States cannot categorically ban other kinds of advertising, price advertising of drugs in Virginia State Board, price advertising of legal services in Bates. It would depend on whether application of the Twenty-First Amendment authorized a State to ban a law that was in fact designed to increase demand. That's not this law at all. Whether consumers would buy beer that's higher strength or lower strength is an empirical question. That empirical question was subjected to a trial, and the trial courts found that the vast majority of consumers would prefer low strength, just like, if you subjected it to a trial, probably most consumers today would prefer lower sugar content in children's cereals than higher sugar content. Higher is not necessarily preferred. Ruth Bader Ginsburg: If a State wanted to encourage drinking wine instead of, say, distilled spirits, could it say, we have a flat advertising ban on distilled spirits, but we'll allow you, indeed encourage you, to advertise wine so as to get the consumers to shift their preferences? Bruce J. Ennis, Jr.: Your Honor, that's a question that I haven't, frankly, thought about, and I don't know the answer to. I do know, however, that the way that question would be answered would be by applying the Central Hudson test and deciding whether the Government had a substantial interest in shifting consumer demand in that way, substantial and legitimate interest, and whether the law would advance it. That's not the interest that's at issue in this case. In fact, Justice Scalia made the point about malt liquor in one of your questions. It is true that this law already permits consumers to identify the highest strength products, because it permits the use on the label and in advertising of the term, malt liquor. Now, Mr. Kneedler said that it's only some years ago that malt liquor came to be known as the highest strength malt beverage, but if you'll look at the 1935 hearings before the FACA regulations, you will see over and over again there that at that time ale was thought to be, and known to be, the highest strength beer product. And there was questioning and testimony about that, and the chairman and every witness said, it is okay with us to allow you to use the word ale, as long as it's truthfully ale, even though that means that consumers will know which are the highest strength products. That is completely inconsistent with any concern that accurate disclosure of factual information will result in strength wars. Antonin Scalia: What is ale? What's the difference between ale and beer? Bruce J. Ennis, Jr.: Well, to the best of my knowledge, Justice Scalia, ale is a malt beverage, but it is produced quite differently from beer. Beer is what's called a bottom fermentation process, and ale is a top fermentation process. Antonin Scalia: Ah, that explains it. [Laughter] Bruce J. Ennis, Jr.: Well, I guess it's something... I guess... I'm not sure, but I think it's something like milk in the old days before it was homogenized. The cream on the top of the milk would be the equivalent of the ale, and the rest of the milk would be the equivalent of the beer. John Paul Stevens: Which is malt liquor, top or bottom? Bruce J. Ennis, Jr.: Pardon? John Paul Stevens: Is malt liquor top or bottom? Bruce J. Ennis, Jr.: Well, malt liquor is the highest strength-- John Paul Stevens: I know it's the highest strength, but-- Bruce J. Ennis, Jr.: --malt beverage. John Paul Stevens: --Is that the only difference between it and... ale and beer, that it's got more alcohol in it? Bruce J. Ennis, Jr.: No. There is another difference, Your Honor, which is the reason why most consumers don't... only 3 percent, historically, of consumers choose malt liquor. The other difference is, as you increase the alcohol strength, you necessarily increase the bitterness, the harshness, the roughness of the taste, and therefore malt liquor has a much rougher, harsher taste than lower alcohol products, which is precisely why most producers are targeting the mid-market and lower. Coors, for example, two-thirds of Coors' sales are of its light beer product, which is 4.1 percent alcohol. That's what they asked permission to do, to say that our light beer is 4.1 percent alcohol. Clearly, Coors was not trying to attract the high strength market there, because 4.1 percent is at the low end, the bottom end of the mainstream range of beers in this country, and why would Coors, which gets two-thirds of its revenue from selling a light beer, want to abandon that market, increase the beer strength, lose those customers, and compete for 3 percent of the market? William H. Rehnquist: Well, light beer doesn't mean... has nothing to do with alcoholic content. Bruce J. Ennis, Jr.: It does have a great deal to do with alcohol content, Chief Justice Rehnquist. It's not one-to-one, but there is a one-to-one correlation between calories and alcohol, and light beer is supposed to be lower in calories, as it is, and in order to do that, it's necessary to make it lower in alcohol content as well. William H. Rehnquist: So your typical light beer will have less alcohol content? Bruce J. Ennis, Jr.: Your typical light beer will have less alcohol content. There is a range of alcohol contents in light beers, however, and that's what Coors wanted consumers to know. They wanted-- Sandra Day O'Connor: But is it a fact that in the Tenth Circuit argument Coors disclosed that its reason for this litigation was to dispel the notion that Coors is a weak beer? Bruce J. Ennis, Jr.: --Your Honor-- Sandra Day O'Connor: Was that part of the argument? Bruce J. Ennis, Jr.: --I was not there, but that's apparently what the transcript reflects, Your Honor. Coors did want to dispel misleading impressions about the strength of its products, but what it wanted to disclose was the accurate, honest information about the strength of its products, and that information would have shown that its products were not the high strength products. The Coors light beer is 4.1 percent... that's what it wanted to say... which is at the low end. The other product it wanted permission to label was its regular beer, which is 4.6 percent, which is the very mid-point of the range in this country. It's not a high strength product at all. Coors was obviously not trying to market its product to attract the high strength-- Antonin Scalia: 4.1 is the low end of beers, but not the low end of lights, I gather. Bruce J. Ennis, Jr.: --I think it's probably about in the middle of lights, Your Honor. Anthony M. Kennedy: But we can't know any of this by looking at the label. [Laughter] Bruce J. Ennis, Jr.: You can't. You cannot. If you happen to be in one of the two-thirds of the States of this country that permit advertising, you can learn that from the advertising, including advertising right in the beer store next to the label, but this Federal law bans that information from the label itself. It obviously cannot directly and materially advance the Federal Government's interests because of that fact, and even if it did, as I pointed out earlier, there is a simple, more effective way to control the strength war problem the Government currently asserts simply by limiting the alcohol content except in States that permit a higher limit. The Government has conceded that that would achieve... fully achieve its strength wars interest. There's no reason to ban truthful, accurate, and important information in these circumstances. Thank you very much. William H. Rehnquist: Thank you, Mr. Ennis. Mr. Kneedler, you have 2 minutes remaining. Edwin S. Kneedler: Thank you, Mr. Chief Justice. First of all, in response to questions by Justice O'Connor and Justice Scalia, I call the Court's attention to pages 65 and 336 of the Joint Appendix, which include the wallet cards that Coors distributed listing... comparing its alcohol content to those of others, in which it was listing itself as highest, or close to the highest, and also the advertisement that it asked ATF-- Antonin Scalia: The highest light? Edwin S. Kneedler: --Well, the advertisement it asked ATF to include lists both lights, on page 65 lists both light beers and full-bodied beers, and it lists itself as one of the highest content light beers, and also within the mid-to-high range of the regular beer. So the point is, Coors was holding itself out as having at least an average, if not above-average alcohol content within each segment of the market, which is precisely what this is-- Stephen G. Breyer: The purpose served... the purpose served by this labeling reg in those 33 States that allow you to advertise is? Edwin S. Kneedler: --The purpose is to prohibit... it's a balance of the interest in labeling. At the point of sale, there are two interests, and the labeling, to be able to compare alcohol content at the point of sale by picking up two bottles can lead to impulse buying in the same way that this Court recognized in the lawyer advertising case there can be impulse decisions on hiring an attorney by virtue of the face-to-face contact. The second point that I wanted to make with respect to the purpose of the-- Ruth Bader Ginsburg: In this evidence of wars, was there anything about substitution of consumers who are looking for higher alcohol content to wine, to something with... or to the bitterer beverage, the malt liquor? Edwin S. Kneedler: --It was a discussion primarily within the malt beverage industry, because that's where the abuse was, and it was identified as an abuse, and I call the Court's attention to the House report on page 16-A. Ruth Bader Ginsburg: Couldn't this regulation make it worse? I mean, if you go to New Orleans at Mardi Gras time you see a lot of cheap wine around, perhaps as many as those bottles of beer. Edwin S. Kneedler: Justice Ginsburg, no. The statute has been construed by ATF to allow disclosure of low alcohol content beer, so it's tailored to limiting the concern about marketing on the basis of high alcohol content and intoxication. William H. Rehnquist: Thank you, Mr. Kneedler. The case is submitted.

Warren E. Burger: We will arguments in the Evansville-Vanderburgh Airport Authority against Delta Airlines. Mr. Mallory. John K. Mallory, Jr.: Mr. Chief Justice and may it please the Court. The Supreme Court of Indiana in this case rested its decision entirely on the Commerce Clause and declared the ordinance invalid under the Commerce Clause. It filed the validity there and stated that it did not therefore reach the other constitutional issues in the case that had been decided by the Trial Court. The Trial Court had decided the ordinance invalid under the constitutional right to travel, the Fourteenth Amendment, Privileges and Immunities Clause and Equal Protection Clause and it also found it invalid under the Indiana Constitution. We contend unconstitutionality under all of these and particularly under the constitutional right to travel. However since I am seeking affirmance of the Indiana Supreme Court decision, I intend to limit or to rely principally or discuss principally the Commerce Clause decision by it. The crucial issue, I submit under the Commerce Clause is whether or not, this is a use tax. The case has been argued and I think briefed by the other side on the assumption that it is a use tax. The cases it cites, the highway use cases principally are use tax cases. It is my submission to this Court that the tax is not a use tax case. It is not a use charge. It is not a service charge. Rather it is a charge or a tax on the passenger for the act of enplanement. That is, it is a charge on the passenger for the act of boarding the aircraft for the purpose of departure 88% of the people who are enplaning at this airport or enplaning for an out of state place. The question and issue of whether or not this is a use tax has been before the Court’s on four states and it has been present in these cases since these ordinances gained popularity some four years ago. It has been and was discussed directly before the Trial Court and the Indiana Supreme Court. In this case, they decided that it was not a use tax. It was not a charge for use and that it was dependent solely on the act of enplanement. It was before the Montana Supreme Court in a very similar case Except that in the Montana case, the charge was nominally levied on the air carrier rather than on the passenger. William H. Rehnquist: Mr. Mallory. John K. Mallory, Jr.: Yes, sir. William H. Rehnquist: Is the distinction you are drawing between a use tax and the kind of tax you say, this is one that depends on the intent of the legislature? John K. Mallory, Jr.: No, Mr. Justice Rehnquist. It depends on the incidence of the tax. The taxable event set forth in the ordinance or the statute. And the taxable event set forth here is not use of the airport facilities by the passenger. It’s the act of enplanement, that is boarding the aircraft for the purpose of departure under the ordinance itself. William H. Rehnquist: Would you concede that the airport district could have somehow passed along some of its costs to the passenger by a similar tax if it were not made incidental to the enplanement? John K. Mallory, Jr.: But when you say similar tax, I have some problems, but where certainly, one can conceive of the Airport Board putting up the turnstile as you enter the airport terminal that all users have to put in a dime or 25 cents or whatever and walk through the turnstile to use the airport terminal. I think I would have a much different argument and a much harder argument than I have here. Warren E. Burger: Mr. Mallory, if -- John K. Mallory, Jr.: Yes, Mr. Chief Justice. Warren E. Burger: If the statute or regulation under which they are imposing this charge also required them to pay $1.00 for every passenger sitting in the plane when it landed, how would that affect your view of the situation? John K. Mallory, Jr.: I would think that that would be quite clearly unconstitutional Your Honor under the large number of cases that say that State cannot tax the act of transportation which is really the basis for the cases that we rely on here under the Commerce Clause. Warren E. Burger: Well, I raised that because you were emphasizing, I thought quite heavily, the act of enplaning? John K. Mallory, Jr.: No, I would not differentiate that from the act of deplaning, Your Honor. I am differentiating it from the act of the passenger using the airport terminal on which this tax is not levied. Warren E. Burger: Well, in my hypothetical, I was not limiting it to the deplaning. All the people who were sitting on the airplane when it hits the runway whether they are getting off or continuing, then it would be certainly for the use of the airport or clearly, would it not? John K. Mallory, Jr.: I would want to see the ordinance. I do not think that it would be for the use of the airport more clearly. I think that it would then for the act of landing in an aircraft. It will depend on the statute of the ordinance, obviously. But I think it would be for the act of landing in an aircraft there. I think this question raised a point that should be emphasized here. In arguing the unconstitutionality of this ordinance or of a statute similar to this, I am not contending and I do not want to be misunderstood that there is no way that the Airport Board can increase its income or can make as the other side says can make interstate commerce pay its fair share. The case is a liegemen under which states and localities have made interstate commerce pay its fair share. They are properly apportioned gross receipts taxes, properly apportioned net income taxes, in this case, we have landing fees, in this case, we have rentals and there are privilege taxes. There are any number of ways that the state can make interstate commerce pay its fair share. So, I am contending that these ordinances, with the incidence on the tax of enplanement or invalid as a tax on direct tax on interstate Commerce and that the dangers of such a tax in multiple taxation emphasize the burden that will be placed on interstate commerce. William H. Rehnquist: But isn’t your real complaint a the lack of apportionment between other users because if your same enplaning passenger had to pay 50 cents as he went to the turnstile of the airport, as opposed to having to pay a dollar fifteen minutes later, that wouldn't make all of much difference if the apportionment was fair, was it? John K. Mallory, Jr.: Your Honor, you are saying that the state can –- with all respect, it seems to me you are saying that the amount of money that the state can raise would be the same under the two circumstances. But it seems to me the first question and it seems to me Spector teaches this and a number of other Freeman against Hewit and McLeod against Dilworth case, that the first thing that one has to consider is not whether the state may validly raise money in some fashion on interstate commerce but what the constitutional channel through which it attempts to raise it is and whether that constitutional channel is, in fact, constitutional or unconstitutional. And what I might -- statement about the turnstiles was not that enplaning passengers would have to drop the dime or quarter in the turnstile. It was that all users would have to do it and that the act of taxation. The taxable event was not enplaning in interstate commerce but on the use of the airport. William H. Rehnquist: But the enplaning passengers would have to go through the turnstile too. John K. Mallory, Jr.: Oh yes! Yes, Your Honor. They would have to go through the turnstile. And they would have to pay for the use of the airport terminal. Thurgood Marshall: Mr. Mallory, what would happen if they raised the regular fees for landing and taking off which they now have by $1.00 each passenger? John K. Mallory, Jr.: In other words, Your Honor, if the ordinance read that landing fees will be increased by one dollar per enplaning passenger, there I think that I come back that the taxable event is the active enplanement. And under the -- basically from Crandall against Nevada to the extent that that may be viewed as a Commerce Clause case right after the –- Thurgood Marshall: What about the fact that one of the measures of the landing fees is the weight of the plane? So I mean, the more passengers has more weight, isn't it? John K. Mallory, Jr.: Yes, Your Honor. So long as the landing fee depends on the weight of the plane, I have no problem with it. That is the type of use tax that has been upheld where the use of the highways, the truck depends on the weight, or the amount paid by the trucker depends on the weight of the truck and so on. But anytime the tax is a tax that is on the passenger, as this one is measured on the carrier measured by a flat amount per head by the passenger. Thurgood Marshall: But then Mr. John would you say, it made no difference if you raised a dollar a head that you would charge it to the passenger anyhow, so they just -- John K. Mallory, Jr.: Your Honor, that gets into the -- Obviously, the airlines passed on charges but where the charge is a dollar or two dollars a head or whatever it may be from a particular airport, that is passed on direct from that airport. And it removes the ability of the carrier and from the CAB, the idea of apportioning its rates in such a way as to serve aviation generally. Thurgood Marshall: Now, my final question is that there was nothing in the airport except the airline booths and the charge facilities. There’s nothing else. And you have a $1.00 turnstile outside, what would your position be? John K. Mallory, Jr.: I suppose if one could argue that that would be excessive and I suppose that one could argue that it was in fact a tax on enplanement and therefore unconstitutional. As I said to Mr. Justice Rehnquist, on the turnstile question, I do not say that that is clearly constitutional. All I say on that is that I have a very different argument and what I would conceive to be a much more difficult argument than I have in this case. Thurgood Marshall: Would it be more difficult if you had it out on a parking lot? John K. Mallory, Jr.: Yes, Your Honor. It really would if you have the charge –- if you have a toll charge on an access rather than one has to use to get into the airport. Clearly, that is a much harder case and a much different case. Now, on the question of the operating need, Mr. Trockman yesterday stated that the Airport Board had an operating deficit and I do not contest that. I think it might be well to put it in some perspective. The total operating income in 1967 of the Board was some $268,900.00. That was raised about equally by and this is exclusive of property taxes in the area. That’s about equally from aviation sources and non-aviation sources (Inaudible) that was the total operating. The total operating disbursements exclusive of bond retirement of a $166,000.00 leaving an operating profit exclusive of bond retirement of approximately $100,000.00. The bond retirement cost was $182,000.00. Incidentally, this is shown, these figures are taken from paragraph 25 in appendix page 59 and from exhibit 5 to the stipulation of facts which was not printed. The only figure taken from exhibit 5 is the operating disbursements and the breakdown of the income between aviation and non-aviation sources. As I said, the bond retirement costs were $182,000.00. The operating profit exclusive of the bond retirement was about $100,000.00. You had a deficit of something less than a $100,000.00 including the bond retirement in the operating expenses. I do not have the figure in the record but the 1970 Annual Report of the Airport Board shows that about 20.56% of the general fund revenues come from property taxes. Now, that does not include the amount that goes of property taxes that goes into the building fund for the airport. Warren E. Burger: During this period that they had a $100,000.00 deficit approximately including the bond amortization, is there a stipulated fact as to how much was raised from the dollar a head tax? John K. Mallory, Jr.: Nothing has been raised from the dollar a head tax, sir. The lower court enjoined, the Trial Court enjoined that in the collection and the Supreme Court of course of Indiana affirmed the Trial Court’s decision. Potter Stewart: Mr. Mallory, what is your point about the deficit only after the -- John K. Mallory, Jr.: I have none. The Court raised and asked questions about yesterday. My brother made a response saying that there was an operating deficit. I said that -- Potter Stewart: It’s still a deficit? John K. Mallory, Jr.: It is still a deficit after bond retirement. Yes, Your Honor, of something less than a $100,000.00. Coming back to the question of whether or not this is a use tax and therefore a sense governed or controlled by the highway use tax cases. The Indiana Supreme Court responded quite directly to the Airport Board’s argument that this charge is a service charge for the use of facilities and stated that there is no question that the incidence of the tax imposed by Ordinance 33 falls on interstate commerce. And it also held that the tax is on the active enplanement. Focused quite squarely on the issue of whether the act of enplanement was reasonably related to the use of airport facilities and held that and I quote that, “it is clear that the tax imposed by Ordinance 33 is not reasonably related to the use of the facilities which benefit from the tax.” Trial court made similar findings stating that not withstanding the name given the charge nor the stated justification for the charge, its operating incidence is solely on the act of enplanement. The Trial Court also made findings that the use of the airport by the minority who were taxed was no different in quality or amount than the use by the majority who were not taxed. That it does depend on the act of enplanement and not use, I think it is clear from the reading of the ordinance itself. It imposes what is called in the ordinance a use and service charge of $1.00 per each passenger enplaning any commercial aircraft operated from the Dress Memorial Airport. It imposes on the airline the obligation to collect that tax and remit it to the state based on the number of enplaning passengers times the $1.00 charge. The tax as the Trial Court and the Supreme Court noted is not imposed on all users only on a minority. While those findings on the discriminatory nature of the charge form the basis of the Court’s holding in part of the basis of the Court’s holding under the Equal Protection Clause of the Fourteenth Amendment and also its holding of invalidity under the Nevada Constitution. The arbitrary nature of the charge or selection of passengers –- selection of users who will be charged also formed its basis or partly formed its basis for the finding that it was not a use charge. I submit that the fact that the funds collected under this tax go into the Airport Board funds for the use on the airport does not make this a use tax. It is clearly a relevant consideration for the Court to consider in determining whether or not it is a use tax but it is not decisive. And I think that McCarroll against Dixie Greyhound 309 U.S. points that out. The Court there stated that it is not enough that the tax when collected is expended upon the state’s highways. It must appear on the face of the statute of the demonstrable where the taxes laid is measured by or has some fair relationship to the use of the highways to which the charge is made. Going back to a minute on this question of what the funds are to be used for, that argument indeed was made in Crandall against Nevada. There at Page 38, “The state argued that the state makes roads, keeps them in repair, and must in some way be paid in order to be able to do all of this.” And what difference does it make, whether it is to be paid by a tax of $1.00 on each passenger or by the same sum collected at a toll gate, or by gross sum for a license? The Court in Crandall indicated that it made a good bit of difference as to whether it was constitutional to tax the passenger at $1.00 a head for leaving the state even though he had obviously used the roads, and the state had to build and keep them repaired. William H. Rehnquist: But wasn’t the tax in Crandall imposed on any departing passenger regardless of what means of -- John K. Mallory, Jr.: No, I don’t believe that’s fact Your Honor. It was imposed on passengers in departing or leaving the state, as I recall, by stage coach railroad and it had another list of things. William H. Rehnquist: But supposing in Crandall, a passenger left by a railroad, there the state wouldn’t have a fair claim to say. We’re just asking you to pay your share for the cost of constructing the means of transportation. John K. Mallory, Jr.: Because the State did not construct the railroad. Yes, Your Honor, I think that is quite right. But they clearly had constructed the roads over which the stage coach passengers ran. In Crandall, it is my recollection, Your Honor, that Crandall was a stage coach operator or owner who was contesting the statute. Incidentally, the use of the proceeds was argued in the Henderson against the Mayor of New York case where two-thirds of the funds went to the Commissioner of Immigration for inspection and to build wards and warehouses. In the Passenger case part of the funds went to a Marine Hospital in People against Compagnie Generale Transatlantique, the sums went to the Commission of Immigration for inspection expenses and the remainder was remitted to the United States Treasury. The states at that time were seeking many ways to validate this type of tax. And in each one, the argument would be made that the funds were being used to recompense the state for expenses made by it in tearing out its proper functions. William H. Rehnquist: How do you deal with Huse versus Glover on which Mr. Trockman relies? John K. Mallory, Jr.: Well, I would deal with that in two ways, Your Honor. First, it’s not a Commerce Clause but in fact I don’t think it is the most important ground. It is the question under Article 1, Section 10 of the article. Secondly, I deal with it by saying that there the Court quite properly found that it was a use tax and was not a tax on a passenger for engaging in interstate commerce. And I think that the sum of these -- that these passengers are engaging in interstate commerce. When they board the plane for the purpose of departure, I think it’s fairly obvious under the Michigan-Wisconsin Pipe Line case where the gathering of gas was considered a tax directly on interstate commerce. I think the same thing is here. The same thing is present here. I think in the Joseph against Carter & Weeks which was a loading of freight case and Baltimore & Ohio against Birch which was the same type of case. The Richfield Oil case where the Court said the commerce begins no later than delivery of oil into the vessel. All of those, I think indicate very strongly that the passenger boarding the plane for the purpose of departure which is what enplanement means, that the passenger is engaged in interstate commerce and the tax that’s being imposed on him is a tax imposed on him for the privilege of engaging in that act. And the cases that talk about a tax on a passenger engaged in interstate commerce or on a passenger, or on freight that’s being loaded or has been loaded for interstate commerce and striking down those statutes are extremely numerous. Basically, you can probably start under the Commerce Clause. I think that basically you can start to submit some of the language in the Passenger Cases. Some of the language by two justices in the Crandall case plus the Perry case which just has a Black has a statement saying that you can’t pass passengers and the people and persons engaged in interstate commerce. I think the Justice or Chief Justice Taney’s dissenting opinion in the Passenger Cases where he was talking about not aliens but persons who were traveling by ship from one state to another and who were taxed at the rate of 25 cents a head for departing the vessel in the State of New York. His comment about those passengers is very strong in saying that the State cannot tax those. And that dissent was later, I believe, quoted in Crandall and has been re-quoted in cases as recently as Gaston, I think, in the Shapiro case, Shapiro against Thompson as well. In the Minnesota Rate Cases, the Court said, the States cannot tax interstate commerce either by a laying a tax upon the business which constitutes such commerce with the privilege of engaging in it or upon persons of property in transit in interstate commerce. I would also submit that the fact that here the incident is the act of enplanement rather than use by the passenger, lends itself to considerable different multiple local taxation involving different incidents of travel and also differing amounts. As to the amount of the tax, the Evansville Airport Board has stated here on that brief in an argument that even this $1.00 is not enough to cover the cost of their plan of improvements. I do not dispute that at all. Indeed, as the taxes grow, as this $1.00 becomes more the ingenuity of an Airport Board to plan other improvements can make a charge of almost any amount not excessive. So I think that it is quite obvious to anticipate that there will be taxes if this ordinance is allowed to stand, there will be taxes by most local airports in this country. The taxes, I think will vary in amount and I think that they will vary as to the incident of taxation. I think some will be for deplaning passengers, some will be for stopover passengers, and some would be for in-transit passengers. Speaker: The whole idea of the airport I supposed is to enplane and deplane passengers. That’s its fundamental function? John K. Mallory, Jr.: That is its fundamental function, Your Honor. I think some have gotten away from that a little bit with fancy restaurants and things of that nature. Speaker: Would you say it’s a general proposition that a city that wants to maintain an airport has a general proposition to make the passengers pay for the airport, the construction of the airport? As Mr. Justice Rehnquist says, let’s just assume that everybody who walks through, who drives into or walks into the airport property is charged a fee and that just happens to be enough to pay for all the facilities there? John K. Mallory, Jr.: I am not sure if they could, Your Honor. I must confess that I probably can not answer -- Speaker: You mean, just because there might be interstate passengers? John K. Mallory, Jr.: No, not just because there might be interstate passengers. I think that it would depend on a great deal on the incidence of taxation. If it were done by a toll, say to the access road, into the airport and for the use of that road that may have -- Speaker: Well, anybody who walks into the airport terminal pays it? Anybody? John K. Mallory, Jr.: In air freight and so on does not bear any of the obligation. It us just passengers. Speaker: Just passengers? John K. Mallory, Jr.: I would have some problem with that by excluding freight, I am sure. William H. Rehnquist: Because it’s discriminatory on interstate commerce? John K. Mallory, Jr.: No. Well, yes because it discriminates against the passengers as opposed to making interstate commerce pay for the freight that it is carrying as well. Speaker: Well, it is then -- John K. Mallory, Jr.: I am sorry? William H. Rehnquist: It is paying in case of freight? In the case of freight bill? John K. Mallory, Jr.: But it does not pay any tax to construct the airport. Warren E. Burger: Your time is up, Mr. Mallory. Mr. Trockman, you have about two-and-a-half minutes left. Howard P. Trockman: I will try to use them as useful as I can. First of all, I would like to comment, Mr. Chief Justice and members of the Court, on Crandall versus Nevada. There is no mention on this case whatsoever that this is a tax upon the use of facilities. It is the tax upon the mere act of departure upon the privilege of going from one state to the other. As a matter of fact, in 1868, when this case was decided, I am not even sure that there was a publicly maintained roadway for the use by a stage coach travel. Certainly, the railroad tax filed with that case was not for the use of publicly supported facilities. And as far as the application of that case is concerned, this was stricken and overruled by the case of Hendrick versus Maryland which was decided in 1915 by this Court. And in this case, it said that with respect to the holding of Crandall versus Nevada involving a tax which was designed to prevent persons from leaving the State of Nevada, that it does not uphold that rationale because in Hendrick versus Maryland, where a tax was levied upon the use of highways by commercial motor vehicles, that this involved the use of valuable facilities provided in public expense and a burden to the taxpayers. And therefore, the holding of Crandall was overruled. And in Hendrick versus Maryland, which is cited at Pages 29 and 30 of our brief, the Court stated that the highways are public property just like our runways are. It is within the power of the State to require those who make special use thereof to contribute to their cost in maintenance. And this Court recognized in Hendrick versus Maryland, the distinction between commercial motor vehicles and pleasure cars and upheld the tax. The same application applied in a flat fee in the Capitol Greyhound Lines case. By the way, in that case as we have in our exhibit C is a list of states which have use taxes. As to the national uniformity argument which my colleague argues, I would like to say this that the Panhandle Eastern case strikes down this argument by saying the power to taxes not the power to destroy. And this we believe is a relevant holding cited by this Court and we feel that the use tax levied in this instance is fair and reasonable under the Commerce Clause. Warren E. Burger: Thank you Mr. Trockman. Thank you Mr. Mallory. The case is submitted.

Warren E. Burger: We will hear arguments first this morning in Aronson against Quick Point Pencil Company. Mr. Cook, I think you may proceed whenever you are ready. C. Lee Cook, Jr.: Mr. Chief Justice and may it please the Court. The petitioner in this case, Jane Aronson, in 1955 made an invention. That invention was the design of a particular kind of key ring or key holder. Now, the particular design of that key holder is not really material to this case, but I think I should note that it is different from the design shown in the English patent which is attached to the brief of the amicus Ercon and it is different from the design shown in the (Inaudible) patent which is a part of the record in this case. Potter Stewart: Is there a picture of it or a representation of it anywhere in the -- C. Lee Cook, Jr.: There is not as such in the printed record. What attached to the record which came to the Court we believe is an actual sample of that key ring. Warren E. Burger: How is that relevant to the contract issue? C. Lee Cook, Jr.: It is not Your Honor except that the only reason I mentioned the particular -- that it is different from the design shown in those patents is the argument of the amicus Ercon, that it was in the public domain or known before the invention by the petitioner. The closest thing that describes it is the catalog of the respondent Quick Point, which is in the printed record, but you cannot see the inside of the key ring. Warren E. Burger: Alright. C. Lee Cook, Jr.: Having made this invention and having prepared and filed a patent application which disclosed and described the invention, she took it to a number of potential manufacturers. One of those manufacturers was the respondent Quick Point Pencil Company in St. Louis. The then President of Quick Point was very interested in manufacturing this article and he proposed a license agreement which called for a 5% royalty on the sales of the article by Quick Point. At the request of petitioner, an addendum was prepared to this license agreement. That addendum provided that if no patent were issued within a five years, the royalty rate would be reduced to 2.5%, but that royalty would continue as long as Quick Point made the article. Now no patent was ever obtained and at the end of the five-year period, the royalty was reduced to 2.5%. Quick Point paid those royalties for many years after it was known that no patent was obtained and after repeatedly reaffirmed its obligation to do so. Now although the article was secret at the time it was first disclosed to Quick Point and it was disclosed at Quick Point and the others under an obligation of confidence, it is the nature of the invention is such that once it was put on commercial sale, it was revealed to the public and could be copied by others. And indeed by the late 1960's, a number of other companies were making devices substantially identical to Quick Point's. Now in 1975, Quick Point stopped paying royalties and brought this suit for declaratory judgment. It contended in the suit that the agreement was illegal and unenforceable. It did not contend as respondent's brief in this Court contends that the intention of the parties was that no royalties would be due if no patent were obtained. On the contrary, it contended the opposite that is that the agreement bound Quick Point to pay royalties even if no patent were obtained and that made the agreement illegal. On a stipulated record and cross motions for summary judgment, the district court found that the agreement was clear and unambiguous, that it was valid and enforceable under the state law and that there was no reason in the federal patent policy or the federal antitrust policy for the federal courts to interfere with its enforcement. The Eighth Circuit Court of Appeals in a two-to-one decision, reversed. It held that the principles involved in the federal patent law precluded Quick Point from being bound by its agreement, because no patent was issued and the article had become publicly known. It was no longer a secret. District Judge Larson sitting by designation decided saying that in his view, the matter should be controlled by state contract law and that there was no reason for the federal courts to preempt and refuse to enforce the state law. Thus the question presented by this case is does the federal patent law preempt the state law and prevent enforcement of a contract calling for continuing royalties on a previously secret article simply because no patent was issued and the article is no longer a secret. Now we submit that the decision of the Court of Appeals here constitutes an unnecessary interference by the federal courts with the normal application of state contract law. That interference was not required by nor even consistent with the federal patent law. I intend to deal primarily with the error of the Court of Appeals with respect to the federal patent law. We believe also that there is nothing inconsistent about enforcing this agreement with the federal antitrust laws or the policy of free and open competition. That subject matter is however covered very thoroughly in the briefs, particularly the brief of the United States amicus and I believe that Mr. Grossman who will speak on behalf of the United States will also touch on that issue. Specifically I want to deal with three points. First, that this case is governed by the rule laid down by this Court in Kewanee Oil versus Bicron. Secondly; that the Court of Appeals failed to apply that test, and thirdly, if that test is applied to the state contract law involved in this case, it is clear that the objectives of the federal patent law are not interfered with and that there is no conflict between the federal patent law and the state contract law in this case. Potter Stewart: That really just one point, isn't it that this case is governed by Kewanee? C. Lee Cook, Jr.: Yes, it really is and I don't think that there can be any doubt that it is governed by Kewanee. The Court will recall in that case, that it sustained the validity of state trade secret law, which permitted an owner of a trade secret to sue former employees for misappropriating those trade secrets. In that case, the Court reaffirmed its prior holding that the patent law is not exclusive and that the state law should be enforced unless it conflicts with the patent law or the federal law, and the way to determine whether a state law conflicts with a federal law, the Court said, was to look at whether it stands as an obstacle to the accomplishment of the objectives of the federal law. Now the objective of the federal patent law as set forth in the Constitution is to promote the progress of science and the useful arts; in other words, to encourage invention. The patent law encourages invention in two ways. First, it offers the inventor a patent, which for a limited period of time permits that inventor to exclude others from making, using or selling his invention. Secondly, in return for that extraordinary grant, it requires the inventor to disclose fully his invention to the public in the patent. And that way, not only is the public free to use it after the expiration of the patent, but it becomes a part of the body of knowledge and that itself should contribute to and stimulate further inventions or other advances in the art. Warren E. Burger: In your view Mr. Cook, would the case be any different? If no patent had been applied for, but the idea that might have been presented to the respondent company and then they made the agreement for either a 2.5% straight or whatever. C. Lee Cook, Jr.: In my view Mr. Chief Justice, the case would be no different, because in this case, the petitioner took nothing from the public. She never got a patent and whether it was revealed in a patent or contained in a patent application is really irrelevant. The point is she revealed an idea, she made a contract and there is no reason for this respondent to get out of its obligation to pay the royalties under that contract. The test thus therefore under Kewanee is whether enforcing this agreement will discourage invention or prevent the disclosure of inventions to the public. The Court of Appeals nowhere applied this test. It did not even consider it as far as we can tell from the opinion. There is no discussion of the analysis or the test in Kewanee at all. Although it made reference to Kewanee, it did not discuss its test. When that test is applied here however, it is clear that enforcing this agreement will not create an obstacle to the accomplishment of the objectives of the patent law, but will instead further those objectives. It will certainly not discourage invention. On the other hand, it will encourage invention to enforce agreement such as this because inventors if they know that they can enter into agreement such as this will be willing to expand the time effort and money without concern as to whether their invention is patentable or not or without concern as to whether their invention is one which can be kept secret. And as this Court noted in Kewanee, often an important invention may not be patentable, but it is nevertheless an important invention. Under the law prior to the decision in the Court of Appeals, if the inventor made a valuable invention and the manufacturer was willing to pay for it, the inventor could have the expectation of entering into an enforceable agreement which would provide him a reward for his invention and he would therefore be encouraged to invent. Failure to enforce this agreement on the other hand will discourage invention, because the inventor who cannot obtain a patent will be faced with two alternatives. He can go into the manufacture of the article himself which this Court noted in Kewanee may not be the best allocation of our economic resources or he can attempt to sell it for a single lump sum payment before it becomes a big secret, get all of his money immediately. But that is often difficult too, because licensees are reluctant to make substantial payments until they know what the commercial success of the invention would be. Not only will enforcement of this agreement encourage invention, it will cause those inventions to be made available and known to the public sooner rather than later. Rather than waiting to see if he can obtain a patent under agreements of this type, the inventor puts his article or his invention out to the public immediately; not only into the commercial channels where it may benefit the economy but also to the public so that they can copy it or be stimulated to make further and additional inventions. Warren E. Burger: But on some inventions, the copying of it is not easy, because the content is discernible. Is it not true that some companies even having a patentable item do not patent it but simply seek to preempt the market – C. Lee Cook, Jr.: That is true Your Honor. Warren E. Burger: -- without any patent so that they don't have to disclose? C. Lee Cook, Jr.: And that is really the truly anomalous thing about the Court of Appeals' decision and the position of the respondent in this case, because if this invention had been one which could be kept secret and was not revealed upon its sale to the public, the Court of Appeals and the respondent would say the agreement is enforceable, and yet the objectives of the patent law are furthered much better by an agreement where the invention becomes public and available to the public than they are in a situation where the invention by its nature remain secret. Yet in this Court, in Kewanee specifically approved, not only enforcing implied agreements against employees, but contracts for inventions where the subject matter of the invention remained secret. Now really nowhere in respondent's brief, does respondent ever contend that enforcement of this agreement will discourage invention or discourage the disclosure of invention. And that is because it is impossible to make that contention on these facts. Under Kewanee, if the enforcement of the state law will not interfere with the accomplishment of the patent law objectives of encouraging invention and encouraging disclosure to the public of inventions which is the case here, there is no need; there is no reason for the federal courts to interfere with the normal application of state law. Now instead of dealing with this point, the respondent argues that the difficulty here is that enforcing agreements of this type will cause inventors who apply for a patent to abandon those patent applications. The argument goes that an inventor will apply for a patent, get an agreement such as this, and then abandon the application. That argument we believe is unsound for several reasons. First, it is factually unsound. As this Court noted in Kewanee, the benefits of a patent are such that it is very unlikely that anyone who really has a patentable invention will abandon that patent application. Secondly, it is particularly true where as in this case, the commercial use of the invention discloses it to the public. We are not talking about the famous coca cola formula which Mr. Justice Marshall referred to in his concurring opinion in Kewanee. We are talking about an invention that when it is sold, it is publicly known. Under those circumstances, the chance is that a patent applicant will in bad faith in order to take advantage of his licensee, somehow abandon a patent application on a valid patentable invention are remote indeed. Moreover, this problem if indeed it is a problem, is one which easily can be solved by draftsmanship. The contract can say the patentee or the licenser will diligently pursue the application. And then if he does not do so, he has breached the agreement, or it can say that the licensee may have the right to prosecute the patent application; a provision that is quite common and frequent in patent license agreement, or it can provide that if no patent is obtained, the royalties will cease or they will cease after a given number of years or they will cease after the production of a given number of units or the payment of a given amount of royalty. All of those are ways of overcoming this problem if indeed it is a problem. But let us assume for the moment, for purposes of argument, that there would be some incentive by a patent applicant who has a license agreement such as this to abandon the application. That does not mean that enforcing this agreement will stand as an obstacle to the accomplishment of the patent laws. As this Court pointed out in Kewanee, some diversion from the patent system is permissible and the diversion in the patent from the patent system or the potential diversion from the patent system in Kewanee is much greater than the potential diversion here, because in Kewanee, it contemplated an invention which remained secret. There at least the owner of the invention has an option. He can say, I will get the patent, but if I get that, it becomes public or I can keep it secret and try to protect my rights by keeping it secret. Here the inventor has no such choice because once he puts his article on sale, it becomes public and he cannot keep it secret. The diversion from the patent system, if indeed there is any, is much less in this case than in the facts presented in Kewanee. As I mentioned before in answer to Mr. Chief Justice's question, the fact is that both the Court of Appeals and respondent here would have enforced this agreement if the subject matter of the agreement had not been the article which became public upon its sale, but for example the process by which it is made. Even though a patent application had been applied for and abandoned under the rationale of the decision below, that agreement would be enforceable. Yet merely because the invention here was one which became public upon its sale, the Court of Appeal says, it is not enforceable. Yet I submit to you that the circumstances here are less inconsistent and indeed more, they are in fact consistent with the objectives of the patent law, much more so than in the case where the invention can be kept secret. Finally this argument of respondent we believe deals not with the objectives of the patent law, but with the means by which the patent chooses to accomplish those objectives. The important thing here is not whether somebody gets a patent, the important thing is that they make inventions and that they disclose those inventions to the public. The fact that the state law will encourage invention and encourage the disclosure does not make it inconsistent with the federal patent law. Indeed as this Court noted in Kewanee, certainly the patent policy of encouraging invention is not disturbed by the existence of another form of incentive to invent. The state contract law involved in this case and the federal patent law are not in conflict; they are in harmony. Both can stand together; one complimenting the other to encourage research and innovation which is vital to our economy and to the continued growth of our nation, probably more so today than in any time in our history. The decision of the Court of Appeals thwarts that encouragement of invention, and unnecessarily strikes down the state law; it should be reversed. Your Honor, I would like to reserve the rest of my time for rebuttal. Warren E. Burger: You very well, Mr. Cook. Mr. Grossman? B. Barry Grossman: Mr. Chief Justice, may it please the Court. The issue before you today is whether state laws, which enforce contracts of the type here at issue, which so significantly impede federal pattern or competition policy as to require preemption. Preemption issues of this type have been resolved by the Court by defining the specific federal pattern and competition policies articulated by Congress and carefully analyzing the impact on such policies that would result from enforcement under state law of various types of contract or procedural rights. Applying such analysis to this case, United States has concluded that enforcement of the contracts such as that entered into between Mrs. Aronson and Quick Point would not adversely impact any federal policy. On the contrary, we believe that the availability of such contractual means of rewarding inventors will foster the achievement of innovation, rapid disclosure of new ideas, and new entry into commercial markets, goes at the very heart of federal pattern and competition policy. Since petitioner's counsel has devoted most of his remarks to pattern policy, I should like to start my remarks with a discussion of the impact of this contract on federal competition policy. Contracts of the type which concern us today pose no danger to federal competition policy that cannot be checked by the normal application of the antitrust laws. Statements by respondent to the effect that enforcement of the contract will promote monopoly in contrast to free competition portray a misunderstanding of both of those consents. William H. Rehnquist: Mr. Grossman, are you suggesting that there are contracts which would be enforceable under state law, which do not violate the antitrust laws, but which would nevertheless be preempted by what you referred to as federal competition policy? B. Barry Grossman: No, I do not make that suggestion. I mean, it is conceivable that contracts enforceable under state law could violate federal antitrust policy. For example, a requirements contract, which under the antitrust standard, would foreclose an unreasonable portion of the market. They could be enforceable under state law, but violative of the antitrust law. One could ever contract that would not be violative of antitrust laws, but would nevertheless frustrate federal patent policy, but I am not suggesting that there is some level of impact on competition beneath the dignity as it were of an antitrust violation that would nevertheless require preemption, unless it frustrated some other federal policy. William H. Rehnquist: What are other federal policies such as --? B. Barry Grossman: The patent policy for this case. William H. Rehnquist: Which would be the laws -- B. Barry Grossman: In terms of – The patent policy and antitrust policy are complementary here, It is conceivable, of course that one could have a situation in which federal patent policy would be frustrated even though antitrust policy might not be. William H. Rehnquist: And one looks to find federal patent policy, I take it in the laws enacted by Congress pursuant to the patents? B. Barry Grossman: That's right. Basically the primary goals of patent policy as articulated by this Court have been the promotion of innovation, the facilitation of rapid disclosure of new ideas and the preservations of ideas in the public domain and protection of those ideas from monopoly confirmed. William H. Rehnquist: I presume the source of this Court's knowledge on that subject must be the acts of Congress? B. Barry Grossman: I can think of no other source. William H. Rehnquist: There cannot-- B. Barry Grossman: It is not clear to me what monopoly could be referred to here. Certainly the enforcement of the contract here at issue does not confer any monopoly in the sense of a right to exclusive views as that term is used in the patent laws. Warren E. Burger: But isn't the contrary precisely what the opposing parties relying on? B. Barry Grossman: The fact that they are being faced with what they believe to be unfair competition is precisely the opposite or the -- Warren E. Burger: Because that is anomalable, because he had no monopoly, if she had not monopoly to sell? B. Barry Grossman: That's right Your Honor. Nor does this case involve monopoly power in the sense that it is used under the antitrust laws, namely the power to control price or forestall entries. The degree of market power conferred on a licensee, a commercially valuable idea, will depend on a number of factors, including the degree to which the product is differentiated in different or competing products, the degree to which the idea can be easily ascertained and used by competitors, and the extent to which competitors have offsetting advantages relative to the licensee. Now we don't suggest that indeterminate licenses of commercially usual ideas could never contravene federal antitrust policy. What we do suggest is that the likelihood is not so great as to warn what is the equivalent to an antitrust rule of per se illegality implemented in the form of patent preemption of state contract law. Our policy of free competition does not mandate competition free of any and all contractual restrains. Only those restrains, which are deemed unreasonable, are prohibited. Economic analysis did not indicate that licenses of the type here at issue inherently restrain competition. Moreover, we lack experience or evidence, which would indicate that such contracts will unreasonably restrain trade in such a wide variety of cases as to justify a per se rule. As this Court noted last term in Exxon v. State of Maryland, the fact that one could reasonably high hypothesize situations in which competition might be impeded does not justify preemption. The existence of the antitrust law should provide sufficient protection against any significant competitive restrains arising from contracts of this type. Unfortunately, the Court of Appeals' decision could produce results inimical to the goals of antitrust policy to the extent that it decreases the available incentives for innovative effort. It adversely impacts on the dynamic core of our free enterprise system to the extent that it increases risks to both inventors and licensees. It is likely to channel inventions to the larger firms, who are better able to spread and absorb those risks. Such a trend of course would foster greater industrial concentration contrary to national competition policy. I would like to address just one point on the patent policy and its relation to contracts of this type. I believe the critical core of respondent's argument is stated on page 28 of its brief, which says that the risk is that inventors such as Aronson, who believe their inventions to be patentable will have every incentive to license their inventions during the period the application is pending and then abandon their application in order to obtain royalties for a period longer than allowed by the patent laws. We suggest that this argument is inconsistent with this Court's decision in Kewanee, unsound as a matter of economic analysis, and unsupported by empirical evidence. It appears unsound is a matter of economic analysis, not only as to the specifics of this case, but in the general run of cases as well. Here, Mrs. Aronson's failure to obtain the patent hardly redounded to her economic benefit. There are three components, which determine how much money an inventor such as Mrs. Aronson would make in a situation like this. One is the royalty rate, which she will receive and the second is the unit price of the goods sold, and the third is the number of units sold. Reduction at anyone of these three numbers or components will reduce her total compensation. Here, we know from the record that the failure to obtain a patent reduced two of those components, and economic theory would indicate that the third was also reduced. Here, her royalty rate was cut in half and also the total sales on which that royalty rate was based would be decreased. Instead of obtaining a percentage on all sales, embodying her idea as would been the case, had the patent been issued, she only receive moneys on those sales made by Quick Point whose share of the overall market declined as new entrants begin making key holders reflecting her ideas. Additionally, economic theory teaches that a monopolist is capable of charging a higher price for its goods and could be obtained for them in a competitive market. As to the extent the disclosure of her trade secret open the market to competition, the selling price of Quick Point's key chains on which the inventor's royalty was based may have been reduced. The same economic analysis would lead one to believe that most inventors are likely to prefer the 17-year monopoly returns afforded by a patent system to the less certain rewards that could be obtained under a contract law, even if those awards might be spread out beyond the termination of a patent. This certainly was the conclusion of this Court in Kewanee and we are unaware of any empirical information or body of academic literature developed since Kewanee, which challenges the reasonableness or correctness of that conclusion. Potter Stewart: How about the Brulotte case? Does that bear on this? B. Barry Grossman: I suggest not Your Honor. The Brulotte case turned upon the concept that the 17-year period is the absolute limit, which Congress grants in exchange for the monopoly power, which it has granted. Brulotte strikes to me to be based upon the same reasoning as was displayed in earlier cases by this Court; Kellogg v. National Biscuit Company and Scott v. Marcalus, which state that upon the quid pro quo received by the public in return for the grant of a monopoly is that at the end of that 17-year period, everybody will be free to use the discovery, free of any restrictions to the inventor. Here of course there was no patent monopoly granted and thus the basic rationale of Brulotte does not bear -- Potter Stewart: Since everybody could use it from the word go? B. Barry Grossman: That's correct. Potter Stewart: What was the item involved in Brulotte, I have forgotten? Was it something that was necessarily disclosed to the public? B. Barry Grossman: That was not clear from the record. It was a hop picking machine, but there is nothing in the Court's decision at least which would reveal whether – reveal to me whether it would have been disclosed to the public upon sale. Potter Stewart: Broadly read the Brulotte case, I should suppose does bear on this, doesn't it? I mean says that, even though it has been disclosed to the public, both because it was patented and presumably because it was sold publicly, you can't receive any license payments for a non-patented article. B. Barry Grossman: Your Honor I believe -- Potter Stewart: Without violating because the patent preempts it? B. Barry Grossman: Yeah, I believe that Brulotte stands for the proposition that where one has obtained a patent then one may not obtain any additional compensation related to that patent after the -- Potter Stewart: After the 17 years. B. Barry Grossman: -- the determination of the 17 years. I think that is the limit. That is the issue the Court was faced in Brulotte and I think that is the limit, a logical limit of its holding. William H. Rehnquist: Certainly -- Thurgood Marshall: There is one case that's Kewanee. B. Barry Grossman: Excuse me Your Honor. Thurgood Marshall: Your side only has one case, that's Kewanee. That is all I have heard beside policy this morning. Am I right? B. Barry Grossman: I believe it would be more accurate to say that not only does Kewanee support it and not only does the reasoning of Kewanee support it, but the very basic preemption theory which this Court used to support it, namely that absent a frustration of federal policy, there is no reason to preempt state law. The other cases in this general field, Sears, Compco, Kewanee etcetera found that enforcement of the particular state policies or rules at issue there would result in the frustration of federal purpose prohibited by the Constitution. Lewis F. Powell, Jr.: May I ask you this -- Warren E. Burger: Mr. Grossman, your time is up. B. Barry Grossman: Thank you. Warren E. Burger: Mr. Griswold. Erwin N. Griswold: May it please the Court. At pages 20 and 21 of the record appears the joint stipulation in this case to which were attached a number of these devices as exhibits. And I have asked the clerk to make them available to the Court. I would point out that exhibits W, X, Y and Z are key holders made by the respondent. The other exhibits are key holders made by competitors. It doesn't make any difference which ones are used, but I identify them that way and to anticipate a question, I think that seeing the key holders is relevant. Warren E. Burger: I had assumed Mr. Griswold that the case proceeded on the assumption that all the others were the same or could be the same because there was no monopoly? Erwin N. Griswold: Yes, Yes indeed Mr. Chief Justice. That's why I say it doesn't make any difference which of the -- I would ask the clerk to make them available to the Court if the Court is willing. It is relevant because it is apparent when you see it that there is no secret here. I have one of them here and you that is it and you put your keys on, and then you with a little force press it back. Once it has been made and distributed, it is completely apparent to anyone not merely a skilled mechanic but to anyone what the idea is. Warren E. Burger: But you suggest that by way of argument that it was never patentable in the first place? Erwin N. Griswold: No, Mr. Chief Justice that I don't know. Two similar devices were patented. I suggest that first on the ground that it shows that the Kewanee decision is not applicable to this case. This case does not involve a trade secret as that term was used in Kewanee. I think it is also relevant because there are arguments here that these indefinite royalties are justified because of the head start that Quick Point got when the secret was disclosed to it. And that head start, was worth a great deal, which could be compensated for by royalties indefinitely in the future. I think the exhibits themselves show that the head start here though probably something was not much, neither in terms of capital cost, nor in terms of time. Now at the outset, I think it is very important to recall that this case involves a relatively narrow issue. There are amicus briefs, which discuss extensively problems of technology and knowhow licensing in billions of dollars which is effected. But this case does not involve any aspect of technology or knowhow licensing. Any decision on that question should of course await a record and briefs which deal with it. And some of the briefs and the government's briefs in particular talk extensively of trade secrets. Indeed the government's brief uses the phrase traded secrets of more than 40 times. But this is not a trade secret case in the sense in which that term is customarily used and what -- as it was involved before the Court in the Kewanee case. Indeed in the Court's opinion in the Kewanee case, the Court said on page 484, by definition a trade secret has not been placed in the public domain, but this key holder has been placed in the public domain. It has been public since 1956, 22 years ago. It's there for everyone to see and to copy. There is no secret way of doing business. No secret formula or process in continues use. No device which is used in the course of business, but not disclosed. Here the item was fully disclosed as soon as the key holder was put on the market as the contract contemplated it would be. The distinction seems to be to some to be more subtle than I should think it would be. I think I can illustrate it by the fact that I was counsel for the petitioner in the Kewanee case and one of the first things I did was to come to the Court and meet with the clerk and make arrangements for the impoundment of the record so that the secrets which were included in it would not be disclosed. There has been no necessity for impounding the record in this case. There was no secret here. No need for reverse engineering which is talked about in the patent cases. Since 1956, the secret has been in the public domain. William H. Rehnquist: Well, Mr. Griswold does the authority of the state to enforce its own contract laws depend on the presence or absence of a trade secret? Erwin N. Griswold: No Mr. Justice, but it does depend on the presence or absence of relation to the patent laws and I will turn to that right now. The most important element in this case is that it is the case involving a patent application and I think that that is as already been pointed out, but I would like to turn to page 23 of the record which is the initial letter, which was the item on page 25 embodies the contract. The second paragraph of the letter of June 26, 1956, “Quick Point Pencil Company will have the exclusive right to make and sell key holders of the type shown in your application, Serial No. 542677 and will start manufacturing within 60 days.” And then at the end of the following paragraph there is a further reference to the design shown in your application Serial No. 542677 and then turn to page 24, the second full paragraph, “in the event of any infringement” and there could not be an infringement unless there was a patent. But this was not something used by the President of the respondent company alone for Mrs. Aronson came back with an amendment to the contract which was accepted and that appears on page 25 and that starts out in the event that the key holder patent application number 542677 is not allowed within five years, Quick Point Pencil Company agrees to pay Jane Leopoldi as she then was two-and-one-half percent of sales at selling prices as long as you continue to sell same. Warren E. Burger: Mr. Griswold, I wonder would it be irrational in your view to treat this transaction between the two parties as being made up of two contracts, one contract if the 5%, if the patent issued another contract to pay two-and-half percent if they didn't get a patent within five years. Erwin N. Griswold: Well, I don't think so Mr. Chief Justice. They have as obviously negotiated at the same time as part of one deal and I point out -- Warren E. Burger: Different days, literally are they not? Erwin N. Griswold: One day apart and finally accepted on June 27th by both parties seems to me that it is one contract and it is not as the government says several times in its brief a contract to pay 5% if a patent is granted and two-and-half percent if a patent is not granted. It is a contract to pay 5% but if a contract is not granted within five years then they pay two-and-half percent, that is the event which actually happened. The patent application was abandoned some six years after the contract was made, but the royalties have been paid at the rate of two-and-half percent after five years until 1975 when this suit for a declaratory judgment -- William H. Rehnquist: But the terms of the contract did require payment of two-and-half percent of the royalties regardless of whether or not a patent is issued? Erwin N. Griswold: Yes it did and that is nothing which was introduced. That was also the same and the original letter of June 26, “on all key holders which we make in accordance with the design shown in your application”, no limited time was specified there and the question in this case is simply whether that provision can stand in the light of the patent laws. I am glad that at the close of the argument one of the relevant cases Brulotte against Thys was mentioned. There are several cases which are relevant by a way of background here, Sears, and Compco to begin with which hold in rather sweeping terms that there cannot be any exclusive right with respect to an unpatented article. Brulotte and Thys which holds that even if it is patented a contract otherwise perfectly valid under state law to continue to pay royalties is invalid because of conflict with the patent laws if it calls for royalty payments after the patent period has expired. And then I would refer particularly to Lear against Adkins which in many ways is quite close to this case. It involved a patent license granted during the application period. The decision of the Court was thereafter a patent was granted and the licensee decided that the patent was invalid and gave notice that it would not pay the royalties covered by the contract and counterclaimed in a suit brought to recover the royalties that the patent was invalid and the basic decision in that case was that the licensee could attack the validity of the patent. But the Court has also held that he need not pay royalties from the time when he claimed that the patent was invalid. That of course was in the teeth of the provision of the contract and our position here is that the petitioner here should not be in a better position than she would be if she'd got a patent in which case her right to royalties would have terminated after 17 years or better position then if she'd got a patent and had attacked this validity in which case her obligation to pay royalties would cease if she got a decision that it was invalid. Warren E. Burger: Do we really know whether she is in a better position? What about the exclusive right to get royalties from licensees from the whole market? Obviously great many people copied this idea and had it been patentable, all of these others or many of them might have had to pay a royalty, the license fee? Erwin N. Griswold: I don't think -- Warren E. Burger: And it would have maintained -- her payments would have remained at 5% throughout the 17 years. Erwin N. Griswold: If she'd got the patent within 5 years which she did not and under the contract she was entitled to only two-and-half percent even if she got the patent. Warren E. Burger: But by the same token doesn't this what we were just discussing indicate that the parties contracted with the view to the possibility if not the likelihood that there would be no patent obtained? Erwin N. Griswold: I don't think that is by any means clear, this is not a contract -- Warren E. Burger: What was the reduction of two-and-half percent for? Erwin N. Griswold: It was not and if you don't get a patent, it was if you don't get a patent within five years and this might have continued for patent application she might have taken that to the Court of Customs and Patent Appeals or to the US District Court, might have been an appeal that could have gone on for a long time and the contract was not if you don't get a patent, but if you don't get it within five years. But I don't think that's really relevant for the reason I'm about to state because another distinction which must be made here is that this is not a simple contract case entirely in the realm of state law a likely agreement in the one in Lambert case where no patent or patent application was involved. Potter Stewart: That's what I was going to ask you Mr. Griswold, in order to be sure that I understand the scope in entire thrust of your argument. What if in this case there been no reference whatsoever to any patent application nor to whether or not a patent would be [Inaudible] but simply the fact show the disclosure by present Mrs. Aronson, to Quick Point of this keyring and a simple agreement that we'll pay you two-and-half percent of the sales price for this keyring for every keyring we sell from now on with no reference to any patent law and that this had been written down in a contract that was valid under state law. Erwin N. Griswold: I know of no reason why that would not be valid. That is the Warner-Lambert case. This Court has never spoken to an endless contract. There are some emanations in the common law to the effect that such things must be limited to a reasonable time. Potter Stewart: No it's endless only insofar as it's not in perpetuity, it's every time I sell these keyrings they pay Mrs. Aronson two-and-half percent. Erwin N. Griswold: But that was true in Brulotte against Thys, if they stop picking half, they wouldn't have to pay royalties. Potter Stewart: I know but my question you think that sort of a contract would not at all be preempted by federal patent law? Erwin N. Griswold: That held that -- the key element in this case is that there was a patent application. Potter Stewart: And that's critical? Erwin N. Griswold: And that's the central fact of this case. The contract was made specifically with respect to it. It provided for an exclusive license which could apply to the secret, but obviously applied to the patent and the petitioner had no power to grant an exclusive license unless she got a patent, anybody else could make it, her license couldn't be exclusive. Potter Stewart: Well according to how you define the word exclusive, one could easily read that as meaning I won't license to anybody else? Erwin N. Griswold: Yes, but that it was the patent application license is a basic significance because this contract was not made under state law alone. It exercised a power specifically given to the petitioner by the patent laws and I call attention to Title 35 of the United States' Code, Section 261 to which not sufficient weight I believe is given in our brief as I prepared for the argument I wish we would had a point more specifically on this, but that Section provides that applications for patent or any interest there in shall be assignable in law by an instrument in writing and that's what we have here. The applicant, patentee or his assigns or legal representative may in like manner grant and convey an exclusive right under his application for patent or patents to the whole or any specified power of the United States and here the patent applicant was exercising that power granted to her under the patent laws. She was proceeding under the patent laws. Now there are many other provisions to which I could make reference. I find for example that the word applicant or application appears at least 240 times in the basic provisions of the patent law. John Paul Stevens: Mr. Griswold, could I ask you one question about your basic theory of the case? Your opponent say that your argument rests entirely insofar as you claim a conflict with the patent law, is entirely on the fact that enforcement of this agreement will provide a motivation to a patent applicant to abandon that patent application. It's that the policy involved here is one that causing people to abandon patent applications and that you do not rely on the interference with the policy to motivate disclosure of inventions or to encourage invention itself, but just rely on their first point about abandoning patent application. Is that a fair characterization of the central thrust of your idea? Erwin N. Griswold: No Mr. Justice -- John Paul Stevens: What is the central thrust of your argument then? Erwin N. Griswold: The central point here is that the petitioner operated under the patent law. She got definite advantages from the patent law, in that she got leverage in making her contract. No one would have made this contract for these royalties on a simple disclosure which could immediately be made by anybody else. That's one reason I wanted the exhibits distributed the show how simple it was and how easy it would be for anyone else to make it. The reason she got substantial royalties which have aggregated up to 1975 more than $200,000. John Paul Stevens: But granting all this, what Federal policy will be frustrated by enforcing this contract? Erwin N. Griswold: In the first place it is not disclosure, disclosure is colorless. John Paul Stevens: I don't know what color it is? Erwin N. Griswold: Disclosure is colorless. John Paul Stevens: Not disclosure, is it invention, the policy favoring invention? Erwin N. Griswold: It is the capitalizing on the use of the patent law thereby obtaining leverage which produces a larger royalty than what otherwise be used -- available and which in this case provided for a royalty which I will call indefinite because it has no limit in time. John Paul Stevens: I respectfully suggest you are not identifying a federal policy that would be frustrated by enforcement of this contract? Erwin N. Griswold: The federal policy is using the patent laws to obtain a monopoly position that is to have the leverage to obtain larger royalties than what otherwise be available, royalties which must eventually be paid by the public in the charges for the article and which continue indefinitely under this contract, despite the fact that if she had obtained the patent they would have been limited to 17 years. Warren E. Burger: Suppose Mr. Griswold that when she came to this company no patent application was pending and they made exactly the same contract that was made, but that she never applied for a patent and assume no obligation to apply was in the contract. How will that be any different? Erwin N. Griswold: While I suggest Mr. Chief Justice -- Warren E. Burger: How would she then be exploiting or making any use of the patent law? Erwin N. Griswold: I suggest Mr. Chief Justice you said and she made exactly the same contract, she would never have made the same contract without having produced a patent application. No body would agree to pay substantial royalties for this idea open to the public in the public domain or simply for its disclosure. The only thing that you would have to go by then would be head start value and again this is one reason why I asked that the item be distributed because here it's applying that the head start value is very little. There is no great capital investment. Almost any mechanic could put the machine together to make this item. William H. Rehnquist: But your client in the contract took the risk of the non-patentability, didn't he? Erwin N. Griswold: Well I think that's the issue in the case to some extent. William H. Rehnquist: Perhaps federal law as you say precludes the enforcement of such a contract but certainly the contract by its terms would seem to indicate that? Erwin N. Griswold: Well, the contract by its terms does not deal with the question of its proper construction in the event that no patent is ever obtained. I have tried to deal with that in the last point of my brief where I refer to the fact that the contract is with respect to a patent application and it calls for the exclusive license to make and sell and when the exclusive license collapsed because there was no power, the petitioner did not deliver her part of the contract when she didn't get any power to deliver an exclusive rescind. I suggest that there was a failure of consideration and that the contract should be construed to mean that royalties would not be payable for more than a reasonable time. I don't think it is entirely clear that this contract made between layman should be construed as a matter of contract law requiring indefinite continuing payment of royalties over an definite period. Now it's true that the patent application gave no rights to the applicant. There can be no infringement of a patent application. Nevertheless a patent application has a substantial in terrorem effect. When a competitor sees patent pending on an item he is disinclined to make the item despite the fact that he knows that it is not protected until the patent is obtained. He doesn't want to incur the capital costs with starting production of the item, setting up his sales force, printing catalogs and so on, when he knows that he may soon be foreclosed by the granting of a patent. The licensing of an application and the use of the patent pending designation are part of the benefits expressly recognized by the patent law. I have already referred to Section 291 -- 261, but Section 292 is the provision which makes it a crime to use patent pending on an article unless indeed you are the applicant or the licensee of a patent application in which case you can use it and that undoubtedly provides important leverage in determining -- in the bargaining process which determines the amount of the royalties under the contract. The heart of this case I suggest is found in the fact that there was a patent application and that the contract was made with respect to that application. The petitioner used the patent laws and the application had value because of its potentiality under the patent laws. No one would pay a substantial amount for a non-exclusive license to make this article. As the affidavit of the petitioner appearing on page 55 of the record shows the key holder was disclosed to several commercial enterprises while negotiations with the respondent were pending. If Quick Point had not come to an agreement with the petitioner for an exclusive license, the petitioner could have sought to make an agreement with one or the other commercial enterprises. If an exclusive license had been granted to a competing company, Quick Point would have been frozen out if a patent was granted and for practical purposes could not have made the article while the patent application was pending. On the other hand Quick Point knew that if the petitioner obtained the patent on the device, the exclusive license would assure the Quick Point had the right to manufacture the key holder free from competition for the patent period. Quick Point, in this case, bargained not only for disclosure, but also for the future exclusive right to use the invention once a patent was obtained. In short, the patent application which was an integral part of the process established by the government under the patent laws pursuant to the Patent Clause of the Constitution gave the petitioner bargaining leverage which she could not have had if she had not first filed a patent application. The mere fact of the patent application gave the petitioner, gave the respondent considerable likelihood of protection against competitors while the patent application was pending and in this way the patent law was used as leverage where the petitioner's benefit, but the patent laws gave more. They gave hope that a patent would be obtained and in that event the contract gave Quick Point the exclusive right to make and sell the item. This was a prospect made possible by the patent laws and it was fully utilized by the petitioner here. The petitioner entered into the patent process and she obtained a substantial benefit because she invoked the patent laws. Without the patent applications she would have been in a no position at all to obtain substantial royalties for this time, which was -- for this item, which was incapable of exploitation without full disclosure. She used the patent laws successfully even though she did not obtain a patent and her contract should be qualified by law in accordance with the principles which had been developed in several patent cases. It is important again to recall that we are not dealing here with a continuing trade secret as in Kewanee. There was a secret here, but it was inherently time limited. Once the article was made and marketed, the secret was fully disclosed. And thus as far as the objective of disclosure under the patent system is concerned a decision in favor of Quick Point will have no adverse effect. The holder of an idea for a secret device like this can keep it to himself if he wishes to do so, but if he wants to realize it on it he must disclose it, there is no alternative. He can of course apply for a patent without licensing the device in which case there will be no disclosure until a patent is issued and he will have no return from the idea while the patent is pending. On the other hand he can license the idea with or without applying for a patent. If he licenses the idea without applying for a patent, he can only hope to obtain head start value from the licensee. And I suggest in this case that would be very small since the idea will be fully disclosed as soon as the licensee puts the item on the market. The only way that the inventor can hope to get more is to apply for a patent, thus utilizing the patent laws and then seek to license the patent application in the hope for a patent. That is what was done here. The petitioner chose to proceed under the patent system and she got great leverage from the patent system. Who would have paid very much for this idea on a non-exclusive basis which would have been the situation if no patent had been applied for. Now turning again to Kewanee, I point out that it did not involve a license situation. There was no question about the validity of a license or about the validity of a license extending for an indefinite period. What it involved was a classic trade secret, breach of employment contract situation in which the Court was asked to strike down a longstanding body of State trade secret law which served important public policy objectives. This the Court was understandably reluctant to do. William H. Rehnquist: The important public policy objectives of the states? Erwin N. Griswold: Important public policies objectives of the State yes Mr. Justice involving the sanctity of fiduciary relations between employers and employees within the State. William H. Rehnquist: Well, can we assume that if the state of Missouri or whatever state this contract was drawn and chose to enforce this contract. They've -- it viewed it as serving important public policy? Erwin N. Griswold: I think Mr. Justice, this Court would have to decide and my suggestion would be that whatever the public policy conceptions objectives may be, they are not nearly as important. The sole issue here is whether it is valid to make a contract with respect to a pending patent application which calls for indefinite royalties extending beyond the period when royalties would be payable if a patent was allowed. William H. Rehnquist: Well, isn't the sole issue also whether federal patent law preempts state law enforcing this contract? Erwin N. Griswold: Yes Mr. Justice to that extent and that step has long since been taken perhaps the clearest and most striking case being Brulotte against Thys where the Court held at no matter what the state contract law was, a contract calling for the payment of royalties after a patent had expired was invalid. And I am contending here that a contract calling for the payment of royalties without limit of time made with respect to a specific pending patent application should likewise not be construed to call for the payment of royalties for an indefinite period because that would be contrary to the scope, effect, objective of the patent laws and I think here is perhaps a better answer to Mr. Justice Stevens' question. There is here the same interference with the patent law that there was in Brulotte against Thys. Here, there is a disclosure, there is an obtaining of royalties with respect to the disclosure. There is if this contract is invalid a perpetual handicapping of this competitor in the market with inevitable increase in the overall price that the public must pay for the item and as in Brulotte and Thys the contract was held to be invalid after the patent period expired. I don't know just when the contract becomes invalid here. I think that a very good peace can be made for the proposition that royalties will not do under this contract after the patent application was abandoned. We don't have to deal with that. There is no question in this case with respect to the payment of royalties during the patent application period. There isn't much question with respect to payment for a number of years, there isn't any question with respect to the payment of royalties for 14 years after the patent application was abandoned because those royalties were paid and this suit is not an effort to get them back. This suit is a suit for a declaratory judgment seeking a declaration that under proper application of the scope of the patent laws any provision in state law which calls for the payment of royalties for an indefinite period under a contract made specifically with respect to a patent application is invalid. John Paul Stevens: Mr. Griswold, I suppose one could describe the federal policy at stake in Brulotte as a policy against allowing a patent monopoly to have any rewards in addition to the monopoly itself, can be enlarged to that monopoly beyond the terms of patent grant, that you can obtain royalties on unpatented articles sold with the patent or on a period after the monopoly protection is expired. I don't see how that federal policy is implicated by this case when there is no monopoly in the first place? Erwin N. Griswold: I think Mr. Justice, the answer is that here there was a preliminary or in court patent monopoly. There was the hope and expectation that a patent monopoly would be obtained and there was a contract made with respect to that hope and expectation which provided for larger royalties undoubtedly then would have been available if no patent application had been filed. And so the patent laws have been used to obtain a larger tribute from the public to use it in that sense than would have been obtained if the patent laws had not been invoked and that I suggest is essentially the consideration which was behind this Court's decision in -- Byron R. White: But the party, the parties also contracted with respect to a payment absolute patent. They said if no patent is obtained the royalties will go down? Erwin N. Griswold: Yes and -- Byron R. White: Why and would the case be different if they had said in “and this is our valuation of the startup value of this disclosure?” Erwin N. Griswold: This is essentially the ground of Mr. Justice Harlan's dissent in the Thys case, not startup value but lump sum payment for the machine and I can imagine a contract calling for royalty payments after the 17-year period. For example suppose the contract provided that the royalties shall be so much for 17 years, but only half of them shall be paid in each year and the second half shall be paid in the 17 years following the expiration of the patent I would assume that would be -- Byron R. White: But how can you say that they are using that the patent monopoly or the in-court patent monopoly is lending some leverage here when they expressly contract for what the royalties should be if there is no patent? Erwin N. Griswold: Well Mr. Justice if she got a patent she couldn't get royalties for more than 17 years, no matter what the contract said. Byron R. White: Yes. Erwin N. Griswold: If she had been a - - if Quick Point had been a patent licensee and a patent had been obtained, Quick Point could attack the validity of the patent and from the time it attacked the validity of the patent it would not have to pay royalties no matter what the contract said. Warren E. Burger: But in that case over the 20 years or more the royalties would have been far in excess of $203,000 on this market rate. Erwin N. Griswold: In the Lear case? Warren E. Burger: No this case. She would have had as I suggested -- Erwin N. Griswold: I don't know whether they would or not, that's hard to -- after all the contract that was made in 1956 was one which called for an aggregate of $200,000 royalty. Warren E. Burger: But it isn't so difficult, you just take the period after the 5 years and double the royalties and add that to the 203 and then add if you could calculate it, so all the people who copied the idea would have to pay license fees. Erwin N. Griswold: I don't see how that is applicable here, but particularly with respect to the Lear case where it was held that if the licensee attacks the patent and is successful, no loyalties are due from the time when he states that he will attack the patent and we find it difficult to think that the licensor of a patent application should stand in a better position than a person who has a good enough invention so that he gets a patent or even one like Lear who has a good enough invention so that he gets a patent but it is latter held to be invalid. There is one point to which I would like to make reference. Twice while this was going on Quick Point asserted its, through one means or another, its obligation to pay royalties. That of course did not necessarily mean indefinitely but to continue to pay royalties. I would point out that one of those letter was by its patent counsel and it may well have been simply erroneous. It was written before the decisions of this Court in Sears and Compco, and Brulotte and Thys and the Lear case and this Court has been a great teacher in this area over the past 15 years. And finally Quick Point may well have thought it equitable or generous to continue making such payments because for sometime it was the only one marketing the key holder. William H. Rehnquist: Mr. Griswold, do you consider Kewanee and Goldstein teaching cases as well as Brulotte and Compco? Erwin N. Griswold: Oh yes Mr. Justice of course and Kewanee is an excellent case that I am very much pleased with. William H. Rehnquist: I should think you would be. [Laughter] Erwin N. Griswold: But it has no relation to this case because this case did does not involve a trade secret of the sort which caused the concern of the Court in the Kewanee case and the Kewanee case did not involve a licensing situation. Harry A. Blackmun: Mr. Griswold, the record contains on page 39 a letter written in 1961 from counsel for Quick Point to Ms Leopoldi. Stating flatly that even if no patent is ever granted, Quick point is obligated to pay royalties in respect of any key holders manufactured by it in accordance with any disclosure of said application. Do you have any comment about that latter? Erwin N. Griswold: Well, Mr. Justice that's what I thought I was commenting on that in the first place he may well have been wrong. He was not an Officer of the company. He was a patent counsel. In the second place it was written before Sears and Compco and Thys and Lear as to which the Court I suggest has been a great teacher. The things have developed, he may well have thought that was the law when he did it, but I suggest that the decisions of this Court had shown that is no longer the law and finally Quick Point may simply have wanted to be generous. They had had good relations with this lady and until the 1960s, they did not have any competition as a practical matter. It was only when beginning in the late 1960s, they found themselves at a heavy competitive disadvantage. You may say only 2.5% royalty but that maybe half the profit. It was only then that they began to explore the situation and come to the conclusion that the decisions of this Court pointed clearly in the direction that a license made with respect to a patent application should not give greater rights than would have been obtained if a patent had actually been granted. Warren E. Burger: Do you have anything further counselor? C. Lee Cook, Jr.: Yes just briefly, may it please the Court. I would like to deal specifically with this letter, which referred to by Dean Griswold just at the end of his argument. Because that letter I think also not only deals with the question of what was the intention of the party but answers also the argument about the fact that the policy really that's its involved here in terms of whether some federal policy is afforded by the existence of the patent application. That -- the argument of respondent on that point ignores I believe the fact that the parties did specifically contemplate that no patent would issue and that in that event the royalty would be reduced to 2.5%. He also argues that why would anyone sign such agreement or why would anyone enter into the agreement such as this, if he could not get exclusivity. This letter, which is on page 39 of the record, I believe clearly demonstrates that the parties contemplated that they might not get exclusivity. Indeed it says that we remind you that under the license agreement, -- the agreement is in respect of the disclosure and not the claims. It is the claims, which give the exclusivity and he is saying here that even if we get a patent, we may not have exclusivity with respect to what we are obligated to pay your royalties on. Potter Stewart: Mr. Cook what if a patent had issued? First of all, there would have been a continuing obligation to pay 5%, not 2.5%. C. Lee Cook, Jr.: Yes. Potter Stewart: But then 17 years had expired after the issuance of the patent, what the obligation have continued? C. Lee Cook, Jr.: In my opinion, it would not under this Court's decision in Brulotte because under those circumstances. Potter Stewart: It's pretty clear, isn't it under Brulotte? C. Lee Cook, Jr.: Yes, because those circumstances the patent owner has taken something from the public. It has taken that extraordinary grant of the right to exclude the entire public from making, using, or selling this device. And in Brulotte if the Court would recall, the Court's – the opinion specifically said that the rationale here does not apply to contracts involving unpatented machines. The rationale of Brulotte was as Mr. Justice Stevens pointed out if you give an inventor a monopoly by a patent, you cannot permit him to expand that monopoly whether to non-patented articles or beyond the 17 years. But in this case, Aronson has taken nothing from the public. The existence of the patent application gives her nothing against the public. It gives her no right to exclude others and there is no public policy that wasn't -- certainly not the policy that was involved in Brulotte has no application here. Warren E. Burger: Well, Mr. Griswold has suggested that there is at least a late wind in her sales by virtue of being able to put the statement patent pending normally? C. Lee Cook, Jr.: Well, we not -- the record doesn't show for sure that anybody did put patent pending or anything in this case. Potter Stewart: They could have? C. Lee Cook, Jr.: But they could have, there is no doubt about that. But also they could have you see the argument I believe the respondent really deserts the Court of Appeals because what the Court of Appeal said is that the important thing here is that that invention wasn't secret. It was somehow in the public domain, but if we had had a patent application on an invention, which was secret, and then abandon the patent application, the Court of Appeals would have enforced that agreement and yet the very same in terrorem effect, if you want to call it that, would be present and indeed in Kewanee there was no question -- the decision was not that you can enforce the trade secret if you haven't applied for a patent on it. The decision was that you can enforce your rights in the trade secret. Now that leaves - Byron R. White: Why you are supposed that royalty rate was higher in this contract up until than it was after the patent was denied? C. Lee Cook, Jr.: I think it is clear that the parties hoped there would be a patent. And if there was a patent - - Byron R. White: They were paying for the right to use a mechanism that on which a patent application was filed? C. Lee Cook, Jr.: Exactly and I believe Your Honor that if the parties hoped there would be a patent and if there would had been a patent, Quick Point would have been willing to pay 5% royalty. Byron R. White: Do you think the case would be different to see if there had been no provision for a reduction in the royalty? C. Lee Cook, Jr.: Yes, I do. I do because I think the reduction in the royalty in this case shows that the party specifically contemplated that the possibilities [Voice Overlap] Byron R. White: So if there hadn't been a provision for reduction of the royalty in the event that there was no patent then you would agree they were piggybacking on the patent? C. Lee Cook, Jr.: No, I would not agree to that, Your Honor. Byron R. White: You just say it would be a different case? C. Lee Cook, Jr.: Yes, I will. Byron R. White: And what would be the result? C. Lee Cook, Jr.: You see that would depend upon the intention of the party. And I think the intention of the parties has made very clear here. Warren E. Burger: But the chief reason why the party -- why they have a reduction in the patent -- patent royalty from 5% to 2.5% because two arm's-length parties agreed on that. C. Lee Cook, Jr.: Exactly and if -- Warren E. Burger: And it doesn't really make much difference or does it, why they agreed on it? C. Lee Cook, Jr.: Well, I don't think it does but I think in this particular case the fact is they agreed on it because they contemplated that a patent might not issue and Quick Point was willing to pay the 2.5% for what Dean Griswold has referred to as the head start value. Now we do know that their head start value was very substantial here. They didn't get competitors in this business until the late 1960s, even though the patent application was long out of existence. The fact of the matter is that if there is a head start value, there is no federal interest in having the Court's interfere with deciding what that value is? If the parties in an arm's-length negotiations agreed that value was 2.5%, why should the courts interfere with that? Why shouldn't the courts permit the state law to enforce that agreement? Now, if I could touch just briefly on the question of a trade secret. There is no doubt that when this invention was first disclosed to Quick Point, it was a trade secret. That's -- it was -- the fact that it was secret is conceded in respondent's brief, it was stipulated to in this record. The fact that it was a value is conceded in respondent's brief because they can see that we are entitled to substantial payments for that disclosure. The fact that it later became public by reason of the sale, does not mean that when the contract was entered into it was a secret. But even if it were not a trade secret within the technical definition on trade secrets, it wouldn't make any difference because the principle involved here should apply whether it's an abstract idea, the concept for a television program, an advertising theme or anything that may not be a trade secret or a patentable invention. The issue involved here is what is the federal policy which is supported by permitting the states to enforce bargains entered into between parties by which one agrees to share with the other the profits he may make from the other's invention or idea and that's exactly what we have here. And if the court's interfere with the enforcement of agreements like this, we will be taking away from potential inventors, particularly small inventors, the strong incentive to make inventions. Otherwise they will be forced to either get a patent or they can't get a patent, they will have to try to sell it for a lump sum, which is a Hobson's choice. We respectfully urge you to reverse the decision of the Court of Appeals. Warren E. Burger: Thank you gentlemen. The case is submitted.

Warren E. Burger: We will hear arguments first this morning in Ernst and Ernst against Hochfelder. Mr. Berner you may proceed whenever you are ready. Robert L. Berner, Jr.: Mr. Chief Justice and may it please the Court. The basic issue in these cases is whether Rule 10b-5 is to be turned into a National Negligence Statute, affecting all conduct in any way touching on the purchase or sale of a security. This issue is presented in the petition for certiorari as whether respondents may predicate a cause of action against petitioners for aiding and abetting a violation of Section 10b of the Securities Exchange Act of 1934 and Rule 10b-5 there under, an allegation and proof of negligence alone of whether they must be alleged and proved something more than negligence, some fraud, some knowledge of the fraud or some reckless or willful conduct tantamount to fraud. There are three other issues in this case which are important to the petitioners and the respondents as a disposition of anyone of them can dispose of this litigation and they are whether. Ernst and Ernst as a matter of law ordered the first securities with all diligence whether the respondent’s conduct is such as to estop them from bringing their claims against Ernst and Ernst and whether the respondents can avoid the bar of the statute limitations. These issues of course are best under understood in the context of the facts which briefly are that First Securities was a small broker dealer in Chicago. It was owned by Leston B. Nay. The respondents for many years were regular securities customers of First Securities and as such in their regular securities transactions received all of the documentary paraphernalia that a securities customer ordinarily receives. They will receive purchase and sale forms, confirmation of sales, accountings, all the documents that emanate from a broker dealer. Most or all of the respondents were also friends or had some personal or social relationship with Nay or with Mrs. Nay and as a result Nay was able to persuade the respondents to invest in what he called an escrow. He told them that he had befriended a small loan company that was required by law to maintain a cash escrow. Their investments would be perfectly safe and it paid 12% interest in some cases, 9% in the other. Of course, the escrow was fictitious and there was no small loan company, but these people paid their funds to Nay by personal check made payable to him personally and he evidenced the investments, the escrow investments by personal notes of his or by -- by letters, all however the correspondence coming from on the letterhead of First Securities Company. None of the transactions involving this escrow ever were reflected on the books and the records of First Securities. The respondents conducted all of their transactions with respect to the escrow with Nay personally as compared with the transactions they had when dealing with First Securities as regular securities customers. The petitioner, Ernst and Ernst was the auditor of First Securities from sometime in the middle 40s until 1967. The respondents’ relationship with First Securities as regular securities customers and as escrow investors began in the early 40s in some cases and continued up until 1968. In June of 1968, Nay’s fancy scheme caught up with them and he shot and killed himself. Warren E. Burger: Killed his wife first? Robert L. Berner, Jr.: Yes sir. He shot and killed his wife and then killed himself. That was, I believe, June 6, 1968. The SEC within a day or two initiated the receivership proceeding which is still pending and the respondents have made their claims in that receivership proceeding, but in 1971, they sued Ernst and Ernst under Section 10b and Rule 10b-5, claiming that Ernst and Ernst caused their loss. Warren E. Burger: Does the record show that in every transaction for the escrow account, the checks were paid to Nay personally and not to First Trust? Robert L. Berner, Jr.: Yes sir. In the litigation against Ernst and Ernst, there were a number of depositions taken of all of the people connected with Ernst and Ernst audit, with the audit by Ernst and Ernst. The documents in Ernst and Ernst's possession relating to the -- their audits over 25 years such as they still had were examined by the respondents and then a motion for summary judgment was filed and granted in favor of Ernst and Ernst in the District Court and the grounds that Ernst and Ernst's conduct in the audits was blameless. The District Court also found that the statute limitations barred these claims and found that the respondents own conduct acted as estoppel. That summary judgment was appealed to the Court of Appeals for the Seventh Circuit which reversed, finding that there could be a genuine issue of material fact as to whether or not Ernst and Ernst's conduct in connection with the audit might have been negligent and they pointed to two -- two transactions, two types of conduct. One, it was the existence of a mailed procedure for securities and the other one was an allegation that they did not take regular vacations. With respect to the what is referred to as the mail rule, I should explain that there was simply an office procedure for securities which provided that all mail delivered to First Securities, addressed to an individual to his attention or to him personally would be delivered to him, put on his desk. Nay, being the owner and president of -- Byron R. White: Unopened? Robert L. Berner, Jr.: Unopened, yes sir. According to the record in the affidavit of John Walsh of Haskins & Sells, that procedure existed at substantially all the brokerage houses, well most of the brokerage houses in Chicago at that time and probably most of them in the county. Nay, however, had an additional -- additional provision which restricted anyone else at the office from opening his mail. As a result when he was not in the office, his mail was not opened. The Court of Appeals found that this could create an issue of fact as to whether or not Ernst and Ernst audited diligently and they reversed and in doing so, the Court of Appeals announced a standard for aiding and abetting liability under 10b-5 -- William H. Rehnquist: Mr. Berner, is the term aiding and abetting a familiar one to members of the security bar? Robert L. Berner, Jr.: It is becoming familiar. William H. Rehnquist: Where did it come from? Robert L. Berner, Jr.: It comes from, I think it comes from the criminal law originally. William H. Rehnquist: How did it get over into the civil law? Robert L. Berner, Jr.: Well, I think it first came over in -- in Fischer versus Klotz, a case in the -- in the Southern District in the late 60s and in the Seventh Circuit, in Brennan versus Midwestern Insurance, the Seventh Circuit adapted the analogy. I believe it comes over because usually an aid and abettor is very little if anything to do with the fraud, and very little knowledge if any, usually no knowledge of the fraud, but it is a term where someone has given substantial assistance and knowing assistance in connection with some wrong and it has been imported from both the criminal law and there is some old SEC administrative decisions which use the concept, but it is -- it is not a well-known concept yet in the securities law. The standard that the Seventh Circuit adapted as a negligence standard, it leaves no room or at least it does not require any element of scienter, that is any element of knowledge of the fraud of reckless conduct tantamount to fraud. It is a pure negligence standard and as such -- Byron R. White: Negligent aiding and abetting? Robert L. Berner, Jr.: Yes sir, negligent aiding and abetting. I believe the first case in the federal jurisprudence, I am certain it is the first case in the securities laws that adapts that standard that a person can negligently aid and abet a securities violation under 10b-5 or other violations. The Ninth Circuit has adapted a standard which does not require the element of scienter although the case in which they adapted it, clearly had that element, but the majority of the Circuits, the Second, Fifth, Sixth, and Tenth circuits at least, who have specifically addressed themselves to the question have required something more than negligence in terms of culpability for a liability in a private money damage action under Rule 10b-5. Those circuits are correct I believe, if the statute and the legislative history and the reasoning behind those as looked at deep as Mr. Justice Powell pointed out in his concurring opinion in Blue Chip when a language -- when a statute is being construed the place to start is the language of the statute. 10b-5 speaks of manipulative and deceptive devices. Now, it is not clear what that is, but that certainly is fraud language. That is not blameless language or negligent language that talks of fraud. The rule also is replete with words of fraud and in fact, Professor Lass has commented Judge Friendly in the Second Circuit have each stated that if Rule 10b-5 is held to encompass merely negligent conduct it goes beyond the mandated Section from which it draws its life. Byron R. White: Where did the B-2 come from, B-2 in this case? Robert L. Berner, Jr.: Clause B-2 in Rule 10b-5? I believe that all of Rule 10b-5 was draft at the same time in the early 1940s by the SEC. Now there is similar language in the Investment Company Act. The SEC points to some New York Corporation law as perhaps suggesting the language. Byron R. White: Well, the B-2 does not refer -- It does not have that fraud language? Robert L. Berner, Jr.: No, it does not and it -- Byron R. White: It is so worded that -- Robert L. Berner, Jr.: It does not have language as to fault at all. It simply speaks of a misrepresentation or an omission, but I believe the proper view of the three clauses of 10b-5 is that they get to this basically the same kind of behavior. In this court’s case in Capital Gains Research -- Byron R. White: Well, is part of your submission then that B-2 just is not within the reach of -- if it is construed this way, not to require scienter of any kind that it just not authorized by the statute? Robert L. Berner, Jr.: Yes sir. The legislative history of course is not conclusive. Nowhere does it conclusively say that Section 10b requires something more than negligent, but it gets near to that because a reading of the legislative history makes it clear that these provisions in the securities laws are designed to get to dishonest behavior. The phrase is honesty in the marketplace, high ethical standards, these phrases permeate the legislative history. I think it is absolutely clear from the legislative history that these acts are not designed to get to the competence of somebody, but his honesty and the certain abuses that we get in capital gains research that Mr. Justice Goldberg’s points are abuses of honesty. Warren E. Burger: Do you suggest that the statute deals in terms of affirmative action rather than commissions? Robert L. Berner, Jr.: I believe it deals in terms of both affirmative actions and of omissions and an omission can be as a culpable as an affirmative action. The standard which the majority of the circuits urge and which we support would not constitute a retreat to 1934 when the Act was drafted. It would not require a retreat to all common-law elements of fraud as we understood them at that time. We are speaking only of the level of culpability and this would not affect the direction that this Court and other courts that have taken and the other elements which constituted a 10b-5 action, elements of reliance, materiality, causation and the like. We submit that requiring something more than negligence in terms of culpability would simply be a continuation of the direction that Rule 10b-5 and Section 10b has been taking and would prevent an abrupt change in direction which endorsement of the Seventh Circuit’s opinion would constitute. With respect to Ernst and Ernst's conduct, even if a simple negligence standard were permitted for Rule 10b-5, it is clear we submit on the record that as a matter of law, Ernst and Ernst conducted its audit of First Securities with all due diligence. Ernst and Ernst's duty to audit First Securities was to audit in accordance with the general accepted auditing standards. In the uncontroverted evidence, the affirmative evidence in this case is unequivocal. It is to the effect that Ernst and Ernst conducted its audits in accordance with generally accepted auditing standards. The evidence submitted by the respondents is evidenced that goes to the question of whether or not First Securities Company maintained high internal accounting controls, strong internal accounting controls. But of course that is not the issue whether or not the a company has strong or weak internal accounting controls is not determinative of whether or not an auditor audits in accordance with generally accepted auditing standards. Internal accounting controls arrangements are controls, arrangements, procedures within a company that are designed to ensure that company, that its assets and liabilities are correctly reflected on the books and records. And if a company has strong controls, the auditor then has more confidence in them and need not extend his procedures unduly to confirm that. If the controls are weak, he has to engage in more procedures, but whether or not they are strong or weak is not determinative of whether the auditor audits correctly. William H. Rehnquist: Well, the respondents had a couple affidavits of that, I thought that the mail rule would have sure alerted auditors to do more than Ernst and Ernst did here? Robert L. Berner, Jr.: Well, I think that the respondent has submitted three affidavits. One is by a man named Michael Garst who was a retired national bank examiner. William H. Rehnquist: Okay. Can we really parse this kind of a thing on when it is simply a reversed level motion for summary judgment in the Seventh Circuit as to whether the affidavits did or did not make out a conflict on the question of proper audit or it is not that more logical to concentrate on the negligence versus something more issue? Robert L. Berner, Jr.: Well, that is an issue that as I mentioned in the beginning, the question of negligence or not can also win this case for Ernst and Ernst and as a result at least in those terms that is quite important for Ernst and Ernst and I believe that a reading of the three affidavits submitted by the respondents makes it fairly clear that the respondents, two of the three are auditors, one is not an auditor, of the two auditors, one has never audited a brokerage house, but he is leased as an auditor and they say that as a -- it is a matter of personal opinion that they expressed that they would do, one says would employ additional audit procedures if you found this rule. Well, of course he has not reviewed the system at First Securities like the affiance whose affidavits are submitted on behalf of Ernst and Ernst did and they know what the system was and they know what procedures were there and as a result they say, even taking into account the mail rule, the audit was conducted with all due diligence in accordance with generally accepted auditing standards. The respondent’s affidavits simply say, taking the mail rule by itself, they would consider that a possible weakness and they may do something. They may employ additional procedures or not, but they do not get to the question and the question is did Ernst and Ernst audit in accordance with generally accepted auditing standards. Now, even more than that, the respondents have charged, particularly in their briefs submitted to this Court that Ernst and Ernst's conduct could be considered as reckless or fraudulent. They charge that even if the proper standard is followed by this Court, the case should be remanded and we submit that this is incorrect because the conduct of Ernst and Ernst was fully disclosed, fully discovered, is fully out in the open and on the record. It was on the record for the District Court. It was on the record before the Court of Appeals and it is here and it is not just a record that was developed during this case. In the other litigation, related litigation in which the respondents were involved which resulted in a full trial under merits, on at least three other appeals, a lot of information was developed. In fact, all of the items, the three or four items about which the respondents complain in their brief, I mean it is there in their brief, were all outlined in the complaint itself. So, this is nothing new. William H. Rehnquist: Did they allege reckless or willful misconduct in their complaint? Robert L. Berner, Jr.: No, they allege that Ernst and Ernst knew or should have known but as the brief of the Hochfelder, the respondents points out, they never characterized that conduct. They simply -- they did not say it was simply negligent. They submitted it the facts to the Court and it is our view that it should not be permitted at this stage on the basis of the same record to apply a few more adjectives and thus send the case back for another view of the same facts simply with different adjectives in mind. This is not a new theory they are proposing. They are simply proposing that they are continuing to propose that Ernst and Ernst conduct was wrong. William H. Rehnquist: Did they argue on this Seventh Circuit that there was sufficient evidence or would be a trial to support a finding of recklessness or willfulness? Robert L. Berner, Jr.: It was not that clear in the Seventh Circuit. They did not emphasize that, but the Seventh Circuit opinion I believe is quite clear that no finding of recklessness or fraud could be found in the Seventh Circuit opinion and the Seventh Circuit had stretched some to find the possibility of negligence. William H. Rehnquist: Well, the Seventh Circuit said in fact that at common law, Ernst and Ernst could not be held -- Robert L. Berner, Jr.: That is correct. William H. Rehnquist: -- under the Ultramares? Robert L. Berner, Jr.: That is correct which would eliminate a finding of fraudulent of reckless conduct. That is correct. Warren E. Burger: Was there a claim here in the pleadings of reliance on the Ernst and Ernst certificate? Robert L. Berner, Jr.: No sir, not direct reliance. In fact, the record is clear that the plaintiffs did not rely on Ernst and Ernst and on their audit. They have never seen the audit. They did not know Ernst and Ernst. They did not know of them. The theory as best I can make it out is that if Ernst and Ernst had audited properly, it would have told the Midwest Stock Exchange and the SEC that there were weak internal accounting controls at First Securities. Warren E. Burger: Would it derive from the mail, the opening of his mail? Robert L. Berner, Jr.: Opening of the mail. Warren E. Burger: And the fact that he did not take the vacations? Robert L. Berner, Jr.: Well, the record does not support he did not take vacations, but for the record is clear to contrary, but vacations, weak internal accounting controls and there are two other elements. One was the fact that Nay borrowed from this company and the other was that there was tampering in net capital violation in 1967. Both of those were litigated in part of this suit below that was directed against the Midwest Stock Exchange and both of those were found to be by the Seventh Circuit and the District Court as not instances of negligence and a part of the Midwest. Now, Ernst and Ernst was simply to report those to the Midwest. The gist of the complaint as I understand it is that Ernst and Ernst reported those informally rather than formally. I am not sure the legal distinction, but that appears to be what it is and those are not audit problems. For instance, the excessive borrowings are called by Nay, they were always less than the earned surplus. Nay owned the company and the amounts he borrowed were always less than the earned surplus of the company, considerably less. They were all reported on the financial statements just as the requisite SEC instructions require. The respondents claim that the debt should have been reserved because they said Nay was hopelessly insolvent. Well, they overlooked the fact that the debts were reserved, reserved to 100% under net capital computations. Debts from an officer or partner or director of a broker dealer must be carried as a zero asset in determining that capital and that was done in these instances. So those are the other instances Mr. Chief Justice. So we submit that a remand on the issue of recklessness or fraud would be particularly inappropriate. There is not a new theory that is being urged by the respondents. They are merely new adjectives that are being applied to Ernst and Ernst conduct, the same conduct that has been fully before all of the courts. I would like briefly to touch upon the two other issues -- William J. Brennan, Jr.: May I ask Mr. Berner, I think the commission suggests that they should have an opportunity to amend their complaint to affect the theory of reckless and the intentional rather than negligent conduct? Robert L. Berner, Jr.: Yes sir. William J. Brennan, Jr.: What do you think? What do you say to that? Robert L. Berner, Jr.: I think the commission’s suggestion is improper. The commission’s brief was filed several weeks after the brief of the Hochfelder, the respondents where the use of the words reckless and fraudulent first occurred and the SEC, that the commission refers to that brief and says perhaps the case should be remanded. However, the SEC bases that apparently on the fact they believe a new theory is being -- maybe argued. We do not consider this a new theory. Byron R. White: Incidentally was there suggestion involve as to the statute limitations questions? Robert L. Berner, Jr.: Well, the statute limitations questions exist now and the statute would be the same. It would not affect the applicable statute. If I may, I would -- William H. Rehnquist: Mr. Berner, if the general rule is that even an intervenor is not allowed to raise a new theory in the case, would the SEC simply as an amicus have any right to raise a new theory at this stage? Robert L. Berner, Jr.: We felt that the suggestion was gratuitous and it is not supported by any case authority as to their standing. It appears on the last page of their brief. Warren E. Burger: Does it not suggest something like the common law action? Robert L. Berner, Jr.: A common law action, a 10b-5 is not the only statute or the only theory upon which a plaintiff can proceed in this case, can a common law -- Warren E. Burger: On what theory, did they proceed, on 10b? Robert L. Berner, Jr.: No, only on 10b-5. Warren E. Burger: But now, if the SEC suggestion is construed to be a suggestion for a common law claim then it is a different theory, is it not? I put that if. Robert L. Berner, Jr.: Well, I would not call it a different theory. I think they would still be alleging fraud. They may have found to know another way to get at Ernst and Ernst, but I would not consider that different theory. I would like to reserve a few minutes if I may. Warren E. Burger: Very well, Mr. Berner. Mr. King? Willard L. King: Mr. Chief Justice and may it please the Court. In 1968, a man calling himself Leston B. Nay, a member of the Midwest Stock Exchange and President of First Securities Company of Chicago murdered his wife and killed himself. He left a suicide note in which he said that his company was bankrupt because of his debts committed over a period of 30 years. His suicide note also said that a certain escrow in which he had sold investments to the customers of First Securities Company was spurious. Nay had persuaded these plaintiffs, long time customers of First Securities Company to let that company sell their standard securities and invest the proceeds in this fictitious escrow. There was no escrow. Nay converted their money to his own use immediately upon its receipt. Nay’s suicide note also asked that Ernst and Ernst be notified. Why? What part did Ernst take it in Nay’s horrid story? For 20 years, Ernst had certified each year to Midwest Stock Exchange that First Securities Company, a balance sheet of First Securities Company showing it to be solvent when in fact it was utterly insolvent. In each of those 30 years, Ernst had certified to Midwest Stock Exchange that it had revealed the internal accounting control of Nay’s company as it was required to do by the standards of its profession. Actually, the company had no internal accounting control because they had Nay had adamant office rule that all mail received by the company, addressed to him or to the company for his attention could only be opened, seen or read by him. When he was away for a few days, the mail by his command piled up unopened on his desk. Nay secreted the incoming mail on his debts. A great mass of his correspondents with his escrow victims was found locked in his desk. Ernst never reviewed the internal accounting control. If they had done so it would have uncovered Nay’s fraud. Now what is internal accounting control? Warren E. Burger: Do you say it would have necessarily uncovered the mail rule that you just described? Willard L. King: Yes, Mr. Chief Justice. What is internal accounting control? In 1939, the SEC published a volume on that subject which established the very simple definition of that term. Internal accounting control means that the work of each officer and employee must be counter checked by the work of another. It means that no fraud or crime can exist without collusion between two or more persons. It means that no one person can profit by fraud because his fraud will be discovered by another person. Warren E. Burger: With whom do you suggest there was collusion here? You say it takes two, at least two to accomplish collusion? Willard L. King: There was no collusion here that I suggest. I was giving the definition of internal accounting control as stated by the SEC on the basis of the testimony of 12 leading American Public Accountants in 1939. I did not suggest collusion. The essence of the internal accounting control is required duality. In 1939, the SEC published the complete transcripts of the testimony of 12 leading American Publican Accountants, each of whom testified to this definition of required duality as internal accounting control. One of those experts was the senior partner of Ernst and Ernst. This occurred in the SEC’s investigation of the colossal frauds that McKesson and Robbins, a multi million dollar drug concern; no securities were listed on the New York Stock Exchange. The President of that company was an ex-convict under a fictitious name who operated the company with the aid of his three brothers also under various fictitious names. They inflated the sales and inventories by many millions. Like Nay, the President shot himself when his fraud was discovered. McKesson had been audited by a nationally known public accounting firm and the SEC condemned its failure to check the internal accounting control. One of the McKesson criminals required that all of the incoming mail be put unopened on his desk. He never took a vacation. Under these circumstances, the SEC questioned each of the twelve leading American Public Accountants on the duty of a public accountant with respect to checking the incoming mail. It showed each of them a bulletin of the American Institute of Certified Public Accountants under a caption “safeguards surrounding the handling of incoming mail.” Each of the twelve leading public accountants testified that a public accountant must not fail to check the routine of examining, handling the incoming mail and find it to be controlled so that no one could secrete that mail. William H. Rehnquist: Well, Mr. King supposing they do fail to check into that, that would still be no more than negligence, would it? Willard L. King: I suggest that it would be the grossest sort of negligence and gross negligence of the public accountant as evidence of fraud. William H. Rehnquist: Well, that is just a lot of words, negligence, gross negligence, evidence of fraud, but those are three fairly separate things and I do not think it helps analysis to simply garble them all together? Willard L. King: I did not mean to garble them, Mr. Justice. Lewis F. Powell, Jr.: Mr. King, do you understand you are now arguing that was fraud, a fraud of Ernst and Ernst? Willard L. King: Our complaint does not allege either negligence or fraud. Lewis F. Powell, Jr.: But in your interrogatory as you expressly disclaim that is fraud? Willard L. King: Yes. Lewis F. Powell, Jr.: Are you standing on that interrogatory, are you now changing the course? Willard L. King: Of course I stand upon it Mr. Justice. Lewis F. Powell, Jr.: Well then you are not charging forward? Willard L. King: Well, I asked, if necessary leave to amend the complaint to charge gross negligence equivalent to fraud. Lewis F. Powell, Jr.: In this court? Willard L. King: Yes. Well, this Court has previously in cases involving summary judgment permitted case to be reversed for amendment of the complaint. Lewis F. Powell, Jr.: So, you are asking that the case be remanded to allow you to amend your complaint to chargeable? Willard L. King: That is correct. Lewis F. Powell, Jr.: When was this suit instituted? Willard L. King: In 1971. Lewis F. Powell, Jr.: And this is the first time that this it has occurred to you, four years? Willard L. King: Well, it only occurred to me when this Court allowed certiorari on the opinion of the Seventh Circuit. I had been describing the McKesson report of the SEC. Since that report, since 1939, the SEC in two cases has suspended a broker from the exchanges for tolerating Nay’s mail rule. The advisory committee of broker dealers to the SEC in its volume entitled “Guide to Broker Dealer Compliance” has stated no personal mail should be permitted in an office or any mail distributed unopened to any salesman or other employees and our position to Ernst's motion for summary judgment, the plaintiffs filed the affidavit of Fred J. Duncan, a former President of the Illinois Society of Certified Public Accountants and a former member of the Board for certifying them. Mr. Duncan’s affidavit stated that he would not have certified the balance sheet of a company employing Nay’s mail rule because such a company had no internal accounting control. To the same effect, the plaintiff’s filed in opposition to the summary judgment the affidavit of Gerhard Meyer, a distinguished public accountant of 30 years experience. Ernst filed in support of its motion for summer judgment, the affidavit of its partner Jerry Hooker who had been in-charge of the First Securities Company audit. Hooker’s affidavit stated that Nay’s mail rule was not relevant to internal accounting control. On his deposition, Hooker testified that he would had not have objected to Nay’s mail rule if he had known about it. He was clearly unacquainted with the elementary rules of his profession. His affidavit is contrary to the affidavits of the two distinguished public accountants that the plaintiffs filed. It is contrary to the testimony of the twelve leading American Public Accountants published by the SEC in 1939. It is in the teeth of the two cases where the SEC has suspended a broker from the exchanges for tolerating Nay’s mail rule. I submit that no summary judgment may be issued on that affidavit. I turn now to privity or as Judge Cardozo called it near privity between the plaintiffs and Ernst. These plaintiffs had been long time customers of First Securities Company. Nay made the proposal of the escrow to them in the office of the company. Nay made the proposal of the escrow to them under this plaque. This plaque was Nay’s principal tool for perpetrating his fraud. By this plaque, Nay defrauded these people of their life savings, aggregating approximately $1 million. It reads, “Midwest Stock Exchange organized 1882, where highest standards have commercial honor and integrity are maintained and just an equitable principles of trade and business prevail.” This certificate of membership is issued to Leston B. Nay of First Securities Company of Chicago. That plaque was kept there for 20 years by Ernst’s false certification of the balance sheet of First Securities Company. That plaque would have come down if Ernst had ever delivered a correct balance sheet. That plaque would have come down if Ernst had ever told Midwest Stock Exchange that First Securities Company had no internal accounting control. That plaque would have come down if Ernst had ever told Midwest that Nay secreted the incoming mail. Twice the SEC has suspended brokers from the exchanges for tolerating that rule. Harry A. Blackmun: Mr. King, neither you nor Mr. Lassers has cited in your briefs the Blue Chip opinion. Although your opposition cites it repeatedly, is there a reason for this? Do you feel that that Blue Chip case has no bearing on this one? Willard L. King: I think there is a footnote in the Blue Chip case that might have a bearing on 17a-5, but our complaint did not mention 17a-5 and I would avoid it. Nay represented this escrow to these plaintiffs as the First Securities Company project. The evidence of that in the Court of Appeals, first Nay decision in the 463rd Federal Second is overwhelming. When one of the plaintiffs asked to withdraw his escrow investment, Nay said to him, your money is safe at First Securities. And Ernst certificate was given wholly for the benefit of these customers of the company and not at all for the benefit of Midwest Stock Exchange. It is only in the name was the protection of the customer’s of the company. I suggest that we thus have a situation approaching privity as Judge Cardozo said between Ernst and these plaintiffs. Lewis F. Powell, Jr.: The Court of Appeals stated that plaintiffs admitted lack of reliance on the financial statements prepared by Ernst and Ernst? Willard L. King: We never saw the financial statement. What we did see this plaque which was kept there by that certificate. Lewis F. Powell, Jr.: But you never saw the financial statement? Willard L. King: We never saw it. Lewis F. Powell, Jr.: And you agree of the clients therefore, did not rely on what you contend are the failures of Ernst and Ernst correctly to audit the accounts of this company? Willard L. King: I agree that we never saw the financial statement, but I think our loss was a direct result of Ernst’s failure to properly audit the company. There failure to discover Nay’s mail rule which would have terminated Nay’s operations. He could not continue those operations if an auditor reported that he has secreted the incoming mail. Warren E. Burger: What if all the factual situation was the same and Mr. Nay had a sideline dealing in second mortgages and did that through the private mail rule and that the whole scheme involved forgeries of the second mortgages, would you think that the same kind of liability would follow in that kind of a case? Willard L. King: I would think you could assume an isolated transaction by Nay -- Warren E. Burger: Well, I mean a series. Willard L. King: A series of isolated transactions? But that is not this situation. Here, he represented that this escrow was a First Securities project. Byron R. White: And he was using the money for what? Willard L. King: That I am not sure. Byron R. White: Well, why was the company bankrupt? Willard L. King: Oh! That was an originally back in 1938, a tremendous theft of some $474,000.00. Byron R. White: Why was the company -- what was he doing to the company that led its failure? This escrow arrangement, how did that contribute to the failure of the company? Willard L. King: His failure was a suicide when he no longer could put all the bank out in Colorado to whom he was short some $475 -- the company was short some $474,000.00 and mind you this is incorporated for 35,000. The company was utterly, hopelessly insolvent from the instant Ernst started to audit. Warren E. Burger: I think you are cutting onto your colleague’s time. Willard L. King: Thank you. Warren E. Burger: Mr. Lassers. Willard J. Lassers: Mr. Chief Justice and may it please the Court. I would like to start off by responding to Mr. Justice Powell’s comment or question as whether we are for the first time in this Court now arguing that the conduct of Ernst and Ernst was reckless. Our answer to that question is that we are not arguing it for the first time because what happened was we tried the case below on the theory that all we have to show was a failure of Ernst and Ernst to observe proper auditing standards and that case was tried on that basis in the District Court and in the Seventh Circuit. William H. Rehnquist: Have you tried -- you are talking about the case against Ernst and Ernst? Willard J. Lassers: Yes sir. William H. Rehnquist: I thought it went off on a summary judgment? Willard J. Lassers: It was. Yes, I am sorry I did not -- yes, right. And then in this Court in the certiorari petition, Ernst and Ernst for the first time raised the issue that something more was needed and we said, well, now that something more is needed, we are prepared to prove something more. Second, I would like to respond to Mr. Justice Blackmun’s comment -- Byron R. White: Before you carry on, our attempt to the response to interrogatories on page 86 of the appendix in which you say, we do not contend that Ernst and Ernst employed any scheme or auditors to defraud. Do you now repudiate that? Willard J. Lassers: No sir because what we are saying there was we do not contend that Ernst and Ernst was in league with Nay. What we do say is that if this Court holds that Ernst and Ernst, if that recklessness is the standard, then we are prepared to prove recklessness after all you can commit a fraud, if you disregard, you close your eyes to the obvious, that too is a fraud and coming to Mr. Justice Blackmun’s comment about the Blue Chip case. As I read Blue Chip I do not think that is applicable because as I read Blue Chip, there has to be a purchase and a sale. We grounded our case on Section 10b and there was clearly a purchase and a sale. Byron R. White: On the negligence basis, would there be a cause of action under state law against Ernst and Ernst? Willard J. Lassers: Under state law? I do not know, I cannot answer that. I have not researched Illinois on that question. Now, I would like to comment on the mail rule. Thurgood Marshall: In this case, four years, you took for discovery? Willard J. Lassers: Yes sir. Thurgood Marshall: Extensive discover? Willard J. Lassers: Well, yes. Thurgood Marshall: And did you find enough of fraud? Willard J. Lassers: I think we found enough to prove it. Thurgood Marshall: Why did you not allege it? Willard J. Lassers: What? Willard J. Lassers: Well, we did our discovery after we filed our complaint. Thurgood Marshall: Well, you still could have amended your complaint, could you not? Willard J. Lassers: No, but -- Thurgood Marshall: Could you not? Willard J. Lassers: Well, we could have asked, but if -- Thurgood Marshall: Well, did you ask? Willard J. Lassers: No sir, because Ernst and Ernst never raised this issue that we have to prove recklessness until we got here. William H. Rehnquist: But it was your lawsuit. What? William H. Rehnquist: It is your lawsuit.[Laughter] Willard J. Lassers: Well, that certainly is true, but we felt that we had alleged enough. William H. Rehnquist: But if you got a claim for negligence and a claim for fraud, certainly you will allege both of them, do you not, you do not say negligence is good enough to get by and so we will not worry about fraud even though we cannot rule (Voice Overlap)? Willard J. Lassers: Well, because fraud is a much more difficult thing to prove, but and I like to say this about the mail rule because I do not think the full flavor of the mail rule has come through to the Court and that is this. It was not just that there was rule on the abstract that the auditor failed to find. What happened was that he went in, the auditors went in every year, at the beginning of every audit, they would spend two and three days, they would come in the morning at nine o’clock, but before the mail was untied from the bundles and their duty was to examine the mail as it came in and they watch the mail being untied from the bundles and they saw the clerk then abstract the letters that were for Mr. Nay and put them off to one side and the auditors never raised a question about that for 15 years and it went through two or three auditors. Now, then the other matter that Mr. Berner alluded to and very late in the game. Potter Stewart: Mr. Lassers? Willard J. Lassers: Yes. Potter Stewart: What do you suggest the auditors should have done, should have said why he do that and the answer would have been, well, because Mr. Nay likes to open his own mail? Willard J. Lassers: Well, I say that at that point, and Mr. Meyer, our expert CPA says that that would have been enough to trigger a warning to him that further investigation was -- Potter Stewart: Well, that would be the further investigation. Why do you hold that mail for Mr. Nay while he is away on vacation? Willard J. Lassers: Right. Potter Stewart: Well, because he likes to open his own mail. Willard J. Lassers: Right, then our expert said, if he had not been allowed in effect to look at that mail and if that practice had not been stopped as an extreme, he would have withdrawn from the audit. He would have withdrawn from the engagement. Byron R. White: Why does that your colleague do have said that an accounting firm is not to certify unless another person in the organization sees the mail? Willard J. Lassers: Well, I do not know if I could go that far? Byron R. White: But you would go that far if the auditor were not permitted to look at it? Willard J. Lassers: Well, I think that our auditor says that he would have not certify and now I want to stress to the Court, Section 17a of the 1934 Act which I think is essential to this action here because that is the Section which says the brokers have to keep books and records and it says that the auditor must have a certified audit once a year so that the audits that Ernst and Ernst was performing were not audits. They were being undertaken voluntarily. These were audits pursuant to the SEC’s command and the audit had to be filed and certified with the SEC. And our point is that the failure to observe the mail practices indicated to the auditors, they should have indicated that there was violation of internal accounting control. Under the SEC regulations, the auditors were required to check internal accounting controls, and therefore, they failed in their statutory and regulatory duties. Lewis F. Powell, Jr.: Mr. Lassers is 17a before us on this petition for certiorari? Willard J. Lassers: Yes sir. Lewis F. Powell, Jr.: Did you file any cross-petition? Willard J. Lassers: No sir, but as I understand the rule that we relied on 17a in the Seventh Circuit and the Seventh Circuit decided the case on the basis of 17a and we are a respondent, and therefore, we are in a position to assert anything that is in support of the judgment below. Byron R. White: Mr. Lassers, let me ask you. Do you mean that if we reversed the Court of Appeals on the 10b, that we could affirm the judgment on 17a? Willard J. Lassers: Well, our position -- Byron R. White: I did not know that, is there a private cause of action under 17a? Willard J. Lassers: Well, there may be. Now, that is not -- it has not been decided by this Court. It has not been decided -- Byron R. White: Well, the Court of Appeals did not say so, did it? Willard J. Lassers: No, it did not. Byron R. White: Well, then we could not affirm on 17a? Willard J. Lassers: Our position on 17a as we are suing under Section 10b and our position on 17a -- Byron R. White: Well, if we reversed the Court of Appeals on 10 and decide against you on the 10b, you have lost the case, have you not? Willard J. Lassers: No sir, your Honor. Byron R. White: What about 17a then? Willard J. Lassers: Our position on 17a as we are suing under 10b, and our position is that Section17a sets up the duty and it also sets up the standard that has to be adhered to under 10b. Byron R. White: Yes, but you do not whether you could stay in court under 17? Willard J. Lassers: Well, that would be an issue before this Court whether there is an implied cause of action under Section 17 as such. Byron R. White: Well, the Court of Appeals certainly did not decide there was? Willard J. Lassers: No, they reserved the question. Byron R. White: Well. Willard J. Lassers: And as I read the Seventh Circuit, they held that there was a -- that the Section 17 set-up a duty and the standard. Byron R. White: Only if we wanted to decide an issue, the Court of Appeals did not decide is 17 here? Willard J. Lassers: Well, I think 17 is here in the sense of a setting up the standard and that we are suing under 10b about the standard of care that the auditor is responsible for is laid out for and very precisely under 17. Now, the final point I want to make has to do with another violation and that has to do with the net capital violation that occurred very late in the game. What happened there was this and here I think that Ernst and Ernst did in effect file of a false audit certificate. They came in and as part of their auditing they were required to examine the question whether the net capital rule of a company had been violated and they found that there was a violation. They called it to the attention of Midwest, Midwest said do not say anything about it. They did not say anything about it and they went ahead and they filed -- gave First Securities a clean bill of health with the SEC. William H. Rehnquist: Mr. Lassers, could I ask you a question which I should have asked your colleague Mr. King. Is he the author of the leading biography on Chief Justice Fuller? Willard J. Lassers: Yes, he is. William H. Rehnquist: Thank you. Warren E. Burger: Mr. Gonson? Paul Gonson: Mr. Chief Justice and may it please the Court. The basic position of the SEC in this case, assuming that the auditor's conduct below was not more than negligent, is that the judgment should be rendered for Ernst and Ernst and this is so on a very simple basis because the plaintiffs in this case, respondents here in their capacity as escrow investors were not reasonably foreseeable by Ernst and Ernst and as they concede, they did not rely on any order prepared by Ernst and Ernst. We share with Ernst and Ernst then with the amicus, American Institute of Certified Public Accountants, a reluctance to expose accounting firms to potential damages in vast amounts for negligence in cases where it strikes one's basic sense of fairness that such damages should not be imposed. But Ernst and Ernst comes to this Court in this quite unusual case actually, quite an untypical case and asks that the baby be thrown out with the bath water. It asks this Court to enunciate a rule that if accepted, would also bar recovery in meritorious cases, the more typical cases; the cases were a sense of fairness would say to one that perhaps damage judgment should be awarded. Now, if this Court wishes to develop such a broad rule, respecting the liability of auditors for negligence then we have offered in our brief in which I will speak to you briefly today, what we think is a sound approach in doing so. But in developing such a broad rule in this case, this Court would then be called upon to strike an appropriate balance between two important competing policies. On the one hand there is the necessity of maintaining high professional standards of accounts because of their extremely important role with respect to the Federal Securities Laws. This country system of such laws is dependent on the disclosure, the integrity of disclosures which are made to investors. In order recognized as having a public duty in that respect to safeguard the interest of the public who reads their reports, more so than an interest to safeguard the auditor’s client. Auditors are called upon to certify financial statements containing the wide variety of documents required to be given to investors by public companies and to be filed with the SEC. In many instances, the opinion of the auditing firm is essential before securities may be offered to the public or placed privately, Thus, the continued confidence of the public in the securities laws of this country has to rest to some great extent on the shoulders of the accounting profession. Now, when I say this I do not mean to suggest that auditors are insurers of the honesty of their clients. Certainly, they are not and they have no obligation affirmatively, but to seek out fraud, nor should they have any liability of any kind for honest professional judgments which turned out on hindsight to have been erroneous, but the auditor is, in a peculiarly advantageous position to detect and to stop fraud in its incipiency. The question here is what if he fails to that through negligence and investors are injured. Now, we doubt that this Court would wish to say that there never could be a case under any circumstances under 10b-5 where an injured investor might recover damages against an auditor whose professional conduct fell below the standards of his profession. Thurgood Marshall: Mr. Gonson, is there anything that Securities Exchange Commission itself can do to a fraudulent auditor? Paul Gonson: Well, certainly there are remedies that are available to the Securities and Exchange Commission. It could sue an auditor for an injunction pursuant to the provisions of the Securities and Exchange Act and under appropriate circumstances they could bring disciplinary proceedings under Rule 2E of its Rules of practice. This Court has recognized in several cases that private causes of action are an effective supplement to the SEC’s own enforcement -- Thurgood Marshall: You seem to anticipate my next question, have they taken any action against Ernst and Ernst? Paul Gonson: In this case, not to my knowledge Your Honor. Potter Stewart: But what role if any, do you think Section 17a of the Exchange Act plays or ought to play? Paul Gonson: Well, this raises a question to which of course Justice White eluded earlier and that is that it does not appear to have been ruled out in the court below and the question -- Potter Stewart: Well, it is discussed in part two or part three of its opinion -- part two of its opinion? Paul Gonson: Yes, there is a question as to whether -- Potter Stewart: It is just saying that it was a statutory -- Paul Gonson: Yes, it implied that right of action could be created and beyond there of course there would be the question whether in this case the requirements of Section 17a as it existed at the time of this action that were met which is a separate factual -- Potter Stewart: But you are going as I understand you, you are a little beyond meats and bones of this case and talking generally about what the rule ought to be and it was in that connection that I asked you a question what role if any, do you think, what function if any do you think that Section 17a ought to play in deciding the question of civil liability of accountants to investors under 10b? Paul Gonson: That rule of course, I am speaking much more broadly in respect as to the order to broker dealers in that rule is of course the rule that relates to the order of broker dealers and the commission has not prepared a position your Honor today with respect to what Rule Section 17a should be playing this case rather we are addressing ourselves to the role of Section 10b and 10b-5. Now, we think that in appropriate balance there must be struck between a sufficiently broad standard of culpability to reinforce this important right of investors to receive accurate information and the need to avoid unfairness to particular accountants by subjecting him for damages to negligence to persons who do not rely on his conduct. Now, the question is how is this balance to be struck? Where should the Court look to for guidance to structure the contours of an appropriate damage remedy? Before I do get to that, I want to make two brief points. First, in this case, we do agree with the respondents that negligent conduct is sufficient to establish a violation of Section 10 and Rule 10b-5, but it does not follow that every negligent violation should give rise to a money damages remedy, thus we separate ours into two questions. The first, is there a violation of the Section and second, what should the remedy be? I agree with Mr. Berner, Ernst and Ernst counsel that the legislative history on 10b is far from conclusive, but I offered to this Court that there is nothing in the phrase “any manipulative or deceptive device or contrivance” which limits conduct only to that which is done intentionally. Indeed, when Congress wanted to limit the Act to willful conduct, both with respect to violations and with respect to civil liability for this violation, it specifically said so. William H. Rehnquist: But do the terms not manipulative and deceptive both at least to the common mind convey a sense of intent as well as the objective result of the actions? Can you negligently manipulate something? Paul Gonson: Well I would respectfully disagree, Your Honor. I think that the phrase manipulative and deceptive refers not to any particular state of mind, but rather to the conduct or to the affective conduct. If one looks at the phrases that Congress used in the various civil liability provisions which are set forth in our brief and in the other briefs, and when they wish to connote conscious or intentional wrongdoing, they use phrases like this they said “did not know” -- William H. Rehnquist: What is the manipulative practice that could be negligently carried on? Paul Gonson: I am not sure what a manipulative practice that could be negligently carried on is, but I think I know what a deceptive practice that could be negligently carried on and that is the kind of a practice where a person, through failure to it adhere to the standards of his profession like an accountant causes financial statements to be deceptive and to mislead persons. Potter Stewart: The statute does not use the word practice. It uses a device or contrivance. Nouns that are derived from verbs, from the verbs device or contrive, and those are affirmative verbs, those are not negligent verbs? Paul Gonson: That is true Your Honor. I would not disagree with that, but I would point out that in Section 9 of the Securities Exchange Act in the subdivisions, in that Section, this is the Section that deals with the prohibition against affecting transaction on the securities exchange for the purpose of influencing the price and that Section and several sub sections prohibit these practices “for the purpose of doing such and such.” And the civil liability Section which is Section 9e, imposes liability on the person who “willfully violate” so at least we are having some sections an indication of the state of culpability required. We have in 10b at least an ambiguous phrase and I would suggest that in this situation, we look to the admonition that this Court has emphasized again and again that when the Court is construing the federal securities laws, in particular Rule 10b-5, since they are remedial legislation, these laws should be construed not technically and not restrictively, but flexibly in order to effectuate the remedial purposes. Byron R. White: For the cause of action that has been implied and the problem is how to construe the law and with respect to the standard of performance is to be required, now why should we not look to some other provisions in the Act to see what -- for some guidance and if you did what would be the nearest guide with the standard, Congress has provided a whole range of standards in various sections? All away from strict liability to negligence to everything to deliberateness, now which section is nearest to this one? Is there any? Paul Gonson: Well, we note in our brief Your Honor. We are now going to the question of remedy as distinguished from the question of whether there was a violation I believe. Byron R. White: Well, no I disagree. You say that negligence is enough. Under some sections of securities law, negligence is not enough? Paul Gonson: I am saying that Your Honor, that even though in a particular case, a person may be held to have negligently violated the law, it still might be improper to impose damages -- Byron R. White: I understand that, but I still wanted to -- at the outset we want to know whether the proof of negligence is enough. Now, Congress has said in some Sections that where it has provided the standard itself, it has said that negligence is not enough? Paul Gonson: Your Honor, that is correct. Byron R. White: Are there some questions that are pretty close to this that require more than just negligence? Paul Gonson: Yes, Your Honor, there are a series of sections that require, that would impose liability absolutely without fault -- Byron R. White: Less than negligent? Paul Gonson: That is correct. Then there are Sections on the other hand that would impose liability only for more than negligence, but there are a series of sections that do impose liability on a duty to discover kind of theory and which give defenses to persons to show that they made a reasonable investigation in the exercise in making that investigation and their basis on which to discover that the information contained was false and misleading. And then I suppose is close to a negligent standard and we think that if in applying the question whether damages should be assessed rather than deciding on negligence yes or negligence no, it is helpful to look to the pattern of civil liabilities that do exist in the Act and we have done that in our brief and we have extrapolated from them what we think is a very useful guide. And if we apply these principles to damage actions under Section 10b and Rule 10b-5, then recovery would be permitted for violations which were committed only negligently under three circumstances. One, the defendant knew or had reason to believe that the plaintiff would rely on this conduct, secondly, the plaintiff did in fact so rely, and thirdly, the amount of the plaintiff’s damages are fairly ascertainable. Speaker: (Inaudible) Paul Gonson: No sir that is not this case and because -- Thurgood Marshall: What case are you arguing then? Paul Gonson: I am speaking largely to a possible rule that this Court if it desires to issue on the subject that auditor negligence may do. In this case, we believe that applying those guidelines that the record would not justify a recovery for the -- William H. Rehnquist: Mr. Gonson, how in this case, just following a literal text to the rule can you say that whatever Ernst and Ernst did that might have violated sub section B was done in connection with the purchaser or sale of any security? Paul Gonson: Well, I suppose that the respondents would take the position -- William H. Rehnquist: Well you are taking a position too that they could be held liable here, so this is not just what the respondent would say? Paul Gonson: Oh! I am sorry Your Honor, I misunderstood your question. I believe that the issuance by Nay of these notes to these investors was the issuance of the security and I would think that upon that the in-connection phrase probably was satisfied by the reading of this Court in the Superintendent case that this activity sufficiently touches upon. William H. Rehnquist: Even though these people never relied on the statements and never saw them apparently? Paul Gonson: Well, I am not urging for that result Your Honor, but I think that the in-connection with phrase could be satisfied by tying the issuance of the note by Nay to the conduct which covered up these transactions. William J. Brennan, Jr.: On the principles you suggest rather most followed by the Court of Appeals, what has the Ernst and Ernst do you contemplate is left to the case when it gets back to the District Court? Paul Gonson: The complaint does not allege negligence nor does it allege intentional or reckless conduct. It simply alleges facts. It alleges that there is a failure of the order to perform properly. The issue of negligence seems to have arisen later on the case. We do not know. We were invited into the case of course at this level of this Court. We do not know whether if they have been advised early in the game that they would have pleaded something more than negligence. Perhaps unwarranted and heedless conduct and so we were reluctant even though we tend to agree that judgment should be for instance Ernst and Ernst to foreclose them from a possibility of making that argument if it is still there. William J. Brennan, Jr.: But it would have to be an argument on something more than negligence? Paul Gonson: Yes, Your Honor. William J. Brennan, Jr.: In admittance which alleges at least recklessness? Paul Gonson: Well, it would have to be I would think proof that would establish. William J. Brennan, Jr.: Or an amendment though it did not have to be? Paul Gonson: Well, the complaint does not as I say allege any standard, it simply alleges facts. William J. Brennan, Jr.: I think it is standard? Paul Gonson: Thank you, your Honor. Warren E. Burger: Mr. Berner, you have something any further? You have about three minutes remaining. Robert L. Berner, Jr.: With respect to the question that has attracted some attention as to what is alleged in the complaint, what the theories are and what the facts are, I would point to the third defense of Ernst and Ernst in its answer filed in this case which says, it is in page 24 of the appendix, in which statements made that Ernst and Ernst had no knowledge of any conduct of Nay alleged to be fraudulent in the second count, without such knowledge, Ernst and Ernst could not aid or abet Nay’s alleged fraudulent conduct. I believe this should answer questions as to whether the possibility of proving or the issue as to recklessness or fraud was ever raised in this case. It was raised in the answer to the complaint. Warren E. Burger: You mean to say that aid or abet without any knowledge would be quite different from the use of those terms as words of originally field of criminal law, would it not? Robert L. Berner, Jr.: My point is that when we -- by this defense we raise the issue as to the level of culpability and this defense tends to set up fairly clearly that the petitioner who was defendant below would take the position that without some knowledge, some scienter, there could be no recovery. This is in response to the discussion as to whether the respondents should be permitted to return the District Court and not amend their complaint as I understand it, but simply to make a new argument which we think is unwarranted. I would like also to point out that the record establishes very clearly that Ernst and Ernst in fact did review the system of internal accounting controls. And with respect to the mail rule, it has never been shown in this case and there is no evidence which supports a causable connection, this issue was not included in the petition for certiorari, but was argued below and to explain the immateriality of a mail rule, if Nay had said to these people, please addressed your mail to me to lock box 1 or First Securities Company lock box 1 that he opened himself, they would have done it. And to think that to require an accountant to review all of the incoming mail of all of the officers and directors of a brokerage house in the circumstances as to think that is -- that itself is a derogation of joint (Inaudible) fraud, we submit is absurd and finally, I would say -- John Paul Stevens: As part of the alleged fraudulent conduct in the scheme on the part of Nay was that he used for securities, he used the stationery and he used the office and the communications were sent to him at First Securities and if had told the plaintiffs when you communicate with me about this escrow business you have to do it through lock box 1, that would -- might well have raised their suspicion. That is the point of -- Robert L. Berner, Jr.: Well -- Potter Stewart: That is part of the fraud. He was using First Securities. Was that not as alleged? Robert L. Berner, Jr.: That is as alleged, but it also is reasonable to assume that he specifically told these people to address all mail to him in connection with the escrow to his attention or to him personally because as the record indicates he told them he did not want anyone at First Securities to know about these investments. He did not want -- this was a company whose name he never revealed and it should remain confidential. Warren E. Burger: So, that is in your point of view that it alert them as much -- should have alerted them as much as the hypothetical which Mr. Justice Stewart gave you about the -- Robert L. Berner, Jr.: It should have alerted the respondents, yes sir. Lewis F. Powell, Jr.: May I ask a question. One of the allegations of the respondents relating to the net capital deficit is that there was concealment by Ernst and Ernst. If you have addressed that I do not recall it. Robert L. Berner, Jr.: I did not. The net capital violation was a temporary violation as of October 31, 1967. It was $9,000.00 net capital violation that Ernst and Ernst discovered in the course of its audit and which it reported to the Midwest Stock Exchange. In the Midwest Stock Exchange at the time of reporting, had they also advised the Midwest Stock Exchange that the net capital violation had been remedied and there was no longer a violation at the time of reporting which was several weeks after the date as of which the audit was being made. And the officer of the Midwest Stock Exchange, Mr. Rothling advised Ernst and Ernst to not to note the net capital violation on the year end audit because it had been corrected. John Paul Stevens: The full extent of it was $9,000.00? Robert L. Berner, Jr.: Yes sir. Potter Stewart: And this is an oral report, was it not? Robert L. Berner, Jr.: No, this was on the certified financial statements that were to be submitted to the Midwest Stock Exchange. Potter Stewart: But the communication between was oral? Robert L. Berner, Jr.: Yes sir, it was oral, but it is memorialized in a memorandum. It is in the record. It is undisputed. There is no dispute about the facts I have just -- Potter Stewart: But I think there is some point made at the fact that this was done orally and not officially and in writing, is that not correct? Robert L. Berner, Jr.: Well as I understand it yes, the argument is that it was done informally rather than formal. I am not sure what formally means. Potter Stewart: Well, among other things, I think it may be means oral nature of it. Warren E. Burger: But did you say it was confirmed in writing? Robert L. Berner, Jr.: No, the fact of the telephone conversation between Mr. Hooker and Mr. Rothling is the subject of a memorandum. Speaker: It is in the memorandum, is it not? Robert L. Berner, Jr.: It is in the record. I beg your pardon? Potter Stewart: Have a one way? Robert L. Berner, Jr.: Yes sir Mr. Rothling testified as of the conversation in related litigation right. And it testified that he instructed Ernst and Ernst not to include the existence of the by then cured violation. Potter Stewart: Right. Lewis F. Powell, Jr.: What is the total amount of damages? Robert L. Berner, Jr.: The total amount of damages is a $1.56 million plus attorney’s fees that is compared to the annual fee received by Ernst and Ernst of between $2,000.00 and $25,000,000.00 for making -- performing these audits. The damages had been reduced by approximately $200,000.00 which the respondents will be receiving as indicated in their brief out of the receivership proceeding. Thank you. Warren E. Burger: Thank you gentlemen. The case is submitted.

Warren E. Burger: We will resume arguments in No. 75-420. Mr. Morris you have about 21 minutes remaining. Doyle S. Morris: Mr. Chief Justice, may it please the Court. When we concluded last evening, it had been established that Section 15(a)(2) is gone, it is no long -- Congress has made it no longer applicable to the railroads. And you will recall that that was the Section, that was the source upon which the Government and the Commission relied for there source of implied power. So it appears that the appellants in terms of statutes had nowhere else to go because the new rule of rate making expressed in new Section 15(a)(4) makes it clearer than ever that the rate making power cannot be expanded by implication in to the power to impose conditions controlling the use of Carriers’ revenues. One or two examples will— Byron R. White: Of course the Government (Inaudible). Doyle S. Morris: I take it they do that Mr. Justice White. Byron R. White: (Inaudible). Doyle S. Morris: I take it they do not but I respectfully submit that any reading, just a casual reading of new 15(a)2 for which appears at page 2 of our supplemental brief establishes once and for all, that the Congress has imposed upon the Commission an affirmative duty to establish revenue levels for the Carriers which will among other things cover “total operating expenses”. And if I may be permitted to give Your Honors a couple of examples that will readily illustrate how the claim power cannot be implied from this new statute. At appendix 467 and 473, you will find the cases that the DTNI, the DTNI is at 467, the Utah Railway is at 473, each of these Carriers applied under their Commissions 305 orders for permission to use these revenues for operating expenses. And what happened? They were turned down. Now the Milwaukee case tells us even more. The Milwaukee case appears at page 477. The Milwaukee was desperately had put for cash and it applied to the Commission under its order for permission to use these funds for operating expenses. After two months of deliberation, the Commission finally grudgingly agreed to give such consent but upon conditions. So at once we see further new conditions superimposed upon the conditions that are here challenged at Bar. And what were these two new superimposed conditions? One, that the Milwaukee’s transfer from its Account 716, that is Special Reserve Fund that the Commission had decreed to its other pocket in Account 701 cash that had to be regarded if you please as I quote “borrowing” and such borrowing could endure subject to the Commission and had to be repaid upon the Commission’s further order. And the second condition was while this borrowing was outstanding, the Milwaukee could not be permitted to transfer any assets of any kind to its parent company or to any of its affiliates or subsidiaries without the Commission's permission. Now, in imposing this second condition, the Commission was exercising a power that the Congress of the United States has steadfastly refused to grant it over a period of a decade, for more than a decade. The Commission has been up on the hill trying to sell a Bill that would give it jurisdiction over it just as very tight of inter-company transactions and the Congress in a full decade has not even given them a hearing on that Bill. So this illustrates what can happen. It illustrates that unlawful, unauthorized action breeds upon itself and leads to further unauthorized actions. Warren E. Burger: I suppose that the Congress thought the particular Amendment was not necessary that might also explain not having any action to do. Doyle S. Morris: Very much so, certainly Your Honor. And we agree entirely. But the point I should like to make is— Warren E. Burger: The Commission might respond to that by saying that they have the power already and they were just trying to confirm it. Doyle S. Morris: Their representations to the Congress were quite to the contrary, they have made extensive representations which they say, they do not have any power whatever. We cite them in our brief, to control or prohibit or deny inter-corporate transactions over the payment of dividends, transfer of assets, what have you. And they claim that this is a serious problem that they ought to have be given jurisdiction to say, yes, you may make such a transfer, no, you may not, it should be rescinded etcetera. Extensive jurisdiction over such transfers and the Congress has not accorded it. Warren E. Burger: Did the Commission in this presentations relate that to some of the disasters that have occurred in the carrier field. Doyle S. Morris: They have. They have related it to the well-known disaster of the Penn Central and it is interesting to find that --- among expert bodies who have studied this subject including the Commission's own staff, there is no conclusive evidence that the fact that the Penn Central had a conglomerate structure as such, had any bearing whatever upon its going bankrupt. But this is a type of thing that the Commission has been asserting in support of the Bill that has been lobbying for a decade and not having been given a hearing. But nonetheless, in this proceeding they exercised that power that has been denied them by the Congress of the United States. It illustrates simply this your Honors, that under a statute such as new 15a(4) which imposes an affirmative duty to establish a revenue levels that will cover total operating expenses. One simply cannot imply a power from that kind of a statute that would give the Commission the right to withhold revenues from the coverage of operating expenses. The two propositions go manifestly 180 degrees in the opposite direction. Thus, we find that the Congress has drawn a bright line of distinction between the rate making power, the power to establish revenue levels on the one hand and power to dictate the use and control the use of the revenues on the other. The latter has been, we respectfully submit, denied. Well, where does the Commission go from there? No statute to rely on. All we hear is the presentation, the Railroads made “promises” may ought to be held to their promises. Yesterday, I reviewed the facts that there were no such promises. That in addition to the deferred maintenance and delayed capital improvements that applicants presented a broad array of facts in support of their rate increase case. The point, I suggest to you gentlemen is simply this. Even if it were true, assuming arguendo that the Carrier's entire case in support of their Ex parte 305 request for a rate increase had rested on their claim need for “deferred maintenance” and “delayed capital improvements” even as narrowly defined later on by the Commission. Still the fact would remain that private parties cannot confer jurisdiction on the Commission which the Congress of the United States has denied. We rely on the fundamental maxim that jurisdiction cannot be created by consent. It is for the Congress to state the Commission’s powers and not for the Carriers to confer any power whatever. So -- Byron R. White: I take it that that is the way (Inaudible). Doyle S. Morris: We were a party to the application and we -- Byron R. White: (Inaudible). Doyle S. Morris: We will take full responsibility for whatever was said in the application. Although we ourselves made— Byron R. White: So your answer is yes. Doyle S. Morris: My answer is yes. Although, we ourselves made it clear in our one little exhibit that we did not intend to spend a penny more on maintenance. We did extend to spend huge amounts on capital improvements. We had a $ 300 Million capital improvement program. But we made it quite clear that as of then we had no intent to apply any of the funds to maintenance. While – as it is turned out of course we have spent many, many millions on maintenance. But as of that time that was our intent. So in the final analysis -- Byron R. White: Do you think (Inaudible) Doyle S. Morris: No sir. We were parties to the application. We accept full responsibility for everything that was said. The overwriting point remains— Byron R. White: (Inaudible). Doyle S. Morris: That is one of the reasons, exactly. Byron R. White: (Inaudible). Doyle S. Morris: Not to deferred maintenance as later defined by the Commission. We spend millions of dollars in maintenance and that means obviously we have huge maintenance needs. Byron R. White: Well, then what does the application say actually apply with— Doyle S. Morris: Not everything. We had no deferred maintenance as such but we have tremendous maintenance needs, tremendous. Byron R. White: Inaudible). Doyle S. Morris: The application did not pin point Chessie as such. Byron R. White: But it said everybody -- . Doyle S. Morris: No, not as such. It said the Railroads as a group had extremely depressed earnings level and that that depressed earnings level had lead to extensive deferral of maintenance and expensive deferral of capital improvements. Byron R. White: (Inaudible). Doyle S. Morris: Yes, yes. It was among a variety of reasons which I set forth yesterday in support of the entire application. The entire industry of course had an extremely depressed earnings level in the Eastern part of the United States for the year 1973 when the Carriers had their most tremendous volume of business ever, the rate of return on that investment in the Eastern District was just a little over one-half of one percent. And with the increase it would become still less than three percent. That was the need. And the Commission found, if you please, the Commission found that the Carriers needed the revenues and without the increase the Carriers would not have sufficient revenues to provide the country with adequate services as required by the Statute. But not withstanding that finding which was a paraphrase of the then controlling statute, the Commission nonetheless determine to embark upon a revolutionary step to control the use of the revenues. Byron R. White: That will increase in the revenue, of the earning(Inaudible). Doyle S. Morris: I suppose not your Honor. The basic statutory finding at that time was as you know in terms of Carrier need which as you wrote in Scrap 2 (ph) is what the Commission focuses on in the main, in its revenue cases. And that need was certainly established here by any standard, any standard whatever. Byron R. White: Does it mean any intention to increase (Inaudible). Doyle S. Morris: None was given. None was asserted in terms of dividends directly but we see the handwriting on the wall, that is one of the reasons why we are here. I think, the handwriting is clear within the Milwaukee case that goes so far as to reach dividends without Congressional authorization. So where does that leave us? All the Commission has got left to talk about is the National Transportation Policy and the teaching of this Court’s decision in Arrow Transportation, 372 U. S., it is clear that the policy as such simply does not enlarge the Commission's substantive powers. That of course, would be much too easy. All you would need to do would be to rely on the policy to do anything that came to mind. You could scrap the Act and just assert any power you might wish and under the policy in the name of “adequate, economic and efficient service.” The Congress has it made it clear, it did not intend to add and put to the rate making power by adoption of the policy. Here is the Senate's report. The policy makes no change in the rate making rule, not contained in Section 15(a) of the Act except broadening it to apply to all carriers. Senate report, 433-76th Congress. So the Transportation Policy is not available to the Government, what is left? Nothing, except to talk in terms of the power ought to be implied because it is reasonable. The fact remains gentlemen, Congress has not conferred the power and adjectives simply cannot grant it. We stand today in a moment of choice in this country between public or private ownership of our National Railway System. Congress was the reasoned enactment of the Rail Reorganization and Revitalization Act 1976 has spelled out the Congressional Policy in Section 101 (a) of that Bill to make it abundantly clear. That is the declared policy of the Congress that the Railroads shall remain vigorous under the Private sector of the economy. Thus, we find with this comprehensive enactment of this new Bill that Congress is bending every effort to keep the Railroads liable in the Private sector. To avoid the huge burden on the taxpayers that will follow with any other Courts, we respectfully submit your Honors that affirmance of the judgment below would provide monumental support to the will of Congress and honest, economical and efficient management be permitted to manage. Thank you. Warren E. Burger: Mr. Friedman do you-- Daniel M. Friedman: I just have four brief points. The first one is an informational one to a question Justice Stevens put to me yesterday. On advise that the supervision of the safety aspects of Railroads has been transferred to the Department of Transportation in 1966. And that the authority that the Commission previously had at that time is now used and performed by the Department of Transportation but the same safety regulation factor. Mr. Morris has said that the Commission for ten years has been seeking from the Congress, the authority, which it now purports to exercise as we pointed out in our reply brief what the Commission was seeking from Congress, was something very different. The Commission was seeking authority to prevent Railroads from diverting their Railroad assets into non-transportation activities. That is what they were talking about in connection with the Penn Central. That the Penn Central allegedly had been using a lot of railroad revenues and railroad properties for non-transportation purpose. That is a very different thing from what the Commission is doing in this case which is to try to ensure that the Railroads use the Transportation Revenues for the purposes for which they say it is necessary. Now, Mr. Morris has said that the new statute denies the Commission, its authority. We emphatically and vigorously deny that. I would like to apart from the language which we have briefly referred to of the statute which we think if anything manifests even clear intention that Congress intended the Commission to have the responsibility to ensure that the Railroads are operating efficiently and of course ensuring that necessary deferred maintenance is done. There is one way to ensure that. But there are two very specific things with respect to the statute. The first is set forth in the Senate Committee report, which is quoted in a lengthy footnote at pages 17 to 18 of our brief, footnote number 18. And the first full paragraph in the footnote on page 18. And I just quote that says, it refers to a study made by the National City Bank – First National City Bank of the Railroads problem said, the figures as to the amount of deferred maintenance in the Nations Rail Industry compiled by the Interstate Commerce Commission in its proceeding ex parte 305, this very proceeding substantially comport with the 5.7 Billion found by FNCB in its study. In other words, Congress recognized in enacting this statute that the Railroads had a very serious problem in connection with deferred maintenance. And along with that, there is a provision of the new statute which is Section 504 which is contained in Public Law 94, Section – Byron R. White: Not in your brief ? Daniel M. Friedman: It is not in our brief because the statute had just been enacted the time we filed our reply - Byron R. White: (Inaudible). Daniel M. Friedman: Yes. It is Public Law 94-210, Section 504(A). And its page 40 of this little printed version of the Act that is around. And that provision expressly directs the Railroads within 18 months, after the enactment of this statute to report to the Secretary of Transportation or Class One Railroads, the total deferred maintenance and the purpose of that is to enable the Secretary to allocate from the fund that has been created announced that will help the Railroads in claiming up this deferred maintenance. Now its seems to us incredible to believe that at the same time that the Congress was attempting to strengthen the statute to enable the Commission to deal more effectively with the problems of the Railroads. And it recognized the vast amounts of deferred maintenance and also took steps to ensure that the Secretary of Transportation would be able to channel funds for that purpose by requiring the Railroads to report the amounts of deferred maintenance. That at the same time it would have cut off the Commissions power when the Railroads told them they needed the money for deferred maintenance that Congress could have said, no, you cannot do that. That just seems to us impossible to believe that that is what it was intended and I stress the whole question here is the question of the Commission's power. Whether or not the Chessie did or did not have deferred maintenance is not the issue before this Court. As I previously mentioned yesterday, the District Court recognized that Chessie needed additional maintenance. The sole question is the question of power. And we submit that the Commission most certainly has the power when the Railroads and all the Railroads tell it, it needs this money for deferred maintenance. To say that the Railroads, yes, we are giving it to you but you have got to use it for the purposes for which you said you needed it. Byron R. White: (Inaudible) Daniel M. Friedman: Well, I suggested that at the time the Commission acted, at the time the Commission acted, that is all they had before it. But since my opponent has now urged that the new statute denies the Commissions’ power is just attempting to indicate why we think the new statute if anything even more -- Byron R. White: I think we should decide it on 15(a)(2). Daniel M. Friedman: I think it can be decided on 15a— William J. Brennan, Jr.: 15(a)(2) or 15(a)(4)? Daniel M. Friedman: I would say at the present Census Act, the statute where this order was entered under 15(a)(2), which should be decided on 15(a)(2), but I would suggest that the more recent legislation confirms the power of the Commission. I also point out that we do not rely wholly on 15(a)(2). We also of course rely on the National Transportation Policy and what we considered to be the inherent power of an Agency to tell people when they ask the agency to do something for them. The— William J. Brennan, Jr.: Do you think it has to be done (Inaudible) say nevertheless 15(a)(4) is (Inaudible) Daniel M. Friedman: Yes. We do not have any question of that. That the whole – that statute, the whole statutory scheme it seems to us indicates that Congress did intend the Commission to have this power. Potter Stewart: What statutory scheme? The one in existence at the time this was done or the on existence now? As you say the issue and the only issue here and your Brother agrees is the issue of Commission power to do what it did. Daniel M. Friedman: Yes. Potter Stewart: And that is not a constitutional question. It is purely a matter of did Congress confer upon the Commission power to do what it did in this case. It is awfully important to know what statutes we are going to look to determine that question and you -- it is kind of an odd answer. I think you would say, where do you take your pick? 15(a)(2), 15(a)(4), anything else you might find. What do you say we should look at? Daniel M. Friedman: Well I think you should first look at 15(a)(2). And then if you agree with us that 15(a)(2)does give the power then the next step I would assume is to look and see whether the new statute 15(a)(4) and the other provisions change that power. Potter Stewart: It it was done under 15(a)(2) and if you are right that ought to be the end of it, should it not? We should not look at anything that is what -- Daniel M. Friedman: If the Court agrees with us, but I think that it is not unusual in interpreting a statute to look to see what later legislation has done in terms of the— William J. Brennan, Jr.: (Inaudible) 15(a)(4) explicitly forbid this kind of condition and we have the case here today even though it was decided under 15(a)(2) and we could – do you suggest 15(a)(2) can be read? What do you suppose we would have to do? Daniel M. Friedman: I would suppose in that case and the order does look to the future. Since the order does look to the future and since it has been staid in the interim I would suppose that would tend to wipe out the order if 15(a)(4) expressly prohibited— Byron R. White: Why is it not exactly the same then if a new law is passed which it has been and it says 15(a)(2) will no longer apply at all? And the – so other provision applies. Either other provision applies or it does not but in any event 15(a)(2) does not apply any longer. But how can we look now as to 15(a)(2)? Daniel M. Friedman: I think Mr. Justice you can look to 15(a)(2) now because what Congress has done in the later statute, 15(a)(4) which was intended to strengthen the Commissions hand has to be viewed— Byron R. White: 15(a)(4) but something does more than that. Something says 15(a)(2)will no longer apply at all. Daniel M. Friedman: To in the future, that is correct. Byron R. White: Well, now is the future. Daniel M. Friedman: Well but this order was entered year-and-a- half, two years— Byron R. White: I know but we are talking about the future now. I mean, about today. We are not talking about yesterday. We are talking about today. Daniel M. Friedman: We are talking about that the Commissions power to do this kind of thing. And it seems to me --when it did it. And it seems to me that in defining the Commissions power -- Byron R. White: But it may enforce then whatever the power was than they have the power now, the order would be out the window, would it not? Daniel M. Friedman: If it had said that but it has not said that. William H. Rehnquist: No, I am not sure that you need to answer Justice White’s question and -- Daniel M. Friedman: The order it seems to me at the time it was entered was a valid order would that regard to what Congress subsequently said it. Potter Stewart: And does not fit – should we not confine our attention to 15(a)(2) then, if that is correct. Daniel M. Friedman: Well, if the order was valid under 15(a)(2) as we think it is and assuming that we are only going to look to 15(a)(2) -- Potter Stewart: The legislation in existence at the time the order was entered and should that not be the end of it. Daniel M. Friedman: Well, except for this Mr. Justice that the order is now been staid and if – Warren E. Burger: (Inaudible) new order? Daniel M. Friedman: No Mr. Justice but in terms of the future effectiveness of the order, I would assume that if Congress had a passed a statute saying in effect cutting off the order by saying that henceforth the Commission cannot exercise this power. I will -- Potter Stewart: Why would you assume that? Daniel M. Friedman: That the Commission presumably would -- I would think it probably reconsider this order if -- because the order speaks to the future. Potter Stewart: Henceforth the Commission the Commission shall not have any power to tell Railroads what they shall do with the revenues and the rate increase. But the henceforth is a great big word, is it not? Daniel M. Friedman: It is Mr. Justice. Potter Stewart: That almost implied that up until that statute there the Commission did have power that Congress had recognized it. Daniel M. Friedman: It would imply that the Congress had power, yes. There is no – I would suppose that if the Commission, if the order is valid under 15(a)(2) when entered in one stance that should be the end of the inquiry. On the other hand since the present posture of the case is such that it has to go back to the District Court in any event because the District Court has not passed upon some of these other aspects. And since the order is now staid, I would think there might be problems if 15(a)(4) and the other provisions explicitly provided that the order that Commission had no longer has this power. Warren E. Burger: Mr. Friedman, but the only issue before the Courts is whether the Commission and the power to do what it did on the day that it did it under 15(a)(2) and that the consequence of the stay was merely to preserve the status quo until we could determine whether they had the power on that date. Daniel M. Friedman: I fully agree Mr. Chief Justice that the issue is what power the Commission had at the time it entered the order and all I was really arguing on the subsequent statute is to answer the claim that the subsequent statute somehow shows that Congress did not intend the Commission to have this power and it seems— John Paul Stevens: It is more than that. This is not a self executing order, is it? Does it not require continuing supervision by the Commission of this whole revenue matter? Daniel M. Friedman: Well, only to the extent that the Rail -- well the Railroads are required to the Commission how they got these revenues and what they are doing. And that part of the order was upheld. The District Court upheld the reporting and accounting provisions. The only thing it struck down was this condition that they had to use the revenues for this -- John Paul Stevens: Do you agree that the reports might show some use of that revenues that was arguably deferred it maintenance and arguably not the deferred maintenance and there are going to be some problems about whether that use was correct or not? So inevitably is there not a continuing supervision by the Commission of the District for these funds. Daniel M. Friedman: There is although there is, although of course the Commission as recognized in one of its orders that the Carrier a considerable discretion to make the determination whether it is or is not deferred maintenance. Of course, there will be continuing supervision to the extent the Carriers come in and ask for an exception from the order the provision I mentioned under which they could use it for purposes other than those permitted in the order. But it seems to me as long as the order is outstanding, as long as the order is within the Commission's power then it is for the -- John Paul Stevens: Whether it is within the Commissions power or was within the Commissions power? Daniel M. Friedman: Well, it is an outstanding order, it is an outstanding order and unless and until the order is modified either by the Commission or by the Court, it seems to me, it is a valid order that the Carriers are required to follow. Speaker: (Inaudible) Daniel M. Friedman: The order? Oh, yes. The order is in effect in so far as it requires the Carriers to report and also in so far as I assume as the Carriers are required to use the money for deferred maintenance except with respect to the Chessie because only the Chessie took the case top Court. And only that Chessie was one that got the Temporary Restraining Order, so as far as all the Carriers are concerned and at least the reports we have in the record indicate that they are complying. Potter Stewart: With respect to the Chessie? Daniel M. Friedman: If the order -- the operation of the order has been staid by the District Court with respect to this condition but the – Potter Stewart: And so with respect to the condition -- with respect to the Chessie or with respect to all Railroads? Daniel M. Friedman: I think that is with respect to the Chessie. That was been staid only to Chessie sought the stay. Potter Stewart: But the Commission although it was been staid with respect to the Cherssie is enforcing it with respect to all other Railroads. Daniel M. Friedman: Well I do -- with enforcing it, I am not sure that has been any need for enforcement. I would say, yes, Mr. Justice as shown by the fact that there were these 21 or 22 instances in which various Carriers came into the Commission and asked for exceptions from the order and the Commission granted some and rejected others. So, I would say the order is in effect. It is just that it was with respect to the Chessie because of the stay, that Chessie has been not required to observe the conditions. Potter Stewart: This have happened since or some of them at least it happens since the District Court staid the order. Daniel M. Friedman: I believe so. I would have to check the dates on that. They are all – the orders are all set out in the – I think since the date that the Temporary Restraint -- certainly since the date of the Temporary Restraining Order because after the Temporary Restraining Order the Commission issued its last order in October and the Chessie then amended its complaint to include that order. And in that order the Commissions gave the instances in which it had granted or denied these exceptions. So the order will staid I would say with respect to the Chessie prior to the time that Commission had finished the case. Warren E. Burger: Thank you Mr. Friedman, thank you Mr. Morris. The case is submitted.

William H. Rehnquist: We'll hear argument now in Number 97-463, Textron Lycoming Reciprocating Engine Division v. United Automobile, Aerospace and Agricultural Implement Workers of America. Mr. Dyk. Timothy B. Dyk: Mr. Chief Justice and may it please the Court: In 1994, the petitioner employer and the respondent union in this case engaged in collective bargaining required by the National Labor Relations Act and by the decisions of the National Labor Relations Board. And the union alleges that in the course of that bargaining the employer failed to supply information that it was obligated to supply concerning subcontracting plans, one of the questions being whether that was a mandatory or permissive subject of bargaining under the act. And the union first brought its claim before the National Labor Relations Board alleging that the employer had committed an unfair labor practice by failing to bargain in good faith under sections 8(a)(5) and 8(d) of the act. And apparently dissatisfied with the progress of this complaint before the board, the union then brought an identical action, making exactly the same charges, seeking virtually the same relief, in Federal district court as a declaratory judgment action, purportedly pursuant to section 301 of the National Labor Relations Act, and the board proceeding has been tentatively settled. A settlement was approved by the regional director last week, and the board has granted limited relief, ordering that certain provisions of the contract be set aside and awarding back pay but refusing to grant the broad relief that the union had requested, which would be invalidation of the entire contract. Sandra Day O'Connor: May I ask a preliminary question? The contract has expired? Timothy B. Dyk: The contract has expired and the parties are in the process of attempting to negotiate a new agreement. Sandra Day O'Connor: And there's been a strike in the interim by the union? Timothy B. Dyk: That is correct, Justice O'Connor. Sandra Day O'Connor: Why isn't this whole thing moot? We don't have a contract any more. There's been some limited relief granted. Why should... why is there anything left for us? Timothy B. Dyk: Well, we think that the matter should have been resolved by the board proceedings, but as far as the mootness of the court proceeding is concerned the union still claims damages based on the identical facts that led it to request the declaratory judgment and that issue would be unaffected, in the union's view, by the board's settlement. William H. Rehnquist: Well, didn't the collective bargaining agreement also provide for the payment of survivor's benefits for a certain number of years after the contract expired? Timothy B. Dyk: There are a variety of issues which could arise under the collective bargaining agreement because, of course, the effect of that agreement wasn't limited to the 3-year period of the agreement, so for all of these reasons we think there's no real issue of mootness in this case. Rather, the issue here is whether the district court had jurisdiction under section 301 and, in our view, the language of section 301 is quite plain. It provides for suits for violation of collective bargaining agreements. There's no question here of any violation. There's no allegation that the employer has committed a violation of the-- Ruth Bader Ginsburg: But Mr. Dyk, you concede if it came up defensively it would properly be a matter for the court. Say the union violated the no-strike clause and the union's answer to that is, this whole contract is no good because it was induced by fraud. Timothy B. Dyk: --Well, Justice Ginsburg, yes, we do agree that if there had been an alleged violation of the agreement and a declaratory judgment were sought, that there had been no violation, that that would be a matter properly within the district court's jurisdiction. Of course, all the parties agree here that in the course of that proceeding the law that would be applied would be board law, in other words, the good faith bargaining requirements crafted by the board pursuant to the act, so-- Ruth Bader Ginsburg: But nonetheless there's nothing about the issue that identifies it as an issue only for the board and never for the courts. Timothy B. Dyk: --That's correct, and what this Court has done, as we understand it, it has said that pursuant to the act, that you can have an affirmative suit that's brought in the courts or an unfair labor practice charge before the board that may involve defenses, defenses before the board concerning contracts, defenses in the courts concerning the interpretation of the act, and that has been brought up in cases like Kaiser Steel. But the courts have... this Court has recognized a distinction between bringing something as an affirmative matter and bringing it as a defensive matter. For example, in Communications Workers v. Beck, which was not a case exactly like this but it involved the duty of fair representation, this Court held that the employer's alleged violation of 8(a)(3) of the act could be raised as a defense to the claim, but that an 8(a)(3) claim could not be asserted at the outset in Federal court, and there's a good reason-- Antonin Scalia: But Mr. Dyk, isn't it the whole purpose of the Declaratory Judgment Act to enable you to anticipate your defenses instead of having to wait for a lawsuit by the other side? Isn't the whole purpose of it to enable the union, for example, in this case to come into court and say, we do not intend to live up to this agreement. We're going to strike, and we think we have a right to strike because the agreement is invalidated by the fraud at the beginning, and we want a declaratory judgment to that effect. It seems to me a classical declaratory judgment action. Timothy B. Dyk: --Justice Scalia, I think it is not a classic declaratory judgment action in the sense that this Court has held repeatedly in the Franchise Tax Board case, in Skelly Oil and a number of others, that the Declaratory Judgment Act can't expand the jurisdiction of the Federal court. William H. Rehnquist: It isn't a grant of jurisdiction at all, is it? It's just a procedural device where a court has jurisdiction. Antonin Scalia: Correct, Mr. Chief Justice. Now, if the court had jurisdiction because there had been a violation of the act and there was a controversy over whether there had been a violation of the act, of course there would be jurisdiction under 301(c). Antonin Scalia: Of the contract. Timothy B. Dyk: Yes, a violation of the contract, but that-- Antonin Scalia: That's his claim. That's what the declaratory judgment claims. Timothy B. Dyk: --No. Antonin Scalia: The declaration judgment says the other side claims that I am in violation of the contract, and I say I am not. Timothy B. Dyk: No, Justice Scalia. There is no claim here that anybody has violated the contract. The only claim is that the court-- Antonin Scalia: There's never a claim that has violated a declaratory judgment. It's always anticipatory, right? Are you saying that they just didn't use the right words, that the union should have come in and said, we are about to strike and we want a declaratory judgment that this will not be a violation of the act. Timothy B. Dyk: --Well, they-- Antonin Scalia: Would that have been okay? Timothy B. Dyk: --If they said we are about to strike and we'd like a declaration, that would not be this case. I would think that if it got to the point of being an anticipatory repudiation similar to Dowd Box-- Antonin Scalia: Right. Timothy B. Dyk: --Yes, you could. Antonin Scalia: Okay. Timothy B. Dyk: But that's not this case. There are-- Antonin Scalia: Okay. Timothy B. Dyk: --There has been no violation, no alleged violation, and we suggest that when Congress said suits for violation it was very clear that there had to be a suit over a violation of the contract. There is no suit over a violation of the contract here. They were asking the district court to declare that at some future time if they chose to do it they could engage in a strike which otherwise might be in violation of the contract, so there was no present controversy about a violation or even an anticipated violation of the agreement. Stephen G. Breyer: Can you... can the... suppose the employer says to the union representative, if you go out on strike, I will sue you for breaching this contract. He says that. So the union representative says, I would like a declaration that you have no lawsuit. He brings the suit. Can he do that in a declaratory judgment action? Timothy B. Dyk: I think there are certainly some circumstances where-- Stephen G. Breyer: Well, let's say the circumstance is a) my basis as union representative is I think you have to have an offer and an acceptance to have a contract and here there was no offer, or there was no acceptance. Timothy B. Dyk: --If the dispute is over a violation of the agreement, yes-- Stephen G. Breyer: No. The dispute is... this is the dispute. The employer says, if you go out on strike, I will sue you. The union says, if you sue, you will lose. Why? Because there is no contract. There was no offer, or alternatively there was no acceptance. I don't agree, says the employer. Fine, says the union. I'll bring a declaratory judgment action. Can they do it? Timothy B. Dyk: --I think under some circumstances that could be brought. Stephen G. Breyer: What about the circumstances I just mentioned? Timothy B. Dyk: No, I'm suggesting, under the circumstances you just mentioned, you could imagine, yes, that there would be section 301 jurisdiction. Stephen G. Breyer: Yes, all right. If the answer to that is yes, now we have exactly the same dialogue but substitute for the words, offer and acceptance, the reason your contract is not valid is it was obtained by fraud. Timothy B. Dyk: Well, it isn't the question of what the basis for the claim is. Stephen G. Breyer: No, the reason that you cannot sue me for a breach of contract is because the contract doesn't exist, and the reason it doesn't exist is because it was obtained by fraud. Timothy B. Dyk: Justice Breyer, I agree that there may be circumstances in which something has gotten to the point where there is a real dispute about whether there would be a violation of the contract which possibly could be brought into Federal court. This isn't that situation. What this situation is, where you have an exactly parallel proceeding in district court and what you have is an effort in essence to bring unfair labor practice charges into court rather than to bring them before the board, and Congress when it enacted section 301 could not have possibly contemplated that. Indeed, the legislative history shows quite clearly that Congress was very concerned about overlapping affirmative jurisdiction between the board and the courts, and they said that one of the provisions of the original Taft-Hartley Act would have given the board jurisdiction to determine compliance with contracts. Anthony M. Kennedy: Well, in Justice Breyer's first hypothetical, could the offer and acceptance dispute have been remitted to the board? Timothy B. Dyk: The offer and acceptance dispute could have been remitted to the board. Anthony M. Kennedy: Why wouldn't there be concurrent jurisdiction, or conflicting jurisdiction in that case just as well as here? Timothy B. Dyk: In some circumstances conflicting jurisdiction is tolerated and will exist. The problem is that if you are allowed to bring this kind of proceeding, this kind of abstract proceeding before there has been a real dispute about whether the contract was violated, what you would be doing is to in essence say, virtually any unfair labor practice charge can be framed as a declaratory judgment matter to be brought into court. Anything having to do with the collective bargaining, the obligation to bargain in good faith could be brought into court on the theory that there might be in some future time a dispute about the ability to strike under the contract. John Paul Stevens: Mr. Dyk, may I just ask this. You say anything covers... is it not correct, at least the union says in their brief that you took the position before the board that this fraud was not a mandatory subject of bargaining and therefore was not subject to review by the board. Timothy B. Dyk: Well, that's correct, Justice Stevens, and I think that's exactly why this matter belongs before the board, because of course the distinction between mandatory and permissive subjects of bargaining under this Court's decision in First National Maintenance is a very difficult line to draw, one that the board has struggled with again and again over the years, and if it's a mandatory subject of bargaining there is the obligation to supply the information to the union, but if it is a permissive subject of bargaining the obligation does not exist to supply the information to the union. William H. Rehnquist: Well, why do we have to decide that it belongs somewhere else? All we have to decide here is whether or not it fits the definition of whether this is an action for violation of a contract and if it isn't that, it doesn't belong in court. Maybe it belongs before the board, maybe it doesn't. Timothy B. Dyk: That's exactly correct, Mr. Chief Justice, and we suggest that-- John Paul Stevens: Yes, but you have argued that the better forum is the board, and that argument kind of falls apart if the forum isn't there. Timothy B. Dyk: --No, no, but Justice Stevens, it's exactly because of the difficult distinctions between mandatory-- John Paul Stevens: Right. Timothy B. Dyk: --and permissive subjects of bargaining that this case belongs before the board. The board ought to be deciding whether there was an obligation to supply the information or not supply the information. That turns on whether it was a mandatory or permissive subject of bargaining. The courts are ill-equipped to make that kind of determination. That's something that-- John Paul Stevens: Are you suggesting that even if it was not a mandatory subject of bargaining, that the company could commit fraud in the negotiation and there would be no remedy for the fraud? Timothy B. Dyk: --No, absolutely not. I think there are two separate issues here. One is misrepresentation. John Paul Stevens: Right. Timothy B. Dyk: Which under Truett-- John Paul Stevens: Which they alleged. Timothy B. Dyk: --That would apply to mandatory and permissive subjects of bargaining. John Paul Stevens: Right. Timothy B. Dyk: But the main part of the charge here is that there was a request for information, that we didn't supply the information. John Paul Stevens: Oh, okay. Timothy B. Dyk: And that turns on the distinction between mandatory and permissive subjects of bargaining. John Paul Stevens: But insofar as they're alleg... their claiming there was an active misrepresentation or a fraud, you would agree that could be remedied by the board. Timothy B. Dyk: Absolutely. John Paul Stevens: Oh, okay. Timothy B. Dyk: There's no license to lie, whether it's a mandatory or permissive subject of bargaining. Anthony M. Kennedy: Mr. Dyk-- --Does the board have jurisprudence cases on misrepresentation and fraud? Timothy B. Dyk: Yes. I mean, this Court's decision in Truett Manufacturing discusses the obligation to engage in honest bargaining, and the board has implemented that in a large number of cases. David H. Souter: Mr. Dyk, you may have answered this. I may have missed it. But you said there is some subjects in which jurisdiction may be concurrent and some not. Where do you draw the line? How do we draw the line? Timothy B. Dyk: Well, the line, Justice Souter, that I'm suggesting that you draw is between matters that are asserted as defense, either contract defenses before the board or unfair labor practice defenses in court, as opposed to allowing affirmative jurisdiction. That is, to bring contract issues in the first instance before the board or bring unfair labor practice charges before the courts. Ruth Bader Ginsburg: But that does-- --Mr. Dyk, what about the Mack case? Do you agree that that was properly a case for the court under 301? That is, an employer that said, the union says we've got no contract. We say we do have a contract. Court, tell us we have a contract. Timothy B. Dyk: There was, if my recollection is correct, a dispute about a violation in the Mack case, the original... the Third Circuit case that preceded this one and yes, that probably was within... that was probably correctly decided. Antonin Scalia: What about a classic contract dispute as to whether there was a meeting of the minds? I mean, there's no violation of the Labor Relations Act. There's not an unfair labor practice if the minds have not met. Timothy B. Dyk: Well, there can be an unfair labor practice under those circumstances. Refusal to execute an agreement, Justice Scalia, that the parties have reached can be a violation of 8(d) of the act, but yes, there-- Antonin Scalia: Well, there's been no violation so far. Nobody has... nobody claims a violation, but the union wants to have it clearly established that there is a collective bargaining agreement. Timothy B. Dyk: --There may be, Justice Scalia, some small number of cases in which there is no board remedy available to a party in the union's situation. Antonin Scalia: And no Federal court remedy. Timothy B. Dyk: And no Federal court remedy as an anticipatory matter but, of course, when there is a violation that can be asserted as a defense, but we don't think that the existence of that small number of cases should drive the decision here. I mean, in the vast majority of situations there is a remedy before the board, and the board is the place to go. Antonin Scalia: Not in the vast majority of anticipatory situations, surely. Timothy B. Dyk: I think that in the vast majority of anticipatory situations there is a remedy before the board. If you allow people to go into court... I'll give another example, that if there is an unfair labor practice alleged to occur during the performance of a contract the union can claim that it has a right to strike in violation of the no-strike clause... that's Mastrow Plastics... and what the union could do under those circumstances is go into court and say, we'd like a declaratory judgment that we're entitled to strike because the employer engaged in unfair labor practices. If you're an inventive lawyer either on the union's side or the employer's side you can craft a declaratory judgment action that would bring a whole range of unfair labor practice charges effectively before the Federal courts-- William H. Rehnquist: Mr.-- Timothy B. Dyk: --thereby bypassing the board. William H. Rehnquist: --An aggrieved... either the employer or the union can go into State court, can they not, under the Dowd case? Timothy B. Dyk: Yes. William H. Rehnquist: So it isn't as if they can't get into Federal court under section 301 they have no judicial remedy. They can go to State court. Timothy B. Dyk: Well, that's a possibility, Mr. Chief Justice, and the Ninth Circuit has held that if there's no unfair labor practice potential before the board you can go into State court and apply State law. That is a difficult question which-- William H. Rehnquist: Well, why is it difficult after the Dowd Box case? Timothy B. Dyk: --It's not difficult as to whether you could go into State court or not. I think the difficult issue is whether you would apply State or Federal law when you went into State court. William H. Rehnquist: Yes, but that's something that isn't involved here, certainly. At least there is some sort of judicial forum in which this dispute could be resolved, even though you can't get into Federal court under 301. Timothy B. Dyk: But our argument, Mr. Chief Justice, would mean that you could not go into State court under section 301 either, because the scope of Federal jurisdiction and the scope of State jurisdiction are the same. Both are governed by section 301. Both require suits for violation, so you could not go into State court and seek a declaratory judgment under-- William H. Rehnquist: You think that's a result of the Dowd Box case? Timothy B. Dyk: --I believe it is, Mr. Chief Justice. Antonin Scalia: Which means that you'd have some of the law of labor contacts made by State law rather than by Federal law, which is seemingly what the act envisions, or what we've said the act envisions. Timothy B. Dyk: Well, our position, Justice Scalia, is that there isn't any room for State law here, that even if you went into State court, that you would have to apply Federal law, but that the State court no more than the Federal court can give declaratory relief under these circumstances. Antonin Scalia: So that there would be no remedy, to answer the Chief Justice's first question. If you concede that the State courts could not apply State law, there would be no remedy. Timothy B. Dyk: I have conceded that there is some small class of cases in which there would be no anticipatory remedy. Antonin Scalia: Anticipatory. Timothy B. Dyk: But you could always assert it as a defense. David H. Souter: And the reason for no anticipatory remedy comes down simply to plain language, I take it. In other words, it's not necessary to preserve board jurisdiction because there are some cases in which, as you say, there would be no conflict with board jurisdiction, so it's a straight plain language theory, in effect that the language of 301 trumps the normal rule which would allow a declaratory judgment. Timothy B. Dyk: Yes. We've suggested that the language is very plain, and the lower court in the-- David H. Souter: But that's all. I mean, you don't... basically your argument is not an argument based upon the preservation of board jurisdiction. It's an argument based on the statutory text, period. Timothy B. Dyk: --Our section 301 argument-- David H. Souter: Yes. Timothy B. Dyk: --is based on statutory text-- David H. Souter: Yes. Timothy B. Dyk: --and the legislative history, but we have also argued alternatively that there is Garmon preemption here even if you could somehow shoe this... shoe-horn this in within section 301, that the Evening News exception to Garmon preemption only applies, as this Court said in Lockridge, where the cause of action requires a construction of the collective bargaining agreement. Here, no construction of the collective bargaining agreement is remotely involved and therefore we suggest that Garmon preemption, that is, Garmon primary jurisdiction. William H. Rehnquist: Are you saying that if the union brought an action simply for a violation of the contract and... that there might be preemption of that sort of a claim? Timothy B. Dyk: We're suggesting that if the union brought an action for violation of contract which did not depend in any way on the interpretation of the contract, which is the scope of the Smith v. Evening News exception, there might not be jurisdiction under those circumstances. William H. Rehnquist: Well, but the statute speaks quite plainly. It says you can bring an action for violation of a contract. How could there not be jurisdiction? Timothy B. Dyk: Well, I think it's not, Mr. Chief Justice, so much a question of "jurisdiction". It's more a question of 301, but that the primary jurisdiction doctrine might apply. That's what Garmon is when you're dealing with Federal law issues. But the primary jurisdiction doctrine might say you should resort to the board even though the district court has technical jurisdiction. Ruth Bader Ginsburg: Well, why wouldn't you make that argument-- --Well, that's a strange doctrine. --here, that the election... if it's primary jurisdiction, they went to the board first, but I don't think you're making any kind of election of remedies argument that... this union did go to the NLRB a year before coming to court, right, so-- Timothy B. Dyk: That's correct, and the matter is still pending before the board. Ruth Bader Ginsburg: --So why aren't you making any kind of primary jurisdiction argument with respect to that? Timothy B. Dyk: Well, I think in essence we are. When we talk about a Garmon... the Garmon doctrine applying here, even if there's technical jurisdiction under section 301, what we're saying is the court should leave it to the board under those circumstances, particularly when you have a board proceeding pending and, most particularly, when there's no construction of the contract that's involved. After all, that was the task assigned by Congress to the Federal courts, was to construe these collective bargaining agreements. There's no construction of a collective bargaining agreement involved in this case. The-- William H. Rehnquist: But if you can't have an action for a declaratory judgment, which you certainly are maintaining in light of the statute, and you can't have an action for construction of the contract, what sort of action for violation of contract can you have under section 301? Timothy B. Dyk: --Well, Mr. Chief Justice, we agree that you can have an action to construe the contract for violation of the contract that requires a construction of the contract. What we're suggesting is that somehow, if this Court went so far as to say that a violation encompassed anything relating to the contract, a position which you seem to have rejected in the Franchise Tax Board case, we're suggesting that if you went that far and said, oh, yes, this fits within the suits for violation of contract, you should still say it's within the primary jurisdiction of the board. Stephen G. Breyer: I understand. Do you know, is there any authority... it seemed to me there ought to be fairly clear whether you could or couldn't do this, but in suits that are, let's say, arising under suits, a person might have a State law defense, and is there any reason that the person with a State law defense cannot get a declaratory judgment action on... where he's claiming that I'm being threatened by a Federal suit and if the person brings that Federal suit I have a perfectly good defense and he wants it litigated in a declaratory judgment action? Timothy B. Dyk: There's a dispute about a Federal law-- Antonin Scalia: Oh, an antitrust case. Timothy B. Dyk: --Yes. Stephen G. Breyer: Some private person says, I'm going to bring an antitrust case against you, and the defendant says, look, I have a piece of paper here. You promised not to. It's a State law contract between us. I would have thought it would be settled. I would have thought you could have done it. You could go into a declaratory... in court and say I want a declaratory action. A person's threatening me, but he hasn't brought it yet, a Federal suit. I want a declaration that he has no Federal suit-- Timothy B. Dyk: I-- Stephen G. Breyer: --for the reason that I have this State law defense. Timothy B. Dyk: --I suppose, Justice Breyer, that such a suit would lie. Stephen G. Breyer: Yes. Timothy B. Dyk: But it depends on the jurisdiction of the Federal courts over the coercive suit that the other party could have brought. Here, there is no coercive suit that the employer could have brought. Stephen G. Breyer: He could have brought a suit claiming that the contract was being violated and if you say, well, he wouldn't have, that would seem to be a question of whether the declaratory judgment action is ripe or not. Timothy B. Dyk: Well-- Stephen G. Breyer: That would seem a question of whether... I mean, yes, of course you're right, if there's no threat he can't bring the declaratory judgment action. Timothy B. Dyk: --Well, I think ripeness and the question of whether there's been a violation or imminently threatened violation are very similar questions, and-- Stephen G. Breyer: Yes, exactly, so if there's no imminently threatened violation, you can't be ripe. That isn't the question before us. Timothy B. Dyk: --But that's not... that's not the issue here. There is no-- Stephen G. Breyer: That's right. Timothy B. Dyk: --imminently threatened violation. Indeed, the union did not say that if it got this declaration that it would strike. It said it wanted to use this declaration with respect to the contract being invalid, the unfair labor practice issue, in the course of negotiations. This was not a situation in which the union came in and threatened to strike. There could have been no coercive action here by the employer, and we simply suggest that under the Declaratory Judgment Act there simply can't be a declaratory action, either, and that to allow this would be to allow unions and employers to bring all sorts of unfair labor practice charges in the courts, where they don't belong, instead of the board, where Congress said they should be. Anthony M. Kennedy: Well, suppose the union said, we are in imminent danger of the employer enforcing this contract against us because we're going to take a specific action. We're going to strike. And we want this contract declared void because it was procured by fraud. Timothy B. Dyk: Well, under some circumstances probably a declaratory judgment like that could be brought. There are questions about an employer's ability to sue to enjoin a threatened strike. I believe the lower courts are divided about the standards there. Anthony M. Kennedy: Well, they just want a declaration of contract invalidity. Would that be violation of the contract? I thought it was your position that that's not a violation of the contract, that's renouncing the contract, and that's different than a violation of the contract. Timothy B. Dyk: No, Justice Kennedy. We agree that an anticipatory repudiation of the contract under standard contract law is a violation of the contract, that if there weren't anticipatory repudiation, that you could bring a lawsuit in Federal court under section 301. The Dowd Box case, the facts of the Dowd Box case seem to be similar to that. Mr. Chief Justice, unless there are further questions, I'd like to reserve the balance. William H. Rehnquist: Very well, Mr. Dyk. Timothy B. Dyk: Thank you. William H. Rehnquist: Mr. Yokich, we'll hear from you. Perhaps, Mr. Yokich, you could tell us what your view is of possible mootness in this case. Stephen A. Yokich: Our view of possible mootness is that there is a fair question of mootness in this case because the contract has expired, but that this is a situation that is a labor case, the labor cases tend to resolve themselves quickly and that therefore it's a situation that's capable of repetition, evading review. In that respect, we think-- Sandra Day O'Connor: Well, but you wouldn't anticipate fraud in the future. I mean, it just doesn't lend itself to that analysis, does it? Stephen A. Yokich: --Well, we hope that Textron would not fool this Local twice, but we do think that, given the fact that we have several thousand collective bargaining agreements and almost a dozen with Textron, that it could come up again, and that this is a case very similar to the Burlington Northern case, where there was a strike that was resolved by an emergency... a presidential emergency board. The Court held in that case that that was a situation capable of repetition, even though the parties were thereafter bound to a certain term, and even though the parties might not ever have that situation-- William H. Rehnquist: I suppose what you say is capable of repetition is a claim that there's been a violation of a contract, whether that qualifies. It wouldn't necessarily have to be the same fraud situation. Stephen A. Yokich: --But... well, that is true also, Mr. Chief Justice. As we indicate in our brief, these contract formation issues come in many different forms. You could have a situation where there was no meeting of the minds, where there wasn't offer and acceptance, all of those types of situations could be repeated also, and bring this case back before the courts and in such a time frame as to make it impossible for this Court to resolve the issue. Antonin Scalia: Mr. Yokich, do I have to struggle with that? Why isn't the fact that there are benefits under this contract that must continue to be provided after the term of the contract has ended, why-- Stephen A. Yokich: Well, I think that's a fair argument and-- Antonin Scalia: --I know it's an argument. Why isn't it right? [Laughter] Stephen A. Yokich: --Well, I-- Antonin Scalia: What's the argument on the other side? Let's put it that way. Stephen A. Yokich: --I have-- Antonin Scalia: Somebody ought to give us the argument on the other side, if there is any. Stephen A. Yokich: --Well, you'll have to find somebody different than me to do it. That's-- Antonin Scalia: But you think it's a good argument. Stephen A. Yokich: --I think it's a decent argument. Antonin Scalia: Mr. Dyk-- --Is it a correct argument? I don't care whether it's obscene or not. [Laughter] Stephen A. Yokich: Yes. As I say, there are lots of implications to it, because it turns on the nature of the right in this particular contract what the bargaining history is, et cetera, et cetera, all of the factual questions that you have to answer in a case like Litton, and that's why I'm not prepared at this time to say absolutely positively this contract's created a vested right. David H. Souter: Well, Mr. Dyk's point was that you got a damage action going down below anyway, and it's the damage action which would be affected by this and therefore that's why there's no mootness here. Is that correct? Stephen A. Yokich: Well, that's what we indicate in footnote 4 of our brief and-- David H. Souter: You agree. Stephen A. Yokich: --that is why this case as a whole is not moot. David H. Souter: You agree. Stephen A. Yokich: Yes. Ruth Bader Ginsburg: So why do you bother with the capable of repetition yet evasive of review if you've got a concrete thing like damages that you say survive? Stephen A. Yokich: I... what I'm... the reason why I bother with it is just that I'm trying to cover all the bases. You could draw a distinction between-- Ruth Bader Ginsburg: So you wouldn't put that as the number 1 reason that it isn't moot. Stephen A. Yokich: --No. My number 1 reason that the case is not moot is set out in footnote 4 of our brief, which is that there's this live damage claim. Ruth Bader Ginsburg: What about something... you said that the determination here will inevitably impact on the bargaining that's currently going on, that you need to know whether the old contract was no good, and you said that will surely affect how it's bargaining now, and I thought, well, how? How will this information about the old contract have an impact on the bargaining for the new contract? Stephen A. Yokich: Well, that's an argument that I would rank after repetition evading review, and I would just that when you bargain a new contract you typically bargain from the baseline of the old contract, and if there's a provision in that contract that for some reason doesn't apply because of fraud, you can make an argument that you would have less moral ability or more moral ability at the bargaining table to say we don't have to bargain about that, or we should bargain from zero instead of the old language. Ruth Bader Ginsburg: But here you're saying the whole contract is no good, so I just don't understand how that declaration would affect bargaining of a new contract. Stephen A. Yokich: I think there is a potential impact of that declaration. I think Mr. Dyk's argument about the vested rights, I think the point about the fraud, and I think about the capable of repetition evading review are all stronger arguments. Since Lincoln Mills v.... since Textile Workers v. Lincoln Mills this Court has held that section 301 gives the responsibility to the Federal courts to fashion a body of law for the enforcement of collective bargaining agreements. In the Lincoln Mills case, the Court rejected a literal reading of the statute. It rejected a reading that the statute was jurisdictional and instead found that the statute created the power to develop a whole body of cases with respect to the enforcement of contracts. In addition in Lincoln Mills, the Court held that the statute gave the Federal courts a wide choice of remedies, remedies such as specific performance in that specific case and, in addition to that, remedies such as declaratory judgments. In Lincoln Mills, for example, specific performance was a remedy that you can't find in the language of section 301 and is one that's really been traditionally disfavored in terms of agreements to arbitrate and disfavored in terms of employment law. William H. Rehnquist: Are you saying that Lincoln Mills broadened the jurisdictional grant beyond the language that Congress had chosen? Stephen A. Yokich: I'm not saying-- William H. Rehnquist: That's what we're talking about here. Stephen A. Yokich: --Well, I would say that... well, Lincoln Mills' reading of the jurisdictional grant was a fair one based upon that language. William H. Rehnquist: Well, are you... what... beyond suits for violation of contracts, which is the statutory language, do you think Lincoln Mills said other things are included in that jurisdictional grant, too? I wouldn't have read it that way. Stephen A. Yokich: Well, I think Lincoln Mills said that the phrase, for violation of contracts, is a broad enough phrase so that the courts have the responsibility to develop a complete body of law with respect to the enforcement of collective bargaining agreements. David H. Souter: Well, with respect to the provision of remedies for a violation. Yes. That's what was involved in Lincoln Mills. The question was, are you going to provide this equitable remedy for a violation? How does Lincoln Mills take you beyond the for violation language? Stephen A. Yokich: Well, I think what Lincoln Mills says is that when we have issues that deal with what the rights and the duties are created by the collective bargaining agreement, that the Federal courts are authorized to adjudicate those rights and duties. I think the phrase, for violation of, can argu... should be read as giving the Federal courts general jurisdiction over the law of collective bargaining ag reements-- William H. Rehnquist: How would you rate that, as a decent argument, or-- [Laughter] --a good argument? Stephen A. Yokich: --Well, I'd rank it way up there on top. Antonin Scalia: PG? PG, General, or-- [Laughter] Stephen A. Yokich: And I suppose that the... what it comes down to on our view in terms of looking at the language of the statute that's involved is what you use the... what the word for, the preposition involves. We think the word for is susceptible of a broad enough meaning, that being concerning or related to, which you can find in the dictionary, in the definition for for, that the Court has considerable latitude to resolve issues that go to the heart of the enforcement of a collective bargaining agreement. Ruth Bader Ginsburg: Considering the Court's latitude, suppose you're right that theoretically there is a 301 suit here. Suppose a district judge then said, well, this union went to the board first, and I have to apply board law, so I'm going to say, prior proceeding pending, and wait until the board acts. Would that be a proper response to your claim? Stephen A. Yokich: I think it would be a proper response to some claims. If the complaint was wholly based upon an alleged unfair labor practice I think that might be a proper response. I don't think that's the case in our situation, because I think if you compare the theory of our case versus the board's theory of their complaint, they're different cases. Our case goes to the entire contract and is based upon the common law of fraud. The board's case is really a little bit different than that. The board argues that it was a mandatory subject and that the parties did not bargain in good faith over that mandatory subject, and that the subcontracted clause that would let the board... that would let the employer proceed on that subject was procured by fraud, and so the fraud really comes in, in the board's theory at least, in the tail end of the case as opposed to being the heart of the refusal-to-bargain complaint. John Paul Stevens: May I just interrupt you with a question there? Do you agree with your opponent that, if it is not a mandatory subject of bargaining, but there was nevertheless active fraud in the negotiation on the nonmandatory issue, that the board could remedy that as a failure to bargain in good faith? Stephen A. Yokich: It's hard for me to see that, Your Honor. If it's a permissive subject-- John Paul Stevens: Let's assume it's permissive, and that there's active fraud in misleading the union and the board would be powerless to remedy that. That's your view. Stephen A. Yokich: --If it's a permissive subject their duty is to supply information-- John Paul Stevens: I know there's no duty to disclose. I'm assuming there's no duty to disclose, but there nevertheless is an active misrepresentation. Stephen A. Yokich: --I don't know of any board cases that give-- John Paul Stevens: He said there were a lot of them. That's what puzzles me. Stephen A. Yokich: --I don't know of any board cases that give relief in that situation, and-- John Paul Stevens: Are there any board cases saying they have no power to give relief in such situation? Stephen A. Yokich: --Well, the closest the board has... the relief that we seek in this case is to be able to declare the entire contract unenforceable. John Paul Stevens: I understand. Stephen A. Yokich: And I don't know of any board cases that deal with that exact situation, and that say that you can award that kind of relief. John Paul Stevens: And you think, in representing the union, the board would not have the power to declare a contract void on the theory that the... there was no bargaining in good faith because of fraud such as I've described? Stephen A. Yokich: Well, representing the union, the best I could do is predict that that would be a very tough case before the board. There aren't any cases that I could supply to the board to support that. Ruth Bader Ginsburg: The petitioner's brief makes that statement that the NLRB could, as a remedy for an unfair labor practice, invalidate the contract. Stephen A. Yokich: Well, the cases the petitioner's brief relies on, first of all they all deal with mandatory subjects where the employer had an obligation to bargain about them. Second, if you look at the most recent case, the Waymouth case, it speaks of a particular commitment that was made in a contract that has... that was held not to be binding upon the union. It was a case where the union said, if you move to another site this contract's not going to cover us representing the people at the other site. The employer misled the union about where it was moving to, and the board said, well, you can't enforce that specific term of the contract, and again that's very much consistent with the board's theory in this case, which goes to a specific term of the contract rather than the enforceability of the entire agreement. Anthony M. Kennedy: You read the statute as if it were to say, suits respecting contracts. Stephen A. Yokich: I... not only do I read the statute that way, but I think that that is the thrust of the board's precedent from Lincoln Mills onwards. William H. Rehnquist: What authority does the board have to construe a grant of jurisdiction of the Federal courts? Stephen A. Yokich: The NLRB? William H. Rehnquist: Yes. Stephen A. Yokich: I think it has very little authority to construe the grant of jurisdiction for-- William H. Rehnquist: So, then, why is it important that the board may have construed it that way? Stephen A. Yokich: --If I said that-- Antonin Scalia: You misspoke. I think you meant the courts-- --Oh. Stephen A. Yokich: --That's correct. I misspoke. William H. Rehnquist: You mean this Court, when you-- Stephen A. Yokich: I think that the entire thrust of this Court's cases is to give section 301 a broad reading. William H. Rehnquist: --Well, I've just been rereading Textile Workers and I must say I don't agree with your characterization of that. It seems to me the Court said, jurisdiction is jurisdiction, and they went on to say that with section (b) there was a grant of Federal... an additional grant to Federal courts to develop a case law, just as you say. Stephen A. Yokich: Mm-hmm. William H. Rehnquist: But I don't see anything expansive in there about the jurisdictional ground. Stephen A. Yokich: Well-- William H. Rehnquist: Maybe you could refer me to specific language. Stephen A. Yokich: --The... I think that the expansive nature of the jurisdictional grant comes as you develop the other cases that deal with section 301. William H. Rehnquist: That would be strange, really, if you have a limited jurisdictional grant and then construed to authorize development of substantive law in cases within that jurisdictional grant, and then the substantive law doctrines enlarged the jurisdictional grant. Stephen A. Yokich: I'm not trying to argue that, Mr. Chief Justice. What I'm trying to say is that I think that the courts in Lincoln Mills read the language, did not apply it literally to just give them jurisdiction, applied... read the language to give them the authority to develop a whole body of contract law, and our argument is that our claim in this case that a part of the inducement, like other contract formation claims, fits within the whole body of contract law. Anthony M. Kennedy: Are there cases in the arbitration area where the contract says suits for violation of this agreement shall be arbitrated, and then the question is whether or not the agreement is void? Stephen A. Yokich: There are arbitration cases where this is put in as a defense to the enforcement of a specific term of the contract. I'm not aware of any arbitration cases that throw out a whole contract because of a claim of voidance of this kind. Anthony M. Kennedy: Well, my question was whether or not there are cases going to the scope of the arbitrator's authority. One party says the contract says suits for violation of this agreement are arbitrated, and the issue is whether or not there's fraud, and the party who's trying to defend says, oh, well, the arbitrator can't consider this because this goes to the whole contract and this is not a violation of the contract. Stephen A. Yokich: There are... let me divide that into two parts. There are Federal court cases that deal with enforcements of agreements to arbitrate that deal with the issue of, can that agreement be enforced due to the fraud, and quite honestly there's a mish-mash of the cases. They go different ways. There are cases, for example, in the Fifth Circuit that say that if an issue of fraud is raised, then that's something the court has to determine before it can order the case to arbitration and that, of course, is, one thing that would happen were this case to go back down is that the district court would have to consider the company's additional defense that this case has to be arbitrated. That was reserved in the court of appeals decision and is something that would be currently before the district court. Stephen G. Breyer: What do you say about what I take it is the declaratory judgment theory? Suppose Mr. Dyk were to say, yes, of course, you can bring that kind of claim as a declaratory judgment to get the contract declared void because that's a possible defense that you'd have if the employer were to sue you, but that isn't the theory that was argued below and anyway, if it were, you'd lose because you have to have some kind of threat that the employer really would sue you, and here there was none. Stephen A. Yokich: Well, I think that your reaction to Mr. Dyk's argument that this is really a ripeness argument is the correct way to analyze that problem, and I-- Stephen G. Breyer: And then he said you'd lose, though, on that. Stephen A. Yokich: --And I don't think I'd lose on the ripeness point, and that's for two reasons. First of all, I think that all of the... that a decision on what we plead can be determined by historical facts. Either the fraud occurred or it didn't. It depends on who said what to whom when, and because there is no other event that really has to happen to determine whether the fraud occurred, I don't... I think this is a situation that is eminently ripe for judicial resolution. Ruth Bader Ginsburg: But that's not how it goes with declaratory judgments. The question is, how imminent is it that you are going to be hurt by what happened? It's not, does anything more have to happen. Stephen A. Yokich: I think that that goes to the issue of whether a judgment would fix the legal rights of the parties, and I think that a judgment would fix the legal rights of the parties, because-- Ruth Bader Ginsburg: But that doesn't sound... I mean, you can think of any kind of contract. Think of a landlord and tenant. They want to settle what the contract means, and so they bring this suit and the court will tell them and they can go on. Declaratory... there has to be, especially in the Federal courts, a case or controversy, so you can't just have this iffy, something happened then, and it may ripen into an adversary concept later. Stephen A. Yokich: --Well, I think that the parties in this case are in an adversary contest. We say there was fraud, they say there wasn't any fraud. We say the contract's not enforceable, they say the contract is enforceable, and I think the fact that we didn't write them a letter before we filed the lawsuit, that we let the lawsuit be our indication that we thought the contract could be rescinded, I think that's sufficient to put us in a posture where we are adverse and where the decree could be meaningful. If the decree did issue, if the court were to hold this contract could be rescinded, then what would happen was that the parties would say, boy, we'd better go back to the bargaining table and try to remedy this problem, and so the decree that the court would issue would give concrete legal guidance to the parties. Antonin Scalia: You don't... you're not going so far as to contradict, however, the assertion that you have not threatened to violate the contract? Have you positively threatened to violate the contract? Stephen A. Yokich: We... I don't think I-- Antonin Scalia: The alleged contract, I suppose I should say. Stephen A. Yokich: --Right. The only place where we have said that we think the contract is void is in the two legal proceedings, in the legal proceeding before the NLRB and in the legal proceeding before the district court. We've not otherwise made that threat. John Paul Stevens: I have understood your position to be that you do not need to allege a threatened violation of the contract in order to establish the jurisdiction you seek in this case. Stephen A. Yokich: That is our-- John Paul Stevens: I really think that's your position. Stephen A. Yokich: --We don't... I don't think we have to go that far. John Paul Stevens: In other words, this case doesn't turn on an estimate of probabilities of how much likelihood there was of a strike. You think basically you should just go in cold and say, we want to know whether we're bound by the contract or not. Stephen A. Yokich: On an issue of this nature-- John Paul Stevens: Yes. Stephen A. Yokich: --where it's solely determined by-- John Paul Stevens: Set aside the entire contract. Stephen A. Yokich: --historical fact, I would say yes. William H. Rehnquist: Well, what if you have a landlordtenant dispute, and say a Maryland lawyer is renting an apartment from a Virginia lawyer, and they've signed a lease, and right after they sign the lease the Virginia lawyer sues the Maryland lawyer in Federal district court and says, we just want to... I want to know whether this is a binding contract or not, and the Maryland lawyer says, I do, too, and we'll just avoid future disputes. Is that justiciable? Stephen A. Yokich: I don't think it's justiciable absent some claim that the contract was not binding and absent all of the facts necessary for a court determination on that claim existing, and so just a naked claim, we want to know whether it's enforceable, is not enough. If there was a claim that there was no meeting of the minds, or that the figure in the contract for rent was the wrong figure, I think that is justiciable. John Paul Stevens: Yes, but the distinction here is, I don't think there's any doubt that if the statute clearly covered your case there would be Article III jurisdiction. Having an interest in knowing whether there's a good contract is sufficient to give you standing. The question is whether it comes within the scope of this particular statute. Stephen A. Yokich: I think that's right, and that's why I think it's important that when you construe the word for, that you construe it as meaning concerning, and that when you look at what are the issues the Federal courts have looked at with respect to concerning, you see the whole-- John Paul Stevens: It seems to me if you construe the word for as meaning concerning that doesn't get over the principal hurdle as to whether there's a violation. Stephen A. Yokich: --Well, I... what we're asking for is a declaration that the contract's not enforceable, that if we commit a breach, that it's not a violation, and I would argue to the Court that we've done all we need to do to indicate to the other side that we think that there's a substantial issue that we disagree with them on with respect to whether or not we can violate the contract. William H. Rehnquist: You agree, don't you, Mr. Yokich, that the Declaratory Judgment Act doesn't expand any jurisdiction. It just applies where there is jurisdiction. Stephen A. Yokich: That's correct, Your Honor, and it's a procedural device that let's a person who expects that they will be a defendant get into court first to get a declaration so that they don't have to risk the consequences of a breach. In this type of situation, I think where you have very large consequences from a breach, where you have an impact on the employer if there's a strike, where you have an impact on the union, and where you could have very, very substantial impacts on the membership of the union, it's entirely appropriate to not put the union to the point where it has to say, this is void or we're going on strike tomorrow. William H. Rehnquist: Do you think you could have gone into State court? Stephen A. Yokich: No. William H. Rehnquist: Why not? Stephen A. Yokich: Because our view of section 301 is that it creates a complete jurisprudence of section 301. William H. Rehnquist: Well, what do you do with the Dowd Box case? Stephen A. Yokich: Well, I... let me step back for a second. We could have gone into State court, but it would have been under section 301 and it would have been limited to whatever this Court would hold-- William H. Rehnquist: Well, why would it have been under section 301? Stephen A. Yokich: --Excuse me? William H. Rehnquist: I say, why would it have been 301> ["] when section 301 is a grant of jurisdiction for Federal courts? Stephen A. Yokich: Well, what the Court held in AVCO was that a State court breach of contract claim was something that arose under section 301 and was therefore removable, and as a consequence, if you go into State court on a breach of contract claim it's going to be determined by the same standards that this Court uses under section 301. William H. Rehnquist: Well, but if it isn't covered by section 301, it's not removable, I would suppose. Stephen A. Yokich: Well, and I think that reading Dowd Box and AVCO together means that if it relates to a collective bargaining agreement, that you use the Federal law under section 301. You can use it in either Federal or State court, but if one party wants to remove, then you're in Federal court. William H. Rehnquist: Even though there's no 301 jurisdiction? Stephen A. Yokich: Well, in the case... you see, and I guess that-- William H. Rehnquist: That would have to rank as one of-- Stephen A. Yokich: --that goes to the point that they're making in this case. William H. Rehnquist: --One of the less plausible arguments, it seems to me. Of course, you're going to have to discuss sooner or later whether one reason you couldn't go into State court would be because of Garmon preemption, which at least they say applies here, too. Stephen A. Yokich: Well, our position on that is that their analysis of section 301 doesn't really do a very good job of explaining how that would work, and that's because presumably if you went into State court you'd be governed by State rules of procedure, and you could have a State Declaratory Judgment Act that was broader or narrower than the Federal Declaratory Judgment Act in terms of what types of violations you could bring before the court. And if that's the case, if section 301 is less than complete in terms of the jurisdiction it gives the courts over issues of contract enforceability, you have a situation where you could have State court actions that are entirely undermining the principle of uniformity under section 301. Now, if... and you know, their argument doesn't account for many different things. It doesn't account for what happens if it's a permissive subject and the board concededly has no authority whatsoever, Garmon preemption couldn't apply in that case, and it also doesn't account for the fact that there are some contract formation issues that might not get you in front of the board. John Paul Stevens: Well, maybe Congress wasn't perfect. Garmon talks about arguably, you know, and from what you both said to me, I think it's at least arguable the board could fashion a remedy for fraud in the inducement of a contract on a permissive subject of bargaining. Stephen A. Yokich: Well, and our position on that is that so long as the court can find section 301 jurisdiction we would continue to live in this world where we have concurrent remedies. Ruth Bader Ginsburg: So your argument does lead to the end result that there would be many, many more cases of overlap of board jurisdiction and court jurisdiction than has been thought up to now. Stephen A. Yokich: I don't think so, Your Honor, and that's because we've had declaratory judgments in the Federal courts in labor cases for over... for almost 40 years now. The first reported case that I can find is the Black and Clawson case in 1962, and-- Ruth Bader Ginsburg: I'm not talking about declaratory judgment cases. I'm talking about parallel proceedings. I mean, you made a complaint to the regional council first, right? Stephen A. Yokich: --To the regional director, yes. Ruth Bader Ginsburg: One whole year, so couldn't what you have done be replicated by many other unions in this situation, that is, go to the board, they're moving too slowly, come to court? Stephen A. Yokich: Well, if you look at the circuits where the courts have acknowledged that lawsuits like this one can go forward, I don't think you can find any evidence that there are dozens and dozens and dozens of cases where the parties are exercising both-- Ruth Bader Ginsburg: How many cases are there like this one that said the union, on what would be a defense, can come in and get a 301-- Stephen A. Yokich: --Well, the Tenth in McNalley, the Ninth in Rozay's and in Wilson, the First has hinted at that in a recent case, but the Seventh would almost certainly say it. The Third would, and the Second Circuit would also say it, too, under Black and Clawson and Kozera and Messenger, which means I think in the majority of places we already have the potential that they're talking about, and it's hard to identify a great number of cases going into the court that deal with these types of issues. Stephen G. Breyer: --Why wouldn't the employers do the same, though? If... why hasn't it happened whenever an employer faces a weak union that isn't going to strike, it sues to have the whole collective bargaining contract set aside as invalid? Stephen A. Yokich: Well-- Stephen G. Breyer: And they had all these things run right into Federal court, and they're deciding the validity of all the collective bargaining agreements? Stephen A. Yokich: --Well, again, in terms of the affirmative... in terms of employers doing this I think the same analysis applies, because I think we've had concurrent jurisdiction over these types of contract formation issues for many years in many places, and we haven't seen this. I guess-- Stephen G. Breyer: That isn't something that bothers you, or the board-- Stephen A. Yokich: --Well, it doesn't bother me in this case. Stephen G. Breyer: --No... well... what... as a labor lawyer-- Stephen A. Yokich: It might bother me in Mack Trucks, but-- Stephen G. Breyer: --does it bother you that if you win in this case I guess the employers would have a perfectly valid legal right to challenge whatever collective bargaining agreement they felt was invalid as a matter of contract law? Stephen A. Yokich: --Well, I think that because-- Stephen G. Breyer: Then you go into the court, not the board. Stephen A. Yokich: --in most places that's already possible. We've accepted the, sort of the run of the courts in that, and as a consequence we want to establish the proposition that it can be used affirmatively as well, and that is what we're trying to do here. I think the best answer to this argument is in the Third Circuit where the decision in Mack Trucks came down 10 years ago, where it's a decision that's pretty closely on point and correctly decided, and where you really don't see a lot of these cases arising. One case came up recently called the Beverly case, and the Third Circuit didn't have any problem in saying, in that case, because all the-- William H. Rehnquist: Thank you, Mr. Yokich. Your time has expired. Mr. Dyk, you have 3 minutes remaining. Timothy B. Dyk: Just briefly, Mr. Chief Justice, if you look at the complaint that was filed in this case, which is pages 16 to 19 of the joint appendix, and particularly to paragraphs 5 through 10, which are the operative paragraphs, you can see quite clearly that the theory of this complaint is a failure to supply information in response to the union's request. This is at the heart of the board's expertise and the board's jurisdiction, determining when there is an obligation on the part of the employer to supply information to the union. The union has admitted in its brief that board law must apply to this proceeding, so we suggest that in terms of the substantive rules, there's an exact parallel here between the complaint theory and the board theory, and Justice Stevens, I don't know of a lot of cases where the board has addressed misrepresentations in the context of permissive bargaining, but there's no reason as a matter of theory that that shouldn't be the case. And if one looks at the brief filed by the United States here, the United States does not suggest that there's any gap in the jurisdiction of the board with respect to this particular case. They make very clear that the board can invalidate contracts, make employees whole... there's an absolute identity of the theories that can be brought before the board and the relief that can be gotten from the board, and the board was set up by Congress to determine what relief should be granted under these circumstances. Sometimes it will be invalidation of the whole contract or, as here, a part of the contract, and it's that kind of discretion, that kind of expertise which the board has and the courts don't have and is a primary reason why this Court should not permit the Federal courts to, in essence, adjudicate unfair labor practices that otherwise would come before the board. Antonin Scalia: Can the board award damages, which is one of the things they sought here? Timothy B. Dyk: Oh, yes. In fact, the board settlement awarded back pay damages and the United States in its brief acknowledged that the board can award these kinds of damages. Thank you. William H. Rehnquist: Thank you, Mr. Dyk. The case is submitted.

William H. Rehnquist: We'll hear argument now in 91-126, Howard Wyatt v. Bill Cole and John Robbins. Mr. Waide. Jim Waide: Mr. Chief Justice, may it please the Court: My client, Howard Wyatt, the petitioner, is a cattle farmer in Simpson County, Mississippi. He had a cattle partnership with the respondent, Bill Cole. In July of 1986 the partners weren't getting along very well-- Byron R. White: To say the least. Jim Waide: --Thank you, Your Honor. They were discussing breaking up the partnership. Now, they had never been able to agree on what the terms were or how they were going to break it up, and they had further discussions scheduled. The day before they were to meet for further discussions on breaking up the partnership, my client, Mr. Wyatt, who is not a very sophisticated man and who has less than a high school education, comes home and he finds out at the farm in Simpson County... he finds on his property Mr. Cole, the respondent, his attorney, the other respondent Mr. Robbins, and a bunch of deputy sheriffs and other people going about the process of taking possession of partnership property. That's what he finds when he gets there. He's never... through 2 days of taking over the property they never serve him with any papers, but they do after they've taken what Cole contends is his share of the partnership property. As it turns out they have an order from the judge that says take 23 head of cattle and other personal property, and they take possession of it. Now, Your Honor, these cattle are Brahma cattle, which probably means not much to most members of this Court, but it's a peculiar type of cow, and that is that a Brahma, if Your Honors have ever watched a rodeo, once these cattle have ever been driven with horses or ever been chased with dogs they become mean and unmanageable. You can't keep them behind a fence, and after that their value is diminished. They're worth nothing more than what they're worth by the pound. If you're gentle with the cattle, if you treat them right, some of these cattle... one of the cows the testimony was it was worth $6,000, a registered, gentle animal, but after this, after the running of the cattle and the manner in which they were taken over, I might say analogous, Justice White, to some football players that you've seen. On one occasion they're gentle, and you go out on the field and they become tough and ornery and that's what happened to these cattle by raising-- Byron R. White: Yes, but when you run them enough they become very gentle. [Laughter] Jim Waide: --Anyway, Your Honor, Brahma cattle are probably not that important to most of us, even though Mississippians probably have more appreciation than some of us that live in Washington, D.C., but to my client, Mr. Wyatt, these animals were very important to him. They were important to his family... it's what he done. He had a job in the factory-- Byron R. White: Well, does that really bear on the constitutional issue? Jim Waide: --No, sir, it probably doesn't, except that the defendants are claiming good faith and innocence and I think it might have some bearing on that, that they would have known what they were going to do to him. William H. Rehnquist: But the good faith and innocence claim goes to their knowledge about the unconstitutionality of the statute, not to the disposition of the cattle. Jim Waide: Yes, sir, that's correct, Your Honor. The end result of it, in any event, was that a hearing was finally held. The Mississippi statute provided for a preseizure... strike that... a prehearing seizure. You go out and seize somebody's property on making an affidavit and then you have a hearing later. That was basically the scheme of the statute, and of course Mr.-- Byron R. White: So it's not a preseizure hearing, it's a postseizure hearing. Jim Waide: --That's correct, Your Honor. The Mississippi statute provided or allowed... it could be interpreted to provide... the Mississippi supreme court later ruled this is an incorrect interpretation, but it could be read to say that you can go seize somebody's property and then have the hearing later. You just file your affidavit with the judge that you're entitled to the property, he automatically issues the order to go pick up the property, and then you have the hearing later after posting a bond, so you can be sued, of course, if you were wrong in making the seizure. So that's basically the statutory scheme, and that's the way that they were able to come take the cattle, and after having them a few days Mr. Cole transported them to Texas, even though a State judge ruled that the order of replevin was wrong in the first place. Byron R. White: Well, you had a postseizure hearing. Jim Waide: That's correct. Byron R. White: What happened at the hearing? Jim Waide: Thank you, Your Honor. At the postseizure hearing the circuit judge ruled that the replevin was erroneously issued under State law, that this dividing up a partnership is not within the replevin statute. You're not wrongfully detaining property when you detain it as a partnership. Byron R. White: So what did he order? Jim Waide: He ordered him... I might point this out, Your Honor. He ordered him to bring the cattle back or pay damages, but at this point, of course, if he brought the cattle back that wouldn't remedy the wrong, because the damages was caused in large part by chasing them. Byron R. White: And then what happened? Jim Waide: Let me finish my answer, if I might... and also, Your Honor, my client, who's never had any history of psychiatric problems, suffered a mental breakdown and was hospitalized, and the remedy of bringing the cattle back which a State judge ordered wouldn't have cured that. But in any event, he didn't follow the judge's order. He'd taken advantage of the replevin statute as far as he wanted to use it, and Mr. Cole just did not follow the order of the State judge. Cole claimed his lawyer, Robbins, never told him about it. Robbins said he told him about it and he doesn't know why he didn't follow it. But anyway, he didn't follow the order of the State judge. Byron R. White: And then what happened? Jim Waide: Your Honor, the next thing that happened was we decided for strategic reasons and because we believed, erroneously as it turned out, we'd be better off in the United States District Court, we took a nonsuit of our pending proceeding. The State judge had said he owed us damages, but we didn't know how much damages or how the State law was going to be interpreted, and we took a voluntary nonsuit of the State replevin action and filed suit in the United States District Court, so that's how this case got started. Now, Your Honor, even though 42... and I feel like I'm right in saying this... even though 42 U.S.C. section 1983 says in the broadest of terms that everybody, every person who violates another's constitutional rights under color of law is subject to damages, even though the statute says that, under well-settled principles that this Court has announced in many decisions, the district judge held that just about everybody involved was clearly immune from suit... everybody. Byron R. White: Absolutely. Jim Waide: Yes, sir, and very little question about it, most of it we abandoned in the district court. We sued everybody, but most of it we abandoned because we thought this Court's decisions didn't leave us any room. Byron R. White: Was this absolute immunity, or qualified? Jim Waide: In this case they're claiming qualified immunity for a private defendant. Byron R. White: That's what the district judge ruled. Jim Waide: Yes, sir. The State was immune, of course, because of the Eleventh Amendment. Of course, everybody knows the judge was immune, and of course we didn't sue the judge. Everybody knows that he was immune from making a judicial decision. There are compelling reasons why the law officers were immune. The judge told them to go out there and seize the cattle, and they couldn't be put in the position very well of violating the court's order of being held in contempt, but in addition to that we had the qualified immunity, which we think is very tough to overcome, but those immunities. So we just... even though the statute says, here you are, you're got a remedy, under the immunity doctrines as they developed we didn't have any remedy because... and the reason we're here today, and the only person that was involved that was not subject to decisions of this Court, and we don't believe the decisions of this Court have been followed in this case, was Cole and his attorney, Robbins. That is the private party immunity, immunity of private parties who violate constitutional rights, and that's the question that's before the Court today. Justice O'Connor in Forrester v. White sounded a familiar theme for this Court, a theme that is said over and over again in these immunity cases, when Your Honor said we don't extend immunity beyond what its policy considerations are. In applying immunity, we look to the policies that the immunity was created for. That was said directly in Forrester v. White and is a theme, I think, in this Court's qualified immunity cases. Now, Your Honor, the policies that this Court has announced in qualified immunity cases are very clear and are just about the opposite of any policies that might be involved in this case. For example, this Court has said and said over and again probably beginning with Harlow v. Fitzgerald, but over and over again, we want to attract citizens to public office. We don't want to make it undesirable for a citizen... unnecessarily desirable for a citizen to hold public office. We're not involved in that. Mr. Robbins and Mr. Cole are not candidates for public office. They're just the opposite. They're private people. And then, Your Honors, probably the strongest case for immunity is the law enforcement officer, the fellow that's out there and he's trying to decide whether to make an arrest. If he makes the arrest, this Court has said we don't want to hold him liable for exercising his judgment and trying to save society from some criminal act in making the arrest. We don't want to put a burden on that discretionary decision. We want him to be able to make that decision on whether somebody committed a crime and whether they ought to be arrested based on exercising his discretion in carrying out a public function. Of course, that's not involved in this case. That has nothing to do with this case. And then, Your Honor, probably the strongest thing, or the thing that's so applicable to public officials and so inapplicable to a private party, when you look at Mitchell v. Forsyth this Court made it very clear that it's not just an immunity from damages, it's an immunity from suit. The official is not supposed to take his mind off of his important public duties, take his time away from them, by having to defend the suit, and so not only it is a freedom from damages, but it's a freedom from suit so he can take an immediate appeal. Now, to put these people in that position and say we don't want to take their minds off of public duties and they can take an immediate appeal is just totally inconsistent with the policies of Mitchell v. Forsyth. Antonin Scalia: Mr. Waide, that may be true with respect to official immunity, but we adopted official immunity for 1983 actions because it was in existence in 1870. There was also a private immunity in 1870, though, for people bringing legal actions. I mean, you couldn't sue and recover for false arrest, for malicious prosecution, for abuse of process, without showing that the person brought that legal process without probable cause, which meant that the person had to have entertained a subjective belief that he was not justified in going ahead. Now, why shouldn't that same immunity... not official immunity, but the immunity of a person invoking the legal process which existed in 1870, why shouldn't that be applied to 1983? Jim Waide: Your Honor, first, it's... I think it's probably not quite accurate to characterize that as an immunity. I consider... it's more accurate to characterize that as an affirmative defense to suit. That is to say that if you have probable cause or malice, there might be some defenses to the suit that could be raised. Antonin Scalia: No, it was not a defense. The plaintiff had to show it, so I don't care whether you call it an immunity or not-- Jim Waide: All right, sir. Antonin Scalia: --But it would have been your burden to show it. Jim Waide: All right, sir. Anyway, it was a matter that would be taken up at trial. It's a matter that would be taken up at trial, it's not a defense from suit. An immunity, as this Court has construed it, is a defense from even having to undergo a trial. Antonin Scalia: Well, no, you would have to plead it. You would have to plead that subjectively malicious frame of mind, or you wouldn't even get past the summary judgment stage. Jim Waide: Well, Your Honor, I certainly don't mean to argue with the Court. I thought... my interpretation of it was, it was an affirmative defense, but in any event of course there was no summary judgment procedure. When I looked at the precedents the conclusion that I drew from it was, it was a matter that would be submitted to the jury at trial, the issue of malice, an affirmative... well, where there's an affirmative defense and not a matter for the factfinder. And Your Honor, I wouldn't quarrel... let me say this, Your Honor. I wouldn't quarrel... the Mississippi supreme court I think took the correct view of this matter in a case that the respondent cited, and they said there might be some defenses you could raise at trial. You might be able to show... it might be Mr. Cole would come up at trial and say well, I thought the statute was legal on its... if the Court wanted to adopt a subjective good faith standard, I don't find that nearly so objectable as saying you can't even get to first base, this is an immunity from suit. Byron R. White: That's what you should have taken to the State court. Jim Waide: Justice White, ironically we should have, because... and I think this is an another important facet about this case... if this Court is going to adopt a policy, and that's what it has to do, Your Honor; Justice White in the Burns case very recently said this Court has no authority to just judicially create policies, and Justice Scalia, that's why, of course, the Court looks to the common law background. But in this case, if this Court adopts a policy, if this Court says we're going to have a policy that private defendants can't be sued, I think it's important to think about what policy interest is it that we're implementing, and to me that is the policy of the State of Mississippi, the policy of the State of Mississippi to protect... to allow its citizens to rely on statutes. That would be the policy that the Court would be looking at, that particular policy, and I think that 42 U.S.C. 1988 counsels this Court to look at what State policies are. Now, the State of Mississippi, Your Honor, on the comment that we should have stayed in State court, in retrospect we certainly should have because the case that counsel cited consistent with his ethical duty to cite cases contrary to his position, the Mississippi supreme court has said in the Foremost case that he cited that they don't see... in effect they don't see any Mississippi policy prohibiting a suit against a person that wrongfully implements... wrongfully brings a replevin action. That's the policy that Mississippi announced. Now, the thing that I don't understand on it-- William H. Rehnquist: Do you think then, Mr. Waide, that the outcome here should depend on what the policy is in each of the 50 States? Jim Waide: --No, Your Honor, I don't. The only point that... I might say it wouldn't differ in this case, because all the States have similar policies, but I'll get to that in a second. But the only thing that I'm saying, Your Honor, if we're talking about a policy decision... we're talking about a policy. That's what we're talking about. Is this Court, as a matter of policy, going to create an immunity? I'm saying that if the Court does that, the policy that it would have to be implementing or trying to carry out is an interest the State of Mississippi has. That would be the policy. Now, Your Honor, I understand the danger that Your Honor Mr. Chief Justice is talking about, that you'd have a different rule of immunity from State to State. I might say, Your Honor, that in Robertson v. Wagaman this Court addressed that and said 42 U.S.C. 1988 counsels, or means there's bound to be some differences. Of course, we have different statutes of limitations because we look to State law. William H. Rehnquist: So is the answer to the question that I asked you yes or no? Jim Waide: Your Honor, my answer to this question is it would be uniform across the States. The reason I say that is because in Dora v. Connecticut... this is the most recent replevin case that's decided... there's an appendix to that opinion that outlaws the replevin laws across the State, and it's practically uniform, if not a uniform requirement, that when somebody brings a replevin action he posts a bond. In other words, all the States contemplate that the private person wrongfully bringing a replevin action can be sued. That's what I'm saying, Your Honor. It wouldn't make for any difference in this case. William H. Rehnquist: Because you say the policy of all 50 States is to allow an action against someone who wrongfully brings a replevin action without any requirement of malice? Jim Waide: Yes, Your... well, Your Honor, the statutes, I think the language of the statutes just simply says if you wrongly sue out a writ of replevin you can be sued. William H. Rehnquist: Well, of course, that leaves the whole question up in the air. What does the word wrongfully mean? Jim Waide: Yes, sir, I understand. The only point that I'm making, Your Honor... that is correct, but the only point that I'm making is the States, as a matter of policy, do not have a policy that people who bring replevin actions are immune from suit. William H. Rehnquist: No, but you don't answer the question of whether there might be States in which there would be some showing of malice required, if you're talking about just State causes of action. Jim Waide: All right. Well, Your Honor, in the first place I would assume, at least for the sake of argument, that in any type of suit as a factual matter, any type of suit that's based on some type of abuse of process or malicious prosecution theory, which is what this essentially is, that type of suit there are certain factual matters that the jury could take into account, and I think one of those might be whether this person acted intentionally or something, but that doesn't... the qualified immunity is an objective standard. It's an immunity from suit, and that's what... all I'm asking this Court-- Antonin Scalia: Excuse me, Mr. Waide, I'm not sure that... I think it's one and the same thing. I think you try to characterize the one as an immunity and the other as a matter of evidence. All the immunity is for officers is that you have no cause of action... if it's qualified immunity, you have no cause of action unless you prove bad faith, and it's the same thing here. Against a private individual you have no cause of action unless you prove bad faith. Now, both of them you can either characterize them as immunity, or you can characterize them as what must be proven at trial, but they are one and the same thing. Jim Waide: --Excuse me, Your Honor, but I would differ with the Court just in this respect. The qualified immunity, as this Court has announced it, is a legal standard of objective rulings. Although the term bad faith is used, it really has nothing to do with bad faith. It's a question of whether they acted contrary to law, and what I'm saying is there are certain matters the Court... I'm asking this Court to rule there is no qualified immunity... in the sense that this Court has applied it to public officials, there is no qualified immunity. It's not necessary, Your Honor, for this Court to even reach the question of what kind of matters might be admissible into evidence at trial, and I'm simply suggesting to the Court that when we go to trial we will probably call some lawyers and they would say, well it was at least known everywhere that there's some question about whether this is constitutional or not. You'd at least know there was a question about it. I mean, maybe you don't meet... maybe it's still qualified immunity, but everybody ought to know there's some question about this type of procedure. And Mr. Cole will get on the stand and he'll say well, I thought the statute was valid, and we'll ask Mr. Robbins well, didn't you tell him there was at least a question about it? Didn't you tell him there was at least a question that this Court has said again and again that these things are of questionable legality, and the Mississippi supreme court, Your Honor, in its opinion appeared shocked that anybody would do anything like this and said that its understanding of the statute was that there had to be some emergency reason to go out and seize property before a hearing. That's... you can't get that from the statute. But the Mississippi supreme court, if anybody is going to have a policy against not suing or allowing reliance on the State statute, it is surely the Mississippi supreme court. I might say the Attorney General, Your Honor, was an amicus curiae in this case and he took no position on this issue. He said, I concede the statute's unconstitutional, but he didn't take any position that I want our private citizens not to be sued. Anthony M. Kennedy: What about Cole? What should be the standard for his liability? Suppose he... he doesn't know anything about the law, let's assume that. Does he have a good faith defense under your view of what the-- Jim Waide: Your Honor, my opinion of how the Court should decide the case as to Cole is that first, disagreeing perhaps with Justice Scalia, that there is no common law background sufficiently close to this to justify this Court giving any immunity at all, so immunity, which is a legal defense, is just out. Qualified immunity is out, and I don't know that it's appropriate for this Court to announce exactly what defenses maybe Cole could raise down in the courts, but if the Court is going to do that, I would just suggest that those analogous defenses that exist in the common law, Mr. Cole ought to be able to get up there and say, I think, well I thought the statute was legal. And we ask him on cross-examination well, Mr. Cole, are you telling me that you think you can go out and seize somebody's property before any trial, not knowing whether you're going to win the trial? Anthony M. Kennedy: --Well, I want to know what the standard is, because he would say well, my attorney told me there was a statute on the books. I thought that it was all right. Suppose he, number one demonstrates his subjective good faith... he acted in good faith. He thought that he had a right to do what he did, what result? Jim Waide: All right, I think the jury in that case would probably decide in Mr. Cole's favor if it thinks the lawyer never told him. Anthony M. Kennedy: Well, is the jury entitled to an instruction under 1983 that subjective good faith is a defense? Jim Waide: No, sir, that's... no, they're not, Your Honor, and what I'm saying is it's-- Anthony M. Kennedy: Well, it seemed to me that earlier you conceded, and I think perhaps that there may be some good reasons for that, that there should be a subjective good faith defense. Whether you call it a defense or an immunity I really don't care, and it seems to me there may be sound reasons for that. Do you concede that that's a prudent course for the law to take? Jim Waide: --Your Honor, the appropriate course in this case, in my opinion, is to decide the case before the Court, which is that the qualified immunity doctrine as this Court has announced it is not to be applied to private defense. Now, that's the end of that discussion. Now, the second question is, what about defenses that Cole could raise, such as-- Anthony M. Kennedy: Let's assume that we think that's before us. Jim Waide: --All right, sir... such as, I didn't think I was doing anything wrong. I think then that the Court could give the jury an instruction that the plaintiff must prove that Cole acted with malice. I think that very well might be an appropriate instruction, but you have to remember, Your Honor, that the Mississippi-- Anthony M. Kennedy: And we get that as a matter of Federal law under 1983. Jim Waide: --Your Honor, the State law standards are incorporated into 1983, as I understand it, by 1988 and generally in a malicious prosecution or abuse of process type suit that is an element of the case. Anthony M. Kennedy: So we do this tort by tort. Jim Waide: Well, Your Honor, the fact that we have 1988 indicates to some extent there's going to be variance among the States, but I don't think there's any great disparity. I think any... as far as I know, any State that talks about a malicious prosecution or an abuse of process type of situation requires malice. Anthony M. Kennedy: Well, but your cause of action is under 1983. Jim Waide: That's correct, Your Honor, but when 1983 doesn't provide the appropriate rules of decision and there's nothing in the statute, it's just general that you look to the common law or the to State law, and we think that... Your Honor, we think that even if the jury's instructed on malice, that we had to prove that as an element of the case, assuming that such an instruction is given, we think that we had evidence that we could have proved that with, but the trouble was the district judge ruled that this was a matter of law, and that's consistent with Your Honor's decisions, and that we were not going to be able to submit the case to the jury. Antonin Scalia: Why would we apply these defenses as a matter of State law? We don't apply immunity... official immunity as a matter of State law. We simply determined that when this Federal statute was passed in 1870 there was such a thing. We changed it a little bit, but basically there existed an official immunity, so we apply it as a matter of Federal law. Why shouldn't we do the same thing with respect to private immunity or defenses against liability? Jim Waide: Well, Your Honors do apply State law and have frequently applied State law on various defenses that might come up such as the statute of limitations, or such as survivorship rules. That's in Wilson v. Garcia, and 1988 contemplates that you'll look to common law or State law for the rules of decision in a lot of cases, and I see nothing wrong with doing that in this case, and I also see no inconsistency, assuming that's a bad thing. Antonin Scalia: Do you know any other case where we look to State law for defenses to a Federal cause of action? Jim Waide: Yes, Your Honor, Wilson v. Garcia on the statute of limitations, which is an affirmative-- Antonin Scalia: No, I'm not talking about statutes of limitations, I'm talking about substantive defenses to the cause of action. Jim Waide: --Well-- Antonin Scalia: It seems very strange to create a Federal cause of action and say however, what defenses exist to this Federal cause of action ought to be a matter of State law. It's very strange. Jim Waide: --Well, Your Honor, all that I can say is it's always my assumption in trying 1983 cases, and it appears to be universally done, if there's no rule, there's no Federal rule... you know, if we're talking about a cause of action and there's nothing in any statute that says what the elements are for this cause of action, you've got to look somewhere for the rule of law, so to me the logical place to look and dictate it by 1988 is State law or the common law. That's what the statute directs the court to do, and of course as in Erie v. Tompkins there's no general Federal common law, so that's the only place logically that you could look. Byron R. White: Mr. Waide, why wasn't the bond valid in this case? Why couldn't you collect on the bond? Jim Waide: Justice White, the bondsman was attorney Robbins' son and Mr. Cole's wife. The wife was in Texas and the son had no assets that we could find. Byron R. White: What was the condition of the bond? Jim Waide: Just pay any damages that might accrue because of the wrongful suing out of the writ of replevin was the condition of the bond. Byron R. White: So if the bondsman had been good the bondsman could recover against his principal, I suppose. Jim Waide: Your Honor, had the bond been good, Mississippi replevin law... we're just talking about State law now for wrongful replevin... had very limited damages rules, which was part of the reason why we came to Federal court. The damages were the loss of use of the property and the value of the property, and there hasn't been any State precedents effected. Byron R. White: Well, anyway, whatever you could have collected on the bond, the bondsman could have collected from his principal. Jim Waide: Yes, sir, that would be correct, Your Honor. Byron R. White: And it wouldn't... and the principal wouldn't have been able to plead any kind of immunity or any defense against that kind of action. Jim Waide: That's an interesting point, Your Honor, and the way the statute is written it's an absolute liability. It's like playing with dynamite. If you wrongfully replevin property, you're liable, and I hope, as I said to Justice Scalia-- Byron R. White: So the risk of an illegal replevin is on the person who replevies. Jim Waide: --Yes. Now, those are the... Justice... I said to Justice-- Byron R. White: And that goes for, you think... and I suppose it goes for-- Jim Waide: --Constitutional tort. Byron R. White: --Yes. Jim Waide: Your Honor, what I would like-- William H. Rehnquist: Mr. Waide, just a minute. You've said... the Mississippi supreme court has said if a replevin action is wrongfully brought the plaintiff is liable for damages. Has the Mississippi supreme court defined what it means by wrongfully? Jim Waide: --Just failing to comply with the statute, Your Honor, is essentially what it would amount to, that it was not justified. William H. Rehnquist: Is that what the Mississippi supreme court has said? Jim Waide: I don't know that that language is there, but that's the situation. There are two situations-- William H. Rehnquist: Well, just a minute-- Jim Waide: --I'm sorry. William H. Rehnquist: --I didn't ask you what the situation was, I asked you what the supreme court of Mississippi has held with respect to the meaning of wrongful replevin. Jim Waide: All right, sir. It's held two things, Your Honor. First, a replevin that the court ultimately rules was not justified is a wrongful replevin. Byron R. White: Under the State law. Jim Waide: Under the State law. It's ruled in that situation. It's ruled in a second situation. It's ruled in this 1983 type situation. Those are the two situations it's addressed on the constitutional issues. Byron R. White: Where the replevin statute has been held unconstitutional. Jim Waide: The Mississippi supreme court, Your Honor... this is the case that I was referring to. The Mississippi supreme court has addressed this precise issue before us and held there was no immunity as a matter of law. Byron R. White: Well, I... well, was it a case in which the replevin statute was held unconstitutional? Jim Waide: Yes, sir, it was. It's a case that's cited. I might give the Court the cite. Byron R. White: But you don't know whether you could have collected under the bond in that case. Jim Waide: In that case, could you have collected on the bond? I would assume so. That wasn't discussed in the case. Byron R. White: Well, you don't... let's not assume it-- Jim Waide: All right, sir. Byron R. White: --because the bond may just be conditioned on a rightful replevin under State law, and not on the possible unconstitutionality of the statute. Jim Waide: Your Honor, the case I consider to be all fours with this case. It's the precise... the only difference in that case and this one is that we did have a ruling by a State judge in this case that the ruling was wrong... that the replevin was wrongful as a matter of State law. Byron R. White: What's that cite for the supreme court of Mississippi? Jim Waide: 563 Southern 2nd 1387. My time is up, Your Honor. William H. Rehnquist: Thank you. Mr. McNamara, we'll hear from you. Joseph L. McNamara: Mr. Chief Justice, and may it please the Court: In analyzing whether to extend immunity to parties who come before it as section 1983 defendants, this Court has engaged in a dual history and policy analysis, and I would first address the issue of what is the compelling public policy which would cause this Court to formally extend immunity to those persons who act such as my clients, Mr. Cole and Mr. Robbins did, and I would say, Your Honor, that the public policy that is foremost is that the courts want to encourage that citizens have a right to rely upon a statute which has not been declared unconstitutional and which they do not suspect to be unconstitutional. Byron R. White: What if they should? Joseph L. McNamara: If they should? Byron R. White: What if, objectively, they should suspect it? Joseph L. McNamara: If they fail to meet the objective standard... in other words, I think-- Byron R. White: Oh, so it's an objective test you're talking about? Joseph L. McNamara: --Your Honor, I would want this Court to approve the objective standard which was applied in this case-- Byron R. White: All right. Joseph L. McNamara: --by the district court and approved by the Fifth Circuit Court of Appeals, but I would also state-- Byron R. White: But not just a subjective good faith test. Joseph L. McNamara: --No, Your Honor. Byron R. White: Okay. Go ahead. Joseph L. McNamara: There are reasons why the objective case, and that contrary to what the general argument of counsel for the petitioner seems to be that the extension of any immunity... and this is said in his brief... the extension of any immunity under these circumstances is going to make it practically impossible for there ever to be a recovery against private party defendants, and Your Honor, for instance, in the case which is before the Court, Mr. Cole and Mr. Robbins were granted the extension of immunity by the district court, approved by the Fifth Circuit Court of Appeals, as to the actions which were taken up to the district court judge's April opinion which said that the statute in question is unconstitutional. Then, when Mr. Cole kept those cattle out in Texas he was subject to damages in this situation, or at least to have the question brought before the jury, so at least in this case is an example of a private party defendant who was at least exposed to liability before a jury and who ultimately by the Fifth Circuit's mandate is going to have to pay some attorney's fees for the conduct which he engaged in after the declaration of unconstitutionality by the district court, since he did not comply with the order. A second point that seems to be made by Mr. Wyatt's counsel is-- Anthony M. Kennedy: That's a new cause of action? Joseph L. McNamara: --No, Your Honor. In the Fifth Circuit Court of Appeals-- Anthony M. Kennedy: I mean, when he fails to obey a ruling of the district court that was made in this 1983 suit, I assume you say that's a new and independent violation for which there must be some other 1983 action-- Joseph L. McNamara: --No, Your Honor. Anthony M. Kennedy: --or was this just a contempt of court? Joseph L. McNamara: No, Your Honor. The Fifth Circuit Court of Appeals affirmed everything which came to it from the district court except that it remanded for a finding of attorney's fees against Mr. Cole for the reason that he had engaged in conduct which violated the statute after the district court judge had declared it unconstitutional. The jury had found no damages at the trial below because for the main reason that counsel for Mr. Wyatt conceded that there were no damages occurring even for the mental anguish which he alleges his client to have suffered, that no damages occurred after the declaration of unconstitutionality, that all of the damages which Mr. Wyatt was claiming he said occurred before the declaration of unconstitutionality, and Mr. Waide has alluded to the great emotion and upset that he experienced because of the taking of his cattle. Now, a second public policy reason to consider is that if the Court does not grant immunity to private persons who acted as Mr. Cole and Mr. Robbins did, then the Court would be putting the burden of paying for the unconstitutionality of the Mississippi statute on the persons who absolutely have the minimal involvement in this case, and in this Court's decision last term in Burns v. Reed, in discussing the extension of... well, actually the issue was, of course, whether the prosecutor would be entitled to absolute immunity in his role of giving the advice to the police. In his majority opinion at... I've got 114 Lawyer's Edition 2nd 564... there is a discussion by the majority there as to why should we extend this grant of absolute immunity to the prosecutor in his role of advising the police and then grant only the limited or qualified immunity to the police. So this Court has previously looked at who has the most involvement, who has the most ability to determine the unconstitutionality of the statute, and one of the comments that the Court makes there is that those police officers are certainly not going to have the law training that prosecutors have. William H. Rehnquist: But one of the people here for whom you're seeking immunity is a lawyer, I gather, and that person would certainly have law training, one assumes. Joseph L. McNamara: That's right, Your Honor, and in Harlow v. Fitzgerald in the majority opinion when it's discussing the objective standard which would be applied, that this Court says that we're going to look at it as whether or not a reasonable person would know that the action taken would be a clear violation of the constitutional rights of the defendant, and further on in that opinion it clarifies... the opinion is clarified where the Court says we're going to look at the reasonable Government official. And so in this instance in the application of the objective standard, one can look at the reasonable attorney, one could look at the reasonable person who's just somewhat casually engaged in the cattle business, or one could look at whether the 1983 defendant was Citibank who may be bringing replevin actions at numbers per hour throughout the United States. Antonin Scalia: Mr. McNamara, as I recollect, one reason we have adopted the objective standard for official immunity, which I as recollect was not the common law approach, was that officials are subject to suit all the time. They'll spend their whole lifetime in court if every time they obey their orders they have to go through a trial to show subjective good faith. Now, that isn't the case with respect to private individuals. They're not going to be drawn into this thing repeatedly. Why do they need that same kind of protection? Joseph L. McNamara: Obviously, even the Citibank example that I gave is not going to have the potential exposure that the public officer would, but it seems to me that there's an important public policy in encouraging people such as Mr. Cole and Mr. Robbins to utilize procedures that are presumptively valid at the time they use them. Antonin Scalia: Well, but sure there is, but we could take account of that by giving a good faith immunity... subjective good faith immunity, not just the objective standard. Joseph L. McNamara: Your Honor, and in this case, that the issue which petitioner raised in the brief was the question of whether or not there should be an extension of immunity, and the petitioner did not argue some alternative to the objective standard of immunity which was applied by the Fifth Circuit and by the district court, and we would say under these circumstances, since there happened to have been in the case before the Court extensive discovery, this is not a situation coming before the Court where there were simply pleadings and where my clients moved for summary judgment on the basis of Harlow Fitzgerald immunity. If there was some malicious conduct, or if there was some evidence of some special knowledge that either of my clients possessed below, then that was not put forward by the plaintiff at that time, and it would... our position would be that in this case if the Court should decide that there should be an extension of immunity but it should be something other than the objective or reasonable objectiveness standard from Harlow v. Fitzgerald, that remand would not be necessary, because there's no indication of any lack of good faith on the part of-- Byron R. White: Do you think this defendant who is a lawyer should have been aware of any decisions in this Court that might raise a question about the validity of the replevin statute in Mississippi? Joseph L. McNamara: --Your Honor, I would rely upon what the district judge stated, and that is that at the time of the execution or use of the statute by John Robbins, that there was not complete agreement about the law. For instance, in the Mitchell v. W.T. Grant case involving, I believe it's Louisiana sequestration statute, there was some similar infirmities there. For instance, I think that in that case, or in the case of that statute, that the writ of sequestration could be issued by a clerk and there was a provision there that the person against whom the writ was issued could come into court and seek a dissolution, but there were similar safeguards available to the Mississippi statute, and I would say this. In 1975, the Mississippi legislature revised an earlier edition of the replevin statute because the first edition which I'm familiar with did not have the requirement of bond, did not have the availability for advancing the course on the docket, and so I would say that a reasonable attorney even with more expertise in the area than Mr. Robbins had would not come to the conclusion that this statute was unconstitutional. John Paul Stevens: May I ask you one question? Your opponent cited a case... I'm not sure I caught the name of it... by the Mississippi supreme court in 563 Southern 2nd 1387 I don't think he cited in his brief. Are you familiar with the case? Joseph L. McNamara: I'm not, Your Honor, and Mr. Waide erroneously stated that I cited it. John Paul Stevens: I didn't see it cited in anybody's brief. Joseph L. McNamara: I don't believe that I did, and I checked my table of contents to see if I'd just forgotten it. Your Honor, if there had been malicious conduct on the part of my clients in this case there was a remedy available under State law, and in fact the remedy available under State law for the wrongful attachment was a remedy of which the petitioner in this case chose not to avail himself. I would concede under Mississippi law that the damages which are available for the suing out of wrongful attachment would not include the mental anguish which Mr. Wyatt alleges to have suffered, but there are Mississippi cases which-- Byron R. White: How about the damage to the cattle, if there was some? Joseph L. McNamara: --Yes, Your Honor. Byron R. White: Yes, what? Joseph L. McNamara: The damages for the-- William H. Rehnquist: Mental suffering of the cattle. Joseph L. McNamara: --Yes, Your Honor. Thank you for helping me out... or their change of attitude, or whatever therapy might be necessary for those cattle. Byron R. White: Even Brahmas. Joseph L. McNamara: Your Honor, Mr. Waide knows a lot more about Brahmas than I do, but those damages would be available if there had been a decrease in the market value of those cattle as a result of the change in their behavior, then that could be recovered under Mississippi law. Hugo L. Black: Do you concede that under Lugar against Edmondson Oil there can be a cause of action under section 1983 against a private defendant for use of a statute, State statute that is later determined to be unconstitutional? Joseph L. McNamara: Certainly, Your Honor, no question about that, and what we say is... we do not challenge that point. What we say is, there is an immunity which ought to be available for the public policy reasons which I've stated. I think the emphasis that I would want to place on public policy reasons has to do with the fact that in this case, and I believe that this circuit alluded to this in the Folsom Investment Company case, it said that the first line of defense in these cases should be the legislature who passed it, or the Attorney General of the State who in some instances would enforce statutes, and that the burden of paying for the unconstitutionality of this statute should not fall upon persons such as Wyatt and Cole. Antonin Scalia: Mr. McNamara, when you said that there would be a remedy under Mississippi law for the suing out of a wrongful attachment, what do you mean by the suing out of a wrongful attachment? Would you have to prove knowing that it's wrongful? Joseph L. McNamara: No, Your Honor, in the joint appendix which was submitted where Judge Barbour, the district judge in this case, was citing to circuit court Judge Jerry Yeager's opinion, after dismissing the attachment that Judge Yeager said that Mr. Wyatt would be able to recover damages for wrongful attachment, that in the initial suit in circuit court is that Judge Yeager said the replevin statute was not what should have been utilized because these gentlemen were partners and they should not have resorted to the replevin statute, so my understanding of the record is that Judge Yeager was prepared to award some damages but it wasn't all the damages Mr. Wyatt felt that he was entitled. William H. Rehnquist: Not on the basis that the replevin statute was unconstitutional, but that it didn't cover that particular situation. Joseph L. McNamara: Right, Your Honor. There was not a declaration in the circuit court of unconstitutionality. It was simply, you've picked out the wrong attempted remedy, Mr. Cole, by coming here, because you are partners, and you should seek dissolution of your partnership and proceed under that particular set of statutes in Mississippi which provides for the splitting up of partnerships. John Paul Stevens: Let me ask another case about Mississippi authorities. I understood your opponent to tell us that the Mississippi... I don't know which Mississippi court... had held its own statute unconstitutional, is that correct? Joseph L. McNamara: Your Honor, I believe that is the earlier edition. John Paul Stevens: You're not-- Joseph L. McNamara: I don't know, Your Honor. I was not aware of... it is cited in... I'm sorry, Your Honor. It's cited in our petition, the Underwood v. Foremost Financial Services case. John Paul Stevens: --Where is that cited again? Joseph L. McNamara: It was in the brief of respondents in opposition to the petition for certiorari at page 3. John Paul Stevens: What did it hold? Joseph L. McNamara: Your Honor, the supreme court of Mississippi was examining the application of good faith immunity to private defendants under color of State law. John Paul Stevens: That's the case we talked about earlier. Joseph L. McNamara: That's right, Your Honor. John Paul Stevens: I see. You were not counsel when the brief in opposition was filed, I understand. Joseph L. McNamara: No, Your Honor, I was not. What the petitioner wants to do in this case is to deny the extension of immunity, and when this Court has denied the extension of immunity it has relied in part on policy grounds and part on the historical inquiry which I'll get to in a second, but for instance, in Owen v. City of Independence, the court there at the end of the opinion makes the comment basically that it is as a matter of policy equating the role... has done equity in that it would provide a plaintiff with a remedy, it would allow the official who acts in good faith to go about his duties without fear of being dragged into court, and it makes the public pay only for those unconstitutional policies which the State enforces, and so therefore it spreads the liability for the unconstitutionality of a statute among the citizens of the State, and that would not be done in this case. It would be quite the opposite. It would be placed upon the private party. As far as the historical analysis is concerned, this Court has looked at historical analyses most strongly when it was denying... or when it was granting full immunity as in the case of legislatures, prosecutors, and judges. In the later inquiries there is not... such as in Anderson v. Creighton, there has not been the great reliance upon historical precedent. When a police officer at common law did not have reasonable grounds to act in effectuating an arrest or carrying out a search, then he had a defense which was based upon a subjective standard, and this Court in Anderson v. Creighton adopted the Harlow v. Fitzgerald standard and said we will make it an objective reasonableness standard. There's no reason, logically, then, why that same standard cannot translate to be utilized by the private defendant, and one of the things that I think that Wyatt overlooks is that the good faith... or excuse me, the objective reasonableness standard which is applied as an immunity in these cases is, after all, an affirmative defense, and so the party asserting that affirmative defense has to come forward and on a motion for summary judgment bears the burden of showing that he would come under terms of the immunity. Your Honor, in this particular case Mr. Wyatt... or excuse me, Mr. Cole and Mr. Robbins utilized a statute which neither of them had reason to believe was unconstitutional, and they were attempting to go about utilizing an orderly process, although it turned out to be the wrong process, and the court's reasoning below in the Fifth Circuit for the granting of extension of immunity should be adopted here. Sandra Day O'Connor: Had the Mitchell case and Georgia Finishing and Quintus and Snyerback been decided at the time that this replevin was instituted? Joseph L. McNamara: Oh, yes, Your Honor, they had, all of those had been. Sandra Day O'Connor: And you think that they don't make it pretty clear that a prejudgment hearing is necessary? Joseph L. McNamara: No, Your Honor, because the Mississippi replevin statute says... or provides for a person to be able to come in and challenge the taking of the property, and I believe it gives it a hearing within 3 days to seek to set aside the writ of replevin, and it would seem at least under what this Court said in the Mitchell case that there were sufficient constitutional safeguards, but the important issue perhaps for the purposes of this case is in judging the conduct of the defendants under the objective reasonable standard, that the trial court said that objectively it could be determined that the statute was not one which was clearly unconstitutional at the time. Your Honor, the extension of qualified immunity in this situation would be uniform, it would be in keeping with the prior decisions of this Court, it would be a just resolution for private party defendants who until Lugar v. Edmondson were... those were among a class of persons who by most lawyers were not even dreamed to be potential section 1983 defendants, and the holdings in the Adickes v. S.H. Kress Company, and in other cases where a private party acts in conspiracy with a judge or public official, those holdings would be held intact, and furthermore, to use the example of Adickes v. Kress case, even if the court decided to grant qualified immunity in a situation such as that, those parties would not meet the objective reasonableness standard because there was a clear violation of constitutional rights. As is said in... I believe in the dissent in Lugar v. Edmondson makes a comment about Adickes v. Kress having occurred some 10 years after Brown v. Board of Education, and for the public policy reasons and because there's adequate historical basis for an analogy to give a good faith defense, and because this Court has adopted across the board Harlow v. Fitzgerald and other qualified immunity cases, we ask that this Court affirm the holding of the Fifth Circuit. William H. Rehnquist: Thank you, Mr. McNamara. The case is submitted. Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Earl Warren: Number 229, Continental Grain Company, Petitioner, versus Barge FBL-585 et al. Mr. Deutsch. Eberhard P. Deutsch: May it please the Court. At the very outset, permit me to state that this case involves no mandates. This was an order entered by the District Court for the transfer of an action and in the same order, brought the case within the new Interlocutory Appeals Act so that the case came to the Court of Appeals on appeal and then here by certiorari. There is no mandamus status involved. The proceeding itself involves an action in rem in admiralty instituted on the Southern District of New York of -- in the Eastern District of Louisiana against a vessel present in that district. The cause of action had arisen in the Western District of Tennessee where the libel in rem could not have been brought but where a companion action at law was pending. The District Court held that the convenience of parties and witnesses in the interest of justice required it to be transferred to the Western District of Tennessee, rather the right to -- or made the statement that the question involved was one of importance and of doubtful solution and an appeal was accordingly allowed to the Court of Appeals. That Court affirmed, holding expressly that an action in rem in admiralty maybe transferred to a district "to which the movement consents to an unlimited submission of the cause." It had been my intention to suggest that very little could be added at this point to what has been said at this bar in the two preceding cases but I am tempted to depart from that original intention a step or two to answer perhaps one or two questions which I think were not answered directly at this bar. In the first place, the question was asked what would happen, I think Mr. Justice Frankfurter, if the plaintiff had in his pocket a letter granting consent to the filing of an action in a district in which it could not otherwise have been filed, if he had that in his pocket prior to the filing of the action. Now that, I don't think that question was answered here. I don't know that I can answer it under the holdings of the Seventh Circuit that would still not be a district in which the action could be filed because they read that clause as stating where it might have been brought in the absence of any assent or waiver from the defendant. Speaker: But -- and -- and do they go that far? Eberhard P. Deutsch: Oh yes, sir. In exact words, I will read just a -- a couple of lines. We recognize of course that venue maybe waived under proper circumstances but we do not think it can be waived in a forum in which an action has not and could not have been properly brought. The -- when Congress provided for the transfer of a case to a district where it might have been brought, it meant the district where plaintiff had a recognized right to bring his case under the Venue Act and that this right was unqualified and absolute not depending upon consent of the defendant, evidenced by waiver, entry of appearance or otherwise. Speaker: Thank you. Eberhard P. Deutsch: And the language in the other -- Felix Frankfurter: Purely, when they tried -- they tried 1404 and as I understood the respondents here, tried 1404 to the statutory -- statutory venue provisions standing by themselves. Eberhard P. Deutsch: I think so, yes sir. The other case, the other Seventh Circuit case which is up here contains similar language, not as strong as that. Now, with reference to the matter of Josephson, in that case, Judge Magruder held in so many words that even the waiver wasn't necessary once you got the defendant and that as far as I can see with all due deference simply just reads where it might have been brought right out of the statute altogether because the argument which is made “where it might have been brought” by waiver or consent isn't even there anymore. (Voice Overlap) -- Potter Stewart: I didn't quite under -- I didn't' quite understand what you said, Judge Magruder said in In re Josephson. Eberhard P. Deutsch: In In re Josephson and perhaps to avoid any question, let me read two or three lines and then make my comment. One service of process upon all the defendants has been effectuated in Massachusetts, a transfer order. Yes, sir. An order of transfer under Section 1404 (a) sends the case as is to the transferee court with no need of a new service of process upon the defendants after the case reaches the Court in Mexico, in New Mexico. Therefore, in the case before us, it was probably superfluous that the defendants formally waived any question of personal jurisdiction over them in New Mexico. In other words -- Potter Stewart: I suppose he could've meant, to me, that the very making of the motion by the defendants constituted a waiver. Eberhard P. Deutsch: I don't think so. I -- I find -- Potter Stewart: Well -- Eberhard P. Deutsch: Now, we -- we both have to guess in what Judge Magruder meant. I suppose -- but I understood him to mean this venue in the sense -- and I don't understand it either in that sense, this venue in the sense that the Court would normally have jurisdiction of this kind of an action and it doesn't make any difference whether you can serve in there or not, serve them in your transferor district then transfer your case and pay no attention to the phrase “where it might have been brought”. Felix Frankfurter: He actually didn't have that case before leaving, Mr. Deutsch? Eberhard P. Deutsch: No, sir. He had a case involving I think a derivative action against some, I think nine of his 14 defendants could've been sued in New Mexico and the other -- I mean in New Mexico, the other five could not, could be sued only in Massachusetts. But be that as it may, the motion may necessarily import by implication a waiver. In our case, the motion to transfer says nothing whatever on the subject, just a motion to transfer, period. There is no waiver, no express waiver of any kind in this case. Now this, bare in mind, is an action in rem in admiralty. We submit of course that affirmance of the two preceding cases necessarily reverses ours, not without regardless the difference in the type of proceeding but we also submit and that is the only further point to which I will address myself that even should those cases be reversed, this case from the Fifth Circuit must be reversed because of the difference in the nature of the proceeding. One of the arguments made by the respondent in this Court is that the admiralty court has an inherent power independently of the statute and under Rule 44 of the Admiralty Rules of this Court to effect such a transfer. We submit that no such power exist certainly in contravention of the specific provisions of the statute dealing with “Any civil action which it has been held and which clearly includes admiralty causes.” A proceeding in rem maybe instituted only in the district in which the race can be found. We do submit that that approaches a jurisdictional -- if it does not enter the field of a jurisdictional requirement as opposed to one of venue. It is a proceeding in rem as such only within the district in which the race may lie. In admiralty, such a proceeding maybe brought against the vessel even though no personal action would lie against the owner of the vessel, as for instance, in cases of non-contract salvage, in compulsory pilot cases, in cases of bareboat charters modernly, in cases in which a vessel has been transferred and the lien follows the vessel against the vessel but not against the new owner. In such a proceeding, the jurisdiction of the Court is not personal over the claimant. He is merely a sort of ancillary party. He's not actually a party to the litigation, no personal judgment can be rendered against him. He merely comes in and claims his vessel if he files a bond. That bond stands in place of the vessel but no personal action maybe rendered against the claimant except of course under the bond if he gives one and signs it. The claimant under vessel therefore, we submit only this, may not move under Section 1404 (a) to transfer because his motion in a sense is not -- could not even constitute a waiver in behalf of the vessel. He is not a party to the litigation and he cannot constitute the district to which a removal is sought one in which the action might have been brought because that applies only to one in which the race is to be found. Charles E. Whittaker: Is -- for my information, tell me please, is that liberally is settled, that the owner who comes in and signs his principals of bond just to release the boat is not a party to that libel suit, is not thereby made a party? Eberhard P. Deutsch: He is not thereby made a party. His only liability then is on the bond but not in the original proceeding which continues against the vessel or the bond in rem. He is not an actual party. Now, it's a tremendously interesting question and perhaps I should go into it a little bit. There, the case is unusual. Two cases of this Court upheld, one involving a fire statute which limits the liability of the owner in case of fire on a vessel under certain circumstances. A contention was made, the vessel does not have that immunity which is granted by statute to the owner of the vessel and this Court has held that doesn't make sense. The vessel does have the same immunity as the owner. The same thing applies to the limitation of liability which is a sort of bankruptcy statute under which the owner of a vessel may limit his liability to the value of the vessel after the accident. In those cases, he files his petition for limitation. He puts up a bond for that value and the vessel is released and he then repairs the vessel and an action was brought against the vessel as repaired stating the limitation does not apply to the vessel, only to the owner and this Court said that is talking in riddles and doesn't make sense. In the third case, Boyd I think, and it is another case in this Court and that did not involve admiralty but it involved an action in rem, Boyd versus the United States. That was a forfeiture condemnation proceeding in rem against merchandise. The United States on seizing that property sought to require the owner of the property to bring his books and records in the Court from which they would get certain information. He pleaded the Fifth Amendment and the Government said, “Well, this is not an action against you, it's an action in rem.” And they held that nevertheless, he was entitled to that defense and that would be carrying the doctrine too far. Now, those are the three cases in this Court that tie in, let us say, the owner with the race in such an action. But it -- there isn't any question that the action in rem is different from an action in personam despite the fact that such distinctions or analogies as the case maybe have been made. Felix Frankfurter: Are those -- all the three cases involved general considerations of the policy which were rendered applicable not because there was an identification between the owner and the vessel -- Eberhard P. Deutsch: True. Felix Frankfurter: -- but because the policy also apply -- Eberhard P. Deutsch: Of course, what this Court says is -- Felix Frankfurter: (Voice Overlap) together. Eberhard P. Deutsch: -- is (Inaudible) Felix Frankfurter: Well, all I'm suggesting is that the respectable documents. Eberhard P. Deutsch: Right. I concur. Now, I might -- such one little further point. Potter Stewart: Before you leave that, I just -- Eberhard P. Deutsch: Surely. Potter Stewart: -- want to be sure I understand what you're telling us. Take the case of a -- of a vessel plying Mississippi River, the Ohio, Mississippi River system up and down. It's part of the New Orleans. Now that vessel owes -- that the nature of things likely to be in a different federal judicial district everyday isn't like -- and as the -- does the question of where a suit maybe brought in rem depend exclusively on -- where the vessel happens to be at -- at a moment in time? Eberhard P. Deutsch: At -- well, now that also is not an absolute. The rule of this Court, the Admiralty Rule does say the action is to be brought in the district which the race is to be found. Potter Stewart: Yes. Charles E. Whittaker: Well, it is in navigable -- would have been physical control of a tangible thing? Eberhard P. Deutsch: No question at all, and this rule makes that statement. But -- and you -- I suppose we must recognize practice, in universal practice, an accepted custom even in matters of jurisdiction I suppose. But these actions are brought with the statement the vessel is now or will be during the pendency of this action within the jurisdiction of this Court. That is the usual allegation and that is accepted. There are decisions. First, that the vessel need not be seized, that the bond maybe filed and take the place of the vessel and perfect the jurisdiction court even if there's no actual seizure. And there are two or three District Court cases in which it is stated that the vessel need not even be in the district, if the bond is filed, it becomes in effect the race. There is no appellate decision to that effect. Potter Stewart: This is a -- therefore, sort of conferring jurisdiction by consent of the defendants, isn't that it? Eberhard P. Deutsch: I don't think there's any -- well, I would say by consent of both parties. Potter Stewart: Of both parties. Eberhard P. Deutsch: I thought -- Felix Frankfurter: Well, the bond is deemed to be in place of -- the bond is -- is identified with the vessel. Eberhard P. Deutsch: Right. Felix Frankfurter: Fulfilling the function of what seizure of the vessel it dealt with. Eberhard P. Deutsch: Right. Potter Stewart: But until or unless the vessel itself were actually subjected, there would be no requirement on the defendant to file a bond. Eberhard P. Deutsch: None whatever and that is very frequently the case. Now, take the case -- all this is -- this is partly been discussed before here. But in this connection, becomes more interesting perhaps, the Internatio-Rotterdam case that has been mentioned at this bar. Now, that was a suit in rem filed in New York with the usual statement that I made is now or will be during the pendency of this action, et cetera. The vessel didn't show up in New York but she showed up as I recall it in Philadelphia. The libelant then went to the judge in New York and said, “Please, I move to transfer this case to Philadelphia where the vessel actually is.” And that is a jurisdiction in which the action might have been brought. Now, the vessel is there, perhaps might have been brought before on the assumption that she would come there. The question was raised but the judge doesn't have the power to sign the order of transfer since he never got jurisdiction, the case goes the vessel and never in New York in the first place. Potter Stewart: No bond was filed in New York? Eberhard P. Deutsch: No bond was filed in New York but the judge did affect the transfer and the transfer was upheld and that was the status of the case as far as it involves the situation. In other words, there are cases of this sort which have arisen, and that is of course why it's so important for this Court to consider this whole issue as it arises in these three cases. And -- Felix Frankfurter: Mr. Deutsch, am I wrong that -- is my recollection treacherous, New York is often arrayed between practice of filing a bond, knowing that the suit will be brought although the vessel is physically never seen? Eberhard P. Deutsch: We are guilty of that in -- Felix Frankfurter: If indeed -- Eberhard P. Deutsch: -- more places than New York -- Felix Frankfurter: Alright. Eberhard P. Deutsch: -- for ratio, I may say it -- Felix Frankfurter: And my knowledge is limited -- Eberhard P. Deutsch: And that is universal. Felix Frankfurter: -- in the local area. Eberhard P. Deutsch: That is universal practice for parties to get together and arrange for a convenient jurisdiction by the filing of bond, right or wrong that's done. Felix Frankfurter: Surely, I think been done out of time. And my -- I'm out of -- mind in New York which has a little admiralty purpose. Eberhard P. Deutsch: And of course, the New Orleans is the great part of the world. [Laughter] Why -- Mr. Justice Frankfurter, you asked some questions about legislative history and I would like to touch on those for about two moments. It -- it was mentioned and I'm not quite sure why but the most significant factor in the legislative history of Section 1404 (a) is a reviser's note which says this is based on the doctrine of forum non conveniens. This Court has held that that is too narrow, that the discretion may be broadened over what it was on the -- maybe broadened under this statute over what it was before as to what constitutes convenience of parties and witnesses in the interest of justice. I might mention perhaps as related to the question of legislative history, the following subsection of that statute 1404 (b). It throws some light on the meaning to me of 1404 (a). In the first place, it states that the District Court may transfer an action in its discretion. Now that is without any question of interest of justice, convenience of parties and so on from one division to another division within the same district and then it goes on and has this rather interesting sentence. “Transfer of proceedings in rem brought by or on behalf of the United States maybe transferred under this Section without the consent of the United States where all other parties request transfer. Now, it -- it doesn't necessarily clarify the preceding section but it does throw some light on it. In other words, if the United States is a party to a proceeding in rem, you may transfer from one division to another without the consent of the United States. We submit that you cannot transfer at least without the consent of all parties in rem from one district to another. Felix Frankfurter: That is a clear indication and I'd overlooked the -- that -- that the transfer maybe made by the -- on the motion of the plaintiff, doesn't it? Eberhard P. Deutsch: On motion of either party, or I suppose ex proprio motu. Felix Frankfurter: That is -- plainly, that is -- plainly, that allows the plaintiff to move, doesn't it? What you've just read, Mr. Deutsch. If the United States is a party, then the United States maybe a party under the Vessels Act by a plaintiff. Eberhard P. Deutsch: Of course, the United States could be a -- Felix Frankfurter: A party (Voice Overlap) -- Eberhard P. Deutsch: -- a plaintiff. Felix Frankfurter: Yes. The United States could be a plaintiff, yes. Eberhard P. Deutsch: But it could not be -- then of course (Voice Overlap) the situation would not apply because it says without its concern. Felix Frankfurter: The other way around, shows that the -- otherwise have no function at all? Eberhard P. Deutsch: None whatever, sir. But we submit that the -- the action cannot be transferred over the protest, let us say, of the vessel to another district in which the vessel could not have been found. That is a question of jurisdiction rather than a venue in the in the personam actions which have been discussed to you. Earl Warren: Mr. Matthews. George B. Matthews: Mr. Chief Justice and may it please the Court. I think the fundamental purpose of this appeal is to determine and to effectuate in some manner the purpose of the transfer statute whether it'd be in a patent case, a diversity case or an admiralty case. Now, certainly, the purpose of the statute is not questionable. It was, I'm sure, to save time and expense and to promote the efficient administration of our judicial system. How to achieve this purpose is obviously questionable in view of these appeals. I would like to address myself first to the question of ambiguity of the transfer statute. It has been suggested in the Paramount-Rodney case and I think clearly implied in the Karachi case that Mr. Deutsch just mentioned in the Fourth Circuit that the word “brought” means simply filed in a court that has jurisdiction of the subject matter, nothing more. That is that you need not be able to maintain the action. Thus, in the Karachi case, a suit was filed in New York for the obvious purpose of interrupting the one year limitation under the Carriage of Goods by Sea Act. The allegation account that Mr. Deutsch mentioned was made that the vessel would be within the jurisdiction of the Court. The vessel in fact never was on learning that you would call at Baltimore, the motion to transfer was made. Judge Parker in the course of his opinion pointed out first that the filing of the suit in New York interrupted proscription. That is, the Court had come -- the court was a court of competent jurisdiction and therefore, the filing of the suit even without (Inaudible) of process within the year was sufficient to interrupt proscription. He further said that clearly, the Court had jurisdiction over the subject matter and therefore powered to any -- any necessary orders to maintain the litigation. This must -- this evidence is, one, interpretation of the word “brought” in the statute. Other cases including Judge Whittaker's opinion in the General Electric case, apparently take the position that the word “brought” means filed at a time when the Court has power to issue process and in other words, power to achieve or file adjudication of the case. So there, we have two clearly divergent ideas. Secondly, we have the time problem which has been mentioned here before and to further confound that time problem or I think everyone agrees that the words “might have been brought” not everyone certainly, but Mr. King was the last one that suggested it, refer to some time in the past. Now, in this particular case, the accident happened in Memphis, Tennessee while our barge is being loaded by the -- with the petitioner's grain, the barge sank in Memphis. The grain was removed by sailboats, the barge was raised and she remained in Memphis. According to the record, for a week or more after the sinking, now, might not this action have been brought in Memphis and I do not intend to make a play on words. But the barge was there, subject to the process of the Memphis Court at a time prior to the filing of this case. Charles E. Whittaker: You say, “might not this action.” Do you really not mean “might not an action? George B. Matthews: No sir, I mean an action by the cargo owner. Charles E. Whittaker: Yes. George B. Matthews: Yes. Charles E. Whittaker: Yes. But the question of whether this action was filed in a later time when the barge has been removed from that place. George B. Matthews: Exactly and that -- that is what poses the problem in any admiralty case, Mr. Justice Whittaker. If our opponents are right, this statute is emasculated, because there is only one jurisdiction. And if they are right, you can never transfer. That can't be the purpose of the statute. Your Honors have recognized in connection with limitation -- Hugo L. Black: Would you explain that -- George B. Matthews: Sir? Hugo L. Black: -- would you explain what -- precisely what you mean by that? George B. Matthews: Oh very well, Mr. Justice Black. The contention is made here that in an in rem proceeding in admiralty, the only just -- possible jurisdiction is that in which the vessel is at the time the suit is filed. In other words, there is never any other form. Now, if the further contention that you have to have on alternate forum or a transferee forum at the time the -- the instant action is filed, that can't be because the vessel can't be in two places at one time. Felix Frankfurter: Well, that wouldn't -- Mr. Matthews, without -- without commenting on the validity of your argument of the -- of the conclusion, but the argument doesn't emasculate the statute. It merely says that with reference to admiralty, in rem proceedings, you're restricted to where the vessel is at the time that the -- monition is -- is without or whatever the he technical phrase is. George B. Matthews: Well, Mr. Justice Frankfurter, I -- I've limited -- I meant to limit the emasculation to an admiralty in a match -- Felix Frankfurter: Then that is an in rem case, yes. George B. Matthews: Correct. And insofar as that action is concerned, you could never have a transfer under our opponent's theory. Felix Frankfurter: And that -- and that's the implication of your argument is, it might have been -- if that resulted in admiralty, we've got to reexamine as to what might have been needed? George B. Matthews: Correct, sir. Charles E. Whittaker: That would be the case, I take it in every situation if the petitioner is right -- well, the action was one of a local character, an action in rem, isn't it? Not because to admiralty, but in every case where the action is more theory. George B. Matthews: I'm -- I'm not clear as to the use of the words “local character”, in rem, yes. Charles E. Whittaker: What was the (Voice Overlap) -- George B. Matthews: Yes, sir. That would be the case. Potter Stewart: Take -- take an action involving a land. To acquire title (Voice Overlap) -- George B. Matthews: Well, I don't think so. Potter Stewart: -- land doesn't move around. George B. Matthews: That's correct and this Court has held I think that if -- I think was the case in this Court that a dismissal of an action involving land in, say, West Virginia brought in Ohio on the Court's own motion was from, even though the defendant raise no objection. That was -- Potter Stewart: I did -- I didn't quite -- George B. Matthews: Ellen -- excuse me. Potter Stewart: Excuse me, go ahead. George B. Matthews: Ellenwood versus Marietta Chair Company, 158 U.S. 105. William J. Brennan, Jr.: I'm sorry. I didn't catch the point of that when you made it. George B. Matthews: The point? William J. Brennan, Jr.: Yes. George B. Matthews: I was simply agreeing with Judge -- Mr. Justice Stewart that this Court has held that the dismissal of an action involving West Virginia land brought in Ohio by an Ohio judge on his own motion was the problem. William J. Brennan, Jr.: He has no jurisdiction. George B. Matthews: Without any suggestion of dismissal on the part of the defendant. Now, I -- Your Honors have recognized the need for a transfer for convenience in admiralty cases and particularly in limitation of liability proceedings. For example, Rule 54 provides that in the -- that's the venue rule, provides that a limitation proceeding maybe transferred to any district, not one word could have been brought but to any district for convenience of the parties, not for convenience of the witnesses, not in the interest of justice but only for convenience of the parties. Now, Admiralty Rule 54, may it please the Court, provides that in all suits in admiralty, in all cases not provided for by these rules by statute, the District Court, to regulate their practice in such a manner as they deem most expedient for the due administration of justice. We submit to the Court that not only is this motion in the instant case or rather this transfer in the instant case justified under the transfer statute of the Judicial Code, but it is also justified under Admiralty Rule 44 adopted by this Court. That rule as well as the others were adopted pursuant to an Act of 1842 empowering the Court to adopt rules to -- to adopt rules regulating the practice and -- in equity and admiralty matters before the Circuit Courts and the District Courts. A very interesting case came up under that Act and the rules adopted by the Court and that was the steamer, St. Lawrence. The Court had adopted a rule, Number 12, which authorize in rem process against a vessel, although the -- the admiralty law gave no maritime lien provided that the homeport of the vessel or rather state law of the homeport gave a lien for repairs performed in the homeport. The Admiralty Rule then being that there was no maritime lien for repairs and supplies performed as given in the homeport. The Court held that that rule was valid, that it was not an extension of jurisdiction although it did authorize an in rem process and of seizure where non-existed under the maritime law, but that it was merely a rule regulating practice before the Court. Now, certainly, a transfer of this action is nothing more than a regulation of the practice or administration of the District Courts. The -- if -- if again our opponents are correct and there can never be a transfer in an in rem action in admiralty, the -- and certainly, those cases must arise for the convenience of the parties and witnesses in the interest of justice would be served, the only way to achieve it then would be pursuant -- excuse me -- to Rule 44. And we suggest to the Court that that is a problem. Now, with regard to the question of the personification of a vessel, I have rather a number of cases as I'm sure that people have and I am frankly confessed that I'm somewhat misdefined. They say that a -- on offending vessel is a juridical person entitled to be proceeded against in rem. But what happens where the owner is not in (Inaudible) the vessel doesn't defend the litigation. The vessel doesn't pay and again in the case of (Inaudible) The vessel doesn't pay the decree. The vessel doesn't post a bond and certainly, the claimant of any vessel is a very much interested party to any litigation. He does not simply come in and say, “I claim the vessel and I put up a bond and I will await your decree.” He comes in and files a claim as we did here saying that he claims the said barge's owner and prays to be permitted to defend. That is the claimant's interest. He is the owner of the vessel. He has a proprietary interest in it and as this Court said in the Boyd case mentioned by Mr. Deutsch, the vessel doesn't pay the claimant, the owner does. Now, another interesting case along those lines is the decision of Judge Learned Hand in Burns Brothers Transportation Company versus the Central Railroad of New Jersey which will indicate the fact that at least in the Second Circuit, the personification theory has gotten somewhat out of vote. In that case, Burns Brothers sued for barge damage caused by a collision with a car float belonging to the Central Railroad of New Jersey. The car float, when it had gone adrift was in the possession of the -- or Long Island Railroad. The suits were filed in personam only. The time of trial, the central was in reorganization and the trial of course did not proceed against that road. A decree of sole fault was entered against the Long Island. When they went around to collect a decree, the Long Island was in reorganization. The libelant then had the idea that he would file an in rem suit against the car float which he did. Now, what I say to this Court now was dicta, for a reason I will mention but Judge Learned Hand there held that the pry in personam decrees were bars to the -- in present in rem action. And he said, “Disputes arise between human beings not inanimate things and would be absurd to give the beaten party another chance because on second trial, he appears as a claimant to a vessel that is and can be nothing but the measure of his stake in the controversy.” He then went on however to permit the suit because at the time the first action was filed, seizure, in rem seizure of the car float was prohibited pursuant to an order in the reorganization proceedings. Potter Stewart: What you're telling us is, as I understand it then, that while there is an ancient history which seemed to give personifications of the vessels that an actual present practice does amounts to no more and no less than getting jurisdiction by attachment of personal property in ordinary -- ordinary lawsuit. George B. Matthews: Not only jurisdiction, Mr. Justice Stewart, but security which I think is the main purpose. Potter Stewart: Well, yes. George B. Matthews: The -- certainly, jurisdiction but why in this case where the acting -- New Orleans action was filed not only in personam which was not mentioned in the opening argument but in rem. No security was needed. Nothing was needed to enforce jurisdiction, Federal was in New Orleans, Federal have an alternative forum, a transferee in -- forum in Memphis. So certainly, have the in rem feature not been joined, there would be no question about the possibility of transfer in this action to -- Potter Stewart: Why couldn't this action have simply been brought in Memphis in personam? George B. Matthews: I know of no reason why it couldn't. Potter Stewart: Of course it wasn't signed so I'm thinking (Voice Overlap) -- George B. Matthews: Federal is amenable to process in Memphis, at the -- for a week after the casualty, the barge was amenable to process in Memphis. Charles E. Whittaker: This would be probably true had the action been brought to one personam in Memphis, petitioner wouldn't have your bond, would he? George B. Matthews: Mr. Justice Whittaker, they do not have a bond now. All they have is a letter of undertaking signed by Federal alone and not Federal's underwriters saying, “We will do what we would have to do anyhow.” That is, pay the decree if you get one. Charles E. Whittaker: I don't know if I understand it and that bring us, and we're supposed to because that's (Voice Overlap) -- George B. Matthews: The letter of undertaking, there are two types generally. There is an owner's letter and an underwriter's letter. The underwriter's letter is in terms identical to a release bond except no premium is charged, that's the only difference I know of. An owner's letter, simply says, “In consideration of your not seizing my barge and not requiring a release bond, I agree to pay any judgment you got against me or the barge.” But that is nothing more than an obligation that I would have in the event of a decree. Charles E. Whittaker: Either that or the barge thing? George B. Matthews: Just -- no, because the giving of the letter releases the lien I think, because the letter provided that the rights of the parties would be the same as if a release bond had been given and there is no question that if a release bond was given, the lien would be released. So I think a fair construction of the letter, and I'm sure concurred in by our opponents is that the giving of the letter release the lien and the barge was free from -- thereon. Thank you.

Earl Warren: Number 132, Ollie Otto Prince versus United States of America. Mr. Jenkins. Joseph P. Jenkins: May it please the Court. This is a criminal case on certiorari to the United States Court of Appeals for the Fifth Circuit which had overruled an order entered by the United States District Court for the Western District of Texas, whether affirmed in which he had overruled an order for a motion filed by the defendant asking the court to placate or correct an illegal sentence. It involves interpretation of that part of a Bank Robbery Act which I believe because of the contentions of the Government and because of the Fifth Circuit Courts of Appeal relative to the entry with intent provision has placed that particular provision in a rather unique position insofar as the (Inaudible) of our jurisprudence is concerned with criminal matters because this Court is being asked to construe the bank robbery statute. First, to define the purpose of the 1937 Amendment to the statute, secondly, to determine what is a maximum sentence imposable under subsections (a), (b) and (d) of the statute which are the traditional or classic form of bank robbery, if I may the use the term. And thirdly, if a person is accused of entering a bank with intent to commit a robbery or felony therein or larceny and counsel makes the act particularly under aggravated circumstances as involved in this case, whether or not the entry with intent act, which is peaceful in this case, merges with the aggravated robbery provision. The sole contention of the petitioner here is that count two of the indictment here it involved is legal and that no crime was committed thereon. And if a crime was committed, it was merged in the first count of the indictment. The statute involved is Title 18, Section 2113, the Federal Bank Robbery Act. This Act was enacted in 1948 as a reenactment of the original bank robbery statute, Title 12, Section 588 (b) amended in 1937 and repealed at the time the reenactment was held. Subsection (a) of the Act prohibits two crimes, robbery by force and violence and intimidation and entry of a bank with intent to commit a felony therein affecting such bank and larceny and a 20-year penalty is assessable. Subsection (b) prohibits grand and petit larceny. Subsection (d) which is a rather unique statute prohibits any of these acts to be committed by the use of a dangerous weapon or device by assault. And if so, a penalty of 25 years is assessable. This is known as the jeopardy or aggravated portion of the statute. Now, the facts -- William J. Brennan, Jr.: Now, 15 years that he had on the second count, does that -- Joseph P. Jenkins: Yes, sir. William J. Brennan, Jr.: -- consecutive to the 20 years? Joseph P. Jenkins: That's correct. The facts are simple, Your Honor. And that I was returned against this petitioner in 1949 charging him with two counts. Count number one was commission of the act of bank robbery under aggravated circumstances. Count number two was entry of the bank to commit the robbery. Trial was held and the evidence show that he had entered the bank at Malone, Texas during daylight hours, during regular business hours through a duly designated entrance without any force or violence as other people had done familiar to customer while where he was invited. While there, he asked certain directions of a bank officer. He was given directions. He then displayed the weapon and consummated the act of bank robbery which is prohibited by subsection (d) of the Act under aggravated circumstances. He was sentenced after being found guilty for 20 years on entering the bank or the robbery forcing thereof and 15 years on the second count which is the entry with intent, these sentences to run consecutively or for a total of 35 years. He is now serving the 20-year sentence, a motion to enlarge -- Earl Warren: What is the maximum -- what is the maximum punishment for those crimes? Joseph P. Jenkins: The maximum punishment, well, that's the crux of this case. Earl Warren: Well, for the -- I mean for the major crime of a bank robbery. Joseph P. Jenkins: Major crime in my opinion, if the Court please, in a typical bank robbery is subsection (d) or 25 years. Now, a motion to enlarge has been -- Stanley Reed: Well, which -- which one of these did he serve first? Joseph P. Jenkins: He is now serving the 20-year sentence which has been imposed on the actual crime of bank robbery. The Court could have given him 25 years but chose to give him 20. He is now serving that level with penitentiary. Stanley Reed: And you brought -- they discovered? Joseph P. Jenkins: No. Stanley Reed: (Voice Overlap) -- Joseph P. Jenkins: Under Rule 35, a motion can be filed any time -- Stanley Reed: To correct. Joseph P. Jenkins: -- to correct in legal sentence. Stanley Reed: And that -- and you're -- you're moving under that. Joseph P. Jenkins: And this motion was filed in the sentencing court under Rule -- Stanley Reed: You don't have any problem in which one he serves? Joseph P. Jenkins: No, that's not the problem at all. William J. Brennan, Jr.: And what is the maximum on that second count? (Voice Overlap) -- Joseph P. Jenkins: The maximum on the second count is 20 years. A motion to enlarge is in the record and that was -- it was granted by the court and the last four pages of the record pertain to how the bank was entered which is important we believe in this case. And as referred to by both the Government's brief and the petitioner's brief at the supplemental record, it's actually pages 17 to 20. Now, in 1955, a motion to correct or modify in legal sentence was filed under Rule 35 with Federal Rules of Criminal Procedure. It was overruled by the trial court, Judge Ben Rice presiding. It was appealed to the Fifth Circuit. Your Honor, it was affirmed and certiorari was granted by this Court last June. The contentions of the petitioner are two-fold. First, that when Congress enacted the 1937 Amendment to the Bank Robbery Act, they did not intend to cover anything but burglary and larceny. Burglary being in a tradition or classic form or in the form under the modern statutes and it was not intended to cover mere peaceable entry of a bank walking in the front doors in this case. And secondly, that if this Court feels that this particular type of crime or entry is within the purview of the 1937 Amendment in any event when the culminated act, when the intended act is completed. Congress isn't interested in sensing for both but merges into the completed act particularly when the 25 years sentence is imposed under subsection (a) of the Act, that being we submit to this Court, the maximum penalty accessible under the Bank Robbery Act, Sections, (a), (b) and (d), leaving out kidnapping and murder which are covered in other subsections. But the traditional, the classic form of bank robbery is covered in (a), (b) and (d) of the statute. Now, the point A, my first point refers to what did the 1937 Amendment to the Act cover. Now, the Government in its brief rather oddly, I believe, submits that this Court doesn't have to go behind the statute but can just read the words and that words themselves will show what the intent of the Congress was. I heard just in this Court yesterday that we cannot apply artificial, mechanistic reasoning to interpreting words of a statute like the hieroglyphics of shorthand. We must go behind the statute to determine what is the intent of Congress. This -- the history of this Act is very revealing. The 1934 Act only included robbery by force and violence and then if it was committed under aggravated circumstances, a -- an additional sentence was then imposable. They had requested the Attorney General that this Act include larceny and burglary, but for some reason, the Congress did not deem that. It should be so and did not enact that procedure. Now, in 1937, this was found to be a mistake. This Act was not all-inclusive and something else should be added to the Act and this was done. The Attorney General directed a letter to the Speaker of the House and he said that he wanted this Act amended to include burglary and larceny. And he submitted a -- a draft of proposed legislation in which he uses the words entry with intent. Now, the House Judiciary Committee and the Senate Committee reported favorably on the bill, both of their reports referred to the bill as an act to amend the Bank Robbery Act to include burglary and larceny. There were some debates on the floor between Representative Rankin and Wolcott and both of them referred to the Act as burglary. They used the word breaking and entering no less than five times when -- when the Act was read to the -- to the House, to the Floor, the clerk used the words, enact to amend the bank robbery statute to include burglary and larceny. The request of the Attorney General was heeded and the Act was enacted, but nowhere in any of the history, debates, letters, reports was there anything said, this Act should include burglary under the circumstances here if that is at all burglary. Now, was there any intention to increase the penalties under the Ac, now, was there any intention to redefine burglary far beyond any concept that I know in the state courts or any concept known in the federal courts. Now, for some reason, the courts, some of the courts below, there are just a few of them that have interpreted the statute, have felt that peaceful entry is burglary and that this particular part of the statute means that peaceful entry is prohibited. If the necessary animus is present, even though a person may abandon his intent, he is still committed the crime. He is a felon, even though the act itself has no -- no intention whatsoever of that purpose. Now, burglary, we all know is a very serious crime, particularly the old classic form of burglary in the nighttime with -- of dwelling house with occupants. But our modern versions have redefined burglary, so that now, today, burglary may be entrance without force of a place in the daytime. But there was always the element of trespass involved. In my home state of Kansas, there are four degrees of burglary, but the least of the degrees, the fourth degree, is far more serious than merely walking in a bank where the public is invited with the necessary animus. The Government contends that this statute is modeled after Section 190 of the Penal Code. What does that section say? Breaking and entering a Post Office with the intent to commit a felony therein, breaking and entering. We submit that if this Court feels that this statute covers peaceful entry, even though the legislature meant burglary and larceny and clearly pass the Act to cover that and the Attorney General requested that, we'll be going far beyond the ordinary concepts of burglary. Now, the penalty is 20 years according to the statute. Now, that's in line with the regular burglary of penalties in most of the States. The most serious form of burglary, however, first degree of burglary is usually 20 years, maybe 25. My state is 20. But fourth degree is one of five in my state. It has a more serious crime than walking the bank, in 20 years, can be had in this particular instance. Furthermore, burglary is considered under this statute. Entry is more serious than larceny. So a person may steal a $100,000 from a bank and he can get 10 years under the statute. If he enters the bank, intending to steal a fountain pen because -- because larceny is a misdemeanor under the statute, he can still get 20 years for entering the bank, theoretically, and addition of one year for the larceny if consummated. If not consummated, he can still get 20 years and inconceivable. Robbery, under the Act, subsection (a), without a dangerous weapon, but the words force and violence is used and intimidation carries a crime or whether a sentence of 20 years. Entry is also 20 years. I believe it is clear that the -- that burglary in its traditional form or its redefined form as most of the state courts have now done, legislatures was meant and not mere peaceful entry. The maximum we submit is 25 -- 25 years under the statute which is aggravated form of robbery. Now, we believe that the penal statute must be strictly construed against the Government and as Justice Frank said, a penal statute is not to be generously construed in favor of the Government. Well, as to point B, in the event the Government feels, this Court feels, the Government will certainly does so feel, that peaceable entry was included under the statute. What does it mean? Justice Huxman said this, in cases not similar to this, this particular provision was enacted to provide the omission in a case where a party enters the bank intending to commit a felony and then abandons his purpose or as apprehend before he commits it, not to cover this particular type of situation. If the petitioner is wrong, this particular amendment, 1937, which is part of -- of the Act today, the 1940 Act, it act -- merely consolidated the earlier Act, if the petitioner is wrong, not only was this Act expanded, which is -- it seems to be the motivating force behind it, but the penalties have been increased, even though the Attorney General has showed no interest in increasing the penalties. Under the interpretation of the Fifth Circuit, a man can get 55 to 60 years for the traditional form of bank robbery without hurting anyone and he can get 21 years or, say, 30 years, we can juggle the statute in all different ways for entering a bank and maybe stealing $101 and we don't believe that's the intent of the legislature. Speaker: I've got a question for you (Inaudible) Joseph P. Jenkins: If -- Speaker: (Inaudible) Joseph P. Jenkins: If it was done, it is in the power of Congress to place any sentence it wishes on any act. Speaker: (Inaudible) is simply as a matter of statutory construction. Joseph P. Jenkins: We believe that it is a matter of -- of statutory construction, but however, it has amounted to double jeopardy because I'm going to -- it has amounted to double jeopardy and that we don't believe that Congress meant, these two particular acts to be subdivided, I was getting to that point, so that the commission of one is a separate crime from the commission of the other. We've mentioned that in the court below but we still feel that does involve statutory construction. Felix Frankfurter: Well, I'm -- I meant you are -- it's clearly what the purport of your ends for Justice Harlan's question. Joseph P. Jenkins: I feel that -- Felix Frankfurter: Do you think there is a question of constitutionality or do you disallowed that? Joseph P. Jenkins: I believe -- I believe there is a question of constitutionality. Felix Frankfurter: There is. Joseph P. Jenkins: Yes, Your Honor, I certainly do. But as I have stated with honor, the question is somewhat integrated with construction of the statute and intent and it's hard to say whether we can separate the two or not. If the statute is being construed wrongly, there is double jeopardy. That's the only way I can look at it. Felix Frankfurter: You -- you mean to say if -- if it should be construed if not allowed sentences for both, cumulative sentences for both, when Congress disallowed it and rends it -- that if a court goes wrong to allow that or you're wrong to prevail with amounts of punishment for something that's -- in relation of punishment, but suppose Congress explicitly say in this case, 20 years or 15 years for one and 20 years for the next. Joseph P. Jenkins: Then there would be no question. Felix Frankfurter: There'd be no question. Joseph P. Jenkins: That's correct. Felix Frankfurter: There's no question of double jeopardy, wouldn't there? Joseph P. Jenkins: That's correct. Felix Frankfurter: What you say that the same were severed and therefore, it's a matter of construction, they made construction. Joseph P. Jenkins: I believe you -- please, very well. William J. Brennan, Jr.: Well, Mr. Jenkins, may I ask, actually I -- I gather is the second paragraph of subdivision (a) -- Joseph P. Jenkins: That's the -- William J. Brennan, Jr.: -- they signed it here, isn't it? Joseph P. Jenkins: That's right. William J. Brennan, Jr.: As well as (d). Now, that creates an act offense dichotomy, I gather. The same act as this appears, may be two offenses. Is that what you would think the Government -- Joseph P. Jenkins: That's correct. I -- my opposition is that (a) and (b) are actually four separate and distinct offenses, all of which fall into subsection (d) if the crimes are committed -- William J. Brennan, Jr.: Well, what -- Joseph P. Jenkins: -- as aggravated crimes. William J. Brennan, Jr.: -- I'm trying to get at is in effect, the same act is made two offenses, is it not? Joseph P. Jenkins: I say no. William J. Brennan, Jr.: I see. You say no because you say that (d) embraces (a). Joseph P. Jenkins: That's correct. William J. Brennan, Jr.: Is that it? Joseph P. Jenkins: That's correct. William J. Brennan, Jr.: Well, now, if there's a matter of statutory construction, that should -- we should conclude that was not the case and that (a) and (d) are separate offenses. Are you raising your constitutional question based in the fact that the same act is made two offenses? Joseph P. Jenkins: No, I'm raising a question that statutory construction will arrive at the conclusion that subsections (a) and (b) of the Act contained four separate and distinct crimes, each of which will stand by itself and will not integrate in the others that Congress meant four separate crimes to be involved here and that -- if one crime is committed, the other crime cannot. For example, petit larceny and grand larceny, they can't stand together. Robbery, taking a property and petit larceny, no court has ever held they can stand together in the Bank Robbery Act, but we have taken away the -- the one concept of entry and placed that by itself and say that can be added to any of the other act so that we can have two crimes committed at (a) and (d) -- (a) and (b). We'll I'd say, and I believe and the other courts have so held, that only one crime can be -- can be committed under (a) and (b) and if it's an aggravated form, it merges into -- William J. Brennan, Jr.: Into (d). Joseph P. Jenkins: -- (d). William J. Brennan, Jr.: Well, I'm still trying to find out whether in the event we don't quite agree and should feel that (d) has a different offense from (a), although both go out of the same act. Are you -- which are making any constitutional point of that? Joseph P. Jenkins: No, I -- I would -- I would say this that a smacks of double jeopardy, and a person being sentenced twice for one crime. The courts have held that have interpreted -- William J. Brennan, Jr.: Well, then he said no but it smacks the double jeopardy. That tells me, no, it isn't constitutional question, yes, it is. Joseph P. Jenkins: Well, I believe it would be under the Fifth Amendment, yes. And I -- I urge that point below. Now -- William J. Brennan, Jr.: (Inaudible) Joseph P. Jenkins: I might have, Your Honor. I might have. I wasn't going to press that point on this short time I have here. Now, if Your Honor please, the courts below have held over and over again the that (a) and (d) are only one crime, is a massive citations in the -- both briefs that (a) and (d) cannot stand together, but these all have referred to the robbery, prohibited in (a) and then (d), the same robbery under aggravated circumstance and the courts have held unanimously one crime with the 25 years sentence including this Court whether obliquely perhaps in Holiday v. Johnston, when it was sent back to lower court to change the sentence. The courts have -- maximum to being 25 years. Now, the courts have even held that when seven or eight persons are in -- put in jeopardy that only one count will stand because the maximum again is 25 years under this Act. However, the -- the particular question involved here when entry not under aggravated circumstances is charged and then, the bank robbery, under aggravated circumstances, those are (a) and (d) crimes, the Fifth, Sixth and Ninth Circuit have met the problem head on. Only the Fifth of all the courts has held that an -- an aggravated entry will stand with aggravated robbery so that a person may be sentenced to a maximum of 45 years, while the Sixth Circuit has said, no, there is a merger into the -- into (d), a maximum of 25 years. And the Ninth Circuit has held that similarly, except in dictum because they sent the case back to the -- to the trial judges, there were two of them, and simply said that they had no jurisdiction, hard case of the quicksand of law, you should apply for executive clemency. Clearly holding that there is a merger of (a) and (a) crime has committed into (d), particularly entry with intent. But the Fifth Circuit has held if the entry with intent is not committed under aggravated circumstances, then it will not merge into (d) which simply means that if you commit the entry with -- with aggravated circumstance and walk in and threaten a guard when you walk in and then commit the robbery under aggravated circumstances, they will both merge into subsection (d). But if you don't commit the entry under aggravated circumstances, they won't merge, which means a more serious penalty for the lesser crime. And if this is hard to believe, on page 17, or rather in the brief in pages 37, the Court has quoted and this only shows the confusion may arise if we interpret this as separate crimes is inconceivable that a person who enters a bank under unaggravated circumstances can be sentenced to a heavier sentence than one who does enter the bank under aggravated circumstances and then commits the robbery. The court truly held below that that could be done. Now, the Fifth Circuit has also held just last year that there is a merger, holding my point of view. However, in my case when I stressed Heflin case to them, they said that the Government had conceded the error. And since the Government conceded the error, they felt that was not -- they were not bound by their own decision. When again they said, and this Court has said, the maximum penalty under (a), (b) and (d) which covers the classic bank robbery is 25 years. In this case, 35 years was imposed. Now, I submit and -- and this might answer the questions put to me that Congress meant to cover omissions, Huxman and Frank said so. In dissenting opinions Huxman -- rather Frank was upheld by this Court in the Jerome versus United States. It -- it supplies an omission in a certain kind of case. That is, of course, if we -- if we say peaceful entries in the first place intended to be covered. We have four separate distinct crimes which can be put in place in compartments. If anyone has committed, then that particular crime would be the only crime chargeable. If it is committed on aggravated circumstances, it then merged into (d). Now, in our particular instance, I believe that Congress never intended to -- to place prohibitions against successive steps in this transaction. They intended to supply an omission. When the transaction finally consummate in the intended act, it is the submission of the petitioner that that's what Congress wanted and therefore there is a merger so that the intended act is the one upon which sentence can be imposed and I believe no matter how we look at the legislative history, no matter how we examine this particular act, there is nothing to show that Congress intended any type of permitting as is done in this case and as can be done in another cases instead of the 25-year sentence. Judge Edgerton once said that, in King v. United States, that sentencing should not be a game in which the wrong move by the court will grant immunity to the prisoner. We have the same thing here just reversed. The prosecutor can by manipulation of the various sections of the statute, that is of each one of those crimes in (a) and (b) can be charged in addition to other crimes in (a) and (b) by merely manipulating the section of the statute, we can get sentences varying 50 to 60 years depending upon the ingenuity of the prosecutor. Yet, this hasn't been done. The courts have seemed to interpret this reasonably, except the Fifth Circuit in this particular type of case. There are no cases anywhere in our -- among our circuits that hold that what this Fifth Circuit has done in this case can be done in any other type of bank robbery case. So if the Court please, we feel that -- that the maximum sentence is 25 years imposable under this Act. Now, armed robbery, which is a serious crime, the general prohibition against it will carry a sentence of about 25 years. That's if no murder was done or any other harm, 25 years. It does not seem conceivable that Congress intended the Bank Robbery Act to go beyond 25 years when no kidnapping or killing is involved. Yet, that's what can be done if the prosecutor and some of our district judges are giving a license to pyramid these offenses far beyond 25 years which seems to be reasonable. This Court itself has said in the Holiday case, the maximum sentence imposable under the Bank Robbery Act, of course, in that case, we had robbery and then aggravated robbery, and the court said you couldn't sentence on both, but the maximum sentence is 25 years and this Court has never changed its view and no other court in United States has changed its view except the Fifth Circuit and even that court, just last year held that 25 years was the maximum sentence, why it change its mind in our case, I do not know, but when this was pointed out, the court refused to follow its own decision. Now -- now, if the Court please, we submit finally that armed robbery under aggravated circumstances which contains a maximum sentence imposable embraces the entry. Congress, I believe, would be satisfied if this entry were embraced within the Act. I can use the word merger. There is no intent to increase the penalties merely to cover the -- or expand the Act to include another type of crime which is larceny and burglary. So, as Justice Hudson once said, nothing is a crime unless specifically made so by a statute. Crimes do not arise by implication and that is what we have here. We submit to Your Honors first that burglary was meant to be covered by the clear intention of Congress and if this Court feels that burglary should be expanded to include a peaceable type of entry which I submit is unheard-of under this type of case because everyone has a right to go into a bank, then in any event a merger was held because the maximum sentence is 25 years. Thank you. Earl Warren: Ms. Rosenberg. Beatrice Rosenberg: May it please the Court. We're dealing here with a statute first that's 1934 and amended by the material here in 1937. When that statute was proceeded by a number of decisions of this Court ranging by -- from the Burton case about 1905 through the Albrecht case in 273 United States, must have been in that -- in that period about 10 decisions dealing with the question of whether one transaction resulted in one offense or more than one offense. And the court in that 30-year period spoke not only frequently but unequivocally consistently. And it is our basic position here that there is nothing in the legislative history or the language of this statute to take it out of those decisions. But those decisions must -- cannot be ignored when you're trying to decide with intent of the legislature in 1937 with respect to a bill suggested by the Attorney General and that in the light of those decisions, entry with intent to rob and a robbery are separate in distinct offenses and separately punishable. Now, out of the many decisions that were decided in this period between 1905 and 1937, (Inaudible) should I want to talk about in particular because I think it is fair to say that they established as the regular method of interpreting federal criminal statutes. The proposition that where a statute rebating to what would normally be a series of steps in one transaction, the Act would normally be interpreted as punishing each step as well as the completed transaction itself. In the first decision to that effect, Burton against the United States in 202 U.S., where the statute punished, in just one paragraph, anyone who shall agree to receive or receive any compensation of the type prohibited, Burton case discussed on page 17 of our brief. And the court there said, Congress intended place its condemnation upon each distinct, separate part of every transaction coming within the messages intended to be reached and remedied. Therefore, an agreement to receive compensation was made an offense. And so the receiving of compensation in violation of the statute whether pursuant to the previous agreement or not was made another in separate offense. There is in our judgment no escape from this interpretation consistently with the established rule that the intention of a legislature must govern. Now, I looked the briefs in those cases and the decision of the court itself and the intention of the legislature so far as it is manifested by the briefs or the opinion stems from no more than the words of the statute itself which I said in the beginning prohibited any member of Congress who “shall receive or agree to receive any compensation.” Then in 237 United States, we come to a case that's very much in point to the problem here. Morgan against Devine dealing with the post office statute that post office offense is defined in one paragraph forcible entry with intent to commit a felony -- no, with intent to commit larceny -- what was section 190 of the Criminal Code. In another paragraph, larceny, the post office matter and the third paragraph which was not involved in Morgan against Devine also had a robbery statute with provision for increased punishment for the aggravated crime. And to that particular problem of burglary followed by a larceny, there was that the opinion below admits a conflict in the federal courts and an even greater conflict as there is quite generally even now among the state as to when one transaction -- well, when it becomes one offense or two, whether one merges in the other. And the court had argued to it and dealt specifically with the argument that after all what was involved in one post-office theft was -- that any intent at the time of entry was exactly the intent at the time of the stealing. And in answer to that, the court said, it's quoted at page 15 in our brief, the test is not whether the criminal intent is one other thing inspiring the whole transaction, but whether separate acts have been committed with the requisite criminal intent and are such as are made punishable by the Act of Congress. And the very case to which I was to refer as the case of Albrecht against United States dealing with violations of the National Prohibition Act, which in one paragraph punished possession, manufacture, sale, receipt, almost anything that we don't have in relation to intoxicating liquor. Mr. Albrecht was punished or was charged an indictment with on the same day possession of liquor and sale of liquor. And the actual proof that was adduced was that somebody went in and ordered a drink and he went in the back and got out a bottle and gave him the drink. That was the proof related to the possession and sale at the same time. And the argument was made that that was not -- those -- those were not separate offenses and that since it was almost impossible to separate possession and the sale, that you couldn't make a sale without having possession, that there was a violation of the constitutional protection in double jeopardy. And in answer to that, this Court said there was nothing in the constitution, that's quoted on page 18 of our brief, there is nothing in the constitution which prevents Congress from punishing separately each step leading to the consummation of a transaction which it has power to prohibit and punishing also the completed transaction. Now, that (Inaudible) in constitutional terms, but of course, to reach the constitutional problem, there also has to be a statutory construction problem. It must have been -- it employs a holding, of course, that Congress did to intend to punish separately the possession and the sale of liquor. From -- we haven't attempted in our brief to summarize the -- I think literally hundred of Court of Appeals cases which follow the principles laid down by the courts in these cases. (Voice Overlap) -- Felix Frankfurter: When you're -- when you're saying these cases, Ms. Rosenberg, how -- how many -- what -- what litigation or adjudication has there been in the District Court or in the Court of Appeals on this very statute? Beatrice Rosenberg: On this very statute, I was coming to that, Your Honor. I'm going to take it up now. Felix Frankfurter: These generalities, I don't know why -- why everyone spent so much time when Justice Holmes said wildly. Practically, every question of statutory construction is unique problem. These generalities don't you get anything. Of course, Congress has that power. Beatrice Rosenberg: It's more than the power, Your Honor. It seems to me that the legislative history of this statute -- Felix Frankfurter: All right. Beatrice Rosenberg: -- and the congressional intent in 1937 cannot be judge without referring to the climate of legal thinking of the time. After all, it is a well-known fact that Congress consists in the part of lawyers. This was a bill that was drafted by the Attorney General -- Felix Frankfurter: This bill -- Beatrice Rosenberg: -- and submitted -- Felix Frankfurter: -- this bill? Beatrice Rosenberg: -- this bill. Felix Frankfurter: Yes. All right. Beatrice Rosenberg: This bill. Now, it seems to me that if this retained over, if this were the first criminal statute that was called upon to be construed, it could be regarded equivocal, I regard every one of these decisions by this Court as subject to arguments, one way or one another, various States have gone various ways on this. It seems to me very valid and -- and very important, both as a matter of legislative intent, as a legislative intent of this statute to recognize that there was a climate of judicial thinking which presumably the Attorney General knew and -- and the members of Congress. And that when you get to a statute where it seems to me neither the wording nor the legislative history per se is conclusive, it is very significant that for the whole 30 years preceding, that was the almost automatic approach of a court to this problem so much, though as a matter of fact and that I will come to in a moment taking up this particular statute. When they had a statute which was different in one respect, and this was in relation to robbery. Most courts didn't recognize the difference. So that we had the problem that arose about Holiday against Johnston, which came from a particular format was enacted. It -- it -- let me turn now to the legislative history of the statute to explain what I mean. When the Attorney General suggested in 1934, he suggested a draft which is Appendix A of our brief on page 46. And that read, there was a section punishing, driving into the bank with intent to commit a felony, common law of burglary. It was Section 4 (a) punishing robbery and 4 (b) with Section 3, punishing burglary, Section 4 punishing robbery. And it had robbery in the simple form, robbery in the aggravated form. And I had forgotten, I started at 3, I should have started at 2 which was the section punishing larceny. So we had one section punishing larceny, one section punishing burglary, one section punishing robbery, which (a) and (b) had the simple in the aggravated form with the greater offense. For some reason not disclosed in the legislative history, Congress omitted in 1934, Congress decided not to make bank burglary or bank larceny an offense and it passed only the robbery part as a proposed draft. And so we got what was 12 United States Code in the form before the 1948 revision, 588 (a) and (b), passed as such, so we had -- without -- the robbery provision alone with a provision for aggravated form and not the others which would made it clear that they were creating separate offenses. Now, I think that the bill had been passed in -- in its original form. It would never have gotten into the difficulties that it did because as with the separate burglary provision, the separate larceny provision and then the robbery provision simple and aggravated. It was clear from the language of the statute. One, that the aggravated form of robbery related to robbery and also I think clear from the form of that statute in the light of the decisions of the time that burglary and larceny was separate from the robbery. But coming as it did with just the robbery and with the general approach of separate statutes being separate offenses which had permeated federal thinking for 30 years before this statute was passed. What happened was that the great majority of district courts began to consider both robbery and aggravated robbery as separate offenses also and that was the form in which the statute read when Holiday against Johnson or at least at the time of a Holiday against Johnson offense by this Court. And at that time when only robbery was punished by the statute, this Court said, “No, that's just one offense.” And the Government, as a matter of fact, agreed to that interpretation, but it was talking about the situation where we had what was originally Section 4 of the draft, simply robbery in the initial and aggravated form. And it was, in a sense, the result in confusion from being faced with a statute where the court has said, it was only offense which was extremely unusual in federal law that we get some of the problems here. Felix Frankfurter: I think your own recitals, Ms. Rosenberg, shows that the mental climate changes even more than the mere erotical climate. The lower court said there were two offenses, robbery and aggravated, because they were still moving in this mental -- in this adverse here which you speak. But by the time, Holiday and Johnston, the Holiday case statute with -- in 313, the air here began to be a little different. Beatrice Rosenberg: May I suggest, Your Honor, in that the Court of Appeals that they had it, did not do so. It was largely based on the legislative history and based on the particular legislative history represented by Appendix A where I think, as I said, that in the form that -- if that statute had, where you have Section 2 or Section 3 and where the aggravated form applied only to larceny, it would have been done and after the change of climate. I was coming to that later because of the period between 1937 and 1948. May I point to the decision of this Court in 1947 in Michener against the United States, where -- what was involved was a 15 years sentence for possession of a counterfeit plate and a 15-year sentence for causing a counterfeit plate to have been made. Now, the Eighth Circuit in a very limited decision said, “We agree the possession and manufacture can often be separate offenses. But where the only possession you charge is that the very same time as a possession of a counterfeit plate about to be made, we think that merges.” Now, that was the conflict with the Ninth Circuit. As a matter of fact, this was the same defendant and that question was brought here. Now, as late as 1947 with this Court with some dissents. But nevertheless, this Court disposed of that question by reversing the Eighth Circuit in a per curiam opinion citing the cases that I have mentioned before including those I haven't undertaken to discuss here, Gavieres and some of the others that are cited in our brief. So that if neither at the time of the enactment of this statute, nor at the time of the reenactment of the code in 1948, had there been any significant change in this general climate of approach which was to the effect that each step of a transaction as well as the whole transaction should -- could be separately punishable. There were, in addition, judicial constructions specifically on this point which I won't get to it at this time. Earl Warren: We're going to finish this -- Beatrice Rosenberg: Oh, I'm -- Earl Warren: -- now, Ms. Rosenberg. Beatrice Rosenberg: -- sorry, no one told me. In the years between 1937 when this statute was amended and 1948, there were a few cases on this problem. There are notamended whether because they are handled in the sentencing procedure, I do not know. But the one case -- Felix Frankfurter: What do you mean by that handled -- what do you mean by handled in the sentencing procedures? Beatrice Rosenberg: In that -- in that whether because courts have not given consecutive sentences for this or -- I do not know, but they aren't really about -- I suppose altogether about 10 cases where the question had been litigated, several of them for the -- from the Fifth Circuit. Now, those cases are discussed in our brief at pages 31 to 35. And the most precise question, handling of this question, precisely dealing with the question of whether entry and the subsequent robbery were separate offenses was Wells against the United States in 124, coming from this same circuit. Now, there we had exactly all the difficulties, the fact that aggravated robbery and robbery itself had been sentenced to separate sentences as well as entry within intent to rob. And the Court said it is true that aggravated -- that robbery and aggravated robbery are separate offenses -- are not separate offenses and therefore, you can punish only one for the aggravated form. But entry, on the other hand, is a separate offense and for that, consecutive sentences may be imposed because that's in court withholding in this case. I am almost afraid to point out since I am not attaching any significant to it, but the fact is that a petition for certiorari raising precisely that point of whether there could be an entrance with intent to rob was presented to this Court and denied. Now, there was at that time no (Inaudible). The other explicit holding on that point was in the Tenth Circuit. It was the same offense and it was dicta when the question was not correctly involved, but exclusive recognition of that same point of view by the Seventh and the Eighth Circuit. The case is cited at page 33 of our brief. As against that, there was one holding to the contrary in a rather oblique case which had complications in its sentence in another form in the Sixth Circuit and possible dicta. It's not even clear that the Court was ruling on this question in the Ninth. So that by the time of the reenactment, the way the judicial authority was in court with -- with what was then the prevailing view generally as federal criminal statute and that is to the effect that entry with intent to rob and robbery are separate offenses. Now, let me say that -- William J. Brennan, Jr.: Ms. Rosenberg, may I ask, did the first paragraph of paragraph (a) come in at the same time as the second paragraph? Beatrice Rosenberg: No, that's the difficulty. You get -- it will be traced best by looking in our appendix. The first -- the Act that -- was first passed in 1934, Mr. Justice Brennan, took what was -- as I say the robbery section of the proposed bill and that's set out in Appendix B on page 47. William J. Brennan, Jr.: Well, where did this paragraph (a) come from? I mean the -- if the paragraph (Voice Overlap) -- Beatrice Rosenberg: That came from the 1934 Act -- William J. Brennan, Jr.: That's (Voice Overlap) -- Beatrice Rosenberg: -- paragraph (a). William J. Brennan, Jr.: Well, now tell me this. Suppose you had an employee of a bank who came to work in the morning with nothing on his mind at all, in the course of the day, he decided he's going to rob the bank and he takes a gun and he does just what this defendant did here. Now, as I read this first paragraph of paragraph (a), now that would be, would it not, a taking with intimidation of money of the bank. Beatrice Rosenberg: I take he -- from the presence in presence of another. William J. Brennan, Jr.: Well, I'm reading now from the first paragraph of paragraph (a). Beatrice Rosenberg: Yes, by intimidation, it takes from the presence or presence -- William J. Brennan, Jr.: That's right. Beatrice Rosenberg: -- of another. William J. Brennan, Jr.: I'm saying -- Beatrice Rosenberg: He has to rob someone. William J. Brennan, Jr.: -- he did it what this -- this defendant did here. Beatrice Rosenberg: Oh, yes -- yes. William J. Brennan, Jr.: He'd be guilty of offense under paragraph (a). Beatrice Rosenberg: That would be an offense under paragraph (a). William J. Brennan, Jr.: But he'd also be guilty since he used the gun on paragraph (d). Beatrice Rosenberg: Well, that's the aggravated form of the -- William J. Brennan, Jr.: All right. The same thing -- Beatrice Rosenberg: But it's one offense. William J. Brennan, Jr.: -- you think are on both instances. Felix Frankfurter: No. Beatrice Rosenberg: It's one offense. William J. Brennan, Jr.: Well, in that instance, that's my question. Would that be one offense? Beatrice Rosenberg: Yes. William J. Brennan, Jr.: Only one offense? Beatrice Rosenberg: Only one offense. The idea is that as to paragraph (d), the interpretation and then courts had been completely consistent about this, that paragraph (d) -- Felix Frankfurter: Paragraph (d)? Beatrice Rosenberg: (d) of the present statute. Felix Frankfurter: Where is it? Beatrice Rosenberg: On page 3, defines an aggravated form -- William J. Brennan, Jr.: Yes, you see -- Beatrice Rosenberg: -- of whatever offense it applies to. William J. Brennan, Jr.: -- you see what I'm trying to get at, if -- if that's right, then under the first paragraph of now paragraph (a) of 2113, in the situation I put to you, that would be an offense while an offense under that paragraph and also under (d) would be only one offense. Beatrice Rosenberg: That's right. William J. Brennan, Jr.: Why is it that we have two offenses where it's an entry and causing the question, the second paragraph of paragraph (a) of 2113? That's what I'm trying to get at. Beatrice Rosenberg: Because the arrangements here can be understood only in relation to the history of the -- William J. Brennan, Jr.: Well, I certainly agree with that. Beatrice Rosenberg: Only in relation to the history of the statute. As I say what happened was that you had first the proposal to make -- William J. Brennan, Jr.: Well, I know your arguments, no needn't repeat it. I just wanted to see. Then your answer -- Beatrice Rosenberg: All right. William J. Brennan, Jr.: -- your answer to me is that that first paragraph of paragraph (a) came in, in 1934 and the second paragraph for very different purpose in 1947. Beatrice Rosenberg: 1937. William J. Brennan, Jr.: 1937. Beatrice Rosenberg: And then when -- but it had been in existence from -- what happened is that when the statute, read (a) and (b), when the Attorney General then said to Congress, “You made a mistake in admitting the larceny and burglary provisions.” Then the statute then had (a) and (b) instead of going back to its old form and suggesting separate paragraphs. If (a), he could in the definitions of larceny and burglary and so then, you get the statute. It will seem even clearer, I think, why (d) got separate. If you look at pages 4 to 5 of our brief, which is the predecessor statute as enacted in 1937, and there you see -- they said, whoever by -- 588 (b), but paragraph (a) have the separate offenses burglary, robbery, larceny and petit larceny and then it provided for the increased punishment in the aggravated form of the offense. Now, the revises in 1940 (a) separated this (a) into the -- (a) and (b) and (c), and then they added the (d), but it's -- that's a historical accident because it is clear here that from the predecessor statute that the offenses were divine first, and then there was a provision for increased punishment for the aggravated forms of the offense. And it is that history that we say shows that in the light of the decisions, in the light of the blinking of the time, these were intended to be separate offenses. Now, let me say one word about the peaceful, the absence of violence in this. It's hard for a statute to be more explicit than this one. It simply says entry. Congress had before it and the Attorney General's first suggests were forcibly entry or breaking and entering. So that the addition of the simple word entry was intended, we think, should be deliberate. The court -- William J. Brennan, Jr.: Now, Ms. Rosenberg, that means I gather that in the case I put to you, the -- the employee come to work in the morning intending to do what he finally did in the -- in the end of the day. He could have the same sentence as this fellow has. Beatrice Rosenberg: If he -- William J. Brennan, Jr.: That's two sentences. Beatrice Rosenberg: Well, there'd be question of when the intent occurred. I take it. William J. Brennan, Jr.: Well, I'm assuming he enters, he attempted to enter when he came to work in the morning and his intention when he entered that morning was that he was going to rob the bank during the day with a gun and he did. And that circumstance, he could have, as this defendant did, get the enhanced punishment, right? Beatrice Rosenberg: Yes. William J. Brennan, Jr.: But that he came and made up his mind during the day to rob the bank, couldn't he? Beatrice Rosenberg: That's right. It seems to us not essentially different from agreeing to receive and receiving compensation. Normally, one doesn't get a bribe or under lawful compensation unless one agrees to take it. This Court has said those are separate offenses. Earl Warren: Ms. Rosenberg, suppose a man went into the bank two or three times with the idea of robbing it when -- when the time was propitious and he have cashed a check and he say, “Well, this isn't the time.” So he'd walk out and he waited a little a while and come back and suppose he did that about three times during the day and then -- and then finally he robbed it about the fourth time. Could you give him 40 years on the last one, 20 years for entry and 20 years for robbing and 20 years on each one of the others? Beatrice Rosenberg: Your Honor, the (Inaudible) Earl Warren: [Laughs] I don't know. Beatrice Rosenberg: offense statute -- Earl Warren: I don't know. Beatrice Rosenberg: -- allows Congress defined it, congress defined it as entry. People have gotten five years for selling narcotics not in a blank order form, five years -- that's the Blockburger case, five years for -- not with a -- in a pursuant with Steins, five years not with -- pursuant to a written order form. The court said there, sentencing is now here for the District Judge. As I say, it -- this seems to me, I suppose, that one could agree on three different occasions to take the bribe. If he did, according to the Burton case, that's separate offenses. Now, there was a choice of doctrine and as I say the States were not divided on this -- were not agreed on this question at the time these decisions of the court. But the court from 1930 to 1946 was very consistent. Earl Warren: Thank you. I think you have one minute according to -- Joseph P. Jenkins: One minute, yes, Your Honor. Earl Warren: -- the clock, Mr. -- Mr. Jenkins. Mr. Attorney General: If the Court please -- pardon me, if the Court please, the answer to your question is yes, undeniably yes, as to whether or not he could be charged with three or four different counts with each time, all indeed is unanimous and the crime is committed irrespective of whether or not you consummate the crime. If the Court please, turn to pages 2 and 3, I believe, I can answer the question of Mr. Justice Brennan of the Government's brief. Subsections (a) and (d) have been held together to be only one crime unanimously. Subsections (b) and (d) have been held to be one crime unanimously. Only the Sixth Circuit has held that if (c) -- if the second part of (a) is committed and (d) that there is no one crime, that is the only exception I do not know why. Thank you.

Warren E. Burger: We will hear arguments next in 1106 United States against Gregory Washington. Mr. Sheehan you may proceed when you’re ready. William F. Sheehan, III: Mr. Chief Justice and may it please the Court. This case is here on a writ of certiorari to the District of Columbia, Court of Appeals. That Court affirmed the judgment of the Superior Court suppressing for use in evidence in respondent's prosecution for grand larceny and for receipt of stolen property, the testimony that respondent had given earlier before grand jury. Unlike the one just heard, this case does not involve the prosecution for perjury and accordingly it poses squarely the question of whether the constitution requires the Government to warn grand jury witnesses of their privilege against self-incrimination when the Government has reason to believe that the witness maybe indicted on the basis of the testimony that is sought. I will state some of the facts quickly since there is a claim that the Government’s conduct in this case violated the Due Process clause. On the night of December 3, 1972, an officer of the metropolitan police stop the van type automobile after watching it make a u-turn and in the back of the van found a motorcycle that had recently been reported stolen. The two occupants of the van were arrested and the police determined that the van belonged to the respondent and they notified him that the van was in their possession. Within the next several days in an effort to retrieve the van, the respondent went both to the police station and to the United States attorney’s office. On both occasions he said that he did not wish to press charges against the two men found in the van who would -- it had been thought might have stolen the van in addition to the Motorcycle. He said they were his friends and it had his permission to use the van. He also said that he himself had been driving the van on the evening in question and he explained the presence of -- earlier on the evening in question he had been driving the van and he explained the presence of the motorcycle in the van in a manner that both the police man to whom he spoke and the assistant United States attorney to whom he spoke found unpersuasive. I will get his explanation in just a moment. The policeman in fact told the respondent that he did not believe his story and that if respondent were to testify to it in Court, they would be likely to get him into trouble. The Assistant United States Attorney gave the respondent back his van and gave the respondent also a subpoena to appear before the grand jury investigating the crime. He did so because he was afraid respondent would not appear voluntarily either because the respondent would not want to testify against his friends or because he was himself involved. When the respondent came before the grand jury the Assistant United States Attorney in charge not the same one who had given him the subpoena was uncertain whether or not to seek an indictment. He was not sure what respondent's testimony would be or whether it would be believable and accordingly he decided to leave the matter entirely to the grand jury itself after they had heard his testimony -- after they had heard the testimony of the respondent. Before the respondent testified he was given full Miranda warnings. He said that he understood them that he wanted to answer questions regarding this after the motorcycle and that he did not want the services of a lawyer. William J. Brennan, Jr.: He had not gotten any Miranda warnings he was talking to the Assistant U.S. Attorney? William F. Sheehan, III: He had not had Miranda warnings when he was talking to the assistant. No. He then gave testimony to the following effect. On the night in question he said he had been driving the van and he had stopped to help a stranger whose motorcycle had broken down. The two of them put the motorcycle in the van, he said and drove on looking for help and the van itself drove down. Excuse me when the van itself broke down. He then left the stranger with the motorcycle and van he said and walked a block or two away to a gasoline station where he telephoned his two friends to come help him. He said that he waited at the gas station for two hours and his friends did not appear. He said he then went back a block or two away to where the van had been left and found it was gone. He said that he did not report the disappearance of the van because he said he assumed that his friends had come and fixed it and then driven it away. The stranger who owned the motorcycle he said was never heard or seen again. Never heard from or seen again. Following his testimony in due course the grand jury indicted him along with the other two men for grand larceny and received stolen property. The Superior Court then granted the respondent's motion to suppress his testimony on the ground that it had been obtained in violation of his privilege against self incrimination. The Court held the Assistant United States Attorney conducting the grand jury had not adequately inquired into the respondents ability to understand his rights and in addition had failed to warn respondent on top of the warnings he had received that his testimony could result in an indictment by the grand jury. In affirming, the Court of Appeals said that the principal respect in which the full Miranda warnings which respondent had received were deficient was that he had not -- was in that he had not been told that he was a potential defendant. The upshot of the decision is that a potential defendant is entitled in the Court's view in the Court of Appeals view under the self-incrimination clause both the Miranda type warnings and to target warnings. It seems appropriate to begin the analysis here with something that in our view the Court of Appeals gave too little attention to. The words of the constitutional provision themselves. No person shall be compelled in any criminal case to be a witness against himself. This Court in Miranda against Arizona found that the procedures surrounding custody interrogation by the police of a witness of a suspect were inherently coercive. And accordingly it held, that a set of warnings was necessary in order to balance things out. Without those warnings it is now conclusively presumed that any testimony statements given by the witness were compelled against the suspects will. The issue for decision today is whether questioning it in front of a grand jury is also inherently coercive that warnings are required before any testimony given by a witness in response to questions by the Government maybe considered voluntary. Our position is that there are many differences between the questioning of a suspect by the police in custody and the questioning of a witness in regular grand jury proceedings. For the most part, we think that these differences are self evident. They are also -- they are in any event set out at length in our brief. I will mention only two. Before the decision in Miranda the interrogation by the police occurred principally in private. In contrast, the questioning of a witness before the grand jury occurs before between 16 and 23 private citizens who are not likely to be in our view so compliant to the prosecutor's wishes as to countenance the kind of abuses that were cataloged by this Court in Miranda. Second question, I might add that the view that I just expressed was I think stated also by Mr. Justice Black in the Groban decision. He said it would be very difficult for officers of the state seriously to abuse or deceive a witness in the presence of the grand jury. Moreover, the questioning in front of a grand jury is undertaken under the overall supervision of a District Court judge and frequently the questioning is transcribed and reported as it was here. In short, the privacy that before Miranda allowed the abuses of custody interrogation that were perceived to exist. It does not exist in the grand jury setting and there is according -- John Paul Stevens: Mr. Sheehan, your point is that this is not compulsion within the meaning of the Fifth Amendment, if I understand you correctly. If that’s true, I would suppose it's not compulsion if he testified in a trial in open Court? William F. Sheehan, III: If he testified as a witness in trial in open court. If your question Mr. Justice well the Government has an obligation to warn a defendant in criminal cases -- John Paul Stevens: No, as I understand your argument, correct me if I’m wrong I am just trying to get the thread of the argument. You say this is -- this situation is different from the police interrogation in a police station where the man is in custody. William F. Sheehan, III: Yes indeed. John Paul Stevens: With respect to the issue of whether or not there is compulsion. William F. Sheehan, III: Yes indeed. John Paul Stevens: And you say, there is compulsion in the police station but does not compulsion in the grand jury room because it’s more public. William F. Sheehan, III: For that reason and others. John Paul Stevens: And if that reason is valid, would it not also follow that testimony in open court pursuant to a subpoena would not be testimony pursuant -- would not be a compelled testimony. William F. Sheehan, III: Yes it does indeed follow. That is -- John Paul Stevens: Well then it would be -- to what does the Fifth Amendment ever apply then? William F. Sheehan, III: To testimony that is compelled. The subpoena does not compel testimony. The subpoena Mr. Justice Stevens compels only the appearance of the witness and once the witness does appear in response to lawful process, it is open to the witness then to claim his privilege against self-incrimination as to any questions that he fears may tend to incriminate him. He would be compelled in this situation only if in response to such a claim the District Court perhaps upon the grant of immunity would order him to testify. The subpoena itself is simply legal process. There is no constitutional privilege to object to legal process. There is no -- he has no Fifth Amendment privilege against self incrimination. John Paul Stevens: Let me put this case to you. Supposing a defendant in a criminal trial decided to waive counsel and appeared from self and he was -- subpoena was served on him or he was called to the witness stand and a question was asked of him, would he be compelled to answer within -- say he didn’t know about the Fifth Amendment privilege, would that be compulsion? William F. Sheehan, III: I think it would not be compulsion. John Paul Stevens: I see. And compulsion is the failure to exercise a privilege? William F. Sheehan, III: No. The compulsion is not the failure to exercise the privilege. The compulsion -- John Paul Stevens: What is it? William F. Sheehan, III: Compulsion occurs when by the Government’s affirmative conduct did overbears the witness's will. John Paul Stevens: Well, then in my hypothetical case there would be no compulsion because he just didn’t realize that he was -- William F. Sheehan, III: Not unless he was -- not unless he was instructed by the Government that he was compelled to answer questions or that he was compelled to take the stand. I suspected probably the hypothetical would not occur I suspect in a case like that the District Court in -- John Paul Stevens: Well he probably would give one. I realize -- William F. Sheehan, III: I think the District Court probably -- John Paul Stevens: But under your position there will be no duty to warn. No compulsion. There will be no Fifth Amendment issues. William F. Sheehan, III: No I think -- William J. Brennan, Jr.: You don’t really mean that trial judge could say take the stand. William F. Sheehan, III: Oh, no. I think that -- William J. Brennan, Jr.: That’s compulsion. William F. Sheehan, III: I think that might well be compulsion sir. Thurgood Marshall: That’s the question -- William F. Sheehan, III: Oh, no. No, the question to which I -- Byron R. White: But to do that to an ordinary witness. An ordinary witness not a defendant must take the stand. William F. Sheehan, III: That’s correct. Byron R. White: And it isn’t deemed compulsion of the Fifth Amendment purposes unless he has ordered to answer over a claim of the privilege. William F. Sheehan, III: That’s correct. Indeed if the District Court just ordered the witness or that the defendant take the stand without more that would not be compulsion. It would have to be an order to answer the questions that were put to him that would be compulsion. Potter Stewart: But it's well settled that whatever the logic of it maybe that it violates the Fifth Amendment even if called the defendant himself to the stand if the calling is done by the prosecution, am I correct? The prosecution can’t say to the defendant now you take the witness stand. William F. Sheehan, III: That is -- Potter Stewart: That is a violation. William F. Sheehan, III: Well, it would also be a violation -- it would also be a violation of the federal statute making the defendant competent to testify on his own behalf. William J. Brennan, Jr.: Violation of the constitution, heaven sakes. William F. Sheehan, III: I think it would be a violation of the constitution in large measure because the Government could not oblige the defendant in that case assert his privilege in front of the jury. Warren E. Burger: Yes, doesn’t it fall under the cases that simply say that there can be no reference to the failure of the defendant to testify and that would be one way of calling attention to it. William F. Sheehan, III: Yes, the situation is quite different Mr. Chief Justice in the setting of the grand jury. Potter Stewart: Long at a date set the constitutional rule of the comment on its failure to testify, which came about only about 10, 12 years ago. This constitutional rule that violates the Fifth Amendment for the prosecution to call the defendant to the witness stand. For centuries old, at least I think. William F. Sheehan, III: Well it -- I’m not certain if it is a couple of centuries old, I’m prepared to see -- Potter Stewart: That was long established as long as -- I’m not quite – couple of centuries old but when I was at law school I was well established and the proposition that violates the Constitution to comment on the defendant's failure to testify is only about 15 years old. William F. Sheehan, III: Well I’m prepared to concede for purposes of argument here that it is indeed settled today that it would violate the constitution for the defendant -- for the Government to call the defendant to the stand or in anyway to comment upon his failure -- Potter Stewart: If you conceded that it violates the constitution namely the Fifth Amendment to call the defendant the witness stand you must necessarily also concede that that is a form of compulsion within the meaning of the Self-incrimination Clause of the Fifth Amendment. William F. Sheehan, III: Well, even if it is, my position is that the situation in the grand jury is entirely different. The grand jury there is no rule. Potter Stewart: There is less compulsion in the grand jury context than in the open Court? William F. Sheehan, III: Well, the -- John Paul Stevens: The argument before ran in just the opposite direction that the greater the public character, the lesser the degree of compulsion. Warren E. Burger: Well, isn’t the advice of calling in the first type of the hypothetical calling him in the presence of the jury which is then made aware of his failure or his refusal to testify. William F. Sheehan, III: Yes indeed. The grand jury it seems to me -- William J. Brennan, Jr.: Wouldn’t that apply the bench trial as well as the jury trial? William F. Sheehan, III: Well, I think the issue of whether the defendant can be called to the stand in a criminal case is not the issue post here. In any event, the grand jury is entitled it would seem to me to accord whatever weight it thought it wanted to a witness's refusal to make statements in the grand jury setting. So, I think that in contrast to the situation with the trial jury where they are not allowed to make any inference whatsoever. For example, if the witness in the grand jury setting decided that he was going to exercise his privilege and persuaded the prosecutor they are not to call on in front of the grand jury, the prosecutor would not be precluded from telling the grand jury and for example in response to an inquiry by them why that individual would not come to testify before them that that individual is going to assert his privilege and so he had not been called. But the touchdown of our position is that for there are to be a requirement of Miranda warnings in this case, this Court has got to find that the setting of the grand jury is as inherently coercive as is custodial interrogation. For the reasons that I have stated in brief, we find that there is no reason in this case to reject the traditional test for determining the voluntariness of the person’s response. John Paul Stevens: Mr. Sheehan, I interrupted you and I really didn’t mean. You are going to give us two distinctions between the Miranda custody interrogation in the grand jury. One being the public character and you didn’t get to the second. William F. Sheehan, III: Well they were both turns on the same point. The first was that it was public because it was in front of between 16 to 23 citizens and the second was it did have the protection of being under the overall supervision of the District Court and also there was the added safeguarded transcripts being made at the testimony in many cases as it was here. To this point I’ve been talking only of the questioning of grand jury witnesses in general. The Court below did not hold that all grand jury witnesses were required to receive warnings. It held instead that only potential defendants were required to receive warnings. It follows then that the Court must believe that the questioning of potential defendants somehow more coercive than the questioning of ordinary witnesses. William H. Rehnquist: Did the Court say well how it defined a potential defendant? William F. Sheehan, III: It did not. It would seem to us that under either of the tests for defining a potential defendant either a subjective test going to what was in the prosecutor's mind or an objective test going to what was in the prosecutors files would be the likely candidates for determining who is a potential defendant. We failed to see however how the content of the prosecutor's mind or of his files has any bearing on the question whether the setting in the grand jury is inherently coercive. Certainly in the Miranda situation this would be irrelevant. I take it the police would not be heard to say that warnings were not required when they questioned an individual in custody against whom they had no intention to press charges. Potter Stewart: Except the only way the Miranda rule is an exclusionary rule and the only time that it arises that this is in a criminal trial and the interrogatee, whatever the word is of course as what was questioned by definition by hypothesis is now a criminal defendant. So obviously, he was a potential defendant at the time he was being interrogated. William F. Sheehan, III: Well, he may not have been a potential defendant so far as the Government knew though. He might not have been a potential defendant so far as the police new when they questioned him but the police would nonetheless be obliged to give him warnings in the Miranda situation. Potter Stewart: You’re not obliged to give anybody warnings. You know the rule is an exclusionary rule. William F. Sheehan, III: Yes. Potter Stewart: Keeps evidence out of a criminal trial. William F. Sheehan, III: Yes. That’s true. You’re not obliged to give warnings if you don’t give warnings and statements are made, they may not be used because they are deemed involuntary. Well, we think that as the Court recognized last term in the Beckwith case, the Miranda presumption of involuntariness and the Miranda type safeguards should apply only when it can be said that the setting of the questioning is indeed inherently coercive and that in our view has nothing to do with whether the Government thinks or knows this or that at the time of the questioning. My opponent does not appear to argue that questioning before grand jury is necessarily as coercive as custodial interrogation. Indeed, at page three of respondent -- at page 23 of respondents brief note 11, it is said that the matter is open to some doubt, it’s a matter of speculation, he says it is our position that it is not as inherently coercive as custodial interrogation. The argument instead appears to proceed upon the assumption that as was discussed earlier, the subpoena itself is a form of compulsion of --is a form of testimonial compulsion. If that were the case, if the subpoena without more amounted to compulsion to testify in contravention of the privilege against self incrimination. Then, it seems to me that the many immunity statutes and also the many decisions of this Court construing those statutes would be very curious indeed, if it was compulsion simply for the witness to walk into the grand jury in response to a subpoena commanding his appearance. Potter Stewart: It is compulsion. It’s compulsion to appear. William F. Sheehan, III: It is indeed a compulsion to appear. It is not a compulsion to give testimonies since the witness after he appears is entitled to raise his privilege at any point that he thinks a question if answered would tend to incriminate him. Byron R. White: What if he refuses to answer before the grand jury and he says I won’t answer, they take him before the judge and judge just orders him to answer. He never claims a privilege. William F. Sheehan, III: Well, I think in a situation like that under the Cordell case it might be too late for him to claim the privilege later on if he -- Byron R. White: Well, he never claims a privilege at any point. You can’t say that the compulsion doesn’t arise sometimes. It's compulsion to appear and testify, is it not? William F. Sheehan, III: It's compulsion to appear and testify but not to testify as to matters that fall within your privilege against self incrimination. Potter Stewart: Well, there is no privilege against self incrimination, there is privilege against compulsory self incrimination. William F. Sheehan, III: There is a privilege against compulsory self incrimination. The subpoenas command to appear and testify though does not go so far as to command the testimony, as to compel the testimony from a witness that the witness reasonably believes would tend to incriminate. Byron R. White: Let’s just suppose he never claims a privilege. Never claims a privilege -- do you testify. William F. Sheehan, III: And he refuses to answer. Byron R. White: He just refuses to answer and the judge orders him to answer. William F. Sheehan, III: Yes and then what? Byron R. White: And then he answers. And he incriminates himself. William F. Sheehan, III: And incriminates himself. Well in that case -- Byron R. White: Do you say that is compelled certainly. William F. Sheehan, III: Well certainly if the judge orders him to answer and he does. Byron R. White: Well l know but he has never claimed a privilege. But he still is compelled to incriminate himself. Now, what gets the Government have to look in that case? Why is the evidence admissible? With respect to a witness in an ordinary Courtroom it is because he didn’t claim the privilege. William F. Sheehan, III: Well, I think that the general rule is because -- Byron R. White: And that compulsion only arises, prefers to this amendment, after you are compelled to answer after you have claimed the privilege. William F. Sheehan, III: Well, I think in that case it -- the general rule stated in the case of United States against Monia is that the witness has to claim his privilege in the grand jury setting or else it is going to be lost to him. I think then his failure to assert the privilege, I think if he failed in the face of the District Court order or in the face of the questions themselves to assert the privilege under the general rule that it must be asserted he would lose a privilege. John Paul Stevens: Yes, but waiving the privilege is quite a different thing from saying there was no compulsion at all. Which are you arguing? William F. Sheehan, III: I don’t -- John Paul Stevens: Maybe I’m not -- let me give you another case. Supposing a witness who is not even a defendant at all responds to a subpoena gets on the witness stand, they say where were you on such and such a night, and he says I would rather not tell you. He was a friend, I don’t want to identify him because he is some personal reason and the prosecutor says you must answer your under subpoena you got to answer the question. Is he being compelled to answer or not? William F. Sheehan, III: Well, I think in that case it would be incumbent upon to -- if he wanted to keep his testimony out of a subsequent prosecution to say, I don’t want to testify because it would violate my privilege. John Paul Stevens: No, he is not claiming privilege at all. No self incrimination, he just does not want to testify, he does not like to talk about his friends. Can he be compelled to answer those questions? William F. Sheehan, III: Yes, I think he can be. I think there is no doubt about it. John Paul Stevens: With no doubt into the judge. Cant you just say -- William F. Sheehan, III: I think there’s no question about it he is not being -- John Paul Stevens: So then, the compulsion arises without any reference to the judge or any reference to the privilege against self-incrimination that arises solely from the subpoena and getting on the stand -- William F. Sheehan, III: Oh no but he is not -- John Paul Stevens: Obeying the law and answering questions. William F. Sheehan, III: No but the compulsion is that -- the compulsion takes place when he is compelled to incriminate himself when he is called to testify and he says “I don’t want to testify because I don’t want to get my friends into trouble.” He is then stating in open Court. I’m not being compelled to testify in violation of my privilege against self incrimination. If it turns out later that in fact he was and he had an ulterior reason, it seems to me not unfair to insist that he stated his constitutional reason at the time he was compelled to answer. William H. Rehnquist: Well supposing a witness is asked a question by the prosecutor before the grand jury and he says I just won't answer that. Perhaps for reasons like Justice Stevens suggested. Now can he at that stage be prosecuted for content? William F. Sheehan, III: No. He cannot. William H. Rehnquist: Or do you have -- do you have to go before the -- do you have to go before the judging get an order compelling him to answer. William F. Sheehan, III: That is my understanding. And he would not in that case -- I think in that case he would indeed be compelled to answer if -- because the only reason he could avoid it -- well, I think in that case he would be ordered to answer by the District Court judge. Warren E. Burger: The short answer might be that there is a high press to protecting your friends in that setting. You might either be in contempt of Court or find your self charged with perjury. William F. Sheehan, III: Yes, I think that’s right. I turn now to the question whether the failure whether the failure by the Government to give a target warning on top of the Miranda warnings that were given or indeed alone automatically results in the coercion of the witness. Certainly, if warnings regarding the privilege are not required, it seems to us they neither are target warnings because the witness cannot be more coerced by the failure to receive a target warning than he is by the failure to receive warnings regarding the privilege. Even if some warnings are required by the privilege, it does not follow automatically that a target warning is required in addition. If warnings of the privilege are required to be given to a potential defendant presumably the reason will be that they are necessary to overcome an inherently coercive atmosphere in the grand jury. There is no reason to believe we think that such warnings would not by themselves be enough to dispel any inherent coerciveness that might be found to exist in the grand jury. William J. Brennan, Jr.: Mr. Sheehan may I ask. I suppose this interrogation is not a grand jury interrogation. An FBI agent in a custodial context. I gather at 18 1001 makes any willfully false statement in that context even though he has had Miranda warnings. Is it not a crime punishable by $10,000.00 fine and not more than five years imprisonment under 18 USC 1001 isn’t it? The way it leads is, in any matter within the jurisdiction of any department or agency of the United States willfully makes any false statement shall be fined not more than $10,000.00 or imprisoned not more than five years above, that’s what the statute says. Now in that context, is it enough to give Miranda warnings or to have also to give him target warnings? William F. Sheehan, III: Mr. Justice Brennan, I haven’t thought about that, I’m not sure that I can give an easy answer to it. William J. Brennan, Jr.: Well, there the hypothesis is that it's a custodial interrogation of the suspect by an FBI agent who gives them Miranda warnings. Does he also have to tell him he is a suspect? William F. Sheehan, III: I think he would not have to tell him he was the suspect as well in those -- in that case, I think we -- William J. Brennan, Jr.: If then not withstanding his Miranda warning, he lies, he can be prosecuted under that statute. William F. Sheehan, III: I think that’s right. Byron R. White: What additional protection would it give him to tell him he was the suspect? Being a suspect doesn’t entirely commit perjury. And on the other hand even though you’re not a suspect your protection against compulsory self incrimination. William F. Sheehan, III: Yes. The only addition help it seems to me that the target warning gives. Well, it seems to me that it gives no help that warnings of the privilege don’t know already give to protect against self incrimination. The result is the same in respect of target warnings under the Due Process clause. We think that as I suggested in the argument just passed that there is little to be gained by shifting the analysis from the self-incrimination clause to the Due Process clause. A target warning seems to us to be conceivably helpful to the witness only insofar as it aids in the decision making process as to whether or not to invoke the privilege. That process it seems to us is afforded all the protection to which it is entitled by the self-incrimination clause alone. It must be assumed therefore that some values not associated with the privilege, not protected by the privilege are protected by the Due Process clause in the context of a case such as this. We can think of none. In most cases, the witness already knows in addition whether or not he is a potential defendant. Indeed, he may know that far sooner than the Government will discover. That would make an additional putative defendant warning doubly unnecessary as a matter of constitutional law. In any event, the facts of this case certainly do not show a Due Process violation. Before questioning the respondent in this case the grand jury -- in front of the grand jury, the attorney gave him full Miranda warnings. The respondent knew what crime was under investigation. The respondent knew in addition that his connection with the crime was known to the authorities by virtue of his own statements made earlier to the police and the Assistant United States Attorney. He also knew that the explanation of his involvement was not then believed by the policeman to whom he first told it. In these circumstances the prosecutor's failure to give him a target warning on top of full Miranda warnings, seems to us was not so fundamentally unfair as to deprive the respondent of Due Process. Indeed, we believe it was not unfair at all and I will reserve what ever time I have left Mr. Chief Justice. Warren E. Burger: Very well Mr. Sheehan. Mr. Weisberg. Frederick H. Weisberg: Mr. Chief Justice and may it please the Court I’m Frederick Weisberg, I’m counsel for Gregory V. Washington, the respondent in this case. I’d like to begin by setting out what respondent's position is in this case and then the course of that state is clearly as I can what our position is not. And then I would like to discuss briefly what I understand to be the position of the Government and why we think that position is simply unsupportable under this Court’s prior decisions. Our position in this case is simply put that the Government may not compel an individual to incriminate himself by requiring him to testify under subpoena before grand jury that has focused on him as a target for indictment and then after he testifies and he is indicted, use against him at his criminal trial, the compelled self incriminatory testimony without demonstrating that the defendant made a voluntary knowing and intelligent waiver when he chose to testify before the grand jury. The factual premises of that position in this case are the following. Both prosecutors testified below in this case in effect that their purpose in subpoenaing Mr. Washington to the grand jury was to enable the grand jury to determine after hearing his testimony whether or not he should be indicted for the offense under investigation. What they gave him was a very official looking piece of paper that commanded him to appear before the grand jury. It was signed by the clerk of the Court in the name of the Chief Judge of the Superior Court commanding him to appear before the grand jury and answer questions in connection with an investigation into a crime of which he was suspect of having committed. Warren E. Burger: Was it any different in any way from the usual subpoena to appear before the grand jury? Frederick H. Weisberg: No Your Honor. The practice in the District of Columbia in the grand jury section of the United States Attorney’s office is to have pre-signed subpoenas, a stack of them. And as happened in this case, when Mr. Washington came in and asked for his his van back and the prosecutor decided this was someone he had put before the grand jury because he himself maybe implicated in this offense. He had it in the subpoena and it’s pre-signed by the clerk Court in the name of the Chief Judge. William H. Rehnquist: Well isn’t that the fact as in almost every jurisdiction? Frederick H. Weisberg: I’m not familiar with the other jurisdictions. Warren E. Burger: I wondered why you thought that was unusual. Frederick H. Weisberg: It is not unusual Mr. Chief Justice, the reason I’m mentioning not because it’s unusual but because Mr. Washington coming in without counsel gets a piece of paper signed by the -- in the name of the Chief Judge of the Court commanding him to appear and answer questions. And I state that only because it’s a factual predicate for a position that there was compulsion in this case. Warren E. Burger: You might get a similar piece of paper if you were called in, there is a possible witness in an automobile accident case would they not? Frederick H. Weisberg: That’s true. That’s absolutely correct. William H. Rehnquist: Was the subpoena returnable in the grand jury room itself or that you have to go to an Assistant US Attorney’s office? Frederick H. Weisberg: In the grand jury room Your Honor. Our position very simply is that Mr. Washington as the Government concedes in this case and as per the constitutional right to refuse to answer every single one of the prosecutor's questions in the grand jury relating to the motorcycle found in his van. He could waive that rights. We readily concede but this record does not support a finding that Mr. Washington voluntarily, knowingly, and intelligently waived his privilege against self-incrimination and two Courts below had so found. Having stated what our position is that I want to be quick to stay what our position is now. The issue in this case as we see it is not whether grand jury target witnesses are entitled to Miranda warnings or as the Government would prefer to put it are entitled to certain warnings on top of Miranda warnings. We are not asking this Court to extend the prophylactic rules of the Miranda case. We are not asking this Court in the case of grand jury target witnesses to manufacture a set of warnings. The failure to give any one of which automatically will result in the suppression of testimony. What we are asking this Court to recognize as it’s recognized in our view throughout the history of the Fifth Amendment privilege is that when the privilege applies as I will go on to indicate why we think it does apply in this case, it must be waived and the waiver must satisfy the requirements of a voluntary, knowing and intelligent waiver and that does not exist in this case. And I might add in that connection that what the Court below held, What Judge Nevenka writing for the Court of Appeals held was not Mr. Washington’s testimony must be suppressed because the Government failed to give a particular warning that he thought was required by some sort of prophylactic rule, extension of the Miranda rule. What the Court of Appeals -- as they stated the issue at the outset of our opinion and as they held, Mr. Washington did not voluntarily, knowingly and intelligently waive his privilege for among other reasons. The fact that he had no way of knowing presumably or was certainly not told that he himself was the target of the investigation when he testified before the grand jury. Byron R. White: How do you square the -- with your view the situation of the ordinary witness in a civil or criminal case where he gets on the stand and simply refuses to answer a question the judge orders him to answer it. He never claims his privilege and he incriminates himself and that answer is offered in later in the criminal case and he claims that it was coerced from that it was compelled and his objection is overruled. Frederick H. Weisberg: The way we answer that question Your Honor is simply this. It is essential to our position that at the time Mr. Washington was subpoenaed -- Byron R. White: Let’s talk about the witness. Frederick H. Weisberg: Okay. Byron R. White: Talk about him now, why doesn’t he win with his Fifth Amendment Court? Frederick H. Weisberg: Under certain circumstances it’s conceivable to me given the purposes for which he was subpoenaed and the Government’s knowledge at that time he would have a valid subpoena. Byron R. White: Well, let’s take the ordinary civil case of automobile accident and he is called as a witness and he is asked a question and he says, I prefer not to answer it and the judge orders him to answer and he incriminates himself. Frederick H. Weisberg: The answer to that question Your Honor the seeking -- Byron R. White: And because the answer is later admissible isn’t it? Frederick H. Weisberg: The Answer to that question it seems to me Your Honor is in the Gardner opinion written by this Court last term and we relied very heavily in the Gardner opinion. In our view ordinary witnesses are different. I might add in a trial -- Byron R. White: Yeah, but in terms of the Fifth Amendment what is the explanation? Frederick H. Weisberg: The explanation is that when the -- Byron R. White: Because he didn’t want to answer and the judge told him to answer or ordered him to answer and the result was he incriminated himself. Frederick H. Weisberg: The difference is Your Honor that when the Government is seeking to avoid the burdens of the adversary system. The very thing protected by the Fifth Amendment privilege by subpoenaing target witnesses, people who expect to be indicted. Byron R. White: Let’s talk about the witness I was talking about. Why wasn’t he --why isn’t his Fifth Amendment right infringed in the example I gave you? Frederick H. Weisberg: Because with respect to ordinary witnesses Your Honor with respect to whom the Government has no purpose to indict. That the cases from this Court have recognized primarily in dictum but Cordell by holding that the burden is on the witness to appraise the Government that they are encroaching on Fifth Amendment territory. Byron R. White: Whether anybody could sensibly say he knew of his right or not? Frederick H. Weisberg: That’s correct Your Honor. William H. Rehnquist: The classical definition of compelled self-incrimination is one who was ordered to answer a question over the claim of privilege. So, when you talk about the question of waiver you are putting the cart before horse. Frederick H. Weisberg: We don’t think so Your Honor. In the case -- William H. Rehnquist: What authority do you have from this Court for your proposition that in this type of situation you have to show annoying and intelligent waiver rather than the claim of privilege of being an element in the compulsion? Frederick H. Weisberg: We think that the decision in Gardner which we set forth at great length in our brief is exactly the authority for that Your Honor. When you’re dealing with someone whom the Government knows will incriminate himself by giving answers and whom it compels, in this case under subpoena to give those answers then the ordinary rule requiring a witness to put the Government on notice makes no sense. The Government knows it's compelling incrimination. William H. Rehnquist: I thought of a due process not a Fifth Amendment. Frederick H. Weisberg: We think this case could be decided under either provision Your Honor but I think it’s part of the self-incrimination process. We do not view the waiver requirement as simple a prophylactic view. If someone -- as prophylactic rule, if someone is compelled to incriminate himself and is in a situation where the Government knows in advance that the answers are likely to incriminate him and sets out to get those answers by compelling him with a subpoena to give them, then we think that the burden is on the Government to show that he waived his privilege before he answered. We don’t think this is a Due Process case. The Government would prefer to see this is a Due Process case and if his testimony is voluntary in traditional terms then that ends the inquiry as far as the Government is concerned. We don’t think that’s the case here. Now, the Government does not argue that Mr. Washington waived his privilege in the face of two holdings by both Courts below. The Government argues instead that he was not compelled to incriminate himself. Presumably the argument is that he had eventhough he testified under subpoena he had the right not to incriminate himself by simply saying I refused to answer on the grounds that the answer to that question may incriminate me. I should point out here that in many cases like this and certainly in this case, we’re dealing with a witness subpoenaed to the grand jury without counsel unable to afford counsel who probably at the risk of being lived, does not even know what the word incriminate means, and the Government claims that what his burden is to understand the ins and outs of the Fifth Amendment privileges to know which questions to assert it to, which questions it doesn’t apply to and to assert it when it applies and we simply think that view ignores reality. Warren E. Burger: The description of his colloquy with the police would indicate he was rather in his rights, innovative, inventive kind of a fellow. Wouldn’t you think so? Frederick H. Weisberg: I must say Mr. Chief Justice that -- Warren E. Burger: You mean, he didn’t know that he was in some on threshold possibly of some kind of trouble? Frederick H. Weisberg: Well, no. Simply no, he knew that there was a stolen motorcycle at that point that there was a stolen motorcycle found in the back of his van. Warren E. Burger: But someone had just happened to place there? Frederick H. Weisberg: Well, he knew how it got there. Thurgood Marshall: (Inaudible) Frederick H. Weisberg: I have heard it so many times in my practice. Thurgood Marshall: Is there any difference at this one? Frederick H. Weisberg: Pardon me? Thurgood Marshall: Is this one any different? Frederick H. Weisberg: I don’t know whether it is different or not Your Honor that he was not indicted for perjury. Everybody that he told that story to had doubts about it, but he never wavered one fact from the way it happened. And -- Thurgood Marshall: Somebody gets that. Lewis F. Powell, Jr.: Mr. Weisberg. Frederick H. Weisberg: Yes sir. Lewis F. Powell, Jr.: I understand that you say you’re not interested in Miranda warnings if you want, -- must have been called target warnings. Precisely, what in addition to the warnings that were given in this case, do you think are required? Frederick H. Weisberg: Mr. Justice Powell in our view the focus on what he was told or what he was not told is the wrong focus. He needed to be put in the position where his decision to testify could satisfy a Court as a voluntary, knowing and intelligent waiver of a criminal -- Lewis F. Powell, Jr.: What in addition do you think that prosecutor should have asked him in this case? Frederick H. Weisberg: Whether he understood that the body that he was appearing for might indict him for a criminal offense and he might be prosecuted. Lewis F. Powell, Jr.: Do you think that’s materially different from telling him that whatever he said could be used against him? Frederick H. Weisberg: Yes, Your Honor. There's every likelihood that Mr. Washington had no way of knowing what the Government meant when they said it could be used against him. For all he know, he would have testified later as a witness and what he said was going to be used to try to twist his story then. He was given a subpoena by a prosecutor who indicates in the record below that he may have told him that he was needed as a witness in connection with the ongoing grand jury investigation. For all Mr. Washington knew, when he testified, he was appearing as a witness in connection with an investigation against two other people and I might say that that’s not my own -- that is my personal view but it is not just my personal view. Both judges, both Courts below, Judge Hand on Superior Court and Judge Nevenka for the Court of Appeals thought that warning was indispensable in this case to a voluntary knowing and intelligent waiver and both refused to find waiver in this record. Lewis F. Powell, Jr.: Suppose a prosecutor in this case did not know personally that respondent was a target of the investigation but the files did show that respondent maybe a target. What would your view be as to the requirement of the constitution? Frederick H. Weisberg: It seems to me that there has to be some knowledge on the part of the Government that it is compelling potentially self-incriminatory testimony before our analysis is activated. Lewis F. Powell, Jr.: Does that mean the prosecutor would have to exercise due care to know what the Government might know through the FBI or perhaps other officials? Frederick H. Weisberg: I would think at a minimum that’s correct and as a practical matter, prosecutors generally know at least the outlines of -- Lewis F. Powell, Jr.: But perhaps not always. Frederick H. Weisberg: It maybe that they don’t always in such a case if the Government can make a claim before a review in court that this was really an ordinary witness that they have no basis for thinking that this person would -- that they were not trying to avoid the burdens of the adversary system but by building a case against this person out of his own mouth. Then, it seems to me our analysis might not apply. But I heard back to the opinion you wrote last term in Gardner, Your Honor, that seems to me all of the requirements of that opinion are met here. The Government knew exactly why it was subpoenaing Gregory Washington. It was subpoenaing because it didn’t believe the story and it thought the grand jury might not believe his story and if they didn’t, the grand jury would indict them and they could prosecute them and use his own testimony against him. Lewis F. Powell, Jr.: In Gardner the Court stated the general rule derived from Monia or how one pronounces that decision and it said there were three exceptions to it. Which of those three do you think applies to this case? Frederick H. Weisberg: In a sense Your Honor I think all three apply. Lewis F. Powell, Jr.: Which of the three is the more relevant? You go ahead and answer it any way you wish. Frederick H. Weisberg: It seems to me, starting with the one that seems least like this case. The difference between Gardner situation and Mr. Sullivan Situation and the situation of Marquette and Grosso is that the Government when it asks, when it compels Marquette and Grosso to file a tax return required only of gamblers knows that when it gets that return it has incriminating evidence of gambling which can then turn over to the States or the Federal Government for prosecution for gambling offenses. Like the defendants in Marquette and Grosso, Mr. Washington was subpoenaed because the Government knew what his story was likely to be and that it would like be likely to make him a criminal defendant if he told it to the grand jury and they just believed it. Like the situation in Miranda, although we don’t rely in the prophylactic aspects in Miranda. Aside from the custody aspect of Miranda which I hope to get to in a minute, because I get is absolutely nothing to do with this case. The other half of the Miranda decision is the focus rationale that when the police are questioning suspect, non suspects in the fact finding process, people on the street who might know something about an offense, about whom they have no reason to think are guilty of any offense. There’s no requirement to give warnings, there’s no requirement to get a waiver and if those persons happen to incriminate themselves at some point, there would be a burden to get warnings when he became a suspect but at least the threshold statements would not be excluded under the Miranda rule. So to hear, if Mr. Washington was subpoenaed solely because he was someone who had seen the van driver away with the motorcycle, just an ordinary witness and lo and behold, when he got in there, the Government realize for the first time that this person maybe implicated in the offense. We think any incriminating statements made much like the ordinary witness at trial would not be protected by our analysis. Except that it is our view that when the person began to incriminate himself in the grand jury testifying under compulsion of subpoena, the proceedings ought to stop and the prosecutor ought to then say, “you are getting yourself into trouble perhaps you ought to consult with a lawyer.” And I’m not sure what the third is -- Byron R. White: You mean if the Government has a man in the grand jury room and they say “did you steal his property?” They should stop and say by the way if you answer that question the wrong way you maybe in trouble? Frederick H. Weisberg: No, Your Honor. If the question after this -- if he is subpoenaed because he is suspected of having stolen the property as was true here then the Government has to do that before they even get him in the grand jury. That’s our view. Potter Stewart: The fact is that in this case the prosecutor misinformed him as to his rights didn’t he? Told him he had rights, in fact didn’t have. He said you have the right to remain silent. You’re not required to say anything to us in this grand jury at anytime or to answer any questions. Now, that just was incorrect wasn’t it? Frederick H. Weisberg: Your Honor -- Potter Stewart: He was required to answer any questions. Frederick H. Weisberg: He has to required to answer every question. Potter Stewart: So, he was misinformed, he was told that he had rights that in fact he didn’t not possess. Frederick H. Weisberg: We have not argued in this case because it is not necessary to our position that a putative defendant in the grand jury has like a defendant in a trial, an absolute right to refuse to testify if he is in fact refuted the the defendant. That simply is not necessary our position and so we can argue that. I think an argument can be made based on -- in some part on Mr. Justice Rehnquist opinion in Michigan versus Tucker, the language and the opinion that just like the defendant at trial, his right to remain silent at trial could be practically nullified, if you make him go into the grand jury without counsel and defend for himself and decide which questions he think might incriminate him and which ones he think might not. Potter Stewart: But if this family told that he had absolute right not to answer questions or fortiori, he certainly had a right not to answer any questions it would incriminate, didn’t he? He was over warned, he was over advised. He was told he had rights that he didn’t have but certainly those rights would include rights that he did have. Frederick H. Weisberg: If I understand Your Honor’s question. That’s why I responded to Mr. Justice Powell by saying focusing on what he was told or what he was not told, it seems to me is the wrong focus. Two courts below viewed this record, viewed this defendant and heard arguments and held that this was not a voluntary knowing and intelligent waiver and they -- Potter Stewart: Well, he was advised he didn’t have to answer any questions, wasn’t he? Frederick H. Weisberg: That’s correct. Potter Stewart: And while that was incorrect advice, that was the information he was given. Frederick H. Weisberg: The only thing, I’m quarreling with is that means that he was over warned. We submit he was not withstanding an under warned. He had no way of knowing why he shouldn’t answer questions. Potter Stewart: Well, he was totally -- didn’t have to answer any. Frederick H. Weisberg: That’s correct. William H. Rehnquist: He wouldn’t have to give any reason for not answering under the text of the prosecutors warning. Potter Stewart: Exactly. Frederick H. Weisberg: I see. That if he had refused to answer the questions without claiming the privilege. Potter Stewart: He was told he could. He had right not to answer any questions. Frederick H. Weisberg: Our view that contempt proceedings would have begun very quickly and the prosecutor would have told him that he misspoke himself when he said he can remain silent. Thurgood Marshall: Look at the compulsion, where is the compulsion? Where is the compulsion? Frederick H. Weisberg: The compulsion Your Honor, we submit -- Thurgood Marshall: The man says you don’t have to answer any question. Now where is the compulsion that he makes that statement. Frederick H. Weisberg: Your Honor the subpoenas he gets tells -- commands him to testify and give answers. He is then told by a prosecutor he doesn’t have to get answers not knowing without a lawyer why that advise makes any sense to him. Thurgood Marshall: But did he understand it? Frederick H. Weisberg: He may not have understood why it made any difference to him. Thurgood Marshall: Did he understand it? Frederick H. Weisberg: He may have understood that he -- Thurgood Marshall: Didn’t have to answer any question? Frederick H. Weisberg: He may well have understood that Your Honor. Thurgood Marshall: And once he understands, that's the end of the compulsion is it not? Frederick H. Weisberg: Not in our view. Thurgood Marshall: Well, what is the compulsion after that? Frederick H. Weisberg: When your under subpoena as to -- Thurgood Marshall: After that. Frederick H. Weisberg: When you’re under subpoena as a target witness. Thurgood Marshall: Well, it carries over. Frederick H. Weisberg: Our view is that the compulsion -- Thurgood Marshall: Three weeks I guess or four weeks? Frederick H. Weisberg: It’s not a temporal thing Your Honor. Our view is the compulsion ends when the voluntary knowing and intelligent waiver can be found and two Courts have found that it cannot be found on this record. John Paul Stevens: Mr. Weisberg in your view is the grand jury proceeding a criminal case within the meaning of the Fifth Amendment? Frederick H. Weisberg: The short answer to that question is yes. The long answer is that since Counselman versus Hitchcock. This Court has consistently held in probably a hundred -- John Paul Stevens: Well, if that’s your view and if you say he is tantamount to a defendant when he is a putative defendant. Do you still agree with Justice Stewart that he was over warned? Frederick H. Weisberg: I understand your question. It is not a criminal case in the sense that a criminal trial is a criminal case. The grand jury proceeding is -- that’s one of the problems in this case is that we think that the analogy to the criminal defendant is a very strong one. This guy -- if he answers the questions as he did, he will be a criminal defendant the next day as soon as the grand jury hands up its indictment and is doing it without counsel. John Paul Stevens: I understood your theory to be that he was in essence the same as the defendant because the Government had already made up its made to proceed against him and therefore, his rights before the grand jury would tantamount to his rights in open Court which were -- which would be the right to answer no questions at all. Would the right not be in the subpoenaed -- not to be subpoenaed. Frederick H. Weisberg: I met that as an argument by analogy Your Honor as the supporting basis for a holding that a true putative defendant before the grand jury would have a right to silence. We do not make that argument in this case because it is unnecessary in this case. You only have the right not to answer incriminating questions. Like an ordinary witness except that unlike an ordinary witness when he subpoenaed because he is not an ordinary witness because he is the target that the ordinary duty to inform the Government that they are subpoenaing self incriminatory testimony is unnecessary because it makes no sense. They already know their subpoenaing self incriminating testimony and what takes its place is a requirement that there be a voluntary knowing and intelligent waiver. Warren E. Burger: At the point that Justice Stewart took you and characterized it as an over warning, he had already been told that he can have a lawyer outside the Courtroom to help him or haven’t he? And then that continues, you have also have a right to stop answering at any time until you talk to a lawyer which again is an over warning. He didn’t necessarily have that right. Now, the prosecutor went on and said do you want to answer questions in reference to the stolen motorcycle that was found in your truck and he said “yes sir” and do you want a lawyer here or outside, that’s the third time now he’s is told about a lawyer and do you want a lawyer here or outside the grand jury room “no, I don’t think so. How do you say again that he hasn’t been warned about his rights? Frederick H. Weisberg: Your Honor, he was warned. We agree with that much of the plurality opinion in Mandujano that says certain of the Miranda warnings are inapplicable in the grand jury context. Our position is that Miranda fashioned warnings so that people would understand what they are giving up when they answer questions. The warnings that are applicable in the police station are simply inapplicable in the grand jury and what he needed to be told in the grand jury was “by the way Mr. Washington, this body, whose questions you are about to answer is going to indict you, if you answer them a certain way” and you don’t have to and if you want to remain silent you have that right to do so but you should know when you testify, if you don’t remain silent, you’re targeted for indictment. Potter Stewart: Well, now, I don’t -- I know that's the argument you make and I know that’s one of the issues in this case but certainly whether or not you are targeted in an investigation doesn’t either elevate or depress your constitutional right not to be compelled to testify against yourself. That’s true whether you are target or whether you are not a target. Frederick H. Weisberg: I agree. Potter Stewart: And neither true or nor less true whether or not you are. Frederick H. Weisberg: I agree. Potter Stewart: Is that correct? Frederick H. Weisberg: I agree with that. Potter Stewart: And whether or not -- whether you are a target or not a target you don’t have any privilege to tell a lie under oath which of course is not involved here. Frederick H. Weisberg: We agree. Potter Stewart: So why -- what’s the point, what’s the purpose of telling somebody is a target. His constitutional right is no greater and no less whether he is a target or isn’t a target. Frederick H. Weisberg: I would respond to that question Mr. Justice Stewart in two ways. First, the difference between an ordinary witness and a target witness is that if the Government has no idea that this witness is in any jeopardy, that it's not compelling self-incrimination by subpoenaing him then the cases have recognized that he has to tell the Government that it's compelling self-incrimination that subpoenaed and it is duty to testify will force him to incriminate himself. That we take out to the Gardner opinion but -- William H. Rehnquist: So that’s a question that says, suppose the compulsion -- right? Potter Stewart: Or is it got a waiver? Frederick H. Weisberg: We think he’s compelled by the subpoena Your Honor to answer and if he is compelled, and if he is in the category of suspects recognized in Gardner as not being required to put the Government on notice simply because the Governments already had noticed then the compulsion of the subpoena is only undone by a voluntary knowing and intelligent waiver and we think that that requirement is not merely a prophylactic rule. This is not a Due Process voluntary in this case. This is a privilege against self-incrimination case and when the privilege applies, it’s a constitutional right that has to be given up. William H. Rehnquist: What’s your definition of a target defendant? Frederick H. Weisberg: We have -- again in this case not defined -- William H. Rehnquist: Well, it's quite important, it would adopt the principle that you are advocating, prosecutors would have to know who were target defendants and who weren’t. Frederick H. Weisberg: I agree. The principle, we think is the one that emerges from the Gardner opinion. William H. Rehnquist: Well, how do you define it? Frederick H. Weisberg: When the Government knows that the answer is that it is compelling by subpoena may incriminate that witness in the sense that the witness is a potential target for indictment and what the Government knew in this case is that the grand jury will be to believe him or it wouldn’t believe. William H. Rehnquist: When the Government say -- when the Government knows that the answer it's compelling from the witness will incriminate him? Frederick H. Weisberg: Will incriminate him not in the sense that he is definitely just believe and definitely going to be indicted. But in the sense that if he is disbelieved, he may well be indicted. William H. Rehnquist: Well, that’s true of any witness before a grand jury, even if he just believe he maybe indicted probably for perjury? Frederick H. Weisberg: But in this case Your Honor, the difference is that the Government knew when it subpoenaed him, that one very likely possibility is that the grand jury would just disbelieve him and indict him and that’s why they subpoenaed him. William H. Rehnquist: What if I’m a prosecutor and I know that a potential grand jury witnesses have to lie before the grand jury. Do I have to warn him that he is a potential perjury defendant? Frederick H. Weisberg: I think the answer to that question is no in light of the Mandujano opinion but that maybe affected. I have only one minute left and I would -- do I have a minute left? I think, I have one minute left and I would like to comment very briefly and what the Government's argument really comes down do. What it seems to be -- to me to be is that if they tell these witnesses what the constitutional rights are, some of them are going to exercise those rights and the Government is going to lose some testimony. If what they are worried about is losing the testimony of the individual in a prosecution against that individual, our view is that that's exactly what the Fifth Amendment protects. If what they are worried about is losing the testimony of that individual against others who may not might know about in the world of crime, our view is that it loses nothing by giving warnings because it tells the witness with effective warnings, or obtaining as we would say it a valid waiver. Warren E. Burger: The question isn't whether the Government loses something. The question is whether the constitution requires -- Frederick H. Weisberg: That’s our starting point Your Honor. Warren E. Burger: Not whether it is a good idea to give warnings. Frederick H. Weisberg: I agree completely. Our starting point is that not the Constitution requires a warning, the Constitution requires a waiver and whatever warnings are given, a Court has to be able to say that when that person decides to testify it was the product of voluntary knowing and intelligent waiver. But what I wanted to mention briefly is the immunity provisions which answer almost all of the Government's arguments about losing testimony against other people involved in crime. If the person has to make a waiver and refuses to waive, the solution is simply. I’m sorry you can’t refuse to waive, here is an immunity statute that compels you to testify despite your unwillingness to waive and they can compel that testimony. And the only thing that can do is use that testimony against the individual whom they have compelled under the grant of immunity. They can still prosecute the individual under the ruling in Castigar. Warren E. Burger: But on your theory then, the only way you can compel testimony before a grand jury is to grant immunity to people. Frederick H. Weisberg: Not at all Your Honor. They can obtain a voluntary knowing and intelligent waiver. Byron R. White: Suppose, before having questioned they ask -- just as after every question they ask to witness for a grand jury. This witness, the prosecutor said “remember you don’t need to answer this question at all if you don’t want it”, secondly you don’t then furthermore you don’t need to answer they can incriminate you. Which warning would you rather have? Frederick H. Weisberg: Of those two? Byron R. White: Yes. Which probably would you rather have not to answer at all and not embarrass your wife, your friend, your neighbors or the latter? Frederick H. Weisberg: If I were a suspect, it is right not to answer anything regardless of the incrimination. Byron R. White: But Justice Stewart’s point isn’t it? Frederick H. Weisberg: But two Courts below Your Honor has said that that in this case he didn’t knowingly, intelligently waive his privilege because he didn’t know that -- Byron R. White: What if you were in the witness chair and they -- and then prosecutor gave you both of those. Both of those suggestions. Now, we know we don't need to answer at all. Now, you want to answer and you say yes. How about that? Frederick H. Weisberg: It seems to us Your Honor that unless this Court can conclude that that was a knowing and intelligent waiver over the holdings of two Courts below that the holdings of the two Courts below-- the Court below ought to be affirmed. Warren E. Burger: Although -- Byron R. White: Oh, I agree with that, I agree with that but what about you? What’s the argument that it isn’t a knowing and intelligent waiver? Frederick H. Weisberg: That he had no basis of knowing why he shouldn’t answer those questions. Why shouldn't he answer them, he was in no jeopardy, they want to know about the motorcycle found in his truck, it was driven by two other people. I’ll tell them the story. Because they are not interested in me. Warren E. Burger: Very well Mr. Weisberg. Frederick H. Weisberg: Thank you Your Honor. Warren E. Burger: Do you have anything further Mr. Sheehan? William F. Sheehan, III: I would like to add one point in the conclusion. We think the issue in this case is whether the statements were voluntary. Voluntary statements are admissible. It was not -- this testimony was not compelled against the privilege against self-incrimination by the issuance of the subpoena alone. That seems to me be the first question the Court has to decide, is whether the subpoena to appear coerces testimony in violation of the privilege. If that does not as we believe it does not then the Court must decide whether or not this situation is one in which you can abandon the traditional test for voluntariness. Was the witness's will overborne by some sort of informal coercive practices such as took place in the Miranda case. John Paul Stevens: Mr. Sheehan may I just ask one question. You know the over warning part of the warnings were given. You need not answer any questions at all. I take it that Government does not as a matter of routine give all witnesses such advise does it? Because that would mean nobody ever have to answer any questions for the grand jury? William F. Sheehan, III: I think that’s probably right. John Paul Stevens: Is it not fair inference then that if a person like this is given such a warning the Government must have had some notion intending to indict him. William F. Sheehan, III: Oh, I think that there is no -- no I don’t think it is fair. John Paul Stevens: Would there be any reason to give a warning this broad unless the person were likely defended? Sandra Day O'Connor: I think that there is no question but that this person was a possible defendant. The Assistant United States Attorney who gave him these warnings had not decided in his own mind whether he would request an indictment from the grand jury in respect to this-- in respect to the respondent or not. I mean, he was certainly aware that there was a likelihood 50% chance as far as he knew, maybe more that an indictment would follow. Following this respondent’s testimony. Warren E. Burger: Isn’t it equally and likely that this warning, over warning, was something inadvertent mistake. This is not the standard warning that’s given to witnesses if they have a standard warning is it? William F. Sheehan, III: I think that’s entirely correct Mr. Chief Justice. I don’t think that this -- I don’t think that the Assistant United States Attorney in this case focused on this question to the extent that we are today. William J. Brennan, Jr.: Should he testify for the hearing? William F. Sheehan, III: I believe he did. William J. Brennan, Jr.: Was he was asked why? William F. Sheehan, III: No. Warren E. Burger: Wasn’t any focus on the over warning? William F. Sheehan, III: Thank you. Warren E. Burger: Thank you gentleman. The case is submitted.

Warren E. Burger: We will hear arguments next in Bearden against Georgia. Mr. Lohr, I think you may proceed whenever you are ready. James H. Lohr: Mr. Chief Justice, and may it please the Court, this case involves the revocation of an indigent's probation for his failure to pay a fine and restitution which was imposed as a condition of his probation. Mr. Bearden has received a three-year probated sentence. The condition was that he pay $750 as fine and restitution. Two hundred dollars had to be paid almost immediately. This was paid by his parents. Within the next four months, he had to come up with and pay the balance, which is $550. Approximately one month after this sentence was imposed, he was laid off. He became unemployed. From that period until the time of the revocation hearing, he did not gain employment, although the record shows that he tried to gain employment. He was without funds. He was without property. I think he was what we might call functionally indigent. The trial court held the revocation hearing and revoked it on two grounds, as I understand what the trial court did. It revoked it on his failure to pay the fine and restitution. Secondly, it revoked it on his failure to report to his probation officer regularly. That, of course, was not a ground stated in the petition to revoke. In fact, I don't believe there was any evidence to support that finding, and the Georgia Court of Appeals held that even if the trial court did rely upon the failure to revoke the probation... or revoke the probation for his failure to report, that the revocation rested upon an alternate independent ground which was sufficient, and that was that he failed to pay his fine and restitution, which was a condition of his probation. The Georgia Supreme Court denied a petition to review this discretionary appeal, and there are two other important factors I should mention in this case. First of all, the petitioner was serving his probation under what we call the Georgia First Offenders Act. Under that Act, when a person is convicted or enters a plea of guilty, the court suspends further proceedings and places him on probation. If he successfully completes his term of probation, he is discharged without an adjudication of guilt, no criminal record, no criminal purpose. On the other hand, if his probation is revoked, the trial court then at the revocation hearing enter an adjudication of guilt and sentence the defendant to any sentence that it could have originally imposed. In this case, it would have been 20 years for the burglary and ten years for the theft by receiving. The only condition is that he must be given credit for the time that he was on probation. Now, in this case, when the trial court originally revoked his probation, it sentenced him to five years to serve. It was a three-year term of probation. It sentenced him to five years to serve. On a motion on behalf of the defendant, this was reduced to the remaining balance of his probation, in line with the Georgia case of Stevens versus State. Speaker: Mr. Lohr, do you think that a sentencing judge can at an original sentencing proceeding consider the fact that the defendant is indigent and couldn't pay a fine, and therefore decide to sentence the person to jail? Would that be valid? James H. Lohr: In lieu of a fine? Sandra Day O'Connor: The sentencing judge, who has options available to him at sentencing, the possibility of a jail term, the possibility of a fine, the possibility of probation on condition that a fine is paid, can the sentencing judge decide that because the person in fact is unemployed and indigent, and therefore unlikely that he could pay a fine, and would be a poor risk on probation, should be sentenced to jail? Is that all right? James H. Lohr: I think, if I might answer that question, if a high level of scrutiny is to be applied to this type of state action, I don't think it is okay. If a low level is, then I think it is. If I might explain, as I understand your hypothetical, the person could have been placed on probation except for the fact that he couldn't pay the fine. That indicates to me that there is no additional threat to society. There is nothing being achieved by protecting society simply because he was poor. As far as rehabilitation goes, I don't think the state is achieving anything by putting him in jail for rehabilitation under these circumstances. Now, there is the element of deterrence, let's say, to other individuals. For example, other indigents may see this indigent... in their mind he may be getting off scot free. In other words, he is not... doesn't have to pay a fine because he is too poor, and he doesn't have to go to jail. There are other ways that the state can enforce or achieve the policy of deterrence other than the payment of a fine or jail. Those aren't the only two options. So, if we look at strict scrutiny, so to speak, it is not necessary to put him in jail. There are other less intrusive ways to accomplish that deterrence. If we are looking at just a rational basis, then I think the judge can do it, so long as the fine is... or the jail term is in some way commensurate with the fine. Now, the second point I just want to mention, that I am sure you are aware of, that the fact that his probation was revoked because he was too poor to pay the fine resulted in the adjudication of guilt which has several other consequences, among which he loses his right to vote, he loses his right to hold public office, and certain other rights that citizens who are not convicted of a felony of moral turpitude hold. First of all, I would like to consider the cases of Williams versus Illinois and Tate versus Short. This Court in the case of Williams versus Illinois held that it was unconstitutional to incarcerate the defendant beyond the limits of incarceration which by statute apparently the state determined as necessary to achieve the penalogical interests of the state. Now, in this present case, apparently the trial judge made a determination that this individual did not need to go to jail in order to satisfy the penalogical interests of the state. It wasn't a legislative determination. It was apparently done by the trial judge. William H. Rehnquist: The trial judge, I take it, thought that what you referred to as perhaps inartfully, at least in my opinion, less intrusive methods might be used to achieve society's goal without having to send him to jail at that stage. James H. Lohr: That's correct. The probation and the other... and the conditions that were imposed upon his probation would satisfy the penalogical interests of the state. William H. Rehnquist: What were the conditions that were imposed? James H. Lohr: They were the standard... in addition to the fine and restitution, they were the standard conditions, not to associate with-- William H. Rehnquist: Yes, but fine and restitution were the two non-boilerplate conditions. James H. Lohr: --That's correct. Those were the only two non-boilerplate conditions. Sandra Day O'Connor: Did the defendant ever ask to have that term of condition modified... term of probation modified or extended or reduced or-- James H. Lohr: No, he never made that request. Sandra Day O'Connor: --He had that right, I suppose, under state law. James H. Lohr: Yes, the trial judge retains the jurisdiction over probation cases beyond that term of court for the term of probation, and I think at any time the trial court could upon a reasonable showing modify the conditions of probation. Byron R. White: Do you know if... do you know if the obligation, the condition about restitution and paying a fine, did they survive the revocation of probation? James H. Lohr: I have not-- Byron R. White: Or do you know? James H. Lohr: --I have not been able to find any cases right on point on this-- Byron R. White: Well, I know, but in this particular case, if he went to jail, was he free from the conditions of paying the fine? James H. Lohr: --I don't believe he is. I believe he is going to be obligated to pay the fine and restitution until, even after the jail term, you know, until he pays it. It probably will never be collected, in fact. William H. Rehnquist: At the time restitution was requested of him, did he make any showing or statement to the judge that he was indigent and therefore couldn't make restitution? James H. Lohr: At... We are at a disadvantage here. Apparently there was no transcript taken at the time the plea was entered and he was placed on probation. We have searched for it, and we can't find it. I was not present at that time. William H. Rehnquist: So we have to presume that everything that was done to support the constitutionality of the order below was done, since we don't know? James H. Lohr: Well, the only thing we have in the record is that in his testimony on his probation revocation hearing, he did testify that he agreed to pay the fine at the time the condition of probation was entered, and I am assuming that he agreed to it. He had a job at that time, and felt like he could pay it. William H. Rehnquist: Well, what did he steal, or what was the theft? James H. Lohr: The burglary, and I think the theft by receipt, were one and the... arose out of the same incident, but it was breaking into a mobile home and apparently taking some items out of the mobile home. William H. Rehnquist: Was there any finding of the value of the items? James H. Lohr: Again, I really don't know. There is no record of what happened back when he was placed on probation. So I don't know what-- William H. Rehnquist: Any indication of what he did with those items? I mean, at one point I presume he could have made restitution if he had simply still had the property by just giving the property back. James H. Lohr: --All I can... All I can represent to this Court is what the District Attorney has led me to believe in talking to him, the one that was apparently there at the time. William H. Rehnquist: Your argument really then is quite abstract, isn't it, and quite apart from the particulars of this case, where your client was convicted of theft, presumably at one time had the ability to make restitution, accepted a sentence imposing restitution, and now simply wants to shed the whole thing. James H. Lohr: Well, we are assuming some things here, and I don't know that in fact he had the ability to make restitution out of the goods that were stolen. William H. Rehnquist: Well, but if you don't know, if the record is silent, isn't there a presumption in a case such as this that the findings are in support of constitutionality? Doesn't the record show that as a matter of fact the only way he paid the original $200 was to pay it from his mother? James H. Lohr: That's true. Thurgood Marshall: And that he didn't even have it? James H. Lohr: At the time-- Thurgood Marshall: Doesn't the record show that? James H. Lohr: --Yes, it does. He either borrowed it or his mother gave it to him to pay. That's correct. Thurgood Marshall: The record shows that. James H. Lohr: That's correct. And he had a job at the time, and about a month later became laid off. John Paul Stevens: Doesn't the record also show the amount of the restitution, the $200 on one charge and $50 on the other? James H. Lohr: That was the restitution. That's correct. John Paul Stevens: So isn't it fair to assume that's the amount he had to restore? I mean, that must be the value of what he stole? James H. Lohr: It would seem reasonable to assume that, yes. Lewis F. Powell, Jr.: It is also true, isn't it, that your client signed the order of probation in which in effect he agreed that in violation of the terms of probation the court may enter an adjudication of guilt and proceed as provided by law? James H. Lohr: Yes, he signed that. That's correct. Lewis F. Powell, Jr.: Both counsel and petitioner signed it. James H. Lohr: Yes, both counsel that represented him at that time. That's correct. In the case of Tate against Short, again, this Court, in citing from a concurring opinion in Morris versus Schoonfield, stated that it doesn't matter if the fine is accompanied by a jail term or not, and again, in this case, it was not... it was not accompanied by a jail term, but only by a probationary period of time. If a jail term of an indigent extends beyond... excuse me. Or whether or not the jail term extends beyond the statutory maximum. And of course it didn't in this case. It still held there that it is in violation of the equal protection clause in order just to convert a jail term... or, excuse me, a fine into a jail term. And it appears that that is what we... what happened here, and it wasn't any attempt by the trial court to substitute a jail term equivalent to the $550 he owed. William H. Rehnquist: Is there some table from which the trial court could have found an equivalent term? James H. Lohr: That poses a real difficult problem with that... with that approach, simply because how do you know how much one day is worth? William H. Rehnquist: Well, I thought you were arguing that... the intimation seemed to be that the trial judge should have made the effort. I agree with you. I think it would be quite difficult. Then why do you argue that he should have made the effort? James H. Lohr: The only reason I guess I made that point is, it has been suggested... I believe it was in Justice White's opinion in Wood against Georgia that there should be some... when a person's probation is revoked for his failure to pay a fine, that there should be some relationship between the amount of jail time and the amount of the fine, and I guess the reason for that is is that apparently the state needs some... needs to satisfy its interest in deterrence, satisfy its interest in retribution. Sandra Day O'Connor: Well, do you think the suggestion is that perhaps the judge should consider the nature of the offense, and decide considering the offense and the nature of the defendant what punishment is appropriate, whether it is jail, or a fine, or in either case how much or how long it should be? James H. Lohr: Well, I think the Judge has wide discretion at the time of sentencing, at the time he places a person on probation or puts him in jail or imposes a fine. I think he has wide discretion. I think he needs to maintain that. Sandra Day O'Connor: Do you think that a judge who is considering whether to continue someone on probation should reasonably consider whether the person has a job, and if not, the extent to which he is a risk to society, being a convicted felon and not having employment? Is that appropriate? James H. Lohr: I don't think it's appropriate to consider that a person who does not have a job becomes a greater risk to society than a person under the exact same circumstances that does have a job, or a person that is poor is a greater risk to society than an individual who is rich under the exact same circumstances. So, if we are looking at the trial judge's ability just to look at whether or not the person is rich or poor, I don't think they should consider that in making that initial determination. Byron R. White: Do you think... historically in the books there were a lot of provisions that prescribed the punishment for a certain criminal act, 30 days or $30. Now, here is a legislative judgment. Suppose a legislature said, if you steal something that is worth $200, you either pay a $100 fine or go to jail for five days. Those are equivalent. And we just think that if you can't pay the $100, you have got to do something, so we are going to send you to jail for five days. James H. Lohr: Again, I am going to have to answer that, if you apply the strict scrutiny approach, I think there are other ways that the state can accomplish its interests. Byron R. White: Well, that is just shorthand for saying that you think that the statute is bad. James H. Lohr: That's correct. But you see, there would be other ways then that the state could accomplish its same deterrent interest. Byron R. White: Well, the legislature didn't think so. James H. Lohr: It seems to me that if a person is unable to pay... Now, for a person that could pay, it may be a legitimate choice, but for a person that is unable to pay, he really has no choice at all. It is just, go to jail, for him. It seems to me that there should be some other type of provision made, that the state could, with some sort of a work release program, have him do public service work. There are all sorts of options open to the state. And just because it is not paid immediately does not mean that it may not be paid down the road. So, for a person who is indigent, I don't believe that that is a valid option. Lewis F. Powell, Jr.: But wouldn't that depend a good deal on the crime committed? You have an individual that plead guilty to burglary. I can think of all sorts of crimes that would not suggest that the individual would be a very good risk. So if you have no alternative but to him on work relief or doing public service, would that not be a bit dangerous for the public generally? James H. Lohr: Well, I think the determination of whether or not a person is a risk to society, is going to pose a threat to the other individuals around him, needs to be made independently of whether or not this person is rich or poor. Lewis F. Powell, Jr.: Right. James H. Lohr: Now, I agree that in a case of burglary, it would seem... if you compared it to a traffic violation-- Lewis F. Powell, Jr.: Surely. James H. Lohr: --there is a greater probability that the court is going to find that he needs to be incarcerated to protect society, but apparently that is not the situation in this case. Warren E. Burger: Have you considered that one of the consequences, if you prevail, is that judges in the courts dealing with these... matters of this kind are going to have a tendency, or at least they are going to be encouraged to simply impose... have several alternatives: impose a fine, saying, if you pay this fine in cash or post a bond within 48 hours, then the sentence will be suspended; otherwise, imprisonment... that that may be the tendency, or the judges will, as a second alternative, simply forget about restitution and all, which is beginning to be rather illusory, and simply convict and send all these people to prison? James H. Lohr: I have considered that. For an indigent, it really doesn't make a lot of difference. He can't pay the fine, and if it is a condition of being free, he is not free. By definition, he can't pay it, so he is going to go to jail, regardless of what the judges do. Warren E. Burger: Well, he may be able to get somebody to put up a bond, if they can't lend him the money, to put up a bond to see that it is paid. Here there was no security for the balance of this fine, was there? James H. Lohr: No, there was no security. Warren E. Burger: There was just a promise to pay. James H. Lohr: Right. It would have an effect, I think, possibly on the trial court's decisions on close cases. For example, in this case, where a person is employed and it looks like he might become unemployed, the court may say, well, I am not going to fool with a fine. Let me just impose a jail term. That may be the result. I should-- Harry A. Blackmun: Well, didn't one of us say exactly that in Tate against Short, in the concurring opinion? James H. Lohr: --I believe so, and I believe, Justice Blackmun, you did not entirely disapprove of that. Warren E. Burger: As a matter of fact, it has been said in probably half a dozen cases, at least, that this trend will probably lead to that kind of a result. James H. Lohr: It may very well do that. Just because... if it is in fact in violation of the Constitution. I don't think that we necessarily can look at the results to determine whether or not it is in violation of the Constitution. Sandra Day O'Connor: Mr. Lohr, do you think that the judge in revoking probation can consider whether the defendant has made a bona fide effort to be employed, and therefore earn the money to pay the fine, in determining whether to revoke probation? James H. Lohr: I think that if a person wilfully fails to pay the fine, or squanders his resources-- Sandra Day O'Connor: That is not my question to you. James H. Lohr: --Whether or not he made a bona fide effort? Sandra Day O'Connor: Right, to be employed, and to get out there and hustle and earn the money to pay the fine, and the judge feels maybe that wasn't done. Is that grounds for revocation of the probation? James H. Lohr: I don't believe it is. If the condition of probation that an indigent-- Sandra Day O'Connor: So somebody can just sit around and not make a bona fide effort to get a job and pay the fine that has been ordered, that he has agreed to pay when the probation was originally imposed. Is that right? James H. Lohr: --I think that is where my argument would lead me, yes. William H. Rehnquist: He can sit around and not only not pay the fine, but not make restitution of the value of the property that he has stolen. Mr. Lohr, in this case-- --Would you please answer my question? I am helping him. 0 [Generallaughter.] Go ahead, answer the question, counsel. James H. Lohr: I... Could you repeat that, please? William H. Rehnquist: He can sit around and not only not pay the fine, but not make restitution of the value of the property that he has stolen. James H. Lohr: Well, it seems to... yes, I think so. Restitution I don't think carries any greater state interest than does the payment of the fine, and of course that is not the facts that we have in this case, but on the other hand, you just... it seems to me that if we leave the trial courts with the discretion to determine whether or not a person has made a bona fide effort in order to obtain employment and to obtain funds, that that is just... it is just opening the door. I just don't see how a trial court is going to make that determination. Sandra Day O'Connor: Well, there is a little of that element in this case, isn't there, where the trial judge on revoking probation commented that jobs were available for anyone who would come to the courthouse any day during the week, and that this defendant didn't do that, and some indication here that that is what this judge thought that happened? James H. Lohr: Yes, Judge Loggins did mention that. Sandra Day O'Connor: Right. James H. Lohr: And he also mentioned that he recognized that there were times when people cannot find a job, even though they try. Thurgood Marshall: Right. Assuming I may ask a question, does the record show specifically the places he went to looking for work, and name the places, and that he also went to the state labor department? Does the record show that? James H. Lohr: That's correct. That's in his testimony. There is no doubt-- Thurgood Marshall: Did you forget it? James H. Lohr: --No, I didn't forget that. John Paul Stevens: Thank you. 0 [Generallaughter.] Counsel, wouldn't your client be better off if Georgia law permitted him to make a showing of a bona fide effort to raise funds as a defense to the probation? As I understand it now, even with the bona fide effort, even if the facts were 1,000 percent favorable, a total impossibility, he can still be sentenced to jail for, what is it, five years in this case, because he couldn't raise $500. James H. Lohr: That's correct, and in fact, if there was a record showing that the provisions in Stevens versus State had been complied with, technically, he could have been sentenced, I suppose, for 20 years with ten years concurrent. John Paul Stevens: In this sentence, if I remember the record correctly, it was imposed not by the original sentencing judge, but by the judge at the time of the revocation. The original sentencing judge only sentenced him to one year, I think. James H. Lohr: The original sentencing judge was three years' probation on one count and one year on the other. John Paul Stevens: I see. James H. Lohr: That's correct. John Paul Stevens: But the five years was at the time of the revocation. James H. Lohr: By a different judge, and at the probation revocation hearing there was no attempt to determine at that time whether or not his status with respect to his threat to society, with respect to the possibility of rehabilitation, with respect to these other state interests, these weren't even-- Byron R. White: What was the ultimate sentence to jail? First five years. Then he lowered it to three with the credit. So what was the time he was going to spend in jail? James H. Lohr: --He would have had to serve approximately two and a half years in jail, but the Department of Corrections would have given him credit for good days, and so forth. Lewis F. Powell, Jr.: Yes. Mr. Lohr, do you have any criticism of the Georgia statute, or merely of the way it was applied in this case? James H. Lohr: Merely of the way it was applied. Lewis F. Powell, Jr.: The statute is very generous on its face, isn't it? James H. Lohr: I believe it is. Yes, Your Honor. If I may, I would like to reserve my remaining time. Warren E. Burger: Mr. Weaver? George M. Weaver: Mr. Chief Justice, may it please the Court, in this case, the petitioner raises an equal protection challenge to the revocation of his probation. At stake is the broad sentencing discretion that this Court has often recognized to be vested in trial courts. I would like to say at the outset that the equal protection issue here is not the typical equal protection question this Court faces. Most equal protection issues involve broad, sweeping legislative action that is at least to some degree over-inclusive. Here we have a single sentencing decision by a single trial court, highly individualized, a revocation of probation which was an act of discretion by a trial court. That is one reason why the respondent submits that the Court should employ the reasonable basis test of equal protection review. Another is that the conditions this Court has specified in the past to the application of higher scrutiny are simply not met in this case. Strict scrutiny, we feel, would be inappropriate because there is no suspect criterion that is the basis for the state action here. Moreover, no fundamental right is burdened for equal protection purposes. A person on probation has no right, fundamental or otherwise, to probation. Moreover, his fundamental rights may even be limited by his probationary status. As to intermediate review, this Court has reserved that level for the review of state classifications which are based on what some have called semi-suspect criteria, usually immutable characteristics, as gender or illegitimacy, but in this case there is no such characteristic that is the basis for the state action. Another reason why the respondent-- Sandra Day O'Connor: Well, I suppose the defendant who is on probation has some kind of a liberty interest in remaining out of jail, does he not? George M. Weaver: --Yes, Your Honor, I think he has a conditional liberty interest, and that liberty can only be taken away if the requirements of the due process clause are met. This Court established what those are for probation revocation in the case of Gagnon versus Scarpelli. In this case, the requirements of the due process clause were clearly met. There has been no contention, as I understand it, from the petitioner. Sandra Day O'Connor: Well, can he have his probation revoked solely because of circumstances beyond his control? For example, he is told as a condition of probation not to leave the state, and he is kidnapped, and is taken forcibly across the border. Can probation be revoked for that reason? George M. Weaver: I would say no, in that situation. Sandra Day O'Connor: Well, all right. He loses his job, and it is no fault of his own. He was hired as a replacement strike worker-- 0 [Generallaughter.] --as a permanent employee and then fired. Now, can he be... can probation be revoked because of that? George M. Weaver: Well, Your Honor, in your hypothetical, I would say the revocation in those circumstances would be arbitrary, and therefore would violate the equal protection clause. Sandra Day O'Connor: All right. What saves it here, where he says, I lost my job, and I have been trying to get work, and I can't, so I can't pay the fine. George M. Weaver: Justice O'Connor, I think the trial court could rationally have concluded that the petitioner's loss of his job and his failure to pay the fine, his inability to pay the fine from the record increased or made him a less acceptable probation risk. It seems to me that that follows from the ability of a trial court to consider financial resources and employment situation in the original sentencing decision. Thurgood Marshall: Do you mean that a person who is poor is a bigger risk than a person who has money? George M. Weaver: No, sir. I am saying that a person-- Thurgood Marshall: I thought you just said that. George M. Weaver: --Well, I think a trial court could reasonably use-- Thurgood Marshall: A trial court could say that? George M. Weaver: --A trial court could reasonably use a person's financial resources and their employment history as an index to their likely probation success. Thurgood Marshall: No, to the likelihood that they would commit a crime, is what you were talking about. George M. Weaver: Likelihood that they would commit a crime and probation success. Thurgood Marshall: So a poor person is more likely to commit a crime than a person with money? And you are speaking as a state Attorney General? George M. Weaver: Your Honor, I am saying it is reasonable to use... Let me put it this way. When a trial court is faced with sentencing a defendant, in this case deciding whether to put a defendant on probation or not, the trial court must make a prediction. Under Georgia law, he must decide under the statute whether it is likely that the defendant will again engage in a course of criminal conduct. Now, what is to help him make that prediction? I am saying that the financial resources available to the defendant and his employment history are two indices. They are imperfect, Your Honor. I admit that. But they can rationally, reasonably be used to predict the future behavior of the defendant. That is the whole reason why they are considered in the first place. Now, that is the primary position of the respondent, that financial resources and employment background are a reasonable indication of likely probation success of a defendant. Let me illustrate my argument by making a comparison to two other cases decided by this Court. In Vance versus Bradley and Massachusetts Board of Retirement versus Mergia, the Court considered mandatory retirement schemes. The Court held that the mandatory retirement schemes were reasonable and therefore not unconstitutional. This Court said that, even though there were employees under both of those schemes who could still perform the tasks. In other words, it was reasonable for the Congress in one case and the Massachusetts legislature in the other to use age as an index to the physical capabilities of workers, even though there are exceptions. Similarly, in the case before the Court, the respondent submits that it is reasonable for a trial court to use financial condition and employment history as an index to the likely probation success of the defendant. That is the whole purpose for considering those elements, not only on revocation, but also in the original sentencing decision. The respondent also contends to the Court that-- John Paul Stevens: Mr. Attorney General, would that be permissible as a matter of constitutional law if, say, his probation period lasted for three years, and he paid the $550 within the deadline, he used his last dime to pay the $550, and periodically his condition is reviewed, and the judge finds out he is totally broke, he has no money at all, he is indigent. Could he then say, well, I think I am going to revoke your probation because I don't think you are a good risk any more? George M. Weaver: --No, sir. There would have to be the violation of a condition of probation. And I think the violation should have some-- John Paul Stevens: What if one of the conditions is that he must appear to the judge periodically to be a good probation risk? Say the state statute permitted a re-examination from time to time of the condition of the probationer. Would that be constitutional? George M. Weaver: --If he violated a condition of probation, and the trial court-- John Paul Stevens: Well, one of the conditions is, he satisfy the judge that he is still not a risk to society and that he is just generally still a good risk, and you leave that to the wide discretion of the sentencing judge, who always has very wide discretion in these matters. Why couldn't you let the judge just re-examine it every six months, and he just decides, well, I am not sure about you any more, you don't have any money. George M. Weaver: --Your Honor, if that is a valid condition of probation, I would agree with you. John Paul Stevens: Well, that is my question. Is it a valid condition? George M. Weaver: I'm not sure that it is. I think that conditions should be sufficiently specific so that it can be understood, and it has some connection with the probation worthiness, to put it in the best way I can. John Paul Stevens: Well, but I think your argument is that indigency is related to probation worthiness. I think that's what your argument comes down to. George M. Weaver: I am saying that a person's financial resources-- John Paul Stevens: Are related to his probation worthiness. George M. Weaver: --Yes, sir. John Paul Stevens: If that is true, I would not see any constitutional objection to a statute such as I hypothesize. George M. Weaver: If that kind of condition would be legitimate, then I think probation probably could be revoked. John Paul Stevens: I think that is what the issue in the case is. George M. Weaver: Yes, sir. Now-- Thurgood Marshall: Suppose the original case comes up, and the judge says, there are two people involved here. One has $500, and a job that pays $10,000 a year, and the other one is broke, so I find one guilty and I release the other one. He couldn't do that, could he? Could he? George M. Weaver: --I'm not sure, Your Honor. I think a trial court can consider the financial condition of the defendant in sentencing him, but if there is that kind of wide disparity, I think you might even have an Eighth Amendment problem, a cruel and unusual punishment situation, where you have that kind of disproportionality between sentences for people who have committed the same crime. William H. Rehnquist: Wouldn't some of the consideration you are talking about depend on the crime with which the person was charged? I mean, a trial judge could reasonably suppose, I suppose, that a person who was indigent would be more likely to commit petty theft than someone who had $100,000 in the bank, but I suppose he could also suppose that the one with the $100,000 in the bank might be more likely to kite a large check than the person who was indigent. Both of them are crimes. George M. Weaver: Yes, sir. I think a trial court could reasonably come to those conclusions. Now, let me make it clear. I am not saying that the conclusion that this defendant was a greater probation risk is the only conclusion the trial court could have come to, but under the rationality standard, it is not required that there be no reasons to the contrary. The key words that this Court has used to describe state actions which fail to comply with the rationality standard are "arbitrary" and "irrational". And the respondent submits that in this-- Sandra Day O'Connor: Is that a due process kind of a concern rather than equal protection? Are we concerned with fundamental fairness here in talking about arbitrariness of the decision? George M. Weaver: --Well, the due process clause is broad enough, I think, to include this issue, but as I understand the prior decisions of the Court, the equal protection clause has been used to decide whether state action is arbitrary or irrational. In the line of cases-- Sandra Day O'Connor: It is not altogether clear, is it? George M. Weaver: --Your Honor? Sandra Day O'Connor: It is not altogether clear what the basis of some of these prior decisions-- George M. Weaver: No, sir. No, Your Honor. 0 [Generallaughter.] In the case of... Pardon me. In the case of Ross versus Moffitt, this Court summarized some previous decisions of the Court that dealt with state actions which had erected insurmountable barriers to indigents seeking a review of their criminal convictions, and in Ross versus Moffitt, which Justice Rehnquist wrote, the Court said that although those prior cases could be fit... they could be fitted under either the due process or the equal protection clause, that the Court considered them to be best explained under the equal protection clause. Now, I would like to address myself to this issue. My opponent has mentioned Williams versus Illinois and Tate versus Short. In those cases, this Court decided that the additional punishment imposed upon indigents solely because of their indigency served no legitimate state interest. Speaker: --And therefore violated what? George M. Weaver: Well, the equal protection clause, I would say. The Court pointed out that when the two defendants in those cases were sentenced, there was a declaration by the state that the state's penal interests did not require the additional punishment later imposed upon the indigents. Now, in the case before the Court, I submit that there is no... even assuming that analysis, there is no declaration by the state that the state's penal interest is satisfied here without imprisonment. You have to remember, this is a probation case. Tate versus Short and Williams versus Illinois were not probation cases. This defendant, this petitioner was put on probation, which is a conditional release, and he has to comply with certain conditions of probation. So, it is a tentative release. Moreover, in this case, the petitioner was put under the First Offenders Act of Georgia. The Georgia Supreme Court has said in a case called State versus Wiley, which is at 233 Georgia 316, that the purposes of first offender's probation are not the same as ordinary probation. The Court has said that unlike other probated sentences, the defendant is not merely serving his sentence outside the confines of prison, but is serving a period on probation to determine whether or not the prisoner may be rehabilitated. So, first offender's probation in Georgia is even more tentative than ordinary probation. So I submit we don't have a declaration here as in Tate and Williams that the state's penal interest was satisfied without imprisonment. Now, I would like to also point out to the Court that the revocation in this case can rationally be argued to help maintain public confidence in the criminal justice system. Surely, public confidence would seriously be eroded if a person like the petitioner could not only escape imprisonment, but even escape a conviction without having kept the conditions of his sentence. And this concern is especially great here, because the petitioner was sentenced under the First Offenders Act of Georgia. Not only will he escape imprisonment, but also a conviction. Respondent submits that to maintain public respect for the administration of justice, this revocation, this state action here can rationally be seen as furthering that interest. In summary, Your Honor, what we have here is a trial court faced with a difficult sentencing decision. The trial court was faced with a defendant who had plead guilty to burglary and theft by receiving charges. He has no prior felony convictions. He says that he can pay a small fine and restitution, and he appears to be employed. Based on those premises, the trial court places him on probation, gives him a very lenient sentence, and even gives him the benefit of the First Offenders Act. Eight months later, the petitioner comes back in for revocation of his probation. He has failed to keep the conditions. He has not paid his fine and restitution, and is now unemployed. Now, a lot of questions could be asked about the trial court's decision to revoke probation. It could be asked whether it is wise, enlightened, progressive, humane, but those are not the issues. The issue is, was the decision arbitrary, was it irrational? The respondent submits that whatever might be said about the decision of the trial court, it was clearly rational. Therefore, it meets the dictates of the equal protection clause of the Fourteenth Amendment, and the judgment of the Georgia Court of Appeals should be affirmed. Thank you. Warren E. Burger: Do you have anything further, Mr. Lohr? James H. Lohr: Mr. Chief Justice, I have just a couple of points. First of all, as I understand the state's position, it is that the petitioner's loss of his job and his inability to pay his fine and restitution placed him in the position of being easily led to commit another crime. I disagree with that. I believe it is a false assumption, the one that was disapproved of in Griffin versus Illinois. And the state seems to be riding a different horse. It is not saying that the failure to pay the fine and the restitution was... caused him to be a greater threat to society. It was his indigency. In other words, the real reason for the revocation of his probation was his indigency. With regard to public confidence, it is hard to pin down, but it seems to me that people are not going to have much faith in a criminal justice system that puts an individual in jail because he is poor and under the same circumstances when a rich person is going to be able to go free. In Rodriguez, this Court reviewed Griffin, Douglas, Williams, and Tate, and in Justice Powell's opinion it was stated that where a person because of lack of wealth was completely unable to pay for a benefit, and as a result there was an absolute deprivation of that benefit, that the Court has struck down those types of state actions, and I submit that in this case, because of his lack of wealth, he was unable to pay for the benefits which flow from being on first offender's probation, and that he was completely deprived of those benefits. For these reasons, I would respectfully submit that this Court should reverse the Georgia Court of Appeals. Warren E. Burger: Thank you, gentlemen. The case is submitted. Speaker: The Honorable Court is now adjourned until tomorrow at 10 a.m..

William H. Rehnquist: We'll hear argument first today in No. 91-886, Bob Reves v. Ernst & Young. Now Mr. Elden. Gary M. Elden: Thank you, Mr. Chief Justice, and may it please the Court: This case involves RICO and, in particular, it involves what does it mean to participate in the conduct of the affairs of an enterprise. The case is here on writ of certiorari from the Eighth Circuit which affirmed the summary judgment for an accounting firm on the ground that they did not participate in the conduct of the affairs of the Farmer's Co-op. The only relevant fact the Court needs to know I think about the Farmer's Co-op is that it financed itself by selling demand notes to its members. They... the Eighth Circuit held that the proper test was whether the accounting firm engaged in the operation or management of the co-op, but to understand the test I think it's necessary to keep three facts in mind. There's an enormous number of facts. I'm just going to stress three. I think without it, it's not possible to fully appreciate how restricted the test is. All courts agree... and I'm going to use the language of the courts. So, this is not my version of things. The courts who gave the summary judgment agreed that these facts a jury could have found: first, that Arthur Young "created" the financial statements of the co-op, not audited them... not audited them, but created them. And the district court explained in detail what he meant. Arthur Young invented the cost figures. Arthur Young, according to the district court, engaged in a blatant fiction. The records of the co-op showed that a sale had occurred. A multi-million dollar transaction had occurred. A self-dealing transaction that rendered the co-op insolvent was a sale. All the records showed that: tax returns, minutes, court decrees. They chose themselves, consulting no one, to ignore that fact, and numerous other points that the district court made. They created the financial statements, and they created financial statements, basically on their own without consulting very much anyone else, which concealed the insolvency of the co-op and concealed the self-dealing and even crimes of the principals. Second, the courts agreed that Arthur Young took the financial statements it had created and used those affirmatively to mislead the investors and the buyers of the demand notes. They did this by participating... that's the court's word... participating in the creation of condensed financial statements, which everybody admits were fraudulent and misleading. Even Arthur Young makes no attempt to defend those. And they attended annual meetings where both courts, Eighth Circuit and the district court, agreed they lied in response to direct questions. They deliberately concealed facts from the investors. The jury found... there was not even appeal on the weight of the evidence. So, it has become final... that they did this with the actual intent to mislead and deceive investors. And the Eighth Circuit said that everybody knew that if the investors were not told of the insolvency, they'd continue to buy demand notes, and if they were told, there would have been a run on the co-op. Antonin Scalia: Was this in cooperation with any particular officer of the company who was doing the same thing? Gary M. Elden: Your Honor, in this case, the principal wrongdoer was already in jail when this happened. There were nine directors, five of whom remained in office and who were at least guilty of negligence if not collusion. There were four reform directors who were trying to get to the bottom of things and tell the truth to people. Antonin Scalia: You see, I'd find it easier to say that they participated In the conduct of the company's business if they were acting jointly with one of the managers or directors, or at least an employee of the company who was conducting the company's business. Then I could say they participated in the conduct. But as you describe it, anybody that they would have made common cause with was gone, and they were just acting on their own. Gary M. Elden: I would like to make it as easy as possible for Your Honor to agree with me, but the truth is that they basically did it... they did 95 percent of this themselves. No one... there's no proof anyone even knew what they were doing. They pulled off the fraud to cover up themselves, to protect their friends who were by then gone. Now, Kirit Goradia did pull together some of the financial data. I mean, there was a lot of financial data in the financial statements. It wasn't all cooked. Some of it was straight. Kirit Goradia pulled that together. But I think essentially the creation of the false financial statements was virtually totally the work of Arthur Young. David H. Souter: But their friends stood to be harmed or to be hurt when the extent of their derelictions came out. Is that fair to say? So that there was a motive I guess is what I'm saying-- Gary M. Elden: Correct. David H. Souter: --for the accountant to do what it did even though it may not have been in a literal... jointly sense... literally jointly participating at the time it committed the acts that you complained of. Gary M. Elden: Correct. Your Honor, our view that we presented to the jury was that the motive was to cover up what amounted to crimes not only by Jack White who was on his way to jail or in jail by then, but the lawyers for Jack White who had suborned perjury who had put this whole crooked deal together and could themselves been disbarred or who knows what. Those were the people. The people who needed the coverup were the people who changed orders to Arthur Young. Nothing wrong with the old auditor. He had done it the right... he had recorded it as not being owned by the co-op the previous year. The people who needed the coverup brought in Arthur Young and they got it. In terms of participation, if I could address Justice Scalia's point, because I would like to make it easy for everyone to agree with me, I think that there's a lot of things Arthur Young did not do. They didn't sell the grain. They didn't do the lease. They didn't hire and fire employees. They participated in the conduct of the affairs by participating in the conduct of the creation of the financial statements. The third fact which I'll allude to only briefly is that everyone admits they used the financial-- John Paul Stevens: May I just ask on that question? Gary M. Elden: --Yes. John Paul Stevens: Do you take the position that whenever an auditing firm creates financial statements, that it has engaged in the pattern of racketeering activity? Gary M. Elden: No. In fact, I tried my best not... that... Arthur Young tries to portray our position as applying to the typical auditor. It does not. This was an extreme fact situation. If an... there are two things an auditor can do that are perfectly proper. One is it can audit books prepared by others. If the others created a fraud and the auditor misses it, it may be negligence, but it's not RICO. We never contended it was RICO. Second thing, he can go farther. He can help them. He can help them put the books together. You can out-source your accounting function. You can hire Arthur Young to do all your accounting work. There's nothing wrong with that, but once they've gone to a certain point of putting the books together, they can't audit themselves. If they want a certified audit, they need to bring someone new in. I'm in complete agreement that Arthur Young's statement of that in their briefs is the proper role of the auditor. Arthur Young went far beyond the proper role of the auditor here. John Paul Stevens: By creating the books. Is that-- Gary M. Elden: By creating the books, doing it fraudulently, and then auditing themselves, and not catching themselves. Antonin Scalia: --Well, you say they can create the books so long as they don't then audit themselves. Gary M. Elden: Your Honor, I think it is-- Antonin Scalia: It's sort of retroactively taken out of RICO when somebody else later does an audit? Gary M. Elden: --Your Honor, I'm not actually speaking of a legal principle here. I'm speaking of the accounting rules that the accountants set for themselves. They allow themselves, to a small degree, to help the client put the books together even though they audit. Antonin Scalia: Yes, but I don't think RICO was intended to codify general rules of accounting practice, was it? Gary M. Elden: No. Antonin Scalia: I have no indication of that. Gary M. Elden: It plainly was not. It plainly was not, Your Honor. Antonin Scalia: I thought this provision here in particular was meant to prevent a company from becoming an evil mechanism, a company becoming a law-breaking company as an enterprise. And when you're not working with someone in the company, you continue to work as an outside auditor, I don't see how that comes about. Gary M. Elden: Well, in terms of whether outsiders are covered, a point which Arthur Young has conceded... so have all the amicus... the proceeding language in section 1962(c) talks about people employed by or associated with. The classic RICO case, numerous predicate acts, concerned bribers. Bribers are normally outsiders who are influencing only some aspect of the business, not controlling the whole business. Antonin Scalia: Well, that's true, but they are working with someone who is a manager of the business or an employee of the business with authority to conduct the business' affairs. So, you can say it is the business that is corrupted. Gary M. Elden: Your Honor, in that case, I now have an answer to Your Honor's question. Sorry I'm so slow. The board of directors had to adopt the report of Arthur Young, and Arthur Young had to persuade them to do that at meetings by misleading them and not telling them the entire truth. Arthur Young could not single-handedly have set up the meetings and promulgated a final report. Antonin Scalia: Well, misleading them isn't the same thing as making common cause with them. I mean, when you bribe one of them, the two of you make common cause to conduct the business in a... an evil, unlawful fashion. Gary M. Elden: That's true with bribery, but not with fraud. With fraud, you might be deceiving them into doing. If you're bribing them, you're persuading them to do what you want them to do. Fraud you might be deceiving them into doing what you want them to do. Antonin Scalia: Well, that's unlawful. No doubt. But I don't see why that becomes a RICO violation under this section of RICO anyway. Gary M. Elden: Well, the... taking 1962 as a whole, all three sections refer to pattern of racketeering acts. That's the prohibited thing. If you do the prohibited thing to invest in a company, that's A. If you do it to control a company, that's B. But if... but C covers merely participating in the conduct of the affairs or conducting the affairs. Even if you conduct all the affairs, you're still covered under C. Sandra Day O'Connor: Well, Mr. Elden, in interpreting that language, would you think the night watchman might be covered or the elevator operator or anybody who committed a pattern of unlawful acts? Gary M. Elden: No. No, Your Honor. In fact, the word "participate", which has a half-century tradition behind it and which was a word well-known to Congress at the time they used it, plainly excludes people who are not materially involved in furthering something. Participate has been used throughout all the... all 50 States. Numerous Federal statutes have participants as people who materially aid or assist someone else who could be the primary wrongdoer or could just be equal with them in accomplishing something. So, a participant is not someone who... just a person who goes out for coffee while they're committing the fraud is not a participant under the securities laws. You don't even get to a predicate act that way. It's only when you materially aid and assist. Sandra Day O'Connor: But it could be at any level of involvement, and you'd say that's involved in the conduct of the enterprise's affairs? Gary M. Elden: I would say not the very lowest level, but not necessarily confined to the highest level. A person who effects a purchasing decision, bribes the purchasing agent, is covered even though he doesn't also handle marketing. Sandra Day O'Connor: Well, we're dealing with some pretty fuzzy language here I suppose, and the courts are all over the lot in giving meaning to it. Let me ask you this. Do you think that the rule of lenity should apply in our interpretation of the statute-- Gary M. Elden: Your Honor, I-- Sandra Day O'Connor: --and where it is fuzzy, maybe we should err on the side of being careful before we extend liability? Gary M. Elden: --Your Honor, the rule of lenity is to some extent at tension with the statutory command to give liberal construction. I think the way I reconcile them is if by giving a liberal construction to certain words, a person is able to come to a sensible meaning of them, then it's not ambiguous and the rule of lenity... in other words, using Congress' guideline of liberality, if a person is able to understand the words, then the rule of lenity would not apply. If it's still ambiguous, it would. Sandra Day O'Connor: Well, I'm not sure how anyone would understand these words just reading them. Gary M. Elden: Your Honor, I think unlike the pattern of racketeering concept, which is a novel concept in RICO and which is very difficult to understand, these words all have been interpreted by courts in the same way dictionaries interpret them, in the same way laymen use them, and they're used in many other statutes. The concept of participating in the conduct of affairs is used in the FIRREA statute that was just adopted. A similar concept has been used in the securities laws with no problems, no one claiming it's unconstitutional. Participate in the conduct of the affairs is fairly straightforward English prose. And I think that RICO as a whole is a very complicated statute because of the pattern of racketeering concept, and through the pattern to racketeering language, which fortunately I don't think is before the Court today... and I agree that that makes the entire sentence very complicated. But assume for the moment we know... let's say it's stipulated that there's a pattern of racketeering acts. Once that's stipulated, I think the rest of the sentence is not hard to parse relative to other Federal statutes. David H. Souter: But doesn't the notion of participation require at some kind of minimum level an action with other members of the management? And at the point that the accountants were doing things dirty, the other members of the management who would have been aware of this and whom they might have been acting with were gone. So that weren't they in the position, as you describe the facts, not of acting with the management, but of duping the management, as well as borrowers and so on for the benefit of their friends who were in jail? They weren't participating; they were deceiving both the management and the buyers of the notes. Gary M. Elden: Your Honor, I agree with the first comment Your Honor made, that at a certain very low level of participation, I would agree it is not covered, and I think that that is not simply a preference or... I think that is... in the word "participate", as it has been used for half a century, but it is sufficient. It is sufficient. To drive the getaway car is sufficient even if you drive the getaway car all by yourself and you're the only one who drives the getaway car. If you-- David H. Souter: But you are also acting in concert with the people who have robbed the bank, and that analogy doesn't hold here because they're not acting in concert with the remaining members of the management. They are, in fact, acting for the sake of helping members of the management who used to be there, but were gone by the time they can... gone by the time the auditors committed their wrongs. Gary M. Elden: --Your Honor, I think there's a distinction between conspiracy and participate in the conduct of the affairs. Other people were also participating in the conduct of the affairs, the salesmen, the people who were making the demand notes available, the board of directors which was continuing to run the co-op, calling the meetings. There was a lot of things going on at the co-op that Arthur Young had nothing to do with, and without the co-op being an ongoing enterprise... it was functioning in many other respects... Arthur Young's fraud would not have succeeded. Antonin Scalia: Mr. Elden, let me give you a hypothetical which I think will highlight what's troubling Justice Souter and me as well. What if the offense here were selling... fraudulently selling defective parts to a corporation which then sold a... an instrument that incorporated those defective parts to the public. Would that be... which is the conduct of the corporation's business. Would that be participating in the conduct of the affairs of the corporation? Gary M. Elden: I think... no. I think a person who merely is engaged in transactions with the company is not conducting its affairs. Antonin Scalia: Well, why is that any different from what we have here? Gary M. Elden: That person merely sells defective parts to the company. That's all he does? Antonin Scalia: Fraudulently. Gary M. Elden: Commits a fraud on the company. Antonin Scalia: Yes. Gary M. Elden: That's all-- Antonin Scalia: Just as the accountant firm pawned off on the company a fraudulently defective financial statement, this person pawns off on the company fraudulently defective parts. Gary M. Elden: --As I read the word "conduct", it requires some carrying on of the actual business of the company, not merely selling it to them. Antonin Scalia: Well, I don't see that in either case you have an actual carrying on of the business. Gary M. Elden: Thank you, Your Honor. I would like to save the rest of my time for reply if I may. William H. Rehnquist: Very well, Mr. Elden. Whoops, whoops. Ms. Kathryn A. Oberly: I'm sorry, Your Honor. William H. Rehnquist: We'll get to you in a minute, Ms. Oberly. [Laughter] You're eager. Mr. Dreeben, we'll hear from you now. Michael R. Dreeben: Thank you, Mr. Chief Justice, and may it please the Court: Now, the issue before the Court today is whether the Eighth Circuit was correct in holding that the RICO statute requires that a defendant operate or manage the business in order to be held liable under section 1961(c). That holding, we submit, is wrong for several reasons. First, it departs from the text of the statute which does not use the words "operate" or "manage" to describe the requirements for liability. Second... and I think this goes to Justice O'Connor's question about the application of the rule of lenity in this case... the Eighth Circuit's holding ignores that Congress used the words RICO and in other contemporaneous laws, and I will detail those laws in a minute. When Congress wished to impose the requirements of operation or management for liability, it did so explicitly, not as the Eighth Circuit did through the back door by a gloss on words that do not contain that sense. Antonin Scalia: To manage is one thing, but to act authoritatively on behalf of the company is something else, isn't it? Couldn't we impose that minimal requirement and find that even that requirement was not met here? You don't have to be top dog, but you have to be an agent who can act authoritatively on behalf of the company in order to conduct its business. Michael R. Dreeben: Well-- Antonin Scalia: And there's nobody here who meets that qualification, who was participated with by the accountants. Michael R. Dreeben: --Well, first, Justice Scalia, the statute covers two different ways of engaging the enterprise in this pattern of racketeering activity. First, it covers people who conduct the enterprise's affairs. Antonin Scalia: Right. Michael R. Dreeben: Second, it covers people who participate in the conduct of the affairs. If, by hypothesis, the accounting firm had become, in effect, the chief financial officer for the company and was given by the board the authority to create its financial statements, which in effect happened in this case because there was no one within the company to do that, the accounting firm can be said to have conducted this limited aspect of the company's affairs. Even if you turn to the second aspect of the statute-- Antonin Scalia: What aspect of the affairs did they conduct? Michael R. Dreeben: --They conducted, in essence, the-- Antonin Scalia: Not participated in the conduct, but they conducted. Michael R. Dreeben: --That's correct. Antonin Scalia: Why? Michael R. Dreeben: I'm focusing now on their creation of the financial statements of the company in which they made fundamental accounting decisions about the valuation of assets and then gave those to the company. Antonin Scalia: That's not the company's affairs any more than my keeping a diary could seriously be considered my affairs. Unless that's presented to someone with the objective of raising money from that person or some other objective-- Michael R. Dreeben: Well-- Antonin Scalia: --there are no... there's no business being conducted. Michael R. Dreeben: --Well, of course, in this case, the financial statements were integral to the money-raising functions that the co-op was carrying out, but-- Antonin Scalia: Exactly. Now, who was cooperating with the accountant in raising that money, in conducting that affair of raising money? Michael R. Dreeben: --It is the co-op's affairs to present its financial data. There's... this case doesn't involve the construction of the concept of the affairs of the enterprise. It has been taken for granted not only in this case, but in all other cases that have considered this issue, that part of the affairs of a business enterprise consists of fairly presenting its financial data to people who rely on it, which would include in public companies the Securities and Exchange Commission and investors and in this case covers the farmers who invested in the demand notes. And all of the-- Antonin Scalia: Just presenting it? Just generally presenting it? Gee, I-- Michael R. Dreeben: --Well, it's-- Antonin Scalia: --Raising money is part of its affairs, but I don't think developing and writing out a financial statement-- Michael R. Dreeben: --Well, I think that all companies which maintain accounting staffs and financial departments view it as part of their affairs. This is not a narrow term in the RICO statute. This is a statute that's designed to cover comprehensively enterprise criminality, and the concept of affairs has never been given a narrow reading. John Paul Stevens: --May I ask you a question on this second category that you described? Do you think the statute has a different meaning when it refers to conduct of such enterprise's affairs through, so forth, than if it simply said, participate in such enterprise's affairs? Michael R. Dreeben: Yes. I think that is a narrower reading. John Paul Stevens: It does require some level of seniority in the company. Is that right? Michael R. Dreeben: No. I'm not sure that seniority in the company is the issue. I think what the issue is is that it has to be some direct participation in the conduct of the affairs, and I can give an example. John Paul Stevens: Give me an example. The difference between participation in the conduct of the affairs and, on the other hand, participation in the affairs. Michael R. Dreeben: Well, for example, we have a number of RICO cases that cover bribery of court officials to obtain official action. That I believe is participating in the conduct of the affairs of the enterprise because it induces official action. Merely filing a fraudulent pleading with a court, a false pleading that misrepresents facts, would be participating in the affairs of the court generally, but would not be participating in the conduct of the affairs. Similarly, there are cases in which people have been conducting gambling enterprises on corporate property, not involving really the resources or any of the prestige of the company, but simply using it as a location for doing it. Generally, that could be viewed as participating in the affairs of the company, but it's certainly not participating in the conduct of the affairs of the company. Antonin Scalia: Yes, but if you apply that analogy here, what happened here is exactly what happened in your court case; that is to say, the company itself was misled just as the court was misled. Michael R. Dreeben: No. I think the analogy to this case would be if somebody were drafting opinions for the court fraudulently and the court was then issuing them. Here you have financial statements that were prepared fraudulently and issued by the company with the accounting firm serving as the creator and the explicator of the fraud. All-- Antonin Scalia: And that's different from presenting facts to the court fraudulently which the court then adopts. Michael R. Dreeben: --Well, if the court then adopts them, then you have a different kind of question I believe. Antonin Scalia: Oh, I see. Michael R. Dreeben: But if you have-- Antonin Scalia: If it's successful, it's covered by RICO. If it's unsuccessful, it's not. Michael R. Dreeben: --Well, if the court, for example, invited the parties to prepare findings of fact and they were done with the knowledge that they would be used as the basis for the court's submissions, and they were done fraudulently, this would be a different case. Of course, we're not talking here about examples that are actually covered by the RICO statute unless you have the requisite pattern of predicate crimes, and in this case, of course, we do have a pattern of predicate mail fraud and securities fraud crimes. The Eighth Circuit's test is wrong most fundamentally because RICO itself uses the terms that the Eighth Circuit read into section 1962(c) in other places. Section 1962(a) prohibits operation of the enterprise with racketeering proceeds. Section 1962(b) prohibits acquiring control over the enterprise through racketeering acts. The D.C. Circuit said that section 1962(c) requires control, but it's quite clear that Congress imposed that requirement on a different section of RICO, not on this section. The gambling statute, 18 U.S.C., section 1955(a), applies to whoever conducts, finances, manages, supervises, directs, or owns an illegal gambling business, and that statute was passed as another title of the same act of which RICO was a title. Using standard principles of statutory construction, it would be very difficult to say that Congress intended the same limitation in RICO that it explicitly passed in another title of the same act. And 2 weeks after passing RICO, Congress enacted the continuing criminal enterprise statute which applies to a position... a person in the position of organizer, a supervisory position, or any other position of management in a group engaging in narcotics activities. And against the background of those statutes, section 1962(c) must be read as Congress wrote it, to cover generally persons who participate through usurping the enterprise's activities, corrupting the enterprise's activities, or using the enterprise's activities to enhance their ability to commit criminal acts. Antonin Scalia: Assume a construction company... is it your position that a worker, the lowest paid worker who digs ditches for this construction company... is he conducting the affairs of the company within the meaning of this statute? Michael R. Dreeben: No, he's not conducting the affairs. Antonin Scalia: He's not. Michael R. Dreeben: He may very well be-- Antonin Scalia: So, there is some direction element to it, some-- Michael R. Dreeben: --He may very well-- Antonin Scalia: --supervisory, some authoritative element somehow? Michael R. Dreeben: --I don't think there's an authoritative element, Justice Scalia. It does speak to people who participate in the conduct of the affairs even indirectly, and although obviously the Government is not seeking to use RICO against ditch diggers or secretaries or people without some level of involvement in the enterprise so that they can inflict the sorts of harms that RICO is designed to cure, the statute as written refers to people who participate in carrying out the affairs of the enterprise. And if they are able to do that-- Antonin Scalia: But that doesn't include ditch diggers-- Michael R. Dreeben: --I think it-- Antonin Scalia: --or secretaries. Michael R. Dreeben: --I would not say as a matter of law that it excludes anybody-- Antonin Scalia: It does include ditch diggers. Michael R. Dreeben: --As a matter of law, the statute doesn't exclude them, no, but the statute-- Antonin Scalia: Which means it does include them. Michael R. Dreeben: --Yes, it does, Justice Scalia. Thank you. William H. Rehnquist: Thank you, Mr. Dreeben. Ms. Oberly, your turn has been reached. [Laughter] Ms. Kathryn A. Oberly: Thank you, Your Honor. Thank you, Mr. Chief Justice, and may it please the Court: The Court's task in this case is just... is, obviously, to decide what Congress meant when it included the conduct requirement in section 1962(c), and the Court needs to approach that task by choosing, from among all the possible meanings that are set forth in the briefs and the arguments, the one that most fits with a common sense, logical understanding of what Congress had in mind. Our position is that the Eighth Circuit's operation or management test meets that requirement. At least we seem to agree with the Government, that the place to start here is with the language of the statute itself, but in fact, the Government's approach and the petitioners' approach I think, as Justice Stevens points out, has the tendency to completely read out of the statute the conduct requirement altogether because it's very difficult for them to articulate a distinction between participate in the affairs, which is not what the statute says, and participate in the conduct of the enterprise's affairs, which is what the statute says. Conduct is there for a reason. This Court has already said in Sedima that conduct is one of the elements that a RICO plaintiff has to prove. So, we're talking about words of limitation, and they mean that you can't prove a RICO violation simply by showing-- Byron R. White: Does a lawyer... is the outside general counsel to a concern... is it... whether that's an enterprise or not is beside the point, but would the lawyer be considered to be participating in the conduct of the business when he gives advice as to whether this conduct is legal or not? Ms. Kathryn A. Oberly: --Not in my opinion, Your Honor, when he gives advice, which when he gives advice, the company, the enterprise, is free to accept it or reject it. The company is still making its business decisions about how to conduct-- Byron R. White: Is the inside general counsel in the same position? Ms. Kathryn A. Oberly: --If he gives... if the inside general counsel... if he or she gives advice to management, again it's advice which management can accept or reject. If, on the other hand, management delegates to either inside or outside general counsel the power to make decisions and, for example, appoints the lawyer as agent to conduct the corporation's legal affairs, then that would be a different question. Antonin Scalia: But it doesn't say conduct. It says conduct or participate in the conduct. What if an officer of the corporation comes to a lawyer and says, look it, we want to run this scam on the public? I'd like your advice as to how it can be conducted in a way that is least likely to be detected by the bank auditors or whoever. And the lawyer says, okay, this is how you do it. Ms. Kathryn A. Oberly: Ultimately, Your Honor, I-- Antonin Scalia: Wouldn't he be participating in the conduct of the affairs? Ms. Kathryn A. Oberly: --It depends I think, Your Honor, on whether that lawyer is given... if he doesn't have control himself, which I don't think he necessarily has to have, is he operating under the control of the CEO or someone who can direct the affairs of the enterprise? Antonin Scalia: He's not controlled by him, but he's helping him. He's participating with him in the scam. Ms. Kathryn A. Oberly: Then he's participating in the affairs of the enterprise, which is-- Antonin Scalia: But not in the conduct of the affairs-- Ms. Kathryn A. Oberly: --Not in the conduct. Antonin Scalia: --I don't see that. Ms. Kathryn A. Oberly: To me conduct imparts some notion which we get from the statute, its language, and its legislative history and RICO's purpose... conduct imparts some notion of management or direction of the affairs. Participate-- Antonin Scalia: In helping somebody who manages, aren't you participating in the management by helping someone else who manages? Ms. Kathryn A. Oberly: --If you're operating under their direction. If you are just giving them advice, even if it's advice about how to commit an illegality, ultimately the decision making authority still resides with whoever it is that is running, operating, or managing the business. You're an outside advisor. You may be an inside advisor. I don't think the outsider-insider distinction makes that much difference. The question is who is calling the shots, and if you're doing... if you're acting for the company with authority to make those decisions, then you may be participating in the conduct of the affairs. Byron R. White: What if it's... what if a certificate of counsel were required by law? Ms. Kathryn A. Oberly: Well-- Byron R. White: And... or what if they... what if a certified audit is required by law? Ms. Kathryn A. Oberly: --It is. Byron R. White: And without it the business can't go forward. Ms. Kathryn A. Oberly: It is required by law for SEC traded companies, for example-- Byron R. White: Yes. Ms. Kathryn A. Oberly: --that you have an accountant's-- Byron R. White: Yes. Ms. Kathryn A. Oberly: --report every year, but that conduct of the business' affairs-- Byron R. White: You say that would not qualify either. Ms. Kathryn A. Oberly: --No, Your Honor, because what the outside accountant is doing is expressing a professional opinion on how the client conducted its financial affairs. The outside auditor is not making business decisions for the client. The outside auditor is not deciding whether to make particular investments. The outside auditor isn't deciding whether this co-op should advance initially $4.1 million and later up to $5.8 million-- Byron R. White: Well, yes, but the-- Ms. Kathryn A. Oberly: --to the gasohol plant. What the outside auditor is doing is coming in and recording in financial statement form decisions already made-- Byron R. White: --Well, that may be so-- Ms. Kathryn A. Oberly: --by the people running the enterprise. Byron R. White: --of the honest... it may be so of the honest auditor. But what if he's a crooked auditor and he wants to further the affairs of the business end. Without a crooked, dishonest statement, the enterprise can't go forward. Ms. Kathryn A. Oberly: Your Honor, what you're suggesting I think is something akin to a bribery case where the company bribes the auditor and says we know we have no basis for-- Byron R. White: No, I didn't say that at all. I just... the auditor is actirg in its self-interest. He wants to keep a good client. Ms. Kathryn A. Oberly: --Well, let's take this case as an example, Your Honor. That's the theory in this case, that the scheme was to keep the co-op afloat even though it was insolvent and that Arthur Young was somehow instrumental in that scheme. Byron R. White: You don't think that's participating in the conduct of the business? Ms. Kathryn A. Oberly: No. I think-- Byron R. White: Without it, the business wouldn't have been conducted. Ms. Kathryn A. Oberly: --Your Honor, with the opinions that Arthur Young issued in this case, which were qualified opinions on whether the co-op would ever be able to recover the money it had invested in the gasohol plant, which showed the co-op to be losing $100,000 a month, showed a 6 point... almost a $6 million advance to the co-op-- Byron R. White: So, you just want to... I suppose you want to win this case on any ground that you want to win on, but you want to win it... you submit that you want the general rule that no accountant who does no more than jigger with a financial statement... no accountant is participating in the conduct of the business. Ms. Kathryn A. Oberly: --When an accountant acts as auditor, I would say it is very rare that he is participating in the conduct of his client's affairs. I can conceive of and will give you situations in which an accountant goes beyond that, although they're not this case. But suppose that the accountant is not only auditing the client's financial statements, but is sitting on the client's board of directors, for example. He is then conducting or participating with the other directors in the conduct of the-- Byron R. White: And so you... and you say even if the president of the company says, look, we're in trouble, can you jigger up the... our financial statements, your certificate, and the auditor says sure. Ms. Kathryn A. Oberly: --I think the auditor then clearly has committed the predicate acts of securities fraud, but is he conducting-- Byron R. White: Well-- Ms. Kathryn A. Oberly: --is he conducting-- Byron R. White: --That isn't what the question is either. Ms. Kathryn A. Oberly: --Precisely. He... the predicate acts alone are not enough to establish a RICO violation. Byron R. White: Even if he acts, A, at the direction or at the request of. Ms. Kathryn A. Oberly: If he acts at the direction or at the request of, then I agree he's participating in the conduct, but that isn't-- Byron R. White: Well, that was my hypothetical. Ms. Kathryn A. Oberly: --Well, Your Honor, then I'm perfectly prepared to agree, that an auditor who acts at the direction of his client, as opposed to an independent outside auditor who makes mistakes who does even terribly substandard work, but is still doing his work, not the client's-- Antonin Scalia: What if-- --You said "or request" a minute ago. Ms. Kathryn A. Oberly: --Pardon? Antonin Scalia: You said "or request" a minute ago. Just direction or is it direction or request? That was my-- Ms. Kathryn A. Oberly: A request that the auditor can't refuse basically is-- [Laughter] Byron R. White: --He can't refuse without losing a client. Ms. Kathryn A. Oberly: It's... the way I would characterize the test, the operation or management test, is control or under the control of, and if the president of the company either gives a directive to the auditors or makes a "request" in a way that the auditor can't exercise independent judgment, then he may well be participating in the conduct of the client's affairs. John Paul Stevens: Well, you mean he can't exercise his independent judgment without losing the client. Is that what the test is? Ms. Kathryn A. Oberly: Pardon? No. I think he-- John Paul Stevens: Because that I'm sure happens once in a while. Ms. Kathryn A. Oberly: --That... Your Honor, I think you could easily have what the accounting profession calls an independence violation, which is a violation of professional standards without necessarily having a RICO violation. You can have situations where the auditor, for whatever reason, any number of reasons, gets too close to the situation, but is still not conducting his client's affairs. He may be violating his own professional standards. He may be committing predicate acts, but he's not managing or operating the business. John Paul Stevens: Of course, in any event, if I understand your opponent's position, that's not this case because the wrong here is that the auditors acted too independently. They created everything, if I understand their theory, rather than did something at the direction of somebody in management. Ms. Kathryn A. Oberly: As I understand it this morning, virtually the entire theory here of what Arthur Young supposedly did wrong... we have a concession I think that normal auditing does not implicate RICO, and this case seems from petitioners' point of view to turn on whether on the facts of this case, which by the way is not even a question they presented to you or on which the Court granted cert, they asked you to decide the legal test. They didn't ask you to apply it. I'm not saying the Court can't consider the facts. I'm just saying it suggests that perhaps when two lower courts have already looked at these facts and found no RICO issue, that it maybe doesn't warrant reexamination by this Court. But still, focusing on the creation of the factual... of the financial statements is what they say Arthur Young did wrong. What Arthur Young did here was take the client, the co-op's books and records, turn those numbers that reflected completed transactions that the client had already decided to engage, and to turn those numbers into financial statement form. Let's talk about the gasohol plant for a minute. This started off as a $4.1 million-- Byron R. White: Well, they just didn't do it on their own. They were the accountants for the firm? Ms. Kathryn A. Oberly: --No, Your Honor. They were the auditors for the firm. Byron R. White: All right, for... the auditors for the firm. And they just didn't do it... they just wouldn't do it for nothing. They must have been hired. Ms. Kathryn A. Oberly: They were hired. Byron R. White: They were retained as auditors? Ms. Kathryn A. Oberly: They were retained as auditors. Byron R. White: And then so they're... please do our books. Ms. Kathryn A. Oberly: No. Excuse me, Your Honor. But auditors-- Byron R. White: I mean, please do our... please audit our books. Ms. Kathryn A. Oberly: --That's a critical-- Byron R. White: Please audit... now, there's a request. Ms. Kathryn A. Oberly: --That is a critical distinction. Byron R. White: There's a request. Ms. Kathryn A. Oberly: That's a... and it says to the auditor please come in and conduct your affairs, which is auditing. We, the co-op, the client, have already made decisions about our business affairs and our financial affairs, and we want you to come in and look at our books and records, put them in financial statement form for us, because that's not something we're very good at. Byron R. White: Well, what... suppose the... I don't suppose Arthur Young did what it did without some kind of a motive. Ms. Kathryn A. Oberly: The suggestion here... the motive is supposed to be keep a client on whom Arthur Young is losing money because we're having to spend far more time than our fees will ever compensate us for. That's part of the motive. The second part of the motive suggested is help Jack White. Byron R. White: You'll soon be out of business if that's the way you do business. Ms. Kathryn A. Oberly: This turned out to be an audit that took a whole lot more time that... the firm, nevertheless, went ahead and put in the time necessary to complete it. But the notion that we were doing this to keep a client is at odds with the facts. Byron R. White: Well, then what-- Ms. Kathryn A. Oberly: The other-- Byron R. White: --Why did they do it? Why did they do it? Ms. Kathryn A. Oberly: --I don't think they did it in the sense you're talking about. Byron R. White: I guess it isn't in the-- Ms. Kathryn A. Oberly: But the other motive attributed to Arthur Young by the petitioners is that Jack White, the convicted felon, prior general manager of the co-op, was Arthur Young's friend, that we were trying to protect him, that we were trying to keep... and the ultimate motive is that we were trying to keep our client, the co-op, appear solvent when, in fact, we knew it wasn't solvent. If you look, Your Honor, at again... at our report which was qualified to say that we cannot tell either the board of directors or any members of the public, who might want to look at these financial statements, whether the co-op will ever recover its investment in this gasohol plant... what we can tell you is that you've already sunk nearly $6 million in it. You may never see it again. You're losing $100,000 a month as you continue to operate this plant. And frankly, Your Honor, had anyone cared to read those financial statements, they would have known that the co-op was hemorrhaging red ink all over the place based on the report we did issue. Their complaint is we should have said more. Maybe we should have. Maybe that's an auditing mistake that we should have said even more, but there's enough in there to-- Byron R. White: --But do you think that Arthur Young was attempting to... perhaps attempting to keep... by its financial... by its auditing report attempting to keep the company afloat? Ms. Kathryn A. Oberly: --If we were trying to do that, we failed miserably at it. Byron R. White: Well, I know, but... you... were they trying to do that? Ms. Kathryn A. Oberly: No, Your Honor. But there's no support for that notion. When we issue a qualified opinion-- Byron R. White: Well, what if they were trying to keep it afloat and without it, without this effort, it would have been really a dead fish-- Ms. Kathryn A. Oberly: --Let's change the enterprise for a minute because there could be-- Byron R. White: --Well, let's don't change the enterprise. Just how about my question? Ms. Kathryn A. Oberly: --Okay. I think the answer to your question is no. That doesn't mean that I think auditors are always off the hook. I think that it's very possible to suggest that auditors are, under the situation you posed, conducting their own affairs, in other words, the affairs of Arthur Young-- Byron R. White: Well, there's no doubt about that, but how about the... also the affairs of the company? Ms. Kathryn A. Oberly: --When they don't make the business decisions for the client, when those decisions are already made before the auditors arrive on the scene and whether they're good decisions or bad decisions, fraudulent decisions or not, the auditors come in. And the most that you can say about the auditors' conduct is that it's substandard, and it may be so substandard as to amount to securities fraud. That still does not turn it into conducting the client's affairs. You have to draw a distinction. Antonin Scalia: Ms. Oberly, I have trouble going along with the notion that you have to be subject to the direction of somebody in the corporation as opposed to merely acting pursuant to request by or in cooperation with. The beginning of this provision is so broad. It says it shall be unlawful for any person employed by or associated with an enterprise. Now, what time is it up there? If that language... if what was intended is what you suggested, it seems to me that they would not have said something as broad as "or associated with". They would have just simply said any person employed by or directed by. Ms. Kathryn A. Oberly: I agree with you that associated with is quite broad, and it brings in outsiders-- Antonin Scalia: Does it mean people who are directed, who are subject to direction? Ms. Kathryn A. Oberly: --No. Your Honor, I don't think that's the function of associated by. I think the function of associated by brings in people who are not employees of the enterprise that they are... they may be independent contractors. They may be lawyers who are outside the enterprise. And I think the statute does apply to outsiders as well as to insiders. But I think our focus here today is what did Congress mean on the one word of limitation it put in there, not the broad words, but the word of limitation, which is you have to participate in the conduct. Antonin Scalia: And you say what they meant by it was to cancel out associated with. Ms. Kathryn A. Oberly: No. I think associated with, as I said, would bring in an outsider who, if you just had employed, no matter what the lawyer or the accountant or the outsider did, it wouldn't be covered if you just... if it were just limited to employees. So, associated-- Antonin Scalia: xxx strange to use for someone who is subject to direction. He is someone associated with the enterprise. You would say employed by or directed by or something other than associated with. That's a very loose connection. Ms. Kathryn A. Oberly: --I think... I agree with you. I can only repeat that I agree with you that associated is broad enough and serves a broad function of bringing into the statute's coverage people who are not necessarily within the enterprise. But I think all of those broad words in the statutes, "associated with", "participated indirectly", all of the broad words, are still modifiers of conduct, and our focus here has to be on what does conduct mean. And the difference between this case and the Court's prior RICO cases is you had parties before you urging restrictive interpretations of RICO based on language that wasn't there. Anthony M. Kennedy: What would be your position if an in-house accountant, a full-time employee of the company, did everything Arthur Young did here? Now the hypothetical gets a little strange because he has to say I certify as the company accountant that or I advise you, but he did no more. But he was an... let's say that he was an officer of the company, but that's all he did. Same result? Ms. Kathryn A. Oberly: No, Your Honor. He... as you point out, he can't do that. The in-house accountant who attempts to audit the company's own financial statements is I think participating in the conduct of the company's affairs. The outside advisor-- Anthony M. Kennedy: Well, but suppose he says as in-house accountant I have attempted an audit of the company's affairs, and my results are as follows? And he does exactly what Arthur Young did here. Ms. Kathryn A. Oberly: --I would say he is participating in the conduct of the company's affairs, but I would say the distinction... and I'm not ever saying in this argument that outsiders are automatically exempt just because they're outsiders, but the inherent role of the outside accountant, the outside auditor, is to come in and conduct the auditor's affairs expressing a professional opinion on how the client conducted the client's financial affairs. And your internal accountant is conducting the client's internal financial affairs. The outside auditor, on the other hand, comes in several steps removed, looks at transactions the client has already done, whether they're good transactions, bad transactions that happened. They're a done deal before the auditor gets there. Anthony M. Kennedy: But in a very real sense, the outside auditor lends more credence, more weight, to the disclosures and to the statements than would the in-house accountant in my hypothetical example-- Ms. Kathryn A. Oberly: Well, certainly, Your Honor-- Anthony M. Kennedy: --and, therefore, even... and, therefore, furthers the enterprise in a greater degree. Ms. Kathryn A. Oberly: --Furthers the enterprise I don't think is the test for conduct of the enterprise's affairs. Anthony M. Kennedy: Well, it seems to me relevant in deciding what conduct is. Ms. Kathryn A. Oberly: I... what Congress was concerned about, as the Court has noted over and over again in its RICO opinions, was the infiltration of legitimate businesses by organized crime or by people committing patterns of racketeering activity. When you're talking about the outsider who is brought in to express a professional opinion on what the client has already done and who has no power to direct or control or run those decisions by the client, the danger of infiltration by the outsider is just simply not there. Now, that's not to say all outsiders aren't covered. The bribery cases that the Government discusses at length in its brief... I agree outsiders can in... by paying a bribe, in effect, take over the decision making authority of the enterprise by paying the bribe, and now the people who are supposed to be making the decisions inside the enterprise aren't. They're ceding their authority to the outside briber. I'm not saying outsiders are out of the statute. Byron R. White: Which way does the... in your... which way does the bribe run between the outsider-- Ms. Kathryn A. Oberly: From... in this example from the outsider to someone in the enterprise who would normally be conducting its affairs, but who has now effectively ceded his decision making authority to the briber. Byron R. White: --And so, your position would remain the same if the company actually paid a bribe, I mean, more than what the auditor would usually charge, to falsify the books. Ms. Kathryn A. Oberly: I think it probably would, Your Honor, although it might then be-- Byron R. White: Probably would what? You-- Ms. Kathryn A. Oberly: --My position would remain the same, although it might be that I would look at it as a different enterprise. I would then look at the accounting firm as the potential enterprise. Anthony M. Kennedy: --And you take the position the in-house counsel would be liable, bribe or no. Ms. Kathryn A. Oberly: Yes, because he either controls the legal affairs of the company. You said counsel. Anthony M. Kennedy: No. The hypothetical is all he has done is exactly what the accountants did here and no more. Ms. Kathryn A. Oberly: But he controls the financial affairs of the company or he operates under the direction of the board of directors-- Anthony M. Kennedy: Well, why does he do it any more than Arthur Young did? Ms. Kathryn A. Oberly: --Pardon? Anthony M. Kennedy: Why does he do it any more than the accountants did? Ms. Kathryn A. Oberly: The outside auditor has no authority to come in and tell the client what to do. The outside auditor comes in and makes recommendations about how the client's financial affairs look, how they should be presented on financial statements, but the client is free to accept or reject those... the advice of the outside auditor. The decisions cannot be made and are not made by the outside auditor. I know we have a fact dispute here where petitioners contend that the decisions were made by the outside auditors, but we've got-- Anthony M. Kennedy: Well, I suppose in the my hypothetical the directors could have rejected what the in-house accountant said. Ms. Kathryn A. Oberly: --That's correct, and in that event they would have taken away from the in-house accountant the ability to make decisions in the financial sphere of the enterprise's affairs. In this case the board of directors actually affirmatively adopted the financial statements that Mr. Elden makes the centerpiece of his argument about what Arthur Young did that constituted conducting the co-op's affairs. It's true. We drafted those financial statements. That is common professional practice for auditors, but after drafting them, we sat down with the board of directors and met at length, went over the financial statements with the board, and at the end of that meeting, the... several meetings, the board members had no further questions. And the testimony in the record is that they then voted to adopt those financial statements as their own. What we did was an express... express an opinion on their financial statements, which is conducting our affairs, but which is not conducting the client's affairs. I'd like to note on the legislative history and what is it that Congress had in mind here on the use of the word "conduct" that the... every synonym that Congress ever used for the word "conduct" in the legislative history is operate, manage, or run. It's... they're all Eighth Circuit synonyms. There is absolutely nothing in the legislative history to suggest that Congress meant the conduct requirement to be something less than operation or management, to be just mere participation in the affairs, as Justice Stevens asked a little while earlier. In the Senate and House report both, Congress described 1962(c) as prescribing the operation of a business through a pattern of racketeering activity. I'd also like to note that using the Eighth Circuit's operation or management test, there has been no explanation really from the Government about why the catalog of RICO cases that they give us in their brief would not fit... every single one of them would not fit... under the Eighth Circuit's operation or management test. We've already talked about the bribers. Whether they're insiders or outsiders, I think they definitely would be covered by the Eighth Circuit's test because they are either operating or managing the business or operating under the control of a higher-up who tells them what to do. The Government is also concerned about the low level defendants, although Mr. Dreeben acknowledges that the Justice Department doesn't bring RICO prosecutions at some de minimis level, but they have nevertheless expressed concern about the small fry as the case is referred to in criminal enterprises. But there's no reason that those defendants as well would not be covered by the Eighth Circuit's operation or management test because even if they are not themselves operating or managing or conducting because they're not at the top of the hierarchy or anywhere near the top of the hierarchy, they are operating under the direction of the people who do run the enterprise, and they therefore participate indirectly in the conduct of the enterprise's affairs. And as I said, the Government really has not given us any examples of RICO prosecutions that they bring or that they even want to bring that would not be covered by the Eighth Circuit's operation or management test. Earlier it was questioned whether the rule of lenity ought to be applied in this case. It's clear I think to everybody that the statute is not a model of clarity. If there's any doubt about the Eighth Circuit's test, then I do suggest that the rule of lenity is the appropriate way to resolve that ambiguity in favor of the Eighth Circuit's test. This case is very similar to what the Court did last term in Thompson Center Arms, construing a civil tax case that had criminal implications, couldn't find a way to resolve the ambiguity from either the legislative history or the statutory language, and it used the rule of lenity as a tie-breaker. The situation is the same here. If the Court is unable to conclude from the language, purpose, legislative history of RICO, then the rule of lenity ought to still lead to the same result as the Eighth Circuit applied here. Antonin Scalia: Don't you think that the provision of the statute requiring a liberal construction trumps the rule of lenity? Ms. Kathryn A. Oberly: No, Your Honor. Antonin Scalia: If it doesn't, what does it mean? Ms. Kathryn A. Oberly: I think the Court addressed that in a footnote in Sedima where it said that you can harmonize strict and liberal construction in... even within the context of RICO by applying strict construction to sections 1961 and 1962, which are the statutes... the sections that have criminal applications, and liberal construction to section 1964, which is RICO's civil remedies provision. And this, of course, is a case involving section 1962. I think if you-- Antonin Scalia: You have different results that the same transaction can be a civil violation and not a criminal-- Ms. Kathryn A. Oberly: --No, no. I'm not saying that. I'm saying the provision we're construing here has both criminal and civil applications. Antonin Scalia: --Right. Ms. Kathryn A. Oberly: Therefore, the rule of lenity is applicable. Where liberal construction would apply is, for example, in Sedima where you were construing 1964 itself, RICO's civil remedies provision. You weren't construing the criminal applications of the same provision. Here we're construing a statute that has both criminal and civil applications which calls for the rule of lenity. William H. Rehnquist: Ms. Oberly, what if Congress passed a strictly criminal statute and said it shall be liberally construed? Ms. Kathryn A. Oberly: At some point, Your Honor, I think the Court runs into constitutional problems of vagueness and due process concerns because if you... if the Court is unable to-- William H. Rehnquist: Yes, but the rule of lenity-- Ms. Kathryn A. Oberly: --give the statute a construction that people can understand, the potential criminal defendants can understand, then I don't think liberal construction can be used to save a construction that defendants don't know how to conform their conduct to. William H. Rehnquist: --But the rule of lenity has been thought to extend further than just a constitutional prohibition against vague criminal statutes. Ms. Kathryn A. Oberly: That's right, but in answer to Justice Scalia's question about how do you reconcile what Congress put in here about construing RICO liberally, reconcile it by... you can... you'll do that as far as you can, but at some point if you reach an ambiguity that's going to put criminal defendants in a position of not knowing what their conduct should be in order to escape criminal prosecution, then that rule of liberal construction is going to have to give way to giving criminal defendants clear and understandable notice of how to conform their conduct. John Paul Stevens: No, but you don't... you wouldn't disagree with the proposition that Congress could say in a statute the rule of lenity shall not apply to this statute even though it's a criminal statute. Ms. Kathryn A. Oberly: No, I wouldn't disagree with that, but I would still think it's important. John Paul Stevens: The question then is whether the general comment on liberal construction is equivalent to that or is limited to the civil context. Ms. Kathryn A. Oberly: I-- John Paul Stevens: Limited to the provisions that are entirely civil in their application. Ms. Kathryn A. Oberly: --I think the sensible way to interpret is limited to civil, but even if you gave it the broader interpretation, then I think the Court has to still ask itself are we giving this statute a construction that potential criminal defendants can understand. And we can't invoke liberal construction and remedial construction principles to come up with an interpretation that potential defendants can't conform their conduct. Antonin Scalia: Well, I assume we should apply the rule of lenity to this provision instructing us not to apply the rule of lenity. [Laughter] And if we apply the rule of lenity to that, we would come out applying it to the civil provisions and not to the criminal provisions. Ms. Kathryn A. Oberly: Thank you, Your Honor. William H. Rehnquist: Thank you, Ms. Oberly. Mr. Elden, you have 3 minutes remaining. Gary M. Elden: Thank you, Your Honor. I'm going to limit myself to answering questions posed by Justice White and Justice Scalia. That's all I have to add. Justice White asked about whether there was evidence of keeping it afloat by fraud. The point is because of the novel way this case proceeded, we have a final jury verdict that they originated the fraud... that's right from the jury instructions... with an actual intent to defraud, that they deliberately concocted phony statements with no actual belief in their truth. Arthur Young did not appeal that on the weight of the evidence. They conceded. Motive, intent, all those things are established conclusively at this point. Byron R. White: So? Gary M. Elden: So, the question that Your Honor put... Ms. Oberly responded by going into what happened at the board meeting, all sorts of factual things. The point is that is all over. We know that Arthur Young deliberately set out to mislead people and created the financial statements to do so. That is taken as given at this point in the case. Byron R. White: Well, why is that participating in the conduct of the business? Gary M. Elden: It's not... it does not necessarily dispose of the entire case, Your Honor, but I thought it was responsive to Your Honor's question. If I'm wrong, I'm sorry. John Paul Stevens: May I ask this one question just... was this motion for summary judgment granted before or after the jury trial? Gary M. Elden: The... it was granted before. It was renewed at the close of all the evidence. The judge agreed to reconsider, and then reaffirmed his previous decision. John Paul Stevens: So, the record that we look at is the entire record or the record at the time of the original motion? Gary M. Elden: Frankly, Your Honor, the records are essentially the same, but we have cited to the trial record for convenience all throughout the case, and we did it again in this brief. It's a... it's certainly proper to confine the Court's attention, as far as I'm concerned, to just the trial record. It's also proper to consider just the pretrial record. They're essentially the same. John Paul Stevens: Okay. Gary M. Elden: I'd like to answer Justice Scalia's very first question. Should we limit RICO's scope to people who can act authoritatively on behalf of the company? I think there's three reasons why we can't. The predicate acts, bribers and extortionists ordinarily do not act authoritatively on the company. Justice Scalia in a later question pointed out people can merely be associated with the company. They can be outsiders. That's conceded. And we have the word RICO, for a change, is a word with well-settled, very precise meanings, fully covered in the securities laws and aiding and abetting law. And it means it gets us off the ditch digger problem. Ditch diggers aren't covered by the securities laws either. No one has had problems in a half century of construing these statutes. Very low level, ministerial people, file clerks, receptionists, are not considered participants. They're not considered aider and abetters. A person must do something, must materially aid, must materially assist, must engage in some significant act, but does not have to be running the show, does not have to be the primary wrongdoer, does not have to do everything. Antonin Scalia: Well, that's fine when you're talking about securities fraud, but RICO doesn't just apply to securities fraud. It applies to all sorts of misdoings by corporations, breaking people's legs, a lot of things. A ditch digger could be involved in some of those things. Gary M. Elden: Your Honor, I'm focusing on the fact that Congress chose a word 1970 had such a well-settled meaning as striking a middle road. Thank you, Your Honor. William H. Rehnquist: Thank you, Mr. Elden. The case is submitted.

John G. Roberts, Jr.: We will hear argument today in Case 07-1428, Ricci v. DeStefano, and the consolidated case. Mr. Coleman. Gregory S. Coleman: Good morning, Mr. Chief Justice, and may it please the Court: Racial classifications are inherently pernicious and, if not checked, lead as they did in New Haven to regrettable and socially destructive racial politics. Neither equal protection nor Title VII justified New Haven's race-based scuttling of the promotions Petitioners earned through the civil service process mandated by Connecticut law. The lower court required no strong evidentiary basis that the City was acting to remedy or avoid any actual discrimination, but strong safeguards are needed to smoke out illegitimate uses of race and to extinguish the racial favoritism that civil service laws -- excuse me -- are intended to prevent. Governmental employment actions grounded in race must be strictly scrutinized because they engender divisiveness and cause race-grounded harm that the Constitution seeks to avert. That standard does not change with the race of those the government seeks to-- John Paul Stevens: May I just ask this question? Is it undisputed that it was a race-based decision? Gregory S. Coleman: --No, Justice Stevens. I think the city makes the argument that it was not a race-based decision simply because the effect of the scuttling resulted in no promotions being given at all. We believe that that is not a basis for distinguishing this. That it still remains a race-based decision. John Paul Stevens: Are you contending that that's an issue of fact that has to be tried out or that we should accept your version of that -- of that issue? Gregory S. Coleman: I believe that that's an issue of law, Your Honor. It is no different ultimately than what the Court concluded in Croson. This type of an argument that a do-over is not a racial classification is exactly what happened in Croson. There was a do-over declared, a -- a rebidding; and yet the Court said, because that rebidding was declared for racial reasons, it would nevertheless be subjected to-- Ruth Bader Ginsburg: That was pursuant to -- to an affirmative action plan, and here we're dealing with this concept under Title VII of disparate impact. And let's take for one example a test that's given by a police department, a fire department, and it -- it's a physical fitness test, and it disproportionately excludes female applicants. And when the results come in and there are no women on the eligibility list, the department reconsiders. It thinks there is something wrong with this test. It can probably test for the necessary skills in a way that will not achieve those results. Would it be similarly impermissible, similarly based on an impermissible criterion, if the department said: We're not going to -- we have got the results of that test. We're going to throw it out and substitute another that will not have those skewed results. Gregory S. Coleman: --If that decision was grounded in a determination that we simply need to ensure that there are more women on the force, then, yes, it would be subjected to heightened scrutiny, maybe not strict scrutiny under that-- Ruth Bader Ginsburg: Not more women on the force, but this test that we're giving has the effect of excluding most women, just as the high school diploma had the effect, a disproportionate effect, on one race. Gregory S. Coleman: --I think your question gets to part of the heart of this case, and that is, ultimately: Is the decision that's being made one that is -- is based in race or is -- is based on a determination that there is an improper test? But this decision is grounded in race if -- if the police department in your case had clear evidence that the test was simply unnecessary, that it was not job-related and could be clearly done by an identifiable alternative, I think at the end of the day there might be some basis. But if it is grounded in-- Ruth Bader Ginsburg: So they would have to go -- I take it from what you said they would have to go as far as proving a Title VII disparate impact case against themselves. They couldn't do anything short of that to prevail when it is the majority race that is complaining about discrimination. Gregory S. Coleman: --To use the constitutional analogy, Your Honor, I think Wygant, Croson, Adarand, other cases, make clear that you do not have to prove the violation against yourself, but you do have to demonstrate that you have a strong basis in evidence for believing you are violating the law. In Wygant the plurality set that out citing convincing evidence. David H. Souter: The problem, Mr. Coleman, is that -- that the cases you are relying on, it seems to me, are cases in which ultimately what is being judged is a different result in the -- at the end point of the process which was starting. And the problem that I have with -- with using cases like that and -- and essentially the problem I -- I have with your argument is that it leaves a -- a municipality or a governmental body like New Haven in a -- in a damned if you do, damned if you don't situation. Because on -- on the very assumptions that you are making, if they go forward with -- with their -- their hiring plan, they certify the results and go forward with it, they are inevitably facing a disparate impact lawsuit. If they stop and say, wait a minute, we're starting down the road toward a disparate impact lawsuit and, indeed, there may be something wrong here, they are inevitably facing a disparate treatment suit. And whatever Congress wanted to attain, it couldn't have wanted to attain that kind of a situation. Why isn't the most reasonable reading of this set of facts a reading which is consistent with giving the city an opportunity, assuming good faith, to start again? And I -- I recognize there's got to be a good faith condition, and the -- the good faith can always be attacked. But isn't that the only way to avoid the damned if you do, damned if you don't situation? Gregory S. Coleman: No, I completely disagree with that, Justice Souter. It not simply a matter of good faith. The use of race in government is so -- the Court has been so-- David H. Souter: But you make no distinction between race as an animating discriminating object on the one hand and race consciousness on the other. There is no way to deal with a situation like this any more than there is a way to deal with -- with setting lines in voting districts-- Gregory S. Coleman: --I also-- David H. Souter: --without pervasive race consciousness. That is not unconstitutional, and it seems to me that you are not observing that distinction in -- in your reply. Gregory S. Coleman: --I disagree with that as well, Justice Souter. There is a strong difference in what happened in this case. In partial answer to Justice Ginsburg's question, et al., this is not an issue where the -- where the city had before it and was making a determination that our examination is not job related. In fact, it is clear on the record that what the city said is, this comes to the wrong racial result, and, therefore, there must be something wrong with the test. When pressed-- Anthony M. Kennedy: Well, let me ask you this -- this question, and I don't mean to interrupt your answer, but it is based on what Justice Souter and Justice Ginsburg have both been asking. Hypothetical case: The city says, our test is not very good. We need a new test. The expert says, don't pay us to have a new one. There are two great ones out there. One is in City A. The other is in City B. Use either one of those. They are great. They check. They find out that City A has a disparate impact in the statistical sense, not in the legal sense; that it disadvantages minorities, at least if you look at the passage rates. The other test doesn't. Are they permitted to take the test that doesn't have that differential? Gregory S. Coleman: --Under our alternative argument, Your Honor, assuming that -- that fixing disparate impact can be a compelling interest, we believe that you would at least have to demonstrate a strong basis in evidence to show that there is liability under (k) ( 2) -- your -- your example-- Anthony M. Kennedy: My -- my question is -- and you can answer, I guess, both under Title VII and -- and under the Fourteenth Amendment. The city says, the only reason -- the only reason for our selecting the test from City B -- and both tests are very good tests -- is because minorities are better represented on the passing rate. Is that permissible? Gregory S. Coleman: --Under the Armstrong basis of evidence test, it might very well be because it meets the second qualification of the disparate impact statute, in which there is a specific alternative that is equally valid. If you are -- if you are going to assume that it can be shown to be equally valid and that it has less disparate impact-- Anthony M. Kennedy: And do you find -- and do you find any constitutional deficiency in the city's choice in that hypothetical case? Is there any Fourteenth Amendment problem? Gregory S. Coleman: --Well, we are certainly quite troubled that the Court would say, as it has not said, that the idea of -- of overcoming purely unintentional discrimination can be a compelling interest for cutting off what we believe is intentional discrimination. But barring that, our test, our backup test, is then that the strong basis in evidence test that exists from Wygant and Croson would at least in its -- require that you have a strong basis in evidence for demonstrating liability under this-- David H. Souter: Well, what -- what if you've got -- what if you've got the basis of Justice Kennedy's hypothetical? You've -- you've got a municipality. It's a racially mixed municipality. It's got two tests. That's his hypothetical. One of them seems to suggest that there is going to be a significant racial disparity in the results if they use it. The other one from the other city or the other State suggests not. That's all they've got to go on. Is that a strong basis in evidence, or did they walk their way into a lawsuit by you if they adopt the -- the test that doesn't -- that at least in the other place hasn't produced the disparity? Gregory S. Coleman: --Under that argument, as long as it can be demonstrated to be equally content valid, equally or better content valid and to have a lesser impact, then it would show -- it would establish a stronger-- Antonin Scalia: They would not have discriminated against any particular-- Gregory S. Coleman: --That's -- that's correct, Your Honor. Antonin Scalia: --white or -- or majority applicants in -- in that selection, which is what occurred here. You had -- you had some applicants who were winners, and their -- their promotion was -- was set aside. That doesn't exist in these hypotheticals at all. It's just an abstract question of which of these two systems should be adopted. Gregory S. Coleman: Well, I understood Justice Kennedy's hypothetical to be after you have taken a test and building upon the hypothetical. Ruth Bader Ginsburg: It wasn't my-- Anthony M. Kennedy: No. It was-- Gregory S. Coleman: It was-- Anthony M. Kennedy: --It was designed to show, and maybe it's theoretical, but I want to know the answer so that I can understand this case. It's designed to ask you the question whether or not race consciousness is ever permissible. Gregory S. Coleman: --If -- if in your situation is simply in your situation the initial giving of the test, can you choose between those two tests, then we believe based upon what the Court has said in the past that a city could do that. Stephen G. Breyer: A city can in fact choose a test simply because there will be more minority people who will in fact end up in the positions, that's your view? Gregory S. Coleman: Well-- Stephen G. Breyer: You needn't do anything else? I mean, that is your answer to Justice Kennedy? Gregory S. Coleman: --Nobody can know in fact-- Stephen G. Breyer: I want to know is that your answer to Justice Kennedy or not? Gregory S. Coleman: --Under that hypothetical, we believe they can choose that test. John G. Roberts, Jr.: Are you assuming-- Stephen G. Breyer: The answer is yes. John G. Roberts, Jr.: --Are you-- Stephen G. Breyer: If that's so, what's the difference here? The most that you're saying is the worst that could have happened here; the worst that could have happened is that some experts told them, this test -- by the way, test one is -- is even worse than in Justice Kennedy's hypothetical. It's a test that probably discriminates negatively against minorities. So if you admit he could do it even if the test didn't discriminate negatively against minorities, namely test -- in his case, why can't you do it triply, in the case where there's evidence that they did discriminate, the test does discriminate against minorities? Gregory S. Coleman: Two very strong differences, Justice Breyer. First of all, our -- our firefighters had already taken the test; they had earned their promotions under state law. There was nothing left to do but to ministerially certify the lists, all right? The second difference is this. The only-- Ruth Bader Ginsburg: --Well, that can't be right if they -- if what you just answered to Justice Kennedy is -- is right. Suppose they had very strong evidence that the test that they had given that had these results, just as my physical fitness test that excluded all women -- that had it those results, it wasn't job-related, and there was a better test available, they wouldn't have any vested right in getting the promotions under those circumstances, would they? Gregory S. Coleman: --We're not claiming that it's a vested right. What we're claiming is that sometimes the Court has permitted governments to use race to remedy discrimination, and what would be needed in that hypothetical, Your Honor, is -- is the discrimination; and under your hypothetical there might very well be a strong case of discrimination, but under these facts there is no evidence in this record, and the city conceded below and never asserted in its bio in this case that it had any basis to contest the job-relatedness of this examination or these examinations that were given. That is not part of the record in this case. The-- Antonin Scalia: What -- one of the briefs said that, and maybe it wasn't done below, but one of the briefs said part of the claim is that some of the things that this test tested for were not -- were not qualities or abilities that were needed in New Haven, although they might be needed in other fire departments. The test had not been localized. Wasn't that part of the -- part of the objection? Gregory S. Coleman: --No, Your Honor, not in the district court. If you look at 1024a of the Pet. App., the city's lawyer in front of the district court and in its pleadings on summary judgment very clearly states that they didn't believe the job relatedness is even relevant to the case. All that they needed was good faith. They didn't need job relatedness, they didn't need an actual alternative, which is the basis of some of the hypotheticals you're giving. All they need is good faith. Ruth Bader Ginsburg: Then why did they have the testimony before the Civil Service Board, about -- somebody from another testing company said this is a multiple choice test; it tests rote memory; we could have come up with a test that would better test the skills needed to be -- nothing about the localization, but something about command presence. There was a term used, assessment centers; that this test didn't effectively test the skills that you needed on the job, and others did. Gregory S. Coleman: Justice Ginsburg, that's not at all what Mr. Hornick said in front of the Civil Service Board. What he said is first, I didn't look at the test; two, I looked at the results and I see disparate impact; three, I'm not going to tell you what exams we gave, but I'm mentioning this thing called an assessment center, but I could design a better test, not having even looked at this test. But at the end of the day he also said, I think you should go ahead and give these promotions and in the future maybe you could fix your test. He didn't say here's an alternative; here's why this would be equally valid, here's why -- excuse me -- here's why this would have lesser impact. He simply said there is a concept called an assessment center, and I think that that might help you in the future, but you should go ahead and give the promotions on this test. Same-- John G. Roberts, Jr.: --Counsel, some time ago you said you had two answers to Justice Breyer's question. I would like to hear the second one. Gregory S. Coleman: --Well, I actually think I got to the -- the first. Stephen G. Breyer: If you got to that, then I have -- I'd like one follow-up, and that's it. [Laughter] John G. Roberts, Jr.: Maybe if you don't mind, you could remind me what the second answer was. Gregory S. Coleman: Again -- again, getting to the -- the fundamental point is, the use of race is so, so very important that the Court has always expressed skepticism and hostility to it, and what we're saying under this argument regarding a strong basis in evidence, and I think this answers both your hypothetical and Justice Souter's, is that what the city is saying, we don't have to demonstrate a strong basis in evidence for liability, we concede that we don't have that; all we have is good faith. And that's not enough. That leads-- David H. Souter: But you are -- as I understand it, you are imposing your strong basis in evidence test on what you referred to a second ago as the use of race, and that cannot be correct, because the use of race includes race-conscious decisions which are not discriminatory decisions, and they certainly do not implicate the -- the obligation that you want to impose. You -- if -- if your argument is going to be coherent with what we start with, it can't be based merely on the use of race because if it does, then you are, in effect, turning any race-conscious decision into a discrimination decision, and that equation we certainly haven't made and we're never going to make. Gregory S. Coleman: --That's not our intention, Justice Souter. David H. Souter: Then-- Gregory S. Coleman: Our argument is clearly that this is not race-conscious, that it is race-based. The only determination that the city made is we don't like the results of this test; there must be something different that we can do; and we don't need to demonstrate-- David H. Souter: --But even-- Gregory S. Coleman: --viability or strong basis in evidence. We can simply fix it. David H. Souter: --I don't want to turn this into just a rhetoric exercise, but I think the rhetoric is important. You say the city took the position, we don't like the results of this test. That kind of a statement is consistent with saying, look, we don't like the race of the people who are going to benefit from this. It's also consistent with the city's taking the position that there is such a racial disparity here that we are either asking for trouble or walking blindly or perhaps foolishly into a -- a racial disparity lawsuit based on disparate impact. Those are two very, very different attitudes. The first one is discriminatory. I don't see how the second one is discriminatory. Gregory S. Coleman: But it -- it clearly is, Justice Souter. I think the distinction we're making in part is this principle of individual dignity that the Court has recognized is so strong distinguishes the hypothetical that Justice Kennedy gave me from -- form the example that we have in this case where they had already taken the test; identifiable individuals had earned their promotions; and then the city says too many non-minorities passed this test, and we are going to scuttle these results based on identifiable individuals who have passed and not based on any -- anything approaching a demonstration that there is actually any disparate impact liability. David H. Souter: But the cost of drawing the distinction between this case and Justice Kennedy's hypothetical example is that if we draw that distinction, the only way the city can get itself out of not only a certain lawsuit, but quite probably a successful lawsuit, is to make, in practical terms, a preliminary case against itself. Gregory S. Coleman: I-- David H. Souter: And it -- I cannot conceive that Congress intended to put a city into that situation saying you've either got to blunder ahead into a losing lawsuit in court, or you have got to stop and expose yourself to another lawsuit which you can only win by proving that you at least had taken some steps in violating the law the first time. That is inconceivable. Gregory S. Coleman: --Justice Souter, I understand the concern about the employer's point of view, which we don't think stands here just because of the blatant way the City went about this. But in general terms we're not asking, contrary to Wygant, contrary to Croson, that you prove up a claim against yourself. But what we are saying is that the standard cannot be so light that the City very lightly and without any demonstration whatsoever that there might actually be liability here, based simply on the numbers, can say well, we're going to avoid liability and we're going to favor the minority group over the non-minority group. All we're asking for is that the City undertake an honest and -- and open assessment of are we really likely to be liable here under the disparate impact provision of Title VII. Stephen G. Breyer: What do you do if there is not a liability in question? Suppose a school district deliberately, to obtain greater racial diversities in the schools draws district boundaries in a particular way among neighborhoods or plans a construction program. Then suppose having done that, indeed having once drawn the boundaries, a group comes to the school district and says you can achieve greater diversity if you redraw the boundary. You can achieve greater diversity if instead of building this school where the -- where the foundations are laid already, you build the school over here instead. Is that, in your view, different from your case? Gregory S. Coleman: I think-- Stephen G. Breyer: It is? How? Gregory S. Coleman: --I think it is. I think you're giving examples from Justice Kennedy's-- Stephen G. Breyer: That's just what I'm doing exactly. Gregory S. Coleman: --It's -- it's really isn't different from Justice Thomas also had an example in Grutter. These are-- Stephen G. Breyer: But I'm interested in the distinctions, not whether it's similar to Justice Thomas's or not. I'm interested in the distinctions between this program -- I'll add one more if you want just this program, an employer-- Antonin Scalia: Can I hear his answer to this one first? I'm getting confused. [Laughter] Gregory S. Coleman: --I think the Court is certainly not fully in agreement on these questions, but the Court has at least an opinion suggested that those types of examples really are more of -- as Justice Souter, you were saying, the race-conscious type determination, and they don't violate this principle of individual dignity. You're not taking individuals one by one who have already earned promotions, and you're taking away benefits from them clearly on the-- Stephen G. Breyer: --And the difference between that and drawing the school district boundary, which takes from the individual children who live in that neighborhood the right to go to this school, which they think is a better one, and sends them to that school, which they think is a worse one, the difference between changing that boundary and changing the exam is what? Gregory S. Coleman: --The difference that the Court, I believe, has suggested is that that type of a redrawing is likely to include a number of traditional redistricting factors and that race in that instance, unless it was shown to ultimately predominate, would not make it a race -- or, excuse me, a race-based effort that would violate equal protection. I believe that's-- John Paul Stevens: May I ask you one question-- Gregory S. Coleman: --Of course. John Paul Stevens: --because I'm not sure I understood your answer to Justice Kennedy? What is your answer to Justice Kennedy's question about the two alternatives, one of which would fit exactly into the concluding clause of the first question presented to achieve racial proportionality in candidates selected? He says there are two alternatives before the school board, one would achieve the proportionality, the other would not. Are they free to choose the former? Gregory S. Coleman: Again, assuming that no test has previously been given, if there are two tests, they are equally valid, one can be demonstrated to have lesser disparate impact, if there are no other circumstances, then we think they could likely under that test-- John Paul Stevens: They could take that test, even though its sole purpose was to achieve racial proportionality in candidates selected? Gregory S. Coleman: --I disagree that its sole purpose would be for that reason, Justice Stevens. As long as it meets the other criteria for job relatedness, it would still be fulfilling the City's necessary needs for -- for identifying quality candidates for making sure-- John Paul Stevens: This is the -- putting to one side liability in the lawsuit, is the interest in avoiding disparate impact a valid State interest? Gregory S. Coleman: --We certainly have taken the position if disparate impact is identified purely as unintentional discrimination, then we don't believe it's a compelling State interest to overcome-- John Paul Stevens: I didn't say compelling. I said is it a valid State interest. Just the interest in avoiding the kind of results you got here. Gregory S. Coleman: --I'm not sure that we are questioning whether there's a State interest in-- John Paul Stevens: The City is not merely trying to avoid liability, they are trying to avoid a disparate impact. Is that a valid interest? Gregory S. Coleman: --If the disparate impact is caused by something that could be demonstrated to equate to discrimination on behalf of the entity, which is what the elements of-- Ruth Bader Ginsburg: But I thought the whole idea of disparate impact is it's unintentional, that's the assumption, disparate treatment, intentional discrimination, disparate impact, unintentional, but it has askewed racial results. Gregory S. Coleman: --There are two aspects to that, Justice Ginsburg. The first is that you may have disparate impact if it is caused by unintentional discrimination. But you may have disparate impact that occurs through no discrimination, intended or otherwise. And Watson clearly recognized that. And when Watson said we need to have strong evidentiary standards in evaluating disparate impact liability, it was recognizing that employers can't act simply to fix numerical disparities, because otherwise that leads to soft quotas. What we need is some demonstration that there is at least discrimination on behalf of the entity, and perhaps that's unintentional, perhaps it's not. Ruth Bader Ginsburg: How do we know whether something is discriminatory or just that it will have a certain effect? Because it's in spite of. For example, the Greek standard, the employer wants everybody to have a high school diploma, he wants an upgraded working staff, was told by this Court you can't do that because you would disproportionately exclude one race. Gregory S. Coleman: Congress has spoken on this issue, has identified job relatedness and lack -- and the refusal of an alternative in K itself. We believe this is with the provisions we have cited, H, J and L, all in which Congress expressed a strong intent to favor tests. If I may reserve the balance of my time, Your Honor. John G. Roberts, Jr.: Thank you, Mr. Coleman. Mr. Kneedler. Edwin S. Kneedler: Mr. Chief Justice, and may it please the Court: This Court has long recognized that Title VII prohibits not only intentional discrimination but acts that are discriminatory in their operation. John G. Roberts, Jr.: With respect to both blacks and whites, correct? Edwin S. Kneedler: Yes. John G. Roberts, Jr.: So, can you assure me that the government's position would be the same if this test -- black applicants -- firefighters scored highest on this test in disproportionate numbers, and the City said we don't like that result, we think there should be more whites on the fire department, and so we're going to throw the test out? The government of United States would adopt the same position? Edwin S. Kneedler: Yes, and let me -- your question had two parts of it. You said there are too many blacks or too many whites. That is not a permissible objective under our view. The employer's action has to be tied to a concern about a violation of the disparate impact of-- John G. Roberts, Jr.: Yeah. Edwin S. Kneedler: --under -- under Title VII. John G. Roberts, Jr.: That's the part I don't understand. What you're saying is that the department can engage in intentional discrimination to avoid concern that they will be sued under disparate impact. Why doesn't it work the other way around as well? Why don't they say, well, we've got to tolerate the disparate impact because otherwise, if we took steps to avoid it, we would be sued for intentional discrimination? This idea that there is this great dilemma -- I mean, it cuts both ways. Edwin S. Kneedler: Well, to -- to say that an employer violates the disparate treatment provision of Title VII when it seeks to -- when it acts for the purpose of complying with the disparate impact provisions of Title VII would be to set those two mutually reinforcing provisions of Title VII at war with one another, contrary to-- Antonin Scalia: They are at war with one another. Edwin S. Kneedler: --No, I don't think so. Antonin Scalia: How can one avoid-- Edwin S. Kneedler: One of the purposes of -- of the disparate impact test, as this Court has recognized, is -- is as a prophylactic against intentional discrimination, to root it out; also, as this Court said in Watson, to identify possible instances of subjective or -- excuse me, subconscious discrimination, and in some cases, to break down barriers that have existed in the past, for example, possibly the 60/40 weighting requirement that was under longstanding collective bargaining agreement. The disparate impact test has been recognized since Griggs as fundamental to fulfilling the purposes of Title VII. Title VII also has another important objective, as this Court has repeatedly recognized, which is that the voluntary compliance is the preferred objective -- excuse me -- preferred means of achieving the objectives of Title VII. Employers therefore require considerable flexibility in assessing their practices and deciding on appropriate action if it looks like one of their actions -- their practices would violate-- Antonin Scalia: --If it looks like or if the employer just in good faith believes? Edwin S. Kneedler: --We think -- we think-- Antonin Scalia: When I say they're at war with one another, I mean they become at war with one another when you say that all that is necessary to permit intentional discrimination is the employer's good faith belief that if he didn't intentionally discriminate, he'd be caught in a situation of disparate impact. Edwin S. Kneedler: --Well, this-- Antonin Scalia: At that point, they're at war with each other. Edwin S. Kneedler: --Well, in -- in our view, the -- in -- in the situation here where the -- where the test has been given, and there is a list produced, we believe that the -- in order to avoid summary judgment and a disparate treatment case on a claim of intentional discrimination, the employer would have to show that his concerns were reasonable ones. It has to be-- Ruth Bader Ginsburg: How does that-- Edwin S. Kneedler: --more than simply a disparate-- Ruth Bader Ginsburg: --I know you said that in your brief when you made a distinction between mere good faith and reasonable belief. So how does one determine whether the concern that the employer is expressing is really in good faith or is reasonable? What are the indicia of reasonableness? Edwin S. Kneedler: --I -- for example, a -- a gross statistical disparity. A statistical disparity makes out a prima facie case under Title VII. We're not saying that in all cases simply a statistical disparity would be sufficient. A gross statistical disparity could lead the -- the employer to believe that something was wrong with the test. So I think -- but in addition if the employer has concerns about the validity of the test -- as you pointed out, concerns were expressed to the Civil Service Board in this case. Samuel A. Alito, Jr.: Mr. Kneedler, could you explain how summary judgment in favor of the defendants on the Title VII disparate treatment claim can possibly be affirmed, even if the employer had reason to believe that the test that was given would expose itself to liability under a disparate impact theory? If that's not the employer's real reason for refusing to go ahead with the promotions, then isn't there liability under a disparate treatment -- under a disparate treatment theory, and that's a question for the jury? So how can we possibly affirm summary judgment here? Edwin S. Kneedler: Well, we're -- we're not suggesting that the Court should affirm summary judgment. We're -- we're suggesting remand. The District Court identified reasons other than complying with Title VII's disparate impact standard for the employer's action here, diversity and role model, promotion of role models which we do not see as falling within this framework. But if the only evidence that the plaintiff has that the employer took race into account was that the employer was aware, as obviously the disparate impact provisions require him to be, of the racially disparate impact of the test, and the employer acts in response to that, if that is the only evidence the -- the plaintiffs had, then the employer would be entitled to summary judgment. We think that the evidence-- Antonin Scalia: I'm sorry. Edwin S. Kneedler: --We think that evidence of pretext or evidence that there is something else has to be external or something other than-- Ruth Bader Ginsburg: Can you be-- Antonin Scalia: And a reasonable response to that, is your position? Edwin S. Kneedler: --Yes-- Antonin Scalia: Not just in response to that. Edwin S. Kneedler: --If it's-- Antonin Scalia: A reasonable-- Edwin S. Kneedler: --If it's not reasonable, then we think that that would be evidence of -- of pretext -- and-- Ruth Bader Ginsburg: --Can you be specific about what facts you think should be tried on remand? Because you do distance yourself from the Respondents. You are not urging affirmance of the summary judgment. You say there are or may be genuine issues of fact. So what are they? Edwin S. Kneedler: --Well, I think they go primarily to the district court's identification of diversity and -- and role models as possible motivations for what the -- what the employer was doing. The plaintiffs have also alleged that the -- that there was influence on the Civil Service Board external to the -- to the board's own decision. By the way, I should point out in this regard, at pages 166 and 167 of the Joint Appendix, the two board members who voted not to certify expressed concerns about the validity of the test based on what they had heard at the hearing. We don't think realistically a board in this situation should be required to do more, because it's important to recognize that the -- what the employer did here was not what concerned the Court in Wygant and cases like this. The Court -- the employer did not adopt racial classifications with all the potential for adverse consequences for individuals who are labeled by race and promote on the basis of race. That's not what the employer did here. The employer paused and decided that there might be another nondiscriminatory or less discriminatory means. In other words-- Anthony M. Kennedy: Well, counsel, you know, I've given law school examinations, looked at them, and bar examinations for years. There's never been one, when I don't look at it after the fact and say, you know, this could be better, this -- this was not quite right. So shouldn't there be some standard that there has to be a significant, a strong showing after the test has been taken that it's deficient? Before it can be set aside? Edwin S. Kneedler: --We -- we don't think so, and for several reasons. First of all, the action that the employer has taken in response, as I just said, is not a racial classification response. It is a facially neutral response where the -- where the employer has decided the test will -- perhaps we'll look for another standard which would be given and applied equally to all applicants. Antonin Scalia: --And you would say that -- and I'm asking the same question the Chief Justice asked earlier -- you would say that if it had come out the other way-- Edwin S. Kneedler: Yes. Antonin Scalia: --And if there had been a disproportionate number of minorities who -- who passed the test-- Edwin S. Kneedler: And-- Antonin Scalia: --You would say that it's neutral to set that test aside? Edwin S. Kneedler: --And we -- and we-- Antonin Scalia: I don't think you'd say that. Edwin S. Kneedler: --Well, we -- there also has to be some concern that the test may not be job-related and -- and that there may not be other alternatives. And we've been talking just about the prima facie case, but those are important elements as to whether the test is job-related. Antonin Scalia: It's whether it is -- it is neutral to set aside a test simply because one race predominates. Edwin S. Kneedler: No, but the -- but the-- Antonin Scalia: How you can call that race-neutral I -- I do not know. Edwin S. Kneedler: --It's facially neutral. I wanted to make the point that this is not the sort of intentional discrimination favoring one individual because of his race or disfavoring another. What the employer has done here is -- is responded to the impact of the test in general terms, not on specific-- Stephen G. Breyer: What do you think of an employer who does the following? He advertises a job. Everyone comes in and applies. He says May 1 is the deadline. When he sees the applicants, he thinks, I'd prefer more diversity. And solely because he lacks diversity among women, minorities, and whatever, he says, you know, I'm going to extend the deadline 2 months, and I hope I'll get a few more minority or female applicants. Now, what's his reason? He wants more diversity in the workforce. Now, in your opinion, does the Constitution permit that extension? Edwin S. Kneedler: --I -- I think that's a more difficult question, but there may -- there may be a situation where the employer is concerned that his recruitment or his job announcement has had a disparate impact in terms of the -- of the applications that he has gotten. In -- in that situation, the employees who have responded and may be advantaged, like the people promoted here may actually be taking advantage of a test that imposes barriers and disadvantages other people. So when -- when we consider the impact in a situation like this on somebody who has passed the promotion test, it's important to consider that the people who have passed it may have benefited from a test that is discriminatory. John G. Roberts, Jr.: Counsel, this may be the same question Justice Breyer asked, but I'd like something closer to a yes or no answer. Does the government consider promotion of diversity by itself a compelling state interest in the employment context as opposed to the school context? Edwin S. Kneedler: We think -- we think it probably is a compelling state interest, but it is not one that -- that can be advanced by race -- by racial classifications. And that -- and that is our basic submission here. This was not a-- John G. Roberts, Jr.: Can it be-- Edwin S. Kneedler: --This was not a-- John G. Roberts, Jr.: --Can it be advanced by taking actions to avoid what is perceived as a disparate impact? Edwin S. Kneedler: --Yes. John G. Roberts, Jr.: In other words, the disparate impact is regarded as something you can intentionally respond to by drawing racial distinctions solely because you would like a more diverse workforce? Edwin S. Kneedler: No, not drawing racial distinctions. That's our -- this -- the employer's response here did not draw racial distinctions. It did not say so many black firefighters would be promoted-- John G. Roberts, Jr.: It didn't care-- Edwin S. Kneedler: --and so many white-- John G. Roberts, Jr.: --It didn't care -- it had to draw racial distinctions because it looked at the test and said, we think there's a problem because of the racial makeup of who's going to get the promotions. Edwin S. Kneedler: --The employer was responding to the discriminatory test or what -- what it was reasonably concerned was a discriminatory test-- Anthony M. Kennedy: But it looked at the-- Edwin S. Kneedler: --not the individual-- Anthony M. Kennedy: --Counsel, it looked at the results, and it classified the successful and unsuccessful applicants by race. Edwin S. Kneedler: --It -- it-- Anthony M. Kennedy: And then -- and you want us to say this isn't race? I have -- I have trouble with this argument. Edwin S. Kneedler: --No, with respect, it did not classify according to race; it looked in general terms. It did not have the names of individual people. It looked in general terms at what the racial disparity of the test was. It just-- John G. Roberts, Jr.: It didn't look at names; it just looked at the label of what their race was. That's all they were concerned about. Edwin S. Kneedler: --Title VII's disparate impact test requires -- requires an employer to be aware of and respond-- Anthony M. Kennedy: But that's inconsistent with your answer to the Chief Justice who was exploring whether or not what we have here is a -- is a racial criteria, pure and simple, and you say, well, it's general. And then we point out that each applicant didn't have his name, but they had his or her race. Edwin S. Kneedler: --But the employer -- the employer was not making a decision to go forward and appoint individuals or promote individuals because of their race. The employer stopped there and said we're going to start over. That new test would be given equally to all employees, not any one particular employee. John Paul Stevens: Mr. Kneedler, can I ask you this? You -- you've recommended that we set aside the summary judgment and send the case back for a hearing. Edwin S. Kneedler: Yes. John Paul Stevens: What is the issue of fact that you think needs to be decided? Edwin S. Kneedler: As I've mentioned to Justice Ginsburg, I think it would go -- there are several things. One, it would go to the justifications that were advanced by, that identified by the district court here that do not fit into this framework, do not fit into complying with the Title VII disparate impact test, and those are promotion of diversity and -- and role models. That is -- that is one. Also the district court did not apply what we believe is the right test, whether the employer had a reasonable basis for believing that what it was doing was necessary or a reasonable basis to believe it might be violating the disparate impact test. If it did not have a reasonable basis then we believe there would be a triable issue for the jury. Ruth Bader Ginsburg: When -- when I asked that you question, you said that one issue of fact was whether the board was acting in response to improper influence, to racial politics. Edwin S. Kneedler: Yes. That -- the district court rejected that argument and whether or not that should be revisited on remand is -- is another matter. We're-- Antonin Scalia: Isn't that a controverted issue of fact? How can you possibly get around that? Edwin S. Kneedler: --Well-- Antonin Scalia: I mean, one side says what you say is just pretext; the real reason was just politics. Isn't that an issue of fact that has to be tried? Edwin S. Kneedler: --Well, under this -- under this Court's decisions dealing -- dealing with summary judgment, even on questions of intent, the -- the plaintiff ordinarily has to come up with some affirmative evidence that there was -- that there was in this case an impermissible racial motive to do that. And the -- the district court looked at what the civil service commissioners said and concluded that -- that they did not have an impermissible racial motive, that they were responding to concerns about the validity of -- of the test. Samuel A. Alito, Jr.: But does the government think that you can just -- in a case like this you can just look at what -- what is said by the ultimate decision-maker and ignore the input from other people who may have influenced the process? Edwin S. Kneedler: No, no, we do not. There may be other people who had input into the process, and whether the -- the district court evaluated that and concluded that the -- that the input, that there was not a triable issue for summary judgment -- to avoid summary judgment on that question. That would be open to the district court to reconsider on remand. We don't deny that -- that it could go beyond that, but our principal concern here is the analytical framework that an employer who seeks to comply with the disparate impact requirements of Title VII which have been longstanding should not be teamed to have engaged in the sort of intentional discrimination that either the Equal Protection Clause or Title VII prohibits. John G. Roberts, Jr.: Thank you, counsel. Mr. Meade. Christopher J. Meade: Mr. Chief Justice, and may it please the Court: Employers, both private and public, are required to comply with Title VII's disparate impact provisions, which seek to root out barriers to equal opportunity. When an employer learns that a practice has a severe adverse impact such that it creates an inference of discrimination, and evidence further supports that inference, the employer should be granted some limited degree of flexibility to act. An employer certainly should not be encouraged or forced to make a promotion on the basis of the questionable practice. Title VII's disparate impact provisions are designed to remove structural barriers to discrimination, and when an employment practice has an adverse impact such that it substantiates an inference of discrimination, an employer should look beyond that adverse impact. Samuel A. Alito, Jr.: If all the employer-- John G. Roberts, Jr.: Can I ask you-- Samuel A. Alito, Jr.: --If all the employer has is evidence that the test results violate the four-fifths rule, is that sufficient? Christopher J. Meade: In our view it is not sufficient, and that is not what was at issue here. First of all, there was a severe adverse impact, much lower than the four-fifths rule, much lower than what this Court found in Connecticut v Teal, and in addition, not just on the pass/fail ratio-- Samuel A. Alito, Jr.: Well, if I could modify the question. Is there some statistical point at which that's sufficient, if it's not four-fifths, if it's nine-tenths-- Christopher J. Meade: --Our view-- Samuel A. Alito, Jr.: --that alone would be sufficient? Christopher J. Meade: --Our view is that it might be conceivable under Title VII in some cases for the statistical disparity to be so severe such that it would give an employer a reasonable basis under Title VII. However, that's not what we argue here. We argue here that an employer should be able to act when it has a severe adverse impact which creates an inference of discrimination, coupled with evidence that creates doubts about the flaws in the test or the possibility of alternatives. John G. Roberts, Jr.: --Can I ask you to touch on the distinction between racial discrimination and race-conscious action? The actions that were taken in many of our cases, in Croson and Adarand, Parents Involved, Wygant, were obviously race-conscious actions; there was a reason that the governments in those cases were taking the action. It was because of what they saw as the impact on race. Yet we concluded that was racial discrimination. So what's the -- how do you draw the line between race-conscious that's permitted and racial discrimination that's not? Christopher J. Meade: Well, two answers, Mr. Chief Justice. First of all, this race consciousness is race consciousness that's mandated by Federal law. This is not a discretionary decision by an employer. John G. Roberts, Jr.: Well, but if we -- if we agree with your -- I mean, you're assuming, it seems to me in your argument, that the actions that they've taken here are not intentional racial discrimination; and of course if they're not, then you don't have much to worry about. But let's assume that they are, as we found they were in Croson and Wygant and Adarand and Parents Involved. Christopher J. Meade: Well, the difference in those cases that you talk about, Croson, Adarand, Parents Involved, they involve express racial quotas -- excuse me, express racial classifications, where the government is making a decision based on a particular individual on the basis of race. John G. Roberts, Jr.: And the only reason you say that isn't by an individual is that you have blacked out the names? Christopher J. Meade: No, because it's a facially neutral action which applies to all test takers the same. That doesn't mean-- John G. Roberts, Jr.: So your position is what? They threw out the test, so you would have no problem at all if they looked at those results and they were predominantly black rather than white; you would say the city can throw out the test and there's no racial discrimination there at all? Christopher J. Meade: --No, I would say that there's no classification. However, there's another way to trigger strict scrutiny and that comes under cases like Arlington Heights and Feeney, and the action that the -- the facially neutral action that the city took here falls under that line of cases. And then-- Antonin Scalia: I don't see how you can call it facially neutral. It's neutral because you throw it out for the losers as well as for the winners? That's neutrality? Christopher J. Meade: --There is no classification, because each individual, and -- when a particular individual is looked at and a decision is made on the basis of race, that is a racial classification. If-- John G. Roberts, Jr.: So this case would come out differently, if the list was there with then names and they go down and instead of saying throw out the test, they said Jones, you don't get the promotion because you're white; Johnson, you don't get it because you're white. And they go down the list and throw out everybody who took the test; then that would be all right? Christopher J. Meade: --Well, the point is, if all the tests are being thrown out and different decisions are not being made on the basis of different individuals on the basis of race, then-- John G. Roberts, Jr.: So they can keep -- they get do-overs until it comes out right? Or throw out this test; they do another test; oh, it's just as bad, throw that one out; get another one that's a little better, but not so -- throw that one out? Christopher J. Meade: --Well, two responses. The first response is a legal one, the second one is a practical one. As to the legal answer, if a city were to do that or an employer were to do that again and again, first of all, that would go to intent, whether the intent of the employer were actually to comply with Title VII or for some other intent. Second of all, it would speak to whether there are actually equally valid less discriminatory alternatives. Second, the practical-- John G. Roberts, Jr.: Well if -- how many times before it's a problem? Christopher J. Meade: --Well-- John G. Roberts, Jr.: You say if they did it over and over again. What if they did it twice here? Christopher J. Meade: --Well, that would be a question about whether they had a reasonable basis to do it. And I would say if they did it a second time, that could create an inference of discrimination. Ruth Bader Ginsburg: What -- what has New Haven done in fact? This certification was requested in March of 2004; we're now 2009. What has New Haven done in order to get lieutenants and captains in the fire department? Christopher J. Meade: Justice Ginsburg, this is information outside the record, of course. The -- the city has held tests for other positions, both written and oral, in assessment centers that have not had a severe disparate impact -- actually, that have not had an adverse impact at all under the four-fifths rule. And specifically for the lieutenants and captains, what the city has been forced to do is have temporary acting promotions on a rotating basis based on seniority. But the city has not gone forward with any promotions yet, and, in fact, the Petitioners in this case may in the end receive some or all of the promotions. But the city has a duty to make sure that its process is fair for all applicants, both black and white. Stephen G. Breyer: I have purposely gone, of course, to the concurring opinion because I believe it's the controlling opinion in Parents Involved, and there are two examples in that opinion. One is strategic site selection of new schools, i.e., a planned building, and the second is drawing attendance zones with a general recognition of the demographics. Those are given as examples of instances where there is race consciousness, but it does not trigger strict scrutiny. Now, why is your case like that rather than being like those examples where an employer or a government official picks particular people or uses quotas in order to get a certain quota or pay attention to race in an individual selection, both based on race, which clearly does require strict scrutiny? And if there is a difference, even then why is yours justified? Christopher J. Meade: Justice Breyer, there are two ways to enter strict scrutiny. One is a racial classification which makes different decisions based on different individuals on the basis of race. Cases like Croson or Wygant or even affirmative action plans are examples of making different distinctions based on different individuals on the basis of race. There is another line of cases about -- where there's a discriminatory purpose plus adverse impact on a certain group under the Arlington Heights line of cases. Here the Petitioners argue that there is an adverse impact on them. Of course, that depends on the assumption that there was, in fact, a valid test. But here, then, under that line of cases the question is: What is the discriminatory purpose? And this Court's cases are not clear about what a discriminatory purpose is under the Arlington Heights line of cases. However, the answer to your question is: Compliance with a Federal statute, even a race conscious Federal statute, cannot be deemed a discriminatory purpose under the Arlington -- Arlington Heights inquiry. It is very different. John G. Roberts, Jr.: Is that -- I am sorry. Is that correct if we -- we conclude strict scrutiny does apply under the Constitution? Compliance with a statute, looking at impact, is a compelling interest trumping strict scrutiny under the Equal Protection Clause? Christopher J. Meade: No, Your Honor. If strict scrutiny applies, then the question is: Is there a compelling interest? And complying -- complying with a Federal statute needs to be a compelling interest under the Equal Protection Clause. The reason is, otherwise, State and local governments would be in an impossible position of trying to determine whether they should-- John G. Roberts, Jr.: I guess it would go to how you construe the statute. It seems to me an odd argument to say that you can violate the Constitution because you have to comply with the statute. Christopher J. Meade: --Well -- well, I would disagree. That would only be true if there were some doubt as to the constitutionality of the disparate impact provisions. But here that -- this Court first articulated "disparate impact". Congress has reaffirmed that. Anthony M. Kennedy: Well -- well, but you are loading the -- the equation. The Chief Justice's question I don't think has been -- been fully answered. You are -- you are saying that you can eliminate constitutional concerns because the statute is enacted, which just repeats those same constitutional concerns. It's -- it's like having two tracks on the audio that don't quite fit. Christopher J. Meade: Well, I -- I may have misunderstood the question, but compliance with Federal statutes have to be a compelling interest as long as that -- that statute is constitutional. Now-- Antonin Scalia: Of course you're not saying that -- that the test is -- is compliance. You're -- you're saying the belief that it's necessary for compliance is a compelling State interest. Christopher J. Meade: --Or-- Antonin Scalia: I mean everybody would probably concede that if -- if continuing would clearly be in violation, of course, it's a compelling interest. But the issue here is: Is it enough if the employer simply worries that if he doesn't make the change, he may be in violation? Christopher J. Meade: --Well-- Antonin Scalia: What -- what's the line there? Christopher J. Meade: --Well, the line is set out by this Court's cases. So assuming strict scrutiny applies and assuming that compliance with Title VII is a compelling interest, then the question is whether an employer has a sufficient basis. And this Court's cases, both in the intentional and unintentional context, say that that's a strong basis in evidence, and so that would be the relevant test. This Court has applied-- Antonin Scalia: You acknowledge strong basis in evidence is -- is what -- what the city has to have? Christopher J. Meade: --Assuming that strict scrutiny applies-- Antonin Scalia: Right. Christopher J. Meade: --then, yes, then the city needs to have a strong basis. John G. Roberts, Jr.: Can I get back just -- just -- since I don't understand it yet, the distinction between intentional racial discrimination and race conscious action. I thought both the plurality and the concurrence in Parents Involved accepted the fact that race conscious action such as school siting or drawing district lines is -- is okay, but discriminating in particular assignments is not. Now, why is this not intentional discrimination? I understood you to say it was because you don't have particular individuals being treated on the basis of their race. You are going to have to explain that to me again, because there are particular individuals here. They are the plaintiffs, and they say they didn't get their jobs because of intentional racial action by the -- the city. Why is that not on the racial -- intentionally racial discrimination side rather than the permissible race consciousness side? Christopher J. Meade: Well, again, this is a question about what triggers strict scrutiny, and compliance with the Title -- compliance with the Federal statute should not be deemed a -- a discriminatory purpose. However, if strict scrutiny applies, then this Court's traditional strict scrutiny analysis is a way to test the decision. John G. Roberts, Jr.: Well, that -- you may be right that that's what the question is about. I still don't have in my mind from you a line about how we decide. Because there are many cases, Croson, Adarand, Wygant, Parents Involved, where we said action taken obviously because of race is nonetheless discrimination. So -- and then there are cases where we have recognized that race conscious action is permissible. Again, what -- when I look at something like this, how I do decide which side of the line that's on -- this is on? Christopher J. Meade: Well, again, all of those other cases involved discretionary actions by State actors, and those are -- were making decisions, trying to comply, trying to further various goals, and in those cases making a very express use of race that a particular individual -- when that person was looked at, whether in Croson, whether in Wygant, whether in Parents Involved, a particular decision was made as to that individual. John G. Roberts, Jr.: But just to take Parents Involved, it wasn't a necessary -- the driving factor was not a specific decision with respect to specific individuals. They didn't care whether it was Jones or Smith that they were citing. All they cared about was the race. And it seems the -- the same here. You maybe don't care whether it's Jones or Smith who is not getting the promotion. All you care about is who is getting the promotion. All you care about is his race. Christopher J. Meade: Well, the -- the difference there is that in that case, Jones and Smith, different decisions were being made on the basis of race such that there was a labeling on the basis of race. And here there is no such labeling because here there is a question about whether this process is in fact picking the most qualified individuals for the job. And that's what Title VII is designed to do. It is, yes, certainly a race conscious decision, a race conscious statute. But what Title VII is trying to do is to make sure that we don't perpetuate discrimination, albeit unintentional, and, therefore, to take away barriers that have existed over time and that continue to exist. Ruth Bader Ginsburg: When you say "take away barriers", one thing is not a hundred percent clear. Your position is we have to do this in order to avoid Title VII disparate impact liability. Are you not reciting as a justification either the diversity in police -- policing firefighting or still overcoming a legacy of the past where fire departments were among the most notorious excluders on the basis of race? You are not -- you are not saying rectification of past discrimination? You are not saying diversity? Christopher J. Meade: We're not saying that. We did not say that below. And, in fact, the board members who voted against certification cited flaws with the test and flaws with the process, and that was the basis for their failure to certify. And the problem with a discriminatory test is that it does not set a level playing field. It may create an illusion of meritocracy, but the problem is it not only disfavors certain individuals, but on the flip side, it also necessarily advantages others-- John G. Roberts, Jr.: You just referred-- Christopher J. Meade: --and therefore-- John G. Roberts, Jr.: --I'm sorry. You just referred to a discriminatory test. What you said in the district court, and I quote, the issue is not whether the tests were valid. Are you just changing positions on that? Christopher J. Meade: --No, not at all. The ultimate validity of the test, our position below, was not relevant; the question is what was before the board. And the board heard 5 days of testimony over 2 months. And as I mentioned, the two individuals who voted against certification cited concerns with the test and concerns with the process, and that was the basis for their decision. Ruth Bader Ginsburg: What do you mean by-- Anthony M. Kennedy: I'd like to talk just briefly-- John G. Roberts, Jr.: Justice Kennedy. Anthony M. Kennedy: --I would like to talk just briefly about this point that the -- some of our hypotheticals where the test hadn't been given yet. Here the test has been given. And I had some concerns along the line of Justice Ginsburg's question. She said, well, it's not a vested interest. On the other hand, 2000e-(l)( 2) says that test results can't be altered. There's a statutory interpretation question of whether that means they can't be used altogether. Two points about the statute. Number one, doesn't that diminish at least the force of the argument that this is a vested interest? It means the tests are -- have a -- have a certain presumption in -- in their favor. Secondly, on -- and maybe this is a question for the -- for the Petitioners rather than you. If we -- let's assume that we relied on that statute and said that there's a Title VII violation here because the statute was violated. I know you have an interpretational argument there. Would that give the Petitioners all the relief they need here, or is there still additional relief under their 1983 cause of action? Christopher J. Meade: To answer your first question, the question of statutory interpretation, I would disagree with the suggestion that that gives support to the Petitioners' side, and for the following reason: Congress made a careful judgment about what can and can't be done once tests have been administered, and it told employers it -- it can't alter the scores when those scores are being used. And in -- what that-- Anthony M. Kennedy: It can't alter the results. But let's not get into the statutory interpretation-- Christopher J. Meade: --But the -- but the point is that that ties the hands of employers so that the employer, in fact, is limited in what it can do. Just because a test has been administered doesn't mean that Title VII's disparate impact provisions suddenly disappear. And as a number of lower courts have stated, there's no entitlement to be promoted on the basis of a flawed or discriminatory test. The problem is, the alternative is to force employers to go forward and to use a discriminatory or a potentially discriminatory test. That has two problems. First, it's inconsistent with the goal of merit-based selection; and second of all, if it turns out that there is, in fact, discrimination, a court then needs to undo that discrimination. A court will often need to use racial quotas or set-asides to try to undo or to remedy the discrimination that has happened. So it's much better for an employer to stop, to not go forward with discrimination, even after the test has been used, rather than to rush forward and to create potentially further discrimination and a more aggressive use of race down the road. Another problem with creating a high standard is it will discourage employers from removing barriers to equal opportunity. For example, with respect to an ongoing practice, if an employer learns that that practice has a disparate impact, but is not sure one way or another, and gets rid of that provision, under Petitioners' theory that employer will necessarily be liable to either blacks or whites. The only way that it can defend against a lawsuit by whites would be to argue that it was, in fact, violating the disparate impact rights of black Americans. John G. Roberts, Jr.: What type of -- what type of other things are you talking about there? Christopher J. Meade: I mean, it could -- could be, for example, if there were a five-part training program that the City or an employer set up, and individuals may have completed some portion of the training program such that there would be similar reliance interests like the-- John G. Roberts, Jr.: Well, the question, I guess, would be whether the program was valid or not under the traditional approaches you take under Title VII. Christopher J. Meade: --Exactly. But then the question is whether you're forced-- John G. Roberts, Jr.: So does your position here depend on a conclusion that this test is invalid? Christopher J. Meade: --No, it doesn't. The question is whether the employer had a sufficient basis at the time of its action to make a determination that the test should not be used. Samuel A. Alito, Jr.: And why didn't it have a sufficient basis here? It -- it chose the company that framed the test, and then as soon as it saw the results, it decided it wasn't going to go forward with the promotions. The company offered to validate the test. The City refused to pay for that, even though that was part of its contract with the company. And all it has is this testimony by a competitor, Mr. Hornick, who said -- who hadn't seen the test, and he said, I could do a better test -- you should make the promotions based on this, but I could give you -- I could draw up a better test, and by the way, here's my business card if you want to hire me in the future. How's that a strong basis in the evidence? Christopher J. Meade: Well, first of all, the City did not act on the basis of numbers alone. It had 5 days of hearings where it heard from stakeholders on all sides. And it heard numerous flaws in the test at those hearings. For example, there were arbitrary weightings of the scores which had no scientific basis; the company skipped critical design steps in the process; and although this was not before the board, it later turned out that there was no calibration in either the cut-off score or how the test was ultimately going to be used. Previous tests had a much less severe adverse impact. This test was an outlier. Samuel A. Alito, Jr.: What difference does the cut-off score make? Christopher J. Meade: The difference of a cut-off score is a determination, a scientifically based determination to determine who is qualified and who is not qualified for-- Samuel A. Alito, Jr.: Well, I understand that, but the people at the top would -- the problem here was not the composition of the people who scored above the cut-off, was it? It was the composition of the -- of the people who would be eligible for promotion under the "rule of three"? Christopher J. Meade: --Well, two responses, Justice Alito. First of all, as to the pass-fail rate, that could create a separate disparate impact violation under Federal law. So that was relevant for separate purposes. But in addition, it's also true that the test was not calibrated for use for rank ordering, to ensure that a 93 was better than a 91. And this was a special problem because of an intervening decision by a court that was -- that was rendered after the tests were designed, after the tests were taken, after the tests were scored. There was -- there's no evidence that the tests were precise enough to be able to determine who -- who should rank higher versus lower based on those scores. And the amicus brief of the human resources -- human resources professionals points out this point. John G. Roberts, Jr.: So your response to me that you don't have to show that the test is invalid, your argument is you just have to show that there's a basis for being worried that it might be invalid. And then it seems to me the only distinction is how high a showing you require. And you reject the idea that you have to show a strong basis in the evidence? Christopher J. Meade: Yes and no-- Antonin Scalia: I thought you just said that. I just thought you just -- I was -- almost wrote it down. [Laughter] David H. Souter: I think your phrase was -- I think-- John G. Roberts, Jr.: I understand from -- I guess I should say I understand from your brief if not from your argument that-- Christopher J. Meade: --No, no. John G. Roberts, Jr.: --You agree with the strong basis in fact standard? Christopher J. Meade: To answer in a way that's consistent to -- to both of you, the answer is if the test is under Title VII, strong basis should not be the standard. This Court has never indicated that it should be. And that would be much too high of a standard to place on private employers. However, if this Court concludes that strict scrutiny applies, which we think it should not, but if this Court concludes that strict scrutiny does apply, then, yes, we agree-- John G. Roberts, Jr.: So I guess, my -- so my -- your position is that you should never have a strong basis in fact standard, because you don't think strict scrutiny should apply, and you think if it's under Title VII, it's only reasonableness? Christopher J. Meade: --That's correct. John G. Roberts, Jr.: So your position is that the city -- the -- the government can take action without -- only if it's reasonable. It's a reasonable view of whether or not they might or might not be liable. That's the standard. And then they can engage in race-based action? Christopher J. Meade: We agree with the government's articulation of the standard of reasonable basis. Again, I would-- David H. Souter: --But does it have to be reasonable basis to believe they would be liable if they went ahead? Or can reasonableness refer to something other than the probability of or the -- the likelihood of liability? Christopher J. Meade: --I agree that it could be something less than that. And if-- David H. Souter: Okay. John G. Roberts, Jr.: Well, what is something less than that, that they might be sued? Christopher J. Meade: --No, not that they might -- might be sued. Again, this is, just in the Title VII context, so this will affect all private employers, some of which will be small employers where a single human resource professional will be trying to make the determination. There won't be hearings as there were in this case. And the question is sometimes a severe prima facie case could be sufficient under Title VII, not under the strong basis standard, but potentially under Title VII. And if a human resource professional or if an employer had a belief that further investigation could yield evidence of a Title VII violation, that would be sufficient under the reasonable basis standard. John G. Roberts, Jr.: Isn't that -- isn't that kind of a blank check to discriminate, if all they need is a reasonable basis to think that further investigation might be useful? Christopher J. Meade: No, it's not because this is a way to reconcile, under Title VII, the two provisions of this statute. However, in this case-- John G. Roberts, Jr.: No, I'm sorry -- that's an answer about why it would be okay. I'm just saying, isn't it in fact a blank check? Christopher J. Meade: --Well, I would disagree. No, it is not a blank check. John G. Roberts, Jr.: But-- Christopher J. Meade: Here, however, we had much more. There was a strong basis in evidence here. This Court, under the strong basis standard, has suggested that a strong basis is met when the threshold conditions for liability are met. That's what this Court said in Bush v. Vera, a plurality in Bush v. Vera, as well as Abrams v. Johnson. The question is how to apply that standard to this case. That standard would suggest that a prima facie case, which, again, is not just adverse impact alone, but it's adverse impact that creates an inference of discrimination could be enough. Here we have not just that, not just-- John Paul Stevens: Mr. Meade, let me -- let me go back to one earlier question. Suppose everybody agrees that you're right on the -- on the record here now, and the City goes ahead and does another test, with all the advantages and studies they've made and so forth and so on, and it turns out you just had an unfortunate selection of candidates, and they come out exactly the same way. Would you agree that at that time the City would have to certify the results? Christopher J. Meade: --Assuming that it was a test that was valid-- John Paul Stevens: It's a test they made after talking to everybody who testified in this case and filed amicus briefs and everything else ---- [Laughter] And they came out, and it turned out exactly the same results. Christopher J. Meade: --Absolutely. If the Petitioners-- John G. Roberts, Jr.: --I'm sorry-- John Paul Stevens: Absolutely what? [Laughter] Christopher J. Meade: --Absolutely yes. Antonin Scalia: Absolutely positively? [Laughter] Christopher J. Meade: Absolutely positively. John G. Roberts, Jr.: --I still -- I still don't have absolutely yes -- of what? Christopher J. Meade: Yes, because-- John G. Roberts, Jr.: Yes, they can-- Christopher J. Meade: --Yes, they -- they need to certify the -- the results. John Paul Stevens: They would have to certify it. Christopher J. Meade: They would have to certify the results. Sorry I was unclear. They would have to certify the -- the results. The question here is whether there is in fact a fair process. It's-- John G. Roberts, Jr.: --Well, just to get back to your answer to Justice Stevens, you say they'd have to certify it. You say that, in that situation, the decisionmaker could not have a reasonable basis for thinking further investigation is required. Why? Just because the second test came out the same way? It's not at all reasonable to think they ought to look at it further? Christopher J. Meade: --Well, not on the basis of -- of the investigation that Justice Stevens, I understood, hypothesized, as part of the example. Samuel A. Alito, Jr.: And that would be so, even if another Mr. Hornick showed up and said, I could ---- [Laughter] I could make a better -- I could make a test? And here are some problems with this second test that you gave? Christopher J. Meade: Again, having gone through all the different examples that Justice Stevens said, at that point then -- then it would be -- the City would need to go forward with the test. John G. Roberts, Jr.: Thank you, counsel. Christopher J. Meade: Thank you. John G. Roberts, Jr.: Mr. Coleman, to keep the time even here, I think you have 8 minutes. Gregory S. Coleman: There's another statute that the Court ought to consider in the Title VII context, and that's section 2000e-7, which says that Title VII will not overrule and pre-empt State law unless there is a violation of Title VII. In asserting that, under any reasonable basis, as long as they have a reasonable basis, they can dispense with all the provisions of Connecticut civil service law, all these provisions that were put in place to get rid of cronyism, to get rid of discrimination can be set aside based on nothing more than a numerical disparity or perhaps a concern about the test we think cuts against Congress's intent in Title VII in respecting these State and local laws that are intended to ensure that employment practices are fair and that they choose and select those who are best qualified to put into these very important first-responder organizations. Stephen G. Breyer: Do you -- I'm still back on -- a university decides that tenure requirements lead to fewer women professors, so they say as an experiment what we would like to do is not have them for a couple of years; see what happens. On your view is that unconstitutional? Because, after all, it will certainly mean that certain majority race assistant professors have now lost the promotion they otherwise would have. Gregory S. Coleman: I think consistent with the answer I gave you before, Justice Breyer, that based on-- Stephen G. Breyer: That it's unconstitutional? Gregory S. Coleman: --Based on that alone-- Stephen G. Breyer: Yes. Gregory S. Coleman: --No, it would not be. Stephen G. Breyer: It would not be unconstitutional? Gregory S. Coleman: It-- Stephen G. Breyer: And what about-- Gregory S. Coleman: --You're not taking away tenure from anybody. Stephen G. Breyer: --All right. Oh, oh. Gregory S. Coleman: You're just saying we want to change the tenure process. Stephen G. Breyer: But what we are doing is not giving the promotions to the assistant professors who otherwise would have job security. Gregory S. Coleman: The analogy to your analogy is that if we have a series of people who go through the tenure process that exists and it turns out, you know, we -- we don't like the results, and-- Stephen G. Breyer: Oh, so. Gregory S. Coleman: --therefore we want to change it. Stephen G. Breyer: It's the result -- it's that you identify the person that makes your -- so in Texas, for example, they take the top 10 percent of all the high school graduates and put them in the university. Now, suppose they just decided, you know what we want to do? The top 5 percent. We want to see how that works. And, of course, then there are people who in fact would have gotten into the university -- and perhaps we can imagine a majority of the majority race -- and now they don't. Can Texas do that? Gregory S. Coleman: Well, you've chosen a very controversial subject. Stephen G. Breyer: I know that, but I -- I ---- [Laughter] That was not my objective. Gregory S. Coleman: If-- Stephen G. Breyer: I want to test out just what it is about this case. Gregory S. Coleman: --If -- if that is not done on the -- on the basis of race, then, no. The institution of the 10 percent rule itself, most people believe-- Stephen G. Breyer: Well, you said no. Can Texas do that or not? Gregory S. Coleman: --Likely, yes. The answer is-- Stephen G. Breyer: Yes. Gregory S. Coleman: --it can do it. Stephen G. Breyer: Okay. And the difference here precisely is what? Gregory S. Coleman: Is that, under State law, these individuals had gone through an existing process and had -- under State law, had been determined to be the most qualified candidates and, barring anything else, would have been promoted. So the classification that is made clearly does distinguish between those who are qualified for promotion and those who are not qualified for promotion and would not receive. It violates that -- that singular principle of individual dignity to have these individuals be told, on the basis of race, you're not-- Ruth Bader Ginsburg: But if it were shown that, in fact, this test was not job-related and, in fact, the majority of fire departments scotched this test years ago and substituted what most agree is a better test, even so you would say it would violate the rights of the plaintiffs you represent, even-- Gregory S. Coleman: --If-- Ruth Bader Ginsburg: --Even if there's strong evidence that it's not job-related and that there's a better test that doesn't produce these skewed results? Gregory S. Coleman: --I don't think that's what we've said, Justice Ginsburg. Under our alternative formulation in which the Court recognizes-- Ruth Bader Ginsburg: But what -- what would that do to the civil service merit system that says if you pass the test you should be certified? Gregory S. Coleman: --The difference is this, Justice Ginsburg: The example you have given would clearly satisfy or likely satisfy a strong basis in evidence that you are actually in violation of the disparate impact provision of Title VII. There are three prongs. The first is adverse impact; the second is that your test is not related; and the third is the existence of this alternative that is equally valid and that results in lower disparate impact. The City has never asserted -- and I hear it today continue to say, we don't have to show those other two prongs, that a numerical disparity enough may allow the City to conclude that there must be something wrong with the test. This kind of res ipsa loquitur theory of disparate impact is one that the courts have not recognized and that Watson said we cannot allow because it results in racial balancing and soft quotas based on disparate impact-- Stephen G. Breyer: But in your -- in my example, to go back, the thing you've identified, it seems to me, is Texas couldn't do this. It couldn't look at the class that they're going to choose with the 10 percent and say, you know, there are not enough minorities, I think we'll go to 15 percent this year. Gregory S. Coleman: --That I agree with, Justice Breyer. Stephen G. Breyer: It could not. And moreover, in the case of the tenure, what the school couldn't do is it couldn't say, looking over at the present tenured faculty and those who were just ready for promotion and who in all probability will be, we're going to go to the non-tenure system this year. Gregory S. Coleman: I also agree with that. Stephen G. Breyer: That they couldn't do that. And again you that say the ordinary employer across America who announces a deadline for getting in applications cannot, once it sees those applications, say, you know, there are not enough minorities. I want to extend the deadline. Gregory S. Coleman: That's also correct, Justice Breyer. Stephen G. Breyer: All right. And therefore this is a very far-reaching decision. Gregory S. Coleman: No, not necessarily, Your Honor. Okay, what-- David H. Souter: You are -- you are saying, as I understand it, that if the -- if the city in a case like this, prior to giving a test, looked at the test and says, wait a minute, this is going to produce really disparate results, they can stop, regroup, and think it through again and maybe come up with a different test. Gregory S. Coleman: --If-- David H. Souter: But if they don't realize that and they go ahead with the test, and they then see the -- the disparate results, it's too late. And it seems to me that the trouble with drawing that distinction is that the city is not in the testing business. They are unlikely to know what the results are going to be. So you're saying that the city that is -- that is prescient can adjust, the city that doesn't find out there's something wrong or at least undesirable from their standpoint until after the test results cannot readjust? Gregory S. Coleman: --I don't think that's our position, Justice Souter. The first case I think is the hypothetical Justice Kennedy posed to me. The second case, as we've been talking about, is that you identify the disparate impact after the test has been given. Under this alternative theory that would allow a -- an employer to respond, all we are asking under the strong basis in evidence test is that you not react out of a concern, or out of this mere reaction to the numbers, but that you then look, is the test valid? Do you have convincing evidence, in the words of Wygant, to form a strong basis in evidence that if you did go forward-- David H. Souter: But if they see it coming, they don't have to show a strong basis in evidence for changing the test prior to the time they give it? Gregory S. Coleman: --Consistent with what -- my conversation with Justice Breyer, if they see it coming and do it ahead of time, it doesn't violate that principle of individual dignity and that -- and doesn't discriminate against particularized and identifiable individuals. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

Earl Warren: Do you proceed first -- Leonard B. Boudin: No, I -- Earl Warren: -- in this one Mr. Boudin? Leonard B. Boudin: Oh, my apologies Your Honor. I'm sorry, I'm so custom to being the appellant here. Earl Warren: Mr. Lewin, if -- you may proceed. Nathan Lewin: Mr. Chief Justice, may it please -- Earl Warren: Could you answer -- could you respond to what Mr. McTernan just said? Nathan Lewin: So far as the stipulation is concern Mr. Chief Justice or the reference in the -- Earl Warren: Well, you might -- Nathan Lewin: -- in the -- both? Earl Warren: Oh, alright. Take both of them. Nathan Lewin: Well, let -- Earl Warren: Its clear there's a -- it wouldn't depart very far from this case, wouldn't it? Nathan Lewin: No, it wouldn't. Well, the stipulation would, I'd been hoping to address myself to it and I just didn't have the time. Earl Warren: (Voice Overlap) Nathan Lewin: So far as the stipulation is concern, I think we plainly concede that the statement in the stipulation that Mr. Travis did not "bear" a valid United States passport specifically endorsed to travel to Cuba could not or just standing there alone sustain a conviction if this Court were to conclude that the only way that you could violate Section 1185 would be if you had no passport at all when you left the United States. In other words, if Section -- if this Court would conclude that Section 1185 applied only to departures with either a revoked or expired or no passport whatever. In other words, we think that the statement in this stipulation prevents her conviction on that theory so that if we are wrong on our major argument here this Court would hold that we're wrong then we don't urge that her conviction could be affirmed. We do however urge that if the Court were so to hold we should be free to retry the petitioner on that ground and we think that that's plainly within Bryan versus United States. Speaker: (Inaudible) Nathan Lewin: Well, in other words, we think what that would be is that would be a failure, a really quite and accidental, I think failure of proof because of the construction of the -- because of the ambiguity of a stipulation as to a particular element of the offense which the Government did not believe it had to establish at the time this trial was conducted. Now, we think that's what Bryan versus United States in 338 U.S. held when it construed 28 U.S.C. 2106 to authorize a remand for a retrial and that's in effect what this Court did as to a substantial number of the petitioners in the Yates case in 354 U.S. so that so far as the stipulation is concern as I say, we would -- we concede that her conviction could not just simply be affirmed if our major position is rejected. On the other hand, we do think that we should be permitted to a retrial on this indictment which simply charges a violation of 1185 pretty much in its terms and to prove at such a retrial that she in fact had only a revoked passport and therefore if she did have only a revoked passport we submit she's no better off for having travelled to Cuba then if she had gone with the revoked passport to Paris or to London or any place else. The statute on its face plainly we think, prohibits that if it prohibits any. Earl Warren: And do that mean that the Government because the -- of the ambiguity of a statute, I mean, interpretation of it thought that it didn't this one necessary to be proved and didn't undertake to do it that we should let the Government retry this person and supply that? Nathan Lewin: Yes, we think that exactly what this Court did as I say -- Earl Warren: Well, if that -- there is that ambiguity so far as the Government is concerned don't you think that there might be like ambiguity so far as the responsibility of the defendant is concern? Nathan Lewin: Well, yes. Well, we think -- we -- definitely and that's why we concede Mr. Chief Justice that she couldn't be convicted on this stipulation if our principle line of argument is rejected. And we say that if it is then the most we're entitled to do is to go back and retry her and introduce that element of the offense which we did not as of the time the first trial believe we had to prove. Byron R. White: Well, if the -- don't you think there was something that didn't deliberate on the Government's part on trying it on this theory. I suppose you had the opportunity if you could've proved it, to prove that she had no passport at all. Nathan Lewin: I'm sure -- Byron R. White: And there would be absolutely -- and you say, at least the Government claims there would be no problem at all then to convict her under the statute. Nathan Lewin: That's true. Byron R. White: Now, if you knew and you should say that she had an unrevoked passport and you didn't prove it, why should you get another chance to prove it? Nathan Lewin: Because we think that's really what Bryan and what Yates say that if the Government is -- has proceeded under the wrong theory of law the first time and there's no reason to believe that it simply trying a second trial in order to introduce evidence that or in order to present it to another jury if you like. Then fairness and justice which is what 28 U.S., the words in it, the standard incorporate in Section 2106 really entitles the Government's fell back for a retrial. I must say candidly Mr. Justice White, I don't know that this was intentionally so designed. I think probably both parties at the time the Assistant United States Attorney who drafted the stipulation, Mr. McTernan believed that the issue was where the travel to Cuba was a violation of Section 1185. Byron R. White: Well, was there any mystery at all about whether or not she had a passport? Nathan Lewin: No, I don't think there was any mystery there. Byron R. White: Good heavens. I don't know why but -- oh, yes, you make it -- I'm all the way up here on this case when you should -- you say want to go back and retry her on the theory you should've had in the -- at the very first instance, very simple level. Nathan Lewin: Well, that's true but the way the case was tried and the way the stipulation was worded, it just doesn't present that very simple case. As for the -- Earl Warren: I suppose also that consider couldn't we that Mr. McTernan was interested in his one client and wanted to make a stipulation that on the facts that they were so, his client wouldn't be convicted. On the other hand, you want to bring this case to this Court for the purpose of establishing a principle on your theory of the Act, isn't that right? Nathan Lewin: Well, I don't really believe that this case was designed with the view in mind that we would bring it to this Court. I mean, we certainly are not the moving party in this Court, it was a conviction in the District Court sustained by the Court of Appeals and -- Earl Warren: Add you through the years then prosecuting in this manner? Nathan Lewin: No. Because of it -- but because of -- Earl Warren: But for great many years you had never adopted this theory and had never used it. Nathan Lewin: Because of the difficulties of proof Mr. Chief Justice that you got to prove in this kind of a statute even under our construction of it that that the traveler had the intent at the time he departed the United States. And it's a very difficult burden that was established in this case and in Laub, the Government had such proof. If I -- and then if I may just respond Mr. Chief Justice in Mr. McTernan's comment that 18 U.S.C. 1544 is noble and was not cited in response to the Senate Committee's question. The answer at least so far as it appears in the hearings on page 59 specifically does cite 18 U.S.C. 44. The Department of State responded that there are laws in which might well be violating the course of such travel, e.g. trading that the enemy act and treasury regulations there under, 18 U.S.C. 1544, etcetera. So, it was specifically cited at that time and it appeared in the passports. So, I think it's quite clear that this other statute is not a noble creation of the Department of State just raised for purpose of this case. Turning to the Laub case, that case is here on direct appeal pursuant to the Criminal Appeals Act from a dismissal of a one count indictment charging nine appellees with conspiring to violate Section 1185 by inducing and recruiting a group of individuals to depart the United States for Cuba without bearing passports valid for travel to that destination. In this case, unlike Travis the status of the traveler's passport is clear. It was made so by the Government's bill of particulars which alleged that all the persons referred to in the indictment, in other words those who were traveling posses during the relevant period unexpired and unrevoked United States passports which however had not been specifically validated by the Secretary of State to travel to Cuba. So, this case does not involve the ambiguity presented in Travis. Two of the appellees here, Laub and Luce (ph) were also named in a companion indictment which charged them and two others with having arranged an earlier similar trip to Cuba one year prior to the trip involved in this indictment in June 1963 and with having made trips to Cuba in violation of Section 215 (b). The defendants in that case except Luce were tried in the Eastern District of New York in a non-jury trial at the conclusion of which the District judge found them all not guilty. His opinion in that case which contains extensive factual findings and an elaborate discussion of a law was incorporated by reference since the judgment of dismissal in this case because the grounds of this -- for dismissing the indictment here were identical to his grounds for entering a verdict of not guilty in that case. The judgments in both cases rested on the District judge's conclusion that Section 1185 (b) did not cover departures for destinations on which travel restrictions have been imposed. The judge in the present case in other words agree with the principle contention made by the petitioner in Travis that Section 215 (b) is only a "border control statute" ends the question of statutory construction squarely presented. Now, I find and I'd like to continue along that line in discussing what really was the major thrust of the District judge's opinion, the District Court's opinion in this case and of the claimed made by the petitioners which is -- and this relates back to a question of Mr. Justice Harlan's yesterday, "What the administrative practice of the Department of State was?" Now, the District Judge here found and petitioners have argued in Travis and the appellees have found -- have argued here that it was a Department of State's continuous position up until travel restriction were posed in Cuba that the restrictions put in to the passport as to the invalidity of the passport to travel to certain destinations were civil only and contemplated no criminal sanctions. Now, as I try to explain in the earlier argument -- in the Travis case, the real difficulty here arises out of the fact that there are two criminal statutes which might apply to travel to restricted areas. One is the one which prohibits use of a passport in violation of its terms and conditions and which would be violated therefore if the traveler in the foreign country used the passport to enter the country, showed it or in some other way exhibited it. That's 18 U.S.C. 1544 and we submit that it's quite clear from the administrative practice that the Department of State had always viewed that statute which applies both in peace time and in war time as applicable when there is proof of use. Now, petitioner or the -- and the -- petitioner in Travis and the appellees here and the District judge below relied on certain statements made by the Department of State in 1919 and 1952 and in 1957. I think those really do not support the conclusion that the Department of State was in effect disavowing criminal sanctions for violations of area restrictions and I'll get to that in a minute. But I would also like to call attention what is quite clear and what is not been cited out below and it was -- it's not cited and discussed in our brief either but it's quite -- what is quite clear is a press release for example issued or press release issued at the outbreak of World War II in September 1939 where the Department of State announced that passports which are therefore been issued would not be valid for use and travel from United States to any country in Europe unless it is submitted to the Department of State for validation. Now, that announcement which appears at page 534 of Hackworth which is cited in our brief and in the volumes cited in our brief and in the briefs in Travis and Laub and by the District judge also says the same thing as the passports themselves said which is, should a person to whom a passport has been issued use it in violation of the conditions or restrictions contained therein the protection of the United States may likewise be withheld from him while he's abroad and he will be liable for prosecution under the provisions of Section 221 of Title 22 of the U.S. Code which reads in part and then it quotes that statute. In other words, the very press release that announced that there -- restrictions would be imposed prior to World War II specifically referred to what is now 18 U.S.C. 1544. Now, it's true that the Department of State did not at that time refer to this statute. The very simple reason is that this statute was not on the books. Its predecessor was not on the books either. This statute was enacted in 1914 to apply only in time of war. It was reenacted in 1941 to apply in time of war and during the national emergency which have been declared by President Roosevelt in May of 1941. It was reenacted in 1952 to apply in time of war and during any national emergency. Well, the time that restrictions were imposed prior to World War II, Section 1185 or its predecessor which just not a viable statute. Now, the District Court below or the petitioner in Travis and the appellees here point to really three statements, public release as issued by the Department of State. One was the release issued in 1919 when hostilities were over and which did not refer to any criminal sanction. Well, that's true. I mean it certainly didn't refer to the predecessor of Section 1185 because 1185 apply only in time of war and it was very questionable whether it could've applied then. They also rely on the press release issued in 1952 when restrictions were imposed on travel to iron curtain countries. But 1952 was two years after President Truman had announced the -- a nation -- a new national emergency in 1950. The Act passed in 1941 was no longer applicable at the time the new area restrictions were imposed. The Act passed in 1941 applied when the United States is at war or during the national emergency announced in May of 1941. By 1952, the United States was not technically at war and the national emergency announced in 1941 had been superseded by the national emergency announced in 1950. So, obviously the restrictions imposed in 1952 could not have made any reference to the statute enacted in 1941 because it too was not a viable statute at that time. A month later after the imposition to travel restrictions then, the statute involved here was enacted in that provided that it was to apply that in times of war and in times of national emergency and of course that statute was applicable thereafter. It was not specifically cited in the -- or specifically listed in the passports, the other statute was 18 U.S.C. 1544. But the fact that the Department of State did not refer to this statute or its predecessors in the 1919 release, on the 1952 release we think doesn't establish anything because neither or it certainly quite arguable that neither of those statutes was applicable at that time. Abe Fortas: I'm not sure that I follow you Mr. Lewin, forgive me. I take it that your argument is that some importance should be attached to 18 U.S.C. 1544 despite the facts that that is not a statute under which this was brought, number one, is that right? Nathan Lewin: Yes sir. Abe Fortas: Number two, that if -- and despite the fact that 18 U.S.C. 1544 is confined to prohibition of the use of the passport in the country that has been entered and we have nothing before us here to indicate that that is what petitioner in Travis or the appellee or whatever it is here did, is that right? Nathan Lewin: Yes sir. Abe Fortas: But so that 1544 is somewhat remote from the particular issue; I take it that what you're saying is that 1544 is useful to your cause because of the very fact that it indicates that with respect to predecessor action, the State Department gave warning of some kind of criminal penalty was attached to some kind of activity relating to passports which didn't cover travel to particular countries. And that about all it amounts to, -- Nathan Lewin: Oh, I think -- Abe Fortas: -- have I missed something? Nathan Lewin: Oh, I think it's a little bit more than that. I think what it does is it rebuts the claim that the Department of State has always which is very basic to what the District judge here found and what the thing argued in this case in the prior case that the Department of State had always viewed these restrictions as being civil only and not (Voice Overlap) -- Abe Fortas: Well, that these restrictions so that's where your -- that's where one of the (Voice Overlap) -- Nathan Lewin: Area of restrictions. Abe Fortas: -- because the question is whether these restrictions means the use of the passport, means the area restriction in respect to the use of the passport or the area restriction in terms of travel to the restricted area. Nathan Lewin: Well, we think that definitely a difference there but it -- we think that what it does show is that the legend on the passport that says not valid for travel to particular countries. It was always supposed by the Department of State to be enforceable by criminal sanction and that if the passport indeed had not cited any statute at all but had merely said these restrictions are enforceable by criminal sanctions. In other words, it left it quite ambiguous as to what the criminal sanctions were or what could permissibly be done then I think they -- would certainly be no basis for the argument that petitioners are making or the -- petitioner makes in Travis to the appellees here that they weren't put on notice that there was any criminal sanction attached to area restrictions. We're saying in other words, that Congress really armed the Department of State or the executive in the enforcement of these kinds of restrictions with two strings to the bow that because most instances of area restrictions, first of all, area restrictions in peace time and area restrictions as to countries with whom we did have diplomatic relations and a substantial number of area restriction that go -- did involve countries with whom we had diplomatic relations and where a passport would be used. So because the substantial number of violations of those would probably be covered by 18 U.S.C. 1544 the Department of State focused its attention on that statute but there was really another string which Congress have provided and we just don't think that the executive should be prohibited from using the second string simply because it's been given an addition to the first and its mainly when it provided warnings in the passports which referred to the first. Earl Warren: What would you -- what do you think of the press in Eisenhower, a special message to the Congress to requesting that clear statutory authority to prevent Americans from using passports for travel to areas where there's no means of protecting them or where they're presence would conflict with our foreign policy objectives are being amicable both to the security of the United States should be passed. That's -- that was after Kent versus Dulles and that -- and the Congress didn't pass any such laws nor have they since? Nathan Lewin: No. Earl Warren: Now, what do you think of that so far as understanding of the effect of this? Nathan Lewin: I think that it certainly demonstrates two things I think Mr. Chief Justice. It demonstrates that a proposition which we have never contested which is that the present law has substantial loopholes. An individual who leaves the United States without the intent to go to Cuba and let's say who then goes to Cuba having informed that intent somewhere else is -- violates no statute because he doesn't use his passport, he doesn't depart with the intent of going to Cuba and therefore he's violated no statute. And I think a mandatory legislation is necessary for that reason. But I think it also -- Earl Warren: But the President -- did the president point that out? Nathan Lewin: I don't think he pointed that out specifically but I think that the testimony -- Earl Warren: Did the Department of State point out to the Congress that that's what they wanted to -- Nathan Lewin: Well, -- Earl Warren: -- wanted to do -- Nathan Lewin: I think testimony -- Earl Warren: -- flood those loopholes? Nathan Lewin: I think to testimony yes, before the hearings at that time and to hearings continuing to this very day on similar kinds of legislations is repeatedly pointed out these loopholes. Earl Warren: Is that in your brief? Nathan Lewin: No, we have not cited it in our brief. Earl Warren: Why? Nathan Lewin: Well, we -- I gather -- at the time we wrote the brief I suppose we just -- either just overlooked it or didn't put it in but we could provide the -- provide that additional (Voice Overlap) -- Earl Warren: Won't you think it was rather important if you relied on it? Nathan Lewin: Well, we think -- we're Mr.-- really Mr. Chief Justice what it goes to is it -- it's a sort of a surrebuttal, it's an answer to the claim that the executive must have thought that this legislation didn't cover it because he proposed other statutes and we submit that we -- well, for one thing we agree that there were loopholes and that other statutes are necessary and I was going to say a second thing in answer to your question which was that we don't doubt and I don't want to be mistaken today. I'm thinking -- we admit that the statute is not as clear as the Department of State would like to see it or as the Department of Justice would like to see it. We think that it's important and I think the testimony before these committees has also focused on that. It's important to have statute which would say in just precisely so many words that any citizen who enters an area to which travel has been restricted commits a crime. Earl Warren: It would help, wouldn't it? Nathan Lewin: It would help, yes. Earl Warren: Don't you -- Nathan Lewin: We agree with that. Earl Warren: Don't you think that the President when he sent this message to Congress was speaking the minds of the State Department? Nathan Lewin: Yes. Yes, we think he was, definitely. And we think the State Department feels it would help to have him a clear statute then the statute which is now on the books. I think the only difference really is that we think the statute now on the books does and that's our position in this case does cover the states as well. Tom C. Clark: Mr. Lewin, did the City Bar Association report ever get to -- officially before the Congress or the Foreign Relations Committee or before the State Department? Nathan Lewin: I've never seen any official recognition of it but I'm sure it's -- it is a -- Tom C. Clark: You would probably (Voice Overlap) -- Nathan Lewin: I pretty don't know a pretty well-known report and -- I'm sure that those who were involved with the problem have perhaps seen it and have read it. And it -- indeed Mr. Chief Justice I think that also bears on the reasons why the mandatory legislation may very well consort that if a committee such as that thought that the Department of State in effect conceded that there were no criminal sanctions the Department of State then felt it was obligatory to seek a legislation and we could make that clear. Now, I would just like to go to one final point which is a point that the District judge here rely on and he said, "Well, why Congress really intended to make it a crime to violate area restrictions, why was that not specifically spelled out in the statute." And I think that there are really two possible -- we really have two answers to that. First of all, specifically spelling out in this statute that area restrictions will cover and that would be a violation of this statute to travel in violation of an area restriction would by the rule of construction of exclusio unius exclusio alterius possibly lead to a court's ruling that any other restriction on the validity of a passport might not apply. And as I've tried to demonstrate the Secretary of State finds it necessary to impose other restrictions on validity such as the restriction in the official passport to its being restricted to official use only or even the restriction that a passport is not valid until it is signed, that its not valid if it's mutilated. Abe Fortas: Well, that drafting problem has been solved in our history, isn't it Mr. Lewin? Nathan Lewin: Oh, it has. But the -- but I think that that's just one possibility. I think Congress may have thought -- it wanted to give broad powers without presenting these problems. I think another problem really was that as of that time it may very well have been dubious as to whether Congress could constitutionally enact the statute that would make criminal a conduct which is engaged in totally without the jurisdiction of the territorial jurisdiction of the United States. It wasn't until 1922 when United States versus Bowman in 260 U.S. that this Court first -- not even in a square holding met that contention had said that it would be permissible and it wasn't until 1932 in the contempt case of Blockburger versus United States in 284 U.S. that that was squarely decided by this Court. So, I think there have may very well have been substantial doubts even back in the 1918 as to whether a statute could be enacted that said, if you travel the country "X" in violation of the Secretary of States -- in violation to Secretary of State's restrictions in his passport, in your passport, you've committed a crime because then just the mere act a crossing that boundary would've been the crime. We think that the Congress in 1918 which had the problem before it for the first time and which later Congress has adopted really knew of the Department of State's policy of restrictive endorsements as of war time and when they enacted a war time statute but they intended at that time to say was that such restrictions of the Secretary explicitly imposes in his passport are restrictions which if a traveler departs in violation of them with the intent to violate them, he is violating the criminal law. Earl Warren: Mr. Boudin. Leonard B. Boudin: Mr. Chief Justice and may it please the Court. Before I begin my brief argument in chief, I do want to make reference to what counsel has just said. It appears here that a good part of his case depends upon the construction of Section 1544 with which none of us here have been prosecuted. And it appears also that the persons who have the greatest knowledge of the meaning of the statute presumably a correct knowledge that the statute is not applicable could avoid prosecution and that those who like the defendants in these cases who don't have the expertise as counsel has suggested should be subject to prosecution. The fact is that everybody in authority in the State Department and I mean everybody that our briefs will show has agreed that Section 215 is not applicable to area restrictions. And that the area restriction provision comes under a different heading of the State Department's power, the power of the Foreign Relation. And that this view which has been expressed by chiefs of the legal division of the passport office and we have cited by the Directors of the Bureau of Security and Consular Affairs whom we have cited is uniform. And I may say has been subscribed to by another great Solicitor General, one who argued Kent against Dulles who said in talking about passport restrictions, and I'm from reading his brief which we have cited that this restriction, the power to impose area restrictions would carry no sanctions, I repeat, no sanctions. Since the statute referring to Section 215 or 1188 makes it unlawful only to depart or enter the country without a lawful passport. And I may say that -- some urge we cease the controversy, allow the controversy between the defendant and the Government is really a basic controversy between the State Department and the Internal Security Division of the Department of Justice because the State Department knowing of the 600 old law cases over the years has never suggested so far as the record show a single prosecution and it was only until the Cuba problem arose that a prosecution was decided upon. Now, we are here for the third time in eight years arguing the meaning of 1185. And the only difference between this case and the others is that we're here confronted with a criminal proceeding which the problems are the construction of a statute, a so much serious and so much more obvious. Although what Mr. Justice Douglas said in Kent against Dulles cast -- light upon this because he recognized the nature of the statute as one involving an impairment of civil liberties and also the fact that it was a criminal statute. Now, bearing in mind that this is a criminal statute, how does the Government which has the burden of showing that this statute not 1544 is applicable to these clients. How does the Government treat this important problem? It says with respect to the statute upon which it relies in this case, 215 (b), that's 1188 does not in so many words, I thought words were what governed that is not in so many words prohibit violations of area restrictions. And it says in another place in his brief, I won't take the time to give the pages up since they're all in my brief and in the Government's brief. Section 215 (b) was not as explicit in prohibiting violations of area restrictions as it might be. It's not a diplomatic problem. This is not a letter of introduction. This is a criminal statute we have here. Well, let us suppose that the statute is not clear and let us assume although I think its not proper in a criminal statute that the Government can turn to legislative history thus rely upon it. How does it describe the legislative history which is voluminous I may say? It describes it at his brief at page 20 as amici. Well, perhaps legislative history is missing, can the Government show a different purpose from other evidence. No, the Government says, the debates do not show and I quote, "Any awareness of the problem, the problem of area restrictions", has it ever occurred to the Government that the debates don't show any awareness because this is not the problem with which Congress was concerned in 1918 and in 1941 when this whole matter was debated fully. Well, let us assume that all these tests are wrong and we must turn to the administrative interpretation of the statute though I would not of course agree that absent, legislative support, even the State Department could admit it to the statute in a way contrary to law. As to Section 215 (b), what does the Government say? It says 215 (b), it says the Department has not called this application, this criminal application they're talking about, to public attention as much as it might have. And State Department officials have occasionally, I say uniformly, have occasionally suggested that no criminal sanctions lie behind the Secretary's area restrictions. And as to the press release of May 1952 which the Chief Justice adverted upon which the Bar Association made a comment and I may say that the Bar Association had a committee, had as a member Mr. Adrian Fisher who was legal adviser previously to the State Department and is a well-known scholar in this field. After this press release issued by the Department of State, the Government describes it as quote, "somewhat ambiguous". And by the way counsel is wrong when that press release was issued in 1952, there were in effect still the Act of 9 -- the provisions of the Act was 1941 as continued by Congress until the Immigration Act could be passed. And as to the testimony which we have referred to in our brief of all of the Department officials testifying on the subject of area restrictions, what does the Department of Justice say about the Departmental officials from the State Department who were authorized to enforce and to implement and to administer this passport law plainly unsound. Now, we don't have to rely -- Earl Warren: What was that last --? Leonard B. Boudin: That plainly unsound at page 36 is what the Department of Justice says in its brief as to the Department of State's view that area restrictions are not enforceable criminally. And of course it is the Department of State that is supposed to administer passport laws and to put valid or not valid or restricted stance in passports. I suppose and since it's a criminal case I could rest upon what the admission, about the admissions made by the Government but the admissions are made because there is voluminous evidence to support us in this statute. There is a language of the statute, a statute that talks about departing and entering, referring to the borders of the United States, not the borders of Cuba or China. There is the fact that the Congress has always been able to write a clear statute when they wanted to prevent people from going to particular areas and we have referred to a number of instances in our brief which I will burden the Court with now which when Congress said, "We don't want you to go to Indian territory, it said Indian territory", when it said, "We don't want you to go into enemy territory", it said enemy territory. We don't have to look to the past to find the ability of Congress which is perfectly obvious to meet the problem if there is a problem. The bills which have been proposed since 1957 beginning with the bill proposed by the commission on Government's security with Congress and Walter was a member. The proposals made by the President, President Eisenhower and by Secretary of State Dulles, the proposals which were made as recently as a few months ago by the Department itself from the Hayes Bill to which had -- the attention of the Court was called yesterday by Mr. McTernan. All of these bills state very clearly in two -- Speaker: (Inaudible) Leonard B. Boudin: The substance of the 66 bill as proposed by the Department of State introduced by Mr. Hayes is that the Secretary of State with the approval of the President can make it unlawful, can declare certain areas out of bounds. And that a violation of those restrictions is then criminal. That is proposed by a revision of the passport laws which is consistent with the Department's theory that area restrictions don't involve national security but involve foreign affairs, political matters and so forth. In contrast, there is an equally explicit bill, Mr. Justice Harlan which goes to another line of authority and that is an amendment of Section 215, that is an amendment of the very statute we're talking about which would make explicit a violation of area restriction and this is the proposal that from 1957 to date has been made by a large number of Congressmen so that -- sorry. Speaker: Are those bills referred to in your brief? Leonard B. Boudin: Those bills are referred to in Mr. McTernan's brief and in my brief. Now, we have set forth the legislative history of Section 1188 and the predecessor bills in our brief. I cannot take the short time I have to develop but let me say that I owe again a great debt to the Solicitor General, Mr. Rankin who developed this whole legislative history fully intent against Dulles in his brief. We have again put it in out brief here and it's in the brief in Zemel. And what it shows essentially is that the United States Government upon the suggestion of President Wilson in 1917 was concerned not about what might happen in terms of American citizen being injured abroad, a conflagration there. The stuff that is now talked about these modern days when we try to rewrite a statute what President Wilson was concerned about and that Congress misspoke of 1918 and 1941 was to seal the borders of the United States against aliens, neutral aliens who may suspected by -- be crossing to commit sabotage and espionage and against American citizens. And repeatedly in this meager legislative history as it was referred to we have references to espionage, subversive activity, ingress and egress not a word it said about area restrictions. Not a word and this is again an example of a tail -- wagging the dog it was referred to but in another sentence by Mr. Justice Black yesterday when the Government refers to the instance of Canada as a sort of area restriction because another country has been named, it assumes as an area restriction, that was not a restriction. That was for the purpose of being sure that Canada could be treated that it was part of the United States, a non-restriction so that American could go across the border without having any passport not with having passport validated for travel for Canada, without having any passport at all. Now, I've indicated in our brief, the absurd results that was followed from the Government's attempt to change this statute into an area control statute. One example is this, a man leaves the United States intending to go to Cuba. He commits the crime when he passes the border of the United States if you adopt their construction of the statute. The man however doesn't want to go to Cuba but he goes to France and while on France he decides to cause his great conflagration by going to Cuba himself and giving the Secretary of State all these problems. He goes to Cuba. No problem at all. Well, its -- this is only a little example of how absurd the whole situation is because you are attempting to take a statute intended for one purpose and put it into another. This whole question of the needing of term valid of course no matter what they -- we say or they say about what valid means we have to consider valid as to what. Now a -- that a passport is valid within the extreme of cases going under 211 (a) or 22 U.S.C. valid in the sense that it is a letter of introductions then discussed. It was the old conception of the passport. It's not dead, happens not to be practically as important as the exit and entry one. And from that point of view a passport is valid or invalid. But when we are talking about a valid passport within the meaning of a departure and entry statute we mean valid for the purpose of crossing the American border, that's what valid means. And as a matter of fact it is the construction given by the Department itself in the passport handbook which we have cited in our brief and which says that validity -- I'm paraphrasing, refers to the duration of the passport. And Your Honors will recall that when before the Senate Committee on Security and Consular affairs, passport officials were asked what the meaning of the term "valid" was, what was their answer? Said the Chief-of-the-legal division as he then was, "Well, in effect that says this Government is not sponsoring the entry of the individual into those countries and does not response to the entry of the individual into those countries and does not give him permission to go in there under the protection of the United States". Not a word about criminal prosecutions that I must that the line that has been read here really does not represent in my view ascriptions as the departmental official, a fair reading. I can find nothing in this volume or anything else supporting the Government's construction because it was not the construction of the State Department and never has been. And as the present acting Bureau later Bureau Director of the Bureau of Security and Consular Affairs pointed out from his point of view, we've cited it, it's in our brief, passport validity and restrictions all relate to this subject of Foreign Affairs under the 211 (a) problem not under the departing and entering concept. Now, we come to the administrative implementation of a statute and as to that as we show Your Honors never under the Immigration and Nationality Act or its predecessor statutes of 1918 and 1941 was there ever a proclamation, an executive order, a State Departmental regulation referring to area restrictions authorizing area restrictions that of course we know taking the other side of the coin never when area restrictions were imposed by the Secretary of State where they impose except under the heading of an alleged injuring power or a passport act where there was a -- an Act of 1926 or a prior Act. These are the two lines which have to be kept into consideration in analyzing what we're talking about. Now, I pass over the various statements that have been made by the Department. I call the Court's attention to the fact that even in Zemel in the District Court as the record at -- record 63 will show Your Honors, the Government's position, the Department of Justice's position was that the area restrictions were under 211 (a) and not under 1185, the statute involved in this case. With respect to the need for a legislation let me say a word, of course a proposal that has been made by a governmental department doesn't prove, it doesn't have the power. But what shall say here when there has been this avalanche of proposals made by the Department of State and by Congressmen, sympathetic with it or not sympathetic with it to give the Department of State this particular kind of power. I don't understand the explanation as been given that perhaps somebody thought the Department had the power or perhaps they disagreed with the extent of the power that the Department wanted because the bills were sufficiently varied to take into consideration every possible contingency. The fact is and this is one of the interesting facts of life that despite the foreboding of the Department of Justice in Kent against Dulles, the Department never, the -- was able to get the authority to turn Kent against Dulles back although clearly the Department doesn't have the power to deny passports, the people on political grounds. And so here, the Department has not been able to persuade Congress to give it this power now sought for nine years. We think that what Mr. Justice Frankfurter said in the (Inaudible) case is applicable. This practical construction of the Act by those entrusted with its administration is reinforced by the administration. I'm paraphrasing one word, unsuccessful attempt to secure from Congress an expressed grant of authority. And that explains not inadequacy in writing a brief, that explains why we have the Government's brief in this case Mr. Chief Justice because this is all there is. The Government is unable candidly to find anything in this statute which would justify its application and I think even in the civil statute talking about 1185. Now, this construction the Government seeks is of course also, one, which would pose directly the questions put by Mr. Justice Black namely, "Is the statute a clear statute and where are the legislative standards?" I take from my authority if Your Honors who have seen throughout this argument the Department of State and I think that what Mr. Philip Heymann, the present Acting Director of the Bureau of Security and Consular Affairs and a well-known scholar said very candidly that the Department isn't interested in problems of litigation but in getting things done and in stating the problems fairly to the Congress. What Mr. Heymann said in the hearings we have cited in our brief is we agree with the need to provide clear statutory authority for the imposition of necessary area restrictions and appropriate enforcement provisions. And he said, in the present view held either before or after that. In other words, right now we have broadly worded authority to do whatever we want and very sloppy statutory authority to enforce what we do. Well, I think it has been demonstrated by all of counsel here that the authority is so broadly worded as to be meaningless if we are to interpret 1185 as the Government suggest and Mr. Heymann never suggested 1185 to be used here and obviously to say that there are sloppy statutory authorities to enforce what we want here is equally appropriate. And Mr. Heymann then addressed himself to the second problem that was discussed here by Mr. McTernan, the questions of standards because we are dealing here, if the Court pleases with an Act as I think Mr. Justice Black pointed out by an Undersecretary of State for Administration and I may say the new regulations that came down a short while ago that we referred yesterday by a deputy, Undersecretary of State for Administration. So we're moving down the ladder now as we regulate the conduct of citizens suppose to affect their criminal status. Mr. Heymann said on the subject, as you know the Secretary's authority to restrict travel has until now been exercised without any legislative enacted standards and required procedures. One of the important purposes of the proposed State Department bill is to provide congressional standards for the restriction of travel. Well, I suggest that until we have carried out Mr. Heymann's proposal and have a statute that is precise and had one that has standards and until we have had a statute that is clear and there has some legislative history behind it to support the Government rather than this multiplicity of evidence against it that the prosecutions could wait. Thank you Your Honor.

John G. Roberts, Jr.: We'll hear argument first this morning in Case 14-8913, Molina-Martinez v. United States. Mr. Crooks. Timothy Crooks: Mr. Chief Justice, and may it please the Court: As this Court recognized in Peugh v. United States, the United States Sentencing Guidelines remain uniquely central to Federal sentencing even where the district court ultimately chooses to sentence outside the Guidelines. Because of the strong anchoring effect of the Guidelines, as also recognized in Peugh, the natural effect of an erroneously high Guideline range is to skew a defendant's sentence higher than it would have been under the correct range. Yet when the district court has elected to sentence within what it believes to be the correct range, it is typically very difficult to determine what the district court would have done had it been presented with the correct lower range. Ruth Bader Ginsburg: Mr. Crooks, you didn't cite 18 U.S.C. 3742(f), and I wondered why, because it reads: "If the court of appeals determines that the sentence was imposed as a result of an incorrect application of the Sentencing Guidelines, the court shall remand the case for further sentencing proceedings with such instructions as the court considers appropriate." So this seems to say that, if the incorrect -- there was an incorrect application of the Guidelines, then a remand is mandatory. Timothy Crooks: It -- it does appear to say that, Justice Ginsburg; however, I believe in this Court's decision in Williams v. United States, the Court said that Guideline errors are nonetheless subject to the normal doctrines of harmless and plain-error review and not subject to automatic reversal. Anthony M. Kennedy: And -- and so it's not clear that there was a Guidelines violation here. The Guidelines were incorrectly calculated, but it's not clear that at the end of the day there was a violation. I mean, is that really your response to Justice Ginsburg, or am I oversimplifying? Timothy Crooks: There was a misapplication of the Guidelines, but harmless and plain-error doctrines apply to determine the remedy for that violation or misapplication. Anthony M. Kennedy: Well, there was a miscalculation. I'm not sure if there was a misapplication. That's -- I -- I suppose that's the issue in the case. Or -- or is this -- Timothy Crooks: We believe -- Anthony M. Kennedy: -- is this quibble wrong? Timothy Crooks: We believe that there was a misapplication because the Guidelines were incorrectly calculated with respect to the defendant's criminal history. And that is the type of thing that the statute Justice Ginsburg was referring to says you should remand for, subject, of course, as this Court says in Williams, to the normal doctrines of harmless and plain error. And we're here today, of course, on a plain-error case because we have a Guideline misapplication that unfortunately was not discovered by anyone below. Samuel A. Alito, Jr.: Well, you say that when there is a -- excuse me -- a miscalculation of the Guidelines range, that should give rise to a rebuttable presumption that the miscalculation affected the sentence that the judge imposed. Timothy Crooks: That's correct, Justice Alito. Samuel A. Alito, Jr.: And what does that mean? Does that mean that the -- the burden of persuasion shifts to the prosecution? Timothy Crooks: We believe that the Court's opinion in Olano actually supports a conceptualization that it simply gives the defendant an alternative way to satisfy his burden of persuasion, which is done in a generalized rather than a case-specific way. Samuel A. Alito, Jr.: Well, suppose there's no evidence, as -- as will -- may very often be the case. Suppose the judge says -- imposes a sentence within what the judge believes to be the Guideline range but says nothing whatsoever beyond that, and it turns out that that is not the correct Guidelines range, so that there's no evidence one way or the other about what the judge would have done had the judge understood the correct Guidelines range. What outcome in that situation? Timothy Crooks: In that situation, typically the result would be that the third prong of plain-error review would be satisfied and the defendant would have shown an effect on his substantial right. Samuel A. Alito, Jr.: So that means that the burden of persuasion in that situation is on the prosecution. Timothy Crooks: Again, we may be quibbling about terms, but we believe that the defendant satisfies his burden of persuasion with generalized evidence tending to show the -- that the natural effect of a Guideline error is to affect the sentence. Sonia Sotomayor: I -- I don't think I understand the difference between general and specific. Evidence is evidence. And you draw inferences from all sorts of circumstances. So I don't know why you call this general. It's evidence. Okay? Let's assume the Guideline was 70 to 100. The erroneous Guideline was 80 to 100, and the right Guideline was 70 to 100. Would we -- you draw a general inference that the corrected Guideline would have made any difference on that sentence? Timothy Crooks: We would, Your Honor. Our position is that anytime the range is not the correct range, there should be a presumption that it affected -- Sonia Sotomayor: So what changed the judge's mind in terms of the facts? He gave you the max when it was 80 to 100. What's going to change his mind about 70 to 100? Timothy Crooks: Because the fact that the Sentencing Commission gave a different range in its expert advice and its expertise is something that this Court has recognized factors heavily into district courts' decisions. Sonia Sotomayor: Let's assume I don't believe there's a presumption, okay? It's very hard for me to understand what difference between 70 and 100 and 80 and 100 could make. In this case, I have a difficulty understanding what difference the -- the Criminal History Category would make. But I'll give you another example of overlapping Guidelines: a defendant who's never committed a crime and a defendant who has committed a crime. I would be more inclined to say that an inference from the facts is that a defendant who's never been committed of a crime, that the judge might take that into consideration, even in an overlapping Guideline case, and send it back. Because we don't know how much mercy that judge might have shown. But if a defendant like yours has many criminal convictions, I'd be pretty close to saying I don't think he's going to make much of a different choice. Timothy Crooks: But on the other hand, Your Honor, in this case, despite Mr. Molina-Martinez's criminal history, the district judge imposed the bottom of what he believed the Guidelines to be, despite the government's request for a sentence at the top end of the Guideline range. And our position is that the natural pull of the Guidelines is so strong, so influential, that it is going to pull the judge toward the erroneous range, and therefore -- Antonin Scalia: Mr. Crooks, let -- let me ask you this: You fail to object to the erroneous use of the -- of the Guidelines. If you had objected, what would the situation be? You would have to establish that the error was not harmless, or the -- the government would have to establish that it was harmless, right? Would there be a presumption of nonharmlessness? Timothy Crooks: I believe under Rule 52(a) there is in effect a presumption of nonharmlessness that the government must rebut. The government must show that the error was harmless. Antonin Scalia: To show that the error was harmless is the same as saying there is a presumption that it wasn't harmless. Timothy Crooks: I believe -- Antonin Scalia: That's -- that's not the -- Timothy Crooks: -- the facts -- Antonin Scalia: -- not the way I normally talk. I would normally say the burden -- the burden of establishing it is on the government, but I wouldn't say there's a presumption. Timothy Crooks: But -- Antonin Scalia: The government is wrong. Timothy Crooks: But if the government makes no effort to do anything with respect to harmlessness, then the case will be reversed, or there will be -- Ruth Bader Ginsburg: The -- the government -- the government says that you are, in effect, making this standard harmless. That you -- you admit that this is a plain-error case, and yet, your presumption, effectively the burden is on the government, is making this into a harmless-error situation. Timothy Crooks: It is, but -- in a way, but only for the limited class of errors that are Guideline range errors. Under Rule 52(a), the government must show harmlessness for every type of error. Anthony M. Kennedy: Under Justice Alito's questioning, he asked if -- isn't it true that you have the burden of persuasion at the outset to show that there was a miscalculation? Once you meet that, his question was does the government then -- I believe his question was -- does the government then have the burden of persuasion to show no error. He was careful not to use the word "presumption," or at least he did not use the word "presumption." Is that the proper way to think of this case in your view? Another way of asking the question is -- continues with what Justice Alito was inquiring: Do we need to use the word "presumption" here? Timothy Crooks: I don't think the word "presumption" is absolutely necessary. It is the word that the Court used in Olano, but I think it -- it's really viewed more as who bears the risk of nonpersuasion. And what we're asking is that in the very limited context of a Guideline-range error, the defendant should be deemed to have carried his burden by the generalized evidence that this Court recognized in Peugh v. United States, that the Guidelines do affect sentences and that Guideline ranges do affect what the district court does. Antonin Scalia: Where have we done that before? I mean, we had dictum in United States v. Olano, which said that there may be a special category. There may be a special category of forfeited errors that can be corrected, regardless of their effect on the outcome. But this issue need not be -- be addressed. And you're saying -- and we have not found any such category in the past. You're saying you -- we have finally -- finally discovered one category that meets that dictum in Olano. Timothy Crooks: Well, the lower courts -- this Court has not found a presumption since Olano, but the Court did give careful consideration to whether a presumption should apply to the particular type of error at issue in Olano. But more importantly, the lower courts have looked to what this Court said in Olano, and in a tiny handful of -- of errors, they have adopted just such a rebuttal. Antonin Scalia: That's more important? That the lower courts have established the law for us? Timothy Crooks: It's not -- Antonin Scalia: It seems to me we establish the law, and we have never found anything to come within that language in Olano. And it's dictum, and maybe it's wrong. Timothy Crooks: We believe that it's not wrong, and that the lower courts' decisions, of course, do not bind the Court, but they are expressive of the experience of the lower courts. Elena Kagan: But, Mr. Crooks, if I could take you back to your answer to Justice Kennedy. I take it that you don't need to use the word "presumption," right? You're -- you're -- the burden that you have to carry in -- in a -- in plain-error review is you have to show a reasonable probability. And your argument would work just fine if you dropped the word "presumption"; isn't that right? And you just said that the anchoring effect of the Guidelines creates a reasonable probability that the outcome would be different in a case in which the Court initially thought that the range was different from what it turned out to be. Sort of the end. Who needs the word "presumption"? Timothy Crooks: We agree, Justice Kagan. Unfortunately, the Fifth Circuit did not, so. But we do believe that -- that however you conceptualize it, the draw, the pull of the Guidelines is because of the unique centrality of the Guidelines sufficient to establish the reasonable probability of a different result. Antonin Scalia: What good does it do to say that the Guidelines are advisory, which is what we have held, if, when you mistake them or when you don't apply them properly, you automatically get a reversal, which is what you're arguing here? Does that sound like an advisory Guideline? Timothy Crooks: Well, Justice Scalia, we disagree. It's an automatic reversal. Besides the third prong of plain-error review, there are two other very stringent prongs, the second and the fourth that must be met before there can be a reversal on plain error. But with respect to the question of whether it makes the Guidelines any less advisory, we don't believe that it does. It simply recognizes the fact that even though they're now advisory, district court judges still find them influential and persuasive as this Court indicated they should do in Rita. Ruth Bader Ginsburg: How did this -- how did this error come to light? Everybody missed it in the district court. It started with the probation officer, the judge, and the defendant. How did -- how was it found out? Timothy Crooks: Well, actually, it was missed initially, even on appeal, because I wrote an Anders brief, and the defendant wrote a response and pointed out that one of my factual premises was incorrect. Ruth Bader Ginsburg: So the defendant -- the defendant brought -- detected the error. Timothy Crooks: Correct. And when I saw it, I realized immediately I had made a mistake, and I filed a merits brief with the Fifth Circuit instead of an Anders brief. And it proceeded to oral argument in the Fifth Circuit. The government conceded that there was an error that was plain, but they disputed that it affected substantial rights because of the overlap of the Guidelines. Samuel A. Alito, Jr.: Your argument has some appeal on the facts of this case because the judge sentenced the defendant to a sentence at the bottom of what the judge understood to be the Guideline range. But would your argument apply to any sentence that was within both the original and the correct Guideline range? Suppose the judge here had sentenced your client to 87 months, which I -- I think is the top of the correct Guideline range. Would the same -- would you -- can you infer from that that the judge would not have imposed that sentence had the judge understood that -- the judge thought that the top was 96, judge chose 87, that happens to fall within the correct Guideline range. On those facts, would you infer that the judge would have imposed a lesser sentence? Timothy Crooks: Our answer is that whenever the range changes in the absence of any other indication, you should infer that the sentence -- there was at least a reasonable probability that the sentence would change. There may be other contextual factors besides the high end of the Guidelines that would allow the government to show that in fact it wouldn't have made a difference. But if I understand Your Honor's question correctly, with only the difference in the range, we believe that that is a situation where you should assume there's a reasonable probability. Samuel A. Alito, Jr.: Why would you -- John G. Roberts, Jr.: I was -- I was just going to say under that -- I suppose the defendant really wouldn't insist on a resentencing if that were the -- those were the facts, would he? In other words, it was incorrectly a maximum of 87 and he got the maximum, you say, oh, well the correct one could give you up to 96. If I understand it, the defendant is not going to raise that objection, is he? Timothy Crooks: If he believes that he could get more -- but if -- for example, in this case the incorrect range was 77 to 96. If he got 96, he might well insist upon appealing because he might think the judge would give me the high end of the correct range. Samuel A. Alito, Jr.: How about -- I mean, the question is, if the judge -- the judge thinks it's 77 to 96 and chooses 87, which is within that range, and it turns out the correct range is 70 to 87, so the 87 is within the correct range as well -- it's the top of the correct range -- what -- what reason would there be to infer -- why would there be a natural probability that the judge would have given a lesser sentence if the judge thought that the top was 87 as opposed to 96? The judge obviously thought in that situation the correct sentence is -- is 87. Timothy Crooks: With respect, I have to disagree with your premise because I don't believe judges just pick numbers. I believe they look at the Guideline range and typically determine whether the defendant should be low, middle, or high. So the Guideline range does make a difference. And it -- Stephen G. Breyer: Here's an example: Suppose a person -- everybody -- presentence report, government, defense lawyer, prosecutor, everybody -- thought he's in column 2. Okay? He's not a first-timer. And now it turns out they made a mistake. He is a first-timer. And so being a recidivist, the presentence report says put him at the top of the range. Now it's a lower range, but they know he's not a recidivist. Depending on the circumstance they might say, Hey, no, put him in the middle of the first-timers. I don't know. You don't know. They don't know. Nobody knows. And so the question is, we don't know, really, what the judge will do upon remand. Common sense suggests ask him. That's what it suggests. And so you're worried about whether you can work the language around to let you do that, what is common sense. I'll have some questions for the other side, which I suspect you can, but nonetheless, isn't that the issue? Timothy Crooks: That -- that is the issue. And we -- Antonin Scalia: Let's factor in the fact that you did not object. Surely -- surely there ought to be a penalty for that. We don't treat cases where there has been an objection the same as we treat cases where -- where there has not been. Sending it back makes total sense when there is an objection that's -- that's wrongfully denied. Stephen G. Breyer: Yes. Antonin Scalia: But -- but where you or defense counsel has, in effect, assisted the Court's error, it seems to me we demand more. Timothy Crooks: And the Court does demand more. It is much more difficult to secure relief on plain-error review because of the other prongs of the rule. Stephen G. Breyer: But anyway, we've got progress, because it does make sense. And if we've got progress, it is not a punishment to the lawyer for not having raised it. It is a set of circumstances where the result will make sense without unnecessary administrative problems. Antonin Scalia: It's not a matter of punishing the lawyer, is it? It's a matter of establishing a system -- Stephen G. Breyer: Yes, that's right. Antonin Scalia: -- that induces lawyers to make objections when objections are proper and -- and not to mousetrap the -- the Court into -- into error by -- by not -- by not objecting. Timothy Crooks: But we have -- Antonin Scalia: What are the other two elements that you think serve that purpose? Timothy Crooks: Well, first, the second and the fourth prong is the answer to your question. But first I have to say -- Antonin Scalia: But what are the second and fourth prongs? Timothy Crooks: The second prong is that the error must be plain, which means it's not subject to reasonable dispute. Antonin Scalia: Well, that's no big deal. It -- that doesn't satisfy my problem. Timothy Crooks: Well, many Guideline errors are not. We have had plain-error relief denied repeatedly on the second prong. The fourth prong, that it must seriously affect the fairness, integrity, and public reputation of judicial proceedings, is another hurdle that the defendant must meet on plain-error review. A person is not in a better position by not objecting. A person would be foolish not to make an objection that would lower the range because it's always better in a sentencing proceeding to start out with a lower range, even if you're going to ask for something below the Guidelines. Ruth Bader Ginsburg: It's not disputed here. Everybody missed it. You missed it, and you -- you were candid in saying even on appeal you were ready to file an Anders brief until the defendant himself. Timothy Crooks: Yes, Your Honor. In fact I did file an Anders brief. Antonin Scalia: It's -- it's not enough that the lawyer did not intentionally do it. We -- we demand of lawyers that they do it. They're supposed to assist the Court. And where the objection has not been made, it's -- it's an entirely different case when it comes up here. Timothy Crooks: But I would suggest, Justice Scalia, that it is still far more difficult to secure relief on plain-error review, even with the tweak to the third prong that we're suggesting, than it is to just make the objection in the first place. Samuel A. Alito, Jr.: Well, can you give us an example of a Guidelines error that would qualify for -- qualify as a plain-error except for its failure to satisfy the fourth prong of Olano? Timothy Crooks: Yes. In our reply brief on page 22, we cited the Fifth Circuit's decision in United States v. Duque-Hernandez. And in that case, the Fifth Circuit actually pretermitted the first three prongs of plain-error review and said even if you meet these, you lose on the fourth prong for three different reasons. First, the Court said that the defendant had in fact admitted the criminal conduct that underlay the controverted Sentencing Guideline enhancement. Second, there was an issue of quasi dirty hands because the defense attorney had failed to make an objection that the same defense attorney had made in a previous illegal reentry case. And third, the defendant had an extraordinarily serious criminal history involving drugs and guns. And that is an example, one example -- there are others -- where the Fifth Circuit has applied the fourth prong very stringently. Ruth Bader Ginsburg: Who would apply -- Anthony M. Kennedy: Well, in that case would you still send it back to the district judge to ask him in the case you just put? Timothy Crooks: The -- Anthony M. Kennedy: We're trying to -- let's assume that we're going to give you some relief -- that was far from clear, but let's assume that. We're trying to find out what the rule ought to be, what the standard ought to be. In the case you just explained to us, in your view, should that case go back to the district court? Timothy Crooks: The case that I just described? Anthony M. Kennedy: Yes. Timothy Crooks: I -- I don't know whether I necessarily agree with that application of the fourth prong of plain-error -- Ruth Bader Ginsburg: Who applies the first prong in the first instance? Is it -- Timothy Crooks: The court of appeals. Ruth Bader Ginsburg: So you're saying that even if the court of appeals gets through the first three, it doesn't remand for the district court to -- to apply the fourth test. It -- the court of appeals does that itself? Timothy Crooks: Correct. And if the defendant cannot satisfy the fourth prong of plain-error review, there is no reversal and no resentencing. Elena Kagan: So I would think that the answer to Justice Kennedy's question is if the court of appeals really thinks it's not going to give relief because of the fourth prong, why would you bother remanding it? Timothy Crooks: Why -- why would the court -- Elena Kagan: Why would -- why would the court of appeals bother remanding it? They could legitimately say it doesn't matter. We're not going to remand it because whatever happens on remand, we're not going to give relief based on the fourth prong. And if that's the case, why would the court of appeals remand it at all? Timothy Crooks: The court of -- if the defendant does not -- if the court of appeals is not satisfied that the defendant has met his burden on the fourth prong, it will not be remanded; the judgment will be affirmed. And I would like to save the remainder of my time for rebuttal. Ruth Bader Ginsburg: And may I just ask you to answer the government's position that if there's no presumption, it's not in your question presented so -- so that you will lock into the way you phrased the -- the question, that "should an appellate court presume"? Timothy Crooks: Just very briefly, our answer is that the Court in the cases we cited in the reply brief has gone on to consider the merits of a case after deciding a legal question presented by the Petitioner. And certainly, the Court always has the power and the discretion to address a question, even that was not in the question presented or addressed in the court below. And here, the court below undisputably addressed it, and even if the Court does not endorse the presumption we ask for, it would be useful guidance to the lower courts on the application of the third prong. John G. Roberts, Jr.: Thank you, counsel. Mr. Meisler. Scott A.C. Meisler: Mr. Chief Justice, and may it please the Court: This Court should not adopt the presumption that all misapplications of the Sentencing Guidelines are presumptively prejudicial, for three main reasons: First, a presumption is not supported by this Court's plain-error precedence or general principles of appellate review for harmlessness. Second, presumption is unnecessary, because courts of appeal are capable of discerning prejudice on a case-specific basis. And third, a presumption ill-serves the policies -- policies that underlie Rule 52(b); in particular, they need to induce timely objections in the district court. John G. Roberts, Jr.: I -- I am concerned about getting hung up on the labels. Okay? If you -- so don't say it's a presumption. We still have, don't we, the question of what happens if nobody -- and who loses if there's no evidence to move one way or another in a tie? It doesn't matter if you call it a "presumption" or not. Who bears the burden of at least moving forward, and certainly the burden of proof, if one of these errors is on the record? Scott A.C. Meisler: I think, Your Honor, this Court's decisions in Olano and United States v. Vaughn resolve that question, and makes it clear the burden is on the defendant under plain-error review. That is what the Court has said is the main difference on prong three on the substantial-rights prong between plain-error and harmless-error review. Elena Kagan: But let's say that's right: Yes, the burden is on the defendant. But does the defendant meet that burden by saying, look, there was a mistake in the Guidelines; we know that there's an anchoring effect. That's what the Court said in Peugh. That anchoring effect creates a reasonable probability that the Court would have done something differently. Scott A.C. Meisler: And so our -- our answer, Your Honor, is that the -- there's no -- I guess what Mr. Crooks calls a "generalized showing." I think it has to be done on a fact-specific basis. Stephen G. Breyer: That is fact-specific. I mean, I have exactly the same question as Justice Kagan had. Forget all the jargon. You're a -- a lawyer. You want to prove that it rained at noon on the 5th of February. Your witness says, I heard pitter-patter on the roof. I looked outside. Water was going by the window. Anything else? No. Well, it might have been the window washer, but there is no jury that couldn't find that it was raining. Same thing here. Case after case, this Court has said: We assume, we presume -- or they don't even use those words -- the Guidelines influence the sentence. That's what they meant by the word "anchor." If you look at the reality, whether they depart or don't -- whatever you call it now. There's some special word -- you can find evidence after -- of course, the Guidelines affect the sentence. Maybe there's an unusual case, and they don't. The reason the judge doesn't say anything is because in Rita we said that if you say nothing, Judge, then the appellate courts are to assume it was reasonable. And therefore, the judge now says nothing. He just applies the Guideline. So we'd have to overcome about five cases in terms of what we said if we are going to rebut the common sense notion that of course using the wrong Guideline had an effect on the sentence. If it's an unusual case, i.e. if it's the window washer, let the government show it was the window washer. But the normal case, pitter-patter means rain, and the normal case is that the judge, when he uses the Guidelines, or even when he uses them as a basis and says I'm departing, that that made a difference. Scott A.C. Meisler: Well, I think -- I think, Your Honor, there's a -- there's a number of points in there, and to my mind that's a question of how much weight to give the bare facts of the error. Of course the error in this case is you used the wrong range. And so I think you're -- I -- from what I understand Your Honor's position to be is that the bare fact of the error, the difference in the range, itself establishes an effect and substantial rights. That's not usually how we do it. We say you have to look at the particular facts and circumstances in the case. And I think Your Honor -- Ruth Bader Ginsburg: Can you -- can you give a concrete example of what you mean? I mean, in my -- my intuition is the same as Justice Breyer and Justice Kagan, that if you -- if you apply the wrong Guidelines, then there's a reasonable probability that he would have received a lower sentence. But you say he has to show -- what would he have to show, concretely? Give me an example of what is a reasonable probability that he would have received a lower sentence. Scott A.C. Meisler: Right. Well, I think there's just two points to that, Justice Ginsburg. One is what the -- what the appellate court is going to have before them in every Guidelines-error case, which is the nature and the magnitude of the error. The courts then know is this a career-offender bump that changes the defendant's offense level and criminal history and could double his range? Or is it, as in this case, a one-level movement on -- because of a criminal history scoring error that the Sentencing Guidelines, themselves, say you can offset with a departure because it leads to under representation of -- of the defendant's recidivist potential. So the court's going to know nature and magnitude. And by "magnitude" I mean, are we talking one level? Are we talking 16? Are we talking nine? So there are going to be many cases. I don't dispute that. Stephen G. Breyer: There will be many. And there are many cases involving rain. Many. I mean, I don't know how many thousands, but there are many common facts in thousands of cases where the government itself uses very similar kinds of evidence in order to show that it was really raining. And here, what we're doing is we're using very similar kinds of evidence, namely, that he used the wrong Guideline in order to show that, in fact, better -- more probable than not, or pretty probable, or whatever reasonable probability, that it made a difference. Scott A.C. Meisler: Well -- Stephen G. Breyer: Say -- I mean, it's -- I -- I don't see this as special. Scott A.C. Meisler: Well -- well, I think it is -- it was -- it is special, because, of course, it would be the first-ever presumption of prejudice that this Court recognizes in -- Anthony M. Kennedy: Well, that's because you're using -- Stephen G. Breyer: The range -- Anthony M. Kennedy: -- that's because you're using the term "presumption." You don't have to use the term "presumption." You can say that this defendant has met his burden of persuasion. We make the assumption here, we -- a few of us have practiced under the Guidelines -- maybe none of us -- that the Guidelines are the beginning point in almost every sentence. That's the beginning point, not the ending point, but the beginning point. And the question is: Once this is shown, like, at a minimum, can't you just ask the district judge? Now, if you want to say that there is sentencing miscalculations in 20 percent of the cases, that they happen all the time, that this is going to burden the courts, I suppose you can make that argument. But many circuits, or some circuits at least, have the rule; they just remand it, ask the district judge. Scott A.C. Meisler: I'm not sure that's how plain-error review has ever been conceived of, Justice Kennedy. I -- I mean, Your Honor asked before, what's our rule? You know, what is the rule the Court had announced in this case without calling it presumption? And if the Court wants to opine in this case about what the standard should be, we think the Court could say something such as that a difference in the range, the use of the wrong range, creates some likelihood in every case that the sentence will be different. But whether that likelihood arises to the required level of a reasonable probability is going to depend on the factors and circumstances. Elena Kagan: Well, haven't we already answered that question in Peugh? In Peugh, the question was whether the likelihood was going to rise to the level of a significant risk. And we said yes. If you're using the wrong range, there is a significant risk that you would have made a different decision. So significant risk actually seems higher to me than reasonable probability. At least it's not demonstrably lower. So I would think that we've already said, if you're using the wrong range because of the anchoring effect of the range -- an anchoring effect that is kind of mandatory. It's -- you know, we say that these Guidelines are advisory, but we insist that a judge begin with them. So if you're using the wrong range, there is a significant risk. I would think so too, a reasonable -- of reasonable probability. Why -- why -- why is there a difference? Scott A.C. Meisler: I -- this -- I think there's two points on Peugh, Your Honor. The first one is that Peugh itself, in footnote 8, says that this is a -- this is an ex post facto error that implicates constitutional concerns. And the Court said, in their regular Chapman v. California harmless-error analysis, Petitioner concedes that when it's a nonconstitutional Guidelines error, under Williams v. The United States in Rule 52(a), you do the regular harmless-error standard. We think it follows from that, that when the error has been forfeited, not preserved, and there's no constitutional concerns, do the regular plain-error analysis. And I think it -- Anthony M. Kennedy: In regard to -- are you telling us that even if there's a significant risk that this sentence was too high, in this case there can be no relief? Scott A.C. Meisler: Not at all, Your Honor. Anthony M. Kennedy: Is that the government's position? Scott A.C. Meisler: Not at all, Your Honor. If -- if the defendant makes a case-specific showing of a significant risk or a reasonable probability, then the defendant would clear prong three of the -- Antonin Scalia: What the -- you think the two are equivalent? A risk and a probability are -- are interchangeable? We're -- we're -- we're going to change our -- our law now, so that plain error is overcome by just a significant risk? Scott A.C. Meisler: I -- I don't -- I don't think so, Your Honor. And if I could just -- Antonin Scalia: No, but -- but -- but you've accepted it. Scott A.C. Meisler: Well -- Antonin Scalia: You seem to say that significant risk and reasonable probability are one and the same. I don't think they're one and the same at all. Scott A.C. Meisler: This was going to be the second part of my answer to Justice Kagan, which I actually think that the -- framing it in terms of risk, looking at how Peugh analyzed the issue actually lines up almost exactly with how this Court handled the error at issue in Marcus, Marcus from 2010. Marcus was about whether a defendant had been improperly convicted in violation of the due process clause based on pre-enactment conduct. And this Court said the risk that's going to happen can be ameliorated by certain things that a judge does, but that risk is going to vary by case. And the Court said in that situation where there's a risk and it varies, we're going to hold -- require a regular -- the regular individual showing of prejudice. Now -- John G. Roberts, Jr.: Now, does that individual showing, can it be made on the basis purely of the mistake in the Guidelines, there is no extraneous evidence? If you have a case where the erroneous range is 20 to 40 and the judge gives 20, and the correct range is zero to 20, is that a case in which the defendant has established plain error? Scott A.C. Meisler: With the caveat that we'd want to know a little bit more about the -- the facts and circumstances. John G. Roberts, Jr.: I don't want to know anything more about it because if the judge is within the Guidelines, he doesn't have to say anything more about it. Scott A.C. Meisler: I think, Your Honor, if that's all you knew, if it was truly -- it's all you knew, I would say that the defendant probably has -- has met his burden in that case. John G. Roberts, Jr.: Okay. So now let's say -- I mean, this is why the problem is -- is -- whether you want to call it a presumption or whatever, is so difficult. What if the Guideline was 20 to -- to 40 and the judge said 30, and the correct Guideline was zero to 30? In other words, he's half in the middle of the wrong one. Do you say, well, maybe it's an error, maybe it's not? What -- what in that case? Scott A.C. Meisler: I think I can give you a concrete answer without knowing more about the facts and circumstances. And that's not -- that's not -- John G. Roberts, Jr.: That's -- that's why I don't understand why it's one answer, zero to 20 and 20 to 40, and another answer when it's zero to 30 and 20 to -- when it's halfway as opposed to just at the bottom. Scott A.C. Meisler: Right. Well, I think, Your Honor, the Court was faced with a similar situation in the Davila case from a couple terms ago, where the Respondent in that case had argued that -- and that was -- that involved judicial participation and plea discussions. And the respondent in that case argued, well, the courts of appeals are just finding all these prejudicial and reversing them anyway. Don't bother doing cases if they're prejudiced. Let's come up with an automatic reversal rule. And this Court said no. It said serious errors are going to be corrected on plain- and harmless-error review, but do a full record assessment in each case. And that's really all we're asking the Court to -- to say here is full-record assessment like in Davila -- Ruth Bader Ginsburg: But in -- in most Sentencing Guidelines cases, certainly in this case, the judge says nothing. He's told the probation office said these are the Guidelines, and the judge says, okay. I sentence him at the bottom, period. Doesn't explain why. And there's got to be many, many Guidelines cases where that's exactly what happens. The judge doesn't explain it. We have told the judge he doesn't need to explain it if he sentences within the Guidelines. So what do you do with what I think must be the bulk of the cases where the judge just sentences within the Guidelines and says nothing one way or another to explain it? Scott A.C. Meisler: Well, I'm not sure, Your Honor, that's the bulk of the cases. If -- Ruth Bader Ginsburg: But you would agree that at least there are many cases where the judge just sentences within the Guidelines. Scott A.C. Meisler: There are many cases, but I think you run into the same problem as in Davila. You'd run into a problem of categorization. Are we going to -- are we going to change the entire framework, change the rules that we use in plain- and harmless-error cases -- Stephen G. Breyer: We're not changing -- well, you've heard the argument. But I suspect -- and you -- you may know this empirical point better -- I think there probably are a lot of cases where the issue is the sentence. And the appeal will be -- include something like this. In some subset, there will be a plain-error question. And all you'll really have is what the judge did. Now, of course, if the government has more, all you would be saying is that this, in and of itself, shows a risk in this circumstance, the reasonable probability, whatever standard you're using. Of course the government's free to show that there is something different about this. It wasn't harmful. It might have been the window washer, you know? And the government is free to show that. Scott A.C. Meisler: But -- Stephen G. Breyer: So why is this so difficult? Scott A.C. Meisler: It's important, Justice Breyer, to recognize -- as I understand your -- your -- what you've posited, that is a shift in the risk, whether you call it the risk of nonpersuasion. Stephen G. Breyer: Well, you know, you -- Scott A.C. Meisler: Absent the government coming forward with something else, the defendant wins. That's the exact opposite of what usually happens in the prong -- Stephen G. Breyer: Well, you're saying it's a shift in the risk. The government has the burden of proving that it was raining. It's not a shift in the risk to say that the evidence that I've mentioned proves rain, and it's not a shift in the risk to say that the defendant can come in and show it was the window washer. The question is whether the burden, which lies with the defendant, is satisfied if all there is is that the judge applied the wrong Guideline. And given the continuous statement in case after case in this Court, that, of course, judges, whether they apply the Guideline or depart, the Guidelines play a significant part in the -- in the sentence that occurs. If all you have is that, you've satisfied the substantial -- whatever it is, you know. What is it called? The substantial -- Scott A.C. Meisler: I think it does matter what it is, Justice Breyer. Stephen G. Breyer: Of course it matters what it is. Scott A.C. Meisler: It matters what it is. It's reasonable probability -- it's reasonable probability of a lower sentence. Stephen G. Breyer: Well, it doesn't say that in Olano. It says -- it says in Olano -- Scott A.C. Meisler: But -- Stephen G. Breyer: -- in Rule 52(b) -- Scott A.C. Meisler: Yeah, substantial -- that the substantial -- Stephen G. Breyer: It says "a plain error that affects substantial rights." And if it is the case, factually, as this Court has said it is, that applying the Guideline that you apply makes a difference to the sentence, that does affect substantial rights. He's just borne the burden of proof by showing that. That -- I don't see why that's different than any other problem of proof. Scott A.C. Meisler: I think it's quite different, Your Honor. And if I could use the example of this Court's decision in Puckett v. United States, this Court has already spoken to how plain error works in one very serious sentencing error, the government's breach of a Guidelines-related plea promise at sentencing in Puckett. And the Court said, not just, you do plain error; it works in the usual way. Because procedural errors at sentencing -- and the Court cited as an example, a misapplication of the career offender Guideline -- because procedural error at sentencing is amenable to harmlessness-error review. And so we're going to hold the defendant to his usual burden because it's Rule 52(b), not 52(a). John G. Roberts, Jr.: Don't you usually -- don't you usually have a plea colloquy or something in the record in those types of cases? Scott A.C. Meisler: You do. It's just that you have a sentencing -- John G. Roberts, Jr.: Well, no. If it's -- the sentence is within the Guidelines, the judge doesn't have to say anything at all. So it's very difficult for the defendant to go back and say, here's what the error was even though there's also a clear error, a plain error in what the original calculation was. Scott A.C. Meisler: I do want to dispute one other -- I think the key factual premise there. It's not that the judge said nothing at all. Depending on the spread of the range, by statute, the judge is required, this Court's decision in Rita requires that if the defendant makes a nonfrivolous request for a variance and the judge is choosing the Guidelines range, agreeing with the Commission's recommendation, instead of giving that non-Guideline sentence, the judge has to explain that as well. Samuel A. Alito, Jr.: If we -- if we accept the -- the proposition that in every case in which there is an incorrect identification of the Guidelines at the time of sentencing there has to be a remand, unless the government can prove with some sort of evidence that it was harmless, would there be any difference between the standard in a case where there was an objection and a case where there was no objection? Scott A.C. Meisler: Not on prong three, Your Honor, as far as I can tell. The Petitioner's briefs have been a little bit less than clear on what exactly he thinks the government's burden is, but I heard him say today and I believe the citations at page 47 of his brief also indicate that the standard would be the Williams v. United States harmless-error standard. The government would have to show no effect on the sentence. It has to persuade the court of appeals the sentence would have been the same absent the error. Sonia Sotomayor: But these -- John G. Roberts, Jr.: Well, but there are the other factors under the Olano test. Scott A.C. Meisler: There are, Your Honor. I -- I would agree that -- that prong two does some work in these cases, not as much in other settings because courts of appeals look at the plain language of the Guidelines and the application notes and believe that this follows from those -- that language. And more importantly on prong four, which Mr. Crooks mentioned earlier, he -- he would not embrace the Fifth Circuit's application of kind of a fact-intensive, case-specific prong four analysis. And the two courts of appeals that have adopted presumptions of prejudice on the Guidelines issue have both either -- well, the Tenth Circuit explicitly, it says, we presume at prong four as well. So I think it's very unclear whether prong four will do any work in these cases. One other thing I want to mention about these court -- Anthony M. Kennedy: To the extent that our decision is influenced by our considerations of what kind of a burden, say the Petitioner's proposed rule would put on the resources of the Court, is there anything we can look to or can you or your co-counsel or your colleague for the Petitioner tell us how often Sentencing Guidelines occur in 20 percent of the cases, 5 percent of the cases? And when they do, is it that disruptive to ask the district court, what would you do? Remand. Scott A.C. Meisler: A couple points. On the statistics, I believe they're collected in footnote 14 of Petitioner's brief, and there are something like 4,500 procedural sentencing appeals; about 2,400 of those are Sentencing Guidelines appeals, and about 20 percent of those, or about 480, are reversed. We haven't been able to ascertain how many of those are plain-error cases versus harmless-error cases, but it's a substantial number across the judicial districts every year. In terms of the cost, Petitioner's position is that it's less costly than remand for a retrial. We don't dispute that, but we do think it's not costless. The en banc Third Circuit, in a recent procedural sentencing error case, it reached -- explained it's not costless at all. You have to reconvene the parties, the judge, and a very busy -- especially in -- in Texas, a very busy district court calendar has to find a spot, reconvene the parties, transport a defendant from a distant location. And then, of course, we've collected in the appendix to our brief, situations where the remand for resentencing generates another round of appeals. Stephen G. Breyer: What you have not put in your brief, I don't think, is that they have, in several circuits, created a system where there is a limited remand for purposes of finding out just what the judge thought about it. That's not perfect, but it seems to be workable and not quite as expensive. But I think the real difference between us, in -- and you can -- I'm raising this because I haven't seen a reason you shouldn't address it squarely -- is I don't think this is a Rule 52(b) case. You see? It's not about how to interpret Rule 52(b), or 52(a), or Olano. It's a case about Guidelines. It is a case about what the Guidelines are and how they affect a sentence. And once we work that out, the answer will be obvious, because I'm not going to disagree with your interpretation of Olano or 52. But I am going to disagree about what you think the effect of failing to apply the right Guideline is in the mine run of cases. And once -- if you agreed with me about that, this case would be over; or if I agreed with you. Between us, we'd end it. But that -- that's -- so that's -- that -- that's where the -- I mean, the -- the others might have some views, too. (Laughter). But -- but do you see -- do -- do you see -- do you see why I'm -- do you see why I keep pushing you in that direction? Scott A.C. Meisler: I -- I do, Your Honor. And I -- and I understand the point. I guess the -- the way I'd try to breech the gap between, perhaps, our positions is -- is to recognize and to argue Rule 52(b) is a capacious entire record, full-record inquiry. And I think it leaves room; it accommodates judges' intuitions about how likely given errors are to have an effect in certain cases. And so our -- our basic position here, most fundamental position is don't blow up the Rule 52(b) framework. Don't blow up the Rule 52 framework this Court has applied in a number of cases and create, I think, two major problems. One is the anomaly I mentioned with Puckett, earlier. You're going to have courts saying, Well, the Supreme Court in Puckett said one kind of sentencing error doesn't get a presumption to the usual one, but it's a different kind of sentencing error in Molina-Martinez, gets a different kind of treatment. That's a problem. Sonia Sotomayor: I see -- I see -- Ruth Bader Ginsburg: Does it matter -- does it matter that this kind of error is never strategic? This is not an objection that a lawyer would deliberately hold back. This is a -- a lawyer making a mistake by relying on what the probation officer said. I mean, there is practically heavy reliance on that presentence report. Scott A.C. Meisler: I think the issue, Justice Ginsburg, is really incentives at the margins, right, that in these kind of cases it's one -- and that's what both Dominguez Benitez and Puckett say. We want to incentivize lawyers to make these. And if, indeed, the prong three inquiry ends up being no different, the defendant's burden ends up being no different in this cost of cases under plain error than harmless error, it is marginally reducing the incentives -- Sonia Sotomayor: You know, so much of this is the use of that word "assumptions," "presumptions"; but both sides are doing it. This case came up because the Third Circuit has a presumption that if a corrected -- it -- it says it: We assume that if Guidelines overlap, the wrong Guideline and the right Guideline overlap, that there is no way -- we assume there's no way you can prove error, or that it affected substantial rights. And there are a number of circuits who have said that. Overlapping Guidelines, you can never prove. That -- that seems that that's an assumption that's wrong, under your articulation of plain-error review. Scott A.C. Meisler: If that's what the Fifth Circuit were doing, I -- I would agree with Your Honor. We don't think there should be a presumption either way. I think the Fifth Circuit has -- as other have -- circuits have -- have treated overlapping-range cases a bit differently and have suggested that in those cases, because the judge's sentence still aligns with the Commission's recommendation, we're just going to require a bit more. I think what the Fifth Circuit has looked for is something more concrete that moves the dial from -- Sonia Sotomayor: So let's go to Justice Alito's point. The more concrete here is that the parties were fighting about extremes. Sentence him, the government said, to the high end. The defendant was arguing he's entitled to the low end. There is some additional proof there. The judge picks the low end. If the Guideline is an anchor, which I think is almost undisputed, isn't that enough to say it affected substantial rights? Scott A.C. Meisler: We don't think so in this case. I -- I would make two points: One is we're not abandoning our position that this fact-specific issue is not properly before the Court. We would urge the Court to take a close look at Fry v. Pliler, which involved very similar circumstances. But on the merits, I think there are really -- both sides can point to kind of two factors in their favor on the -- on the plain-error issue. The defendant can point to the factors that Your Honor mentioned. I think on our side is the overlap in the range and the nature of the error here. This is an error that can seem kind of abstruse. It's the -- it's because of the happenstance of when arrests and sentencing were sequenced. The defendant has two criminal -- two recent felony convictions that aren't counted at all, just drop out of the calculation. And the Commission realized that could happen in these cases, and so put in, not just a general departure note, but a -- a specific application note recommending a departure in this kind of a case when this kind of underrepresentation -- Sonia Sotomayor: Except the judge -- Scott A.C. Meisler: -- happens. Sonia Sotomayor: -- knew that he could have departed upwards under the old Guideline, because this criminal history was pretty serious. You argued he was entitled to the -- to the -- and should sentence at the upper end, and yet the judge sentenced him at the low end. So the -- the criminal history has less effect on the judge than it has on you, or perhaps on me. Scott A.C. Meisler: Right. Well, I think that maybe that's true, Your Honor. I -- I guess I would just say that I think these are all factors. And that if we're looking at case-specific determination here, I think the court of appeals could reasonably conclude, kind of balancing those four facts I mentioned, that the defendant had shown a possibility, no doubt, of a low sentence. I think it's a close case, but not a reasonable probability. The last point I wanted to make, Your Honor, was just that we mentioned the courts' of appeals experience in this point. And I think it's useful to look at what happened in the Third Circuit in terms of whether this kind of presumption could be confined to the Sentencing Guidelines. In 2001, the Third Circuit, a decision called Adams, first announced it was going to presume prejudice for the denial of allocution, denial of a defendant's right to allocute at sentencing. A few months later, it adopted -- relied on Adams to find a presumption of prejudice for Sentencing Guidelines errors. The next year it applied those precedents to find a presumption of prejudice for constructive amendments to indictments. And in 2005, when Booker came down from this Court, it then applied those precedents to find a presumption of prejudice for Booker error for sentencing under mandatory Sentencing Guidelines. I think it's going to be very difficult to confine this. Mr. Crooks makes the point in his reply brief that the courts of appeals have been relatively restrained in finding errors. One can debate that, but I think the point is that this Court endorses the presumption of prejudice for the first time. I think it's highly unlikely it's going to stay just in the Guidelines context, just because of the anchoring effect that the Court recognized in Peugh. And if there are no questions, we'd ask that the judgment be affirmed. John G. Roberts, Jr.: Thank you, counsel. Mr. Crooks, you have four minutes remaining. Timothy Crooks: With respect to Justice Kennedy's question about the burden on the district courts of resentencings, we would point out that several lower courts in opinions we cited in the brief have pointed out that a resentencing is not all that burdensome, especially in light of the benefits of assuring that defendants are not serving more prison time than the district court wanted them to do. I did also want to address the government's point about -- the government touched on the issue of overlapping ranges versus ranges that don't overlap. And we just wanted to point out that the effect of the Guidelines is the same, regardless of whether the correct and incorrect ranges overlap or not. It's simply that the degree of the error, the amount of excess imprisonment that is produced, will be different. It will be lower in the case of an overlapping range. But as this Court said in Glover v. United States, any extra amount of imprisonment affects substantial rights. Finally, I just wanted to say that the courts of appeals have overwhelmingly recognized, whether you call it a presumption or not, that it is warranted to find that a change in the Guideline range affected a defendant's substantial rights because of the extreme likelihood that a Guideline-range error will skew the sentence. And the lower courts have found, in their experience, that it's necessary to make that inference because of the great difficulty in the typical case of showing a case-specific effect of the type that the government is arguing for here. And these two factors mean that this inference or presumption, whatever it's termed, is necessary to avoid, in many cases, the injustice of excess imprisonment. And it will not blow up Rule 52(b), as the government warns. It's a modest tweak to one prong of the rule that will help the rule serve its basic purpose of fairness. And for these reasons, we ask that the Court reverse the judgment below and remand for further proceeding. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

John G. Roberts, Jr.: We'll hear argument this morning in Case 12-10882, Hall v. Florida. Mr. Waxman. Seth P. Waxman: Mr. Chief Justice, and may it please the Court: In Atkins v. Virginia, this Court held that the Constitution bars executing persons with mental retardation; that is, persons with significantly subaverage intellectual function concurrent with deficits in adaptive behavior with an onset before the age of 18. Because of the standard error of measurement that's inherent in IQ tests, it is universally accepted that persons with obtained scores of 71 to 75 can and often do have mental retardation when those three prongs are met. The statistical error of measurement or SEM is that-- Sonia Sotomayor: Mr. Waxman, a line has to be drawn somewhere. And we did say in Atkins that we would leave it up to the States to determine the standards for this issue. So what's the rule we announce today? We tell them 70 is not okay, but 75 would be? I'm not quite sure. How would you announce the rule? Seth P. Waxman: --Let me first take -- take some issue, with all due respect, with your characterization of Atkins. What this Court said in Atkins is not that we leave it to the States to establish the standards for the clinical condition of mental retardation. What you said, quoting Ford, is, "We leave it to the States to -- we leave to the States the task of developing appropriate ways to enforce the constitutional restriction that we announce. " The rule that we advocate is -- and the only real question presented in this case is just this: If a State conditions the opportunity to demonstrate mental retardation on obtained IQ test scores, it cannot ignore the measurement error that is inherent in those scores that is a feature, statistical feature of the test instrument itself. Antonin Scalia: But -- but we didn't -- we didn't base our decision in Atkins upon a study of what the American Psychiatric Association and other medical associations considered to be mental retardation. We based it on what -- what was the general rule that States had adopted. And a large number of States had adopted 70 as the criterion. I mean, the criterion is what do the American people think is the level of mental retardation that should make it impossible to impose the death penalty. We didn't look for the answer to that question to the APA or any of the other medical associations. We looked to what the States did. Now, what has changed in what the States do? Anything? Seth P. Waxman: Justice Scalia, I have -- I would like to respond with four points, and I hope desperately I'll remember them. First of all, what this Court said was, this Court -- number one, it made clear, as it has reiterated in Miller v. Alabama and Graham v. Florida, that while a consensus or a perceived consensus among the States is important, the ultimate test is this Court's conclusion about what the Eighth Amendment does or doesn't allow. In making that determination at page 318 of this Court's opinion in Atkins, this Court, after reciting in Footnote 3 the virtually identical clinical definitions of mental retardation, and in Footnote 5, pointing out that 70 to 75 is the established cutoff for mental retardation, this Court said the following: Quote, "Clinical definitions of mental retardation require. " --and it recited the three tests. "Because of their impairments, mentally retarded persons by definition. " --that is by the clinical definition -- ‶ have diminished capacities to understand ″ -- and it recited all the other disabilities that made the imposition of the death penalty for persons with that -- excuse me -- with that clinical condition unconstitutional. Now, as to what the States did, the Court did refer to, I believe, 18 State statutes. Not a single one of those State statutes and not a single decision of the highest court of any State or any court in any State applied 70 or two standard deviations from the mean without reference to the SEM. The only statute that addressed it in 2002, when this Court decided Atkins, was Arizona, which expressly provided that the SEM must be taken into account in evaluating the -- an obtained IQ test score. Antonin Scalia: The SEM being -- being what and -- and established by whom? Seth P. Waxman: The standard error of measurement, which is established by the creators of the test. It is not something that clinicians dream up. It's not something that is decided by the AAIDD or the American Psychiatric Association. It is inherent in the test. And all clinicians are told -- both professional associations make clear, because it is simply a statistical fact, it must be taken into account such that an obtained IQ test score is actually the result of an obtained IQ test score, is a test band that accounts for the standard. Antonin Scalia: For what purpose do they establish these scores? Is it for the purpose of determining who is so incapable of -- of controlling his actions that he shouldn't be subject to the death penalty? Is that -- is that what they're looking for when they establish 70 to 75? What are they looking for? Seth P. Waxman: Well, what they're -- they are looking for -- I mean, intelligence tests supply a -- I mean, they weren't created for the definition of -- clinical definition of mental retardation. They were created as a -- in order to determine a proxy for true intellectual function. And therefore-- Antonin Scalia: Right. Seth P. Waxman: --a true IQ test score -- I mean, the general clinical-- Antonin Scalia: I'm not talking about IQ tests in general. I'm talking about why do they pick -- they used to pick 70. Now they pick between 70 and 75 as the upper limit. What are -- upper limit for what? I assume it is for people who would profit from medical treatment. Isn't that it? Seth P. Waxman: --There are many reasons why a person's IQ, that is, a person's intelligent -- intellectual functioning, may be important for a whole variety of reasons, medical, psychological, developmental, and as a component of the clinical condition of mental retardation, the Eighth Amendment. Now, what intellectual-- Ruth Bader Ginsburg: Mr. Waxman, could we just clarify one thing, that what you refer to as the SEM, that is not limited to IQ of 70, 75. That's across the board. Seth P. Waxman: --I mean, the -- the concept, the statistical concept of a standard error of measurement has -- applies to all forms of testing. Ruth Bader Ginsburg: So it has nothing to do with the death penalty and mental retardation-- Seth P. Waxman: No. I mean, I'm sure that, you know, when Archimedes announced his principle based on experimental -- his experimental observations, he also recognized the -- essentially the standard error of measurement. Samuel A. Alito, Jr.: May I come back to a question? May I come back to something similar to what Justice Sotomayor started out with. In your view, does the Constitution establish a State to establish any hard cutoff? Let's say 76. Can it do that? Seth P. Waxman: I think it can because that falls -- because the standard definition of prong one, that is, intellectual functioning, is two or more standard deviations below the mean. Samuel A. Alito, Jr.: All right. If it can do that -- oh, I'm sorry. Seth P. Waxman: I'm sorry. Let me just -- let me just explain. And because -- if -- if a State is using an obtained IQ test score as a proxy for true intellectual function, it has to take into account the standard error of measurement. And therefore, States like Mississippi and Oklahoma that, in fact, establish a cutoff of 75, in our view, is constitutional as this Court announced the class of individuals in Atkins because-- John G. Roberts, Jr.: So that's just saying -- I'm sorry. When you say the standard error of measuring, you're talking about a degree of confidence, right? Seth P. Waxman: --Correct. John G. Roberts, Jr.: And your submission is that you need to have a 95 percent degree of confidence. That's what -- that's what the 5 gives you or do I have the numbers wrong? Seth P. Waxman: Well-- John G. Roberts, Jr.: I thought the standard-- Seth P. Waxman: --The -- on a test that is normed at 100-- John G. Roberts, Jr.: --Right. Seth P. Waxman: --70 is two standard deviations below the mean. If there is a -- the standard error of measurement -- and it's not -- this is not my submission. This is the universal-- John G. Roberts, Jr.: I know. I'm just trying to figure out what it means. Seth P. Waxman: --That's exactly -- what it means is that someone, for example, with an I -- an obtained IQ test score of 71, as Mr. Hall received, has a 95 percent probability-- John G. Roberts, Jr.: Okay. Seth P. Waxman: --that his score will be between 76-- John G. Roberts, Jr.: So why is 95 percent? Where does that come from? Seth P. Waxman: --That -- that is-- John G. Roberts, Jr.: --under Atkins? Why -- why are you picking 95 percent? Why isn't it 90 percent? Seth P. Waxman: --I'm not doing any picking. John G. Roberts, Jr.: Why did the other -- why did the -- the organizations pick 95 percent. Seth P. Waxman: It's been 95 -- it's been two standard error of -- two SEMs, which is 95 percent, for decades and decades, and this Court recognized that consensus, that universal consensus, in footnote 5 in its opinion in-- Samuel A. Alito, Jr.: Which party has the burden of persuasion on the issue of IQ and what is the standard? Seth P. Waxman: --So it varies from State to State. Samuel A. Alito, Jr.: I mean, what -- what does the Eighth Amendment require? Does the Eighth Amendment permit a State to assign to the defendant the burden of persuasion on -- on IQ, IQ above 75? Can they assign that burden of -- above 70? Can they assign that to the defendant, and if they can what is the standard of proof that the defendant has to meet? Seth P. Waxman: So I -- the short answer is, I believe, what I will come to is yes, so that you see where I'm going. But we believe that it is entirely constitutional for the State to assign the burden of proving mental retardation on the defendant. And insofar as the clinical definition recognized by this Court in Atkins is a three-part conjunctive test, I think it's fair to say that a logical consequence of that is that as to every component the burden may constitutionally be placed on the defendant. Now, the burden with respect to prong one is the burden of proving significantly subaverage intellectual functioning, of which a true IQ score is a probabilistic piece of evidence. I don't think-- Samuel A. Alito, Jr.: Why can't the State -- you told me that the State can establish a hard cutoff. And you told me that a State can assign the burden to the defendant. Now, in the case of someone who scores 75, is it not the case that there's roughly -- there's no more than a 2.5 percent chance that that person's real IQ is 70. So how does that square with any burden of proof that might be -- any standard of proof that might be assigned on that -- on that point? That's what I don't understand about your argument. Seth P. Waxman: --I think -- let me see if I can explain this. First of all, we're talking -- I mean, this is a man who has a 71. Samuel A. Alito, Jr.: No, I understand. Seth P. Waxman: Okay. Samuel A. Alito, Jr.: But I'm talking about the general issue. Just hypothetically-- Seth P. Waxman: As -- as to the general issue, let me -- let me -- let me state it this way: The whole idea behind measurement error is that you can't make a valid judgment that somebody doesn't have a true score of 70 or below if the obtained score is within the measurement error. And even more fundamental than that, the -- your question suggests and the State's suggestion suggests that diagnosing mental retardation, which is the constitutional inquiry, is just a probabilistic inquiry into a person's, quote, ‶ true ″ IQ score. But true IQ scores themselves are a statistical concept. It's the score that you would get on a hypothetical test that had no measurement error. But true -- and this is my point -- true IQ is not the same as intellectual function and IQ tests themselves, however perfect they may be, don't perfectly capture a person's intellectual function, which is why-- Samuel A. Alito, Jr.: --I understand that argument. But that doesn't seem to me consistent with your point that a State can establish a hard cutoff. 76, that's the end. You get a 76 on an IQ test, that's the end of the inquiry. The person does not -- does not -- does not qualify under Atkins. Seth P. Waxman: --So I -- what I'm -- this -- this would not be a standard I would endorse, but I believe that in light of the consensus test that all professional organizations apply that was recognized in Atkins, a score that is above the standard error of measurement of two standard deviations above the mean would be okay. But the point -- the converse point it seems to me is not true, which is we know for a fact that many, many people who obtain test scores of 71 to 75, in fact, have mental retardation. And if I just may point out that in this case, there were six experts who fully examined Mr. Hall or supervised a full examination of Mr. Hall. They were cognizant of the IQ test scores that he had received. And each one of them opined without hesitation that he had mental retardation, functional mental retardation, significant-- Ruth Bader Ginsburg: --Retrospectively. Seth P. Waxman: --Excuse me? Ruth Bader Ginsburg: The district court did make a finding that he did not show adaptive behavior, and the district court said that that was so because all of those experts that you've referred to were speaking retrospectively. There was no evidence of what the defendant's current condition was. That was -- I think it's in the Joint Appendix-- Seth P. Waxman: That is correct, Justice Ginsburg. Now, the State trial court ruled that it would not accept evidence as to prongs two and three, but it did allow Mr. Hall's lawyers to make a proffer pursuant to the State's -- the State's agreement that there could be a proffer in some expeditious manner. And that's at Joint Appendix 158. We -- one of the two grounds that we appealed to the Florida Supreme Court on, in addition to the hard cutoff at 70, was the fact that in fact an expeditious proffer did not in fact permit us to put on all of our evidence about prongs two and three. And the Florida Supreme Court, and this is page 125 of the Joint Appendix, said: We don't need to consider that question because we uphold the rule in Cherry. Ruth Bader Ginsburg: --Well, what -- there was nothing that limited you to the retrospective proof. The -- the trial judge asked a simple question, how did the defendant adapt in prison, and quotes one expert as saying: "Well, I didn't test for that. " "I don't know why I didn't do it. " And that same expert said that he had, in fact, done it in other cases. Seth P. Waxman: You're correct. Part of the expeditious proffer -- the expeditious proffer was limited to the testimony of two of -- I believe actually only one of the experts who examined him and did the adaptive testing function, and that expert did say that he didn't test in prison. Now, as -- there is, again, a universal professional consensus that adaptive functioning is tested by adaptive functioning in the real world, not adaptive functioning that occurs on -- after 35 years on death row. And, in fact, we also know to a clinical certainty that because mental retardation is a condition that is both developmental and not transient, that is, there has to be an onset -- demonstrated onset during the developmental period, but one doesn't emerge from the condition of mental retardation, unlike, for example, mental illness. Anthony M. Kennedy: If you talk about the condition of mental disability that's involved here, I want to go back to something you've said in response to Justice Scalia. The question was along the line of what does it mean to have a disorder under the DSM. Obviously, one thing it means is that the scholars can talk about it; that they can all focus on the same subject. Does it have any meaning other than that, that it -- it is an objective index, an objective characterization that certain people have a certain mental condition? Is -- is that what it means? Seth P. Waxman: That's exactly what it means, Justice Kennedy. What it means is, it is a -- as this Court recognized, it is a clinical condition, unlike, for example, insanity or competence. That the clinical-- Anthony M. Kennedy: Is -- is there -- is there any evidence that society in general gives substantial deference to the psychiatric profession in this respect? Are there any studies on that or is there anything we can look to to see that that's true on not true? Seth P. Waxman: --I -- I'm actually not aware of anything that suggests that one -- that society doesn't look to professional evaluations to do this. And, in fact, if one looks only at Florida's system, Florida uses mental retardation as a determinant for things other than the death penalty. It uses the existence of the condition for educational remediation, vocational rehabilitation and everything. And in those instances, as we point out in our brief, the -- the Florida -- Florida does apply the standard error of measurement. And indeed-- Anthony M. Kennedy: We have later in the week an argument about economic theories. And it's a little different because in that case, the Court -- it's the Court's own jurisprudence and we have not said, as we have in Atkins, that it's up to the State. But do you think we defer to psychiatric -- psychologists and psychiatrists any more than we -- or any less than we do to economists? Seth P. Waxman: --Oh, I think it has to be much, much, more because, as this Court pointed out, this is a clinical condition. It's a condition that can only be appropriately diagnosed by professionals. Elena Kagan: Mister-- Antonin Scalia: They change -- they changed their mind, counsel. This APA is the same organization that once said that homosexuality was a -- was a mental disability and now says it's perfectly normal. They change their minds. Seth P. Waxman: Justice Scalia-- Antonin Scalia: And they have changed their minds as to whether 70 or 75 is the -- is the new test -- for for mental retardation. Seth P. Waxman: --The latter is not true. The -- the standard -- two things that are not in dispute in this case. We're only here talking about prong one, which is significantly subaverage intellectual functioning and nothing else. And everyone agrees, all the States agree, they all agreed at the time Atkins was decided, that their -- that the clinical definition is defined by three elements and that the first element, significantly subaverage intellectual functioning is defined as a person whose intellectual function is two or more standard deviations below the mean intellectual functioning of contemporary society. Elena Kagan: --Mr. Waxman, can I take you back to a question that the Chief Justice asked? Because the Chief Justice said, you know, where does this SEM come from. And it is the test maker's determination that this is the margin of error that gives you a 95 percent confidence. I guess the question here or one question here is why do we have a 95 percent -- why do we need a 95 percent confidence level? And you could say it either way. You could say, gosh, we're putting somebody to death, we should -- we should have a 100 percent confidence level. Or you could say, as I take it Justice Alito -- Justice Alito's point was, well, look, the burden of proof is on the defendant here anyway, so a 95 percent confidence level seems awfully high. We should, you know, ration it down to 80 percent. So why for this purpose do we have to go with the test maker's determination that 5 is what gives you a 95 percent confidence level? Seth P. Waxman: So the fact that two SEMs gives you a 95 percent confidence level is just the statistical fact. I take your question to be, well, why does -- you know, why do clinicians and professional associations use that? Elena Kagan: Well -- and that's not really my question. Seth P. Waxman: Oh, I see. Elena Kagan: I understand why they might use it for a wide variety of purposes. The question is: Why does their determination that it's useful for a wide variety of purposes to have a 95 percent confidence level, why is the State stuck with that for this purpose? Seth P. Waxman: Because the whole -- and this goes to the reason that they use it. The reason that they use it is because of the inherent imprecision in testing in general, but in particular testing for the presence of something like relative intellectual functioning. There are so many -- it is so common for people who, for a variety of reasons, obtain a 71 or 72, in fact, to have mental retardation and because evidence of -- an evaluation of intellectual function involves clinically much more than a test score. I mean, look what happened in this case. All of the IQ tests that were administered, all of the Wechsler tests, were accompanied, because they fell within the standard error of measurement, they were accompanied by the administration of further intelligence testing for confirmatory purposes. Stephen G. Breyer: Is that what you want? That is, I go back to Justice Sotomayor's question. Start monkeying around with 95 percent. It's all over the law. I mean, 95 percent is a classical measure by scientists of when they have confidence that the fact that the regression analysis seems to establish is in fact a fact. Seth P. Waxman: Yes. Stephen G. Breyer: That is in tort law. That is in whether jury trials are -- are discriminating because they don't have black people on the jury. It's all over the law. So I assume that we -- you're not asking us to muck around with that number because I don't know what the consequences would be. And if you're not, here's how we reduce it. You give the same test six times and now we've reduced it from 5 percent, if he's above 70 all the time, to maybe one -- one one-hundredth of one percent. Is that what you want to have happen? Seth P. Waxman: Well, let me just, as to your latter point-- Stephen G. Breyer: Am I right? Am I right in what I said? Seth P. Waxman: --You are not right in some of the things you've said. Stephen G. Breyer: Okay. Seth P. Waxman: The last thing you said is not right, which is-- Stephen G. Breyer: No, no. Let's go before the last thing. [Laughter] Seth P. Waxman: --Well, the last thing is important. Stephen G. Breyer: I'm not saying it isn't important, but I want -- my thinking to the last thing is dependent on my being right on everything before the last thing. So am I right before the last thing, about how 95 percent-- Seth P. Waxman: You are right that 95 percent is just a feature -- is, generally speaking, a feature that is widely adopted as a confidence level, and it is particularly important here because the constitutional guarantee announced in Atkins is against the execution of persons with mental retardation. And-- Samuel A. Alito, Jr.: On Justice Breyer's last point, before your -- your time expires, because I do think this is important. Is there not another way of proving reliability? Suppose -- what about multiple tests? Suppose someone is given 25 Wechsler tests and 24 times the person scores 76 and one time the person scores 72. What would you deal with -- how would you deal with that in a State that has a hard cutoff? Seth P. Waxman: --So, this is the last point that I wanted to get to, and I think if you -- that the best thing I can -- before my time runs out, I just want to point you to page 10, Footnote 3 of our reply brief, which cites the Oxford Handbook of, I don't know, Clinical Diagnosis or something, and we've given you the pages. And on those pages, it explains why when you have a situation of somebody who takes more than one test, the appropriate determinant is very much not the average. It is what's called the composite score. And the composite score is different, and, in fact, for people below the mean, below the average, because you have to take into account the fact that regression towards the mean and also, the fact that a person who takes two, three, or four tests, multiple tests, changes the bell curve of standard deviation. So the example that's given in the Oxford Handbook is very similar to this case. There were four tests. They averaged at 72. The composite score, and there's -- there's a -- there's a statistical explanation for how it's arrived at. The composite score is 69, and the standard error of measurement is actually larger using a composite score. So that's why, as to Justice Breyer's last point, simply averaging obtained scores does not, in fact, give you a better handle. Because there are so few people who score significantly below the mean on multiple tests, what clinicians use is a statistical analysis that takes into account the different -- the different calculation of what a standard deviation below the mean is. Samuel A. Alito, Jr.: That's not consistent with my understanding of it, but I don't claim that I have a deep understanding of it. But what -- what would be your answer to my hypothetical? Where there are multiple scores that are above the hard cutoff but one that's below -- and I will ask the State the opposite question -- what would you do there? Seth P. Waxman: Well, we know what Florida does, which-- Samuel A. Alito, Jr.: Well, what does the Eighth Amendment require, in your view? Seth P. Waxman: --Well, in our view, the Eighth Amendment requires that if a State chooses to use IQ test scores as a proxy for intellectual functioning rather than a full inquiry into intellectual functioning, it cannot refuse to employ the standard error of measurement that is inherent in the test. Ruth Bader Ginsburg: And if it were 76, you would not need to go on to adaptive behavior; is that your view? Seth P. Waxman: Our -- our view is that a State consistent with Atkins could say that if you have no obtained score on a valid, properly administered, up-to-date test that is 70 -- that is below 76, you may -- you may constitutionally be precluded. I think many clinicians would go ahead and do adaptive functioning and other intellectual functioning. But our view is that States like Mississippi and Oklahoma that set 76 as the cutoff do, in fact, comply with Atkins. May I save the balance of my time. John G. Roberts, Jr.: Thank you, counsel. Allen Winsor: Mr. Chief Justice, and may it please the Court: This Court should affirm the decision of the Florida Supreme Court because it represents a reasonable legislative judgment and one that is fully consistent with Atkins and the Eighth Amendment. I would like to start by responding to your question, Justice Alito, about what -- what do you do with multiple scores. And in fact in this case we're not talking about someone who had one or two IQ scores. When you look at the Wechsler test, which is what the Petitioner contends is the gold standard, he had test scores of 71, 72, 73, 74 and 80. And as we understand, what the Petitioner would have this Court do is to take some of those lower scores and simply subtract 5 points from them. That is not consistent with -- with the materials that he cited in the footnote in his brief. If you look at the example there, they -- they do apply some statistical principles to a range of scores, but they do not simply take the lowest score and subtract 5 points from it. And the logic of that, I would submit, is fairly obvious. You couldn't have a situation where, take in this case, you have an -- a low IQ on the Wechsler of 71 and a high IQ on the Wechsler of 80, and say at the same time that there is a 95 percent chance his score is between 75 and 85 and also a 95 percent chance that his score is between 66 and 76. Antonin Scalia: So you want us to decide this case and establish the principle, the -- the very significant principle that where you have a -- a criminal defendant condemned to death for -- for murder whose scores are 71, 72, 73, 74, and 80, that's okay? That's all you're trying to persuade us of? I mean, I'm not very happy having to go through this in all future cases where you have somebody who has 69, 73, 74, 75, and 81. I mean, don't you have some more general principle, other than the particular scores in this case are good enough. Allen Winsor: Well, we certainly think the particular scores in this case are good enough. But we do; we have a broader principle, which is that when you are dealing with things like mental diagnosis or things in the medical field generally, that there is good reason for this Court to do as it has historically, which is to defer to reasonable legislative judgments. Elena Kagan: So what-- Anthony M. Kennedy: Well, let -- let me ask you this. Suppose that the American Psychiatric Association and -- and all other professional associations do use the SEM. Suppose that. It seems to me what the State is saying here in declining to use that, is that it declines to follow the standards that are set by the people that designed and administer and interpret the tests. Allen Winsor: Well, I have two responses to that. One, if the constitutional rule -- which we submit it's not -- but if there were a constitutional rule that the Eighth Amendment required Florida to adopt all kinds of -- of clinical criteria that the APA or the AAIDD-- Sonia Sotomayor: This is not clinical; this is statistical criteria with the tests you're relying on. Allen Winsor: --Well, there's two parts-- Sonia Sotomayor: You keep saying clinical, but the SEM is not a clinical judgment. It's a standard error of measurement. That's the test maker's. Allen Winsor: --Well, that's right, but Justice Kennedy's question as I understood it was how can Florida deviate from what the DSM and what the AAIDD suggest are best practices. And my-- Sonia Sotomayor: No. This has nothing to do with best practices. It has to do with what the test givers say is the right way to look at their tests. Allen Winsor: --Well, the -- the test measures published the error measurement; but it's the DSM and the AAIDD that are suggesting how many deviations that you should-- Sonia Sotomayor: No, no. They're not challenging the two standard deviations; they're saying if you are going to preclude functioning abilities and the other two factors of your test based on a score of a test that says it has an SEM of 5, then you have to use the SEM. It's very different. They're not saying you have to take that number and declare that person mentally/intellectually challenged. You just have to apply the other factors. Allen Winsor: --Well, it's a three-prong test, so in any instance you would have to demonstrate the existence of all three prongs. But with respect to the -- the 95 percent interval, that-- Ruth Bader Ginsburg: Can I stop you there? Allen Winsor: --Yes, certainly. Ruth Bader Ginsburg: I thought that you don't have to go to, under your view, you don't have to go to the second and third standards if you -- on the first, it's 70 or below. I thought that adaptive behavior doesn't come into the picture, and onset doesn't come into the picture, if the IQ is above 70. Allen Winsor: That's correct, Your Honor. There -- it's a three-part test, and the medical community doesn't dispute that and the Petitioner doesn't dispute that, that to achieve a diagnosis of mental retardation you would have to demonstrate that you meet each of the three criteria. Stephen G. Breyer: So what is wrong -- this -- there may be agreement among you on this. What the -- what Atkins says is there are three parts, as you say. One part is significantly sub-average intellectual functioning. That's the first part. And so what you say is, if it's above a 70 on an IQ test, or a couple of them, that's the end of it. We don't go further. All right. What they say is, I want to tell the jury something, or the judge if the judge is deciding it: "Judge, I have an expert here. " "Thank you. " Expert: "I want to tell you, Your Honor, that that number 70 is subject to error. " It could be -- and indeed the State can do the same thing. If it's 68, the number 68 is subject to error. So if somebody measures 68 you could bring in the witness, and you would say 5 percent of the time, it's within 5 points either way. I think that's all they want to do. Now, there could be other ways of going about it, and maybe you would give the same test six times with different questions, and that may not eliminate but it might reduce the possibility of error, or there may be some other way to do it. You call in a psychiatrist and he says okay; or an expert: 72, he's still. We have other ways. We have other ways, not just tests. Now, I think you would do the same thing if you wanted to, on the down side, I guess. And that might lead people not to -- to being executed. You see? And that's their position, though, I think. And they get to do it on the upside. All right, what's wrong with that? It doesn't sound so terrible. And anyway, the Eighth Amendment -- this is a way of enforcing the Eighth Amendment. This doesn't need to be, I don't think, an independent Eighth Amendment violation. But go ahead; that's the kind of question I would love to have some-- Allen Winsor: Sure. Well, what is wrong with that is that substantially, if you raise the limit to 75 as Mr. Waxman suggested you could, that doubles-- Stephen G. Breyer: --It doesn't raise the limit to 75. What it does is it says just what I said, and I don't want to repeat it. When it's there at 70, they call their expert, who informs the decisionmaker just what I said. Now, that would take a little time, maybe 15 minutes, maybe a little longer. But that's what they want to do, I think. And -- and why not? I mean, what is so terrible about doing it? Allen Winsor: --What is so terrible about doing it is you would end up increasing the proportion of people, the number of people who would be eligible for a mental retardation finding. Stephen G. Breyer: But only those who in fact are mentally retarded. Allen Winsor: No. No, Your Honor. Stephen G. Breyer: Because? Allen Winsor: They're not mentally -- there is no disagreement that 70 is the appropriate threshold here. So this is almost an evidentiary matter. It's a matter of what does it take to prove by clear and convincing evidence, which is a standard of proof that they have as a matter of Florida law. And it's a standard of proof they do not challenge in this case. And all Florida recognizes is that the best measure of your true IQ is your obtained IQ test score. And so for someone who-- Elena Kagan: --But, General, the ultimate determination here is whether somebody is mentally retarded; and the IQ test is just a part of that. It's a part of one prong of that ultimate determination. And what your cutoff does is it essentially says the inquiry has to stop there. And the question is how is that at all consistent with anything we ever say when it comes to the death penalty? Because we have this whole line of cases that says when it comes to meting out the death penalty, we actually do individualized consideration, and we allow people to make their best case about why they're not eligible for the death penalty. And essentially what your cutoff does is it stops that in its tracks, as to a person who may or may not even have a true IQ of over 70, and let alone it stops people in their tracks who may not be mentally -- who may be mentally retarded. Allen Winsor: --Well, first, with respect to the mitigation, this is -- this Atkins hearing in Florida is completely separate from the mitigation phase, and so he does still have individualized decisionmaking with respect to whether to -- to have a death sentence, and he's still had an opportunity to present all evidence-- Elena Kagan: But he doesn't have it with respect to this critical question, right? We've said you cannot execute somebody who is mentally retarded; and he says now you are preventing me from showing you that you're mentally retarded, because you have an IQ test, a part of one prong of the three-prong test, you have an IQ test that says that I'm not mentally retarded, but you know, that IQ test may be wrong. It's not -- given that you are not using a margin of error. Allen Winsor: --Well, with respect to the IQ test just being one part of the intellectual functioning prong, that is a very recent development and one of the -- one of the problems we have with the idea of constitutionalizing medical criteria is that it is changing. If you look at the DSM-IV which was in -- in existence at the time of Atkins -- the DSDM-V replaced it last year -- they said that intellectual functioning, the prong was defined by IQ as measured on test scores. Antonin Scalia: General Winsor, we-- Allen Winsor: Yes. Antonin Scalia: --we don't allow all factors to be considered, do we? Would -- would the State have been able to refute his assertion of mental retardation by pointing to the fact that he is the one who seized the young woman, who pushed her into a car, who drove the car with his accomplice following in another car, and who killed her, and -- and killed another -- and killed a policeman, too, later, I guess. Allen Winsor: Yes, sir. Antonin Scalia: Could the State bring that in and say somebody who is mentally retarded enough -- so mentally retarded as not to be responsible and not to be subject to the death penalty certainly could not have pulled all of this off. This is not a person who is that mentally retarded, significantly mental -- mentally retarded. Could the State show that-- Allen Winsor: Well, the State certainly-- Antonin Scalia: --in refutation of -- of his mental retardation evidence? Allen Winsor: --Only adaptive functioning is a portion of the test. So there's a three-prong test. The intellectual functioning, which historically has been all about IQ until very recently. And then adaptive functioning talks about how people react in the ordinary world to -- to difficult situations, and some of what you talked about may or may not be relevant to that. But further responding to the earlier question, it's not that Florida is not allowing evidence that you meet prong one. It's that Florida is making a finding that you cannot satisfy prong one and so that's why you don't know the-- Anthony M. Kennedy: But it seems to me that, to follow from Justice Kagan's question, and I think this is a very important question, that we've been talking about here about the -- the inaccuracy, to some extent, of IQ scores, and your rule prevents us from getting a better understanding of whether that IQ score is -- is accurate or not because you -- we cannot even reach the adaptive functioning prong. You prevent it at the outset. And incidentally, you don't prevent it if it's under 65 -- under 70, do you? Allen Winsor: --Well, it's a three-prong test. So you'd have to satisfy all three. But with respect to your question about whether adaptive functioning evidence can affect the reading of the IQ, we submit that's not -- that's not the case. That's why they're discrete inquiries. And so if you have multiple test scores or if you have one test score-- Anthony M. Kennedy: But in very close cases, doesn't it illuminate whether or not the IQ test is exactly as reported or if it is subject to some decrease or increase depending on what the evidence of adaptive functioning shows. Allen Winsor: --No, Your Honor. That would be the position of the modern DSM, but that's a radical departure from where it has been historically. Again, it used to define the intellectual functioning prong as being determined exclusively-- Anthony M. Kennedy: Well, I'll read -- I'll read Atkins again. Allen Winsor: --Yes, sir. Anthony M. Kennedy: But I thought Atkins did -- did refer to the adaptive functioning. Allen Winsor: Oh, no. Make no mistake, there is an adaptive functioning inquiry. That's one of the three prongs. And so you have to prove intellectual functioning, you have to prove adaptive functioning. Anthony M. Kennedy: But that was even under DSM-IV, correct? Allen Winsor: Oh, yes, sir. That's been a a part -- that's been a part for -- for decades. What is changing is the way the medical community looks at how to measure IQ or what to do with IQ. And so the modern-- Elena Kagan: But, General, at the very least, you give somebody an IQ test, he scores a 71. Now, he might actually have an IQ of 71, or we know from the way these standard margins of error work, he might have an IQ of 69, and you won't let him go to the adaptive behavior prong of the test and show that, you know, and -- and show that he can't function in society in the ways that Atkins seems to care about, as Justice Kennedy says, notwithstanding that this IQ score number might be accurate or might not be. Allen Winsor: --Well, the adaptive functioning is a critical component, but even the guidelines that DSM would agree, that no matter what your deficits are in adaptive functioning, you do not qualify for a mental retardation diagnosis without also showing substantial deficits in intellectual functioning. Sonia Sotomayor: Since when -- I know that there's less emphasis now on the IQ test than there was before. But when the IQ test was used, did they always use it as a fixed number or did they always include the SEM as informing the clinical judgment? Allen Winsor: Oh, the SEM has been -- has been part of the equation, yes. I'm not disputing that. Sonia Sotomayor: Since then they have not changed. Allen Winsor: We're not disputing that, but again-- Sonia Sotomayor: That's been the same in all medical diagnosis. Allen Winsor: --Well, I think that the -- the application of the SEM has been a component of this for some time. We don't dispute that. We do note that the emphasis on IQ is -- is decreasing and that the medical community is now suggesting that you should rely less and less on IQ and they've changed-- Sonia Sotomayor: They're not arguing for that. They're just arguing that we should stay where it's always been, which is using the SEM. Allen Winsor: --Well, I think what they're arguing is that you should -- you should do this, you should apply the SEM in the same way that clinicians do because that's the way the clinicians do it. And if you go down that road, then it is very difficult to understand in a principled way where -- where that would stop. Samuel A. Alito, Jr.: Is it the case that those who use IQ tests always require a 95 percent confidence level and always must require a 95 percent confidence level? Let's suppose a school on the other end of the IQ scale wants to identify gifted children and they say a child is gifted if the child has an IQ of 130 or above. So they say if you have an obtained score of 130, you're in. You're in the gifted child program, even though there is the same percentage that would be -- would be the case with respect to someone with an IQ of 70, that really the person is below 130. Would there be something wrong with their doing that? Allen Winsor: No, Your Honor. Samuel A. Alito, Jr.: Do they -- are there places that do that? Allen Winsor: Oh, certainly. That's up to the decisionmaker who is relying on the IQ for whatever the purpose he or she is. There is an SEM that's published that's a part of the -- of the test, but the decisionmaker who's relying on an IQ test score, to take your example about someone in a school, they can set that as high or low as they want to, because they might want to be overinclusive, they might want to be particularly restrictive. And that's one of the areas where, what we're dealing with here in the Atkins context is fundamentally different because we have an adversarial process, at least with respect to contested cases. We have a burden of proof, a clear and convincing evidence burden of proof that's not shared in the clinical setting. And so there are a lot of reasons why it's very different to make a diagnosis in a clinical setting, particularly now where the emphasis in the medical community is on providing services or making services available to people where you don't have the same disincentive to be overinclusive that-- Elena Kagan: General. Allen Winsor: --Yes. Elena Kagan: Could the State change its statute to say we're -- we're now using a threshold of 60? Allen Winsor: Well, the State certainly has substantial leeway. I think the answer to that is yes, although it would be -- it would be more difficult to defend because I think what you'd want to do is go back and look at the consensus that -- that was a part of Atkins, the consensus that supported the decision in Atkins. But I think before making a decision on 60 as a threshold or some other number, you'd want to look at the whole picture-- Elena Kagan: Well, I guess I don't understand it. You have to explain that to me a little bit. Allen Winsor: --Sure. Elena Kagan: Because I thought that the 70 was -- is very longstanding. Everybody has agreed that it's -- it's 70 for many, many decades. Maybe -- maybe forever. So how could a State -- if the State -- why could the State say no to that? What would you look at? Allen Winsor: Well, I think you'd look at, again, at the -- the special interest at issue in Atkins and -- and the fact that the State may need to be more restrictive because of the -- the malingering and -- and incentives that inmates would have to -- to score lower than they -- than they would ordinarily perform at, that you wouldn't have in a clinical setting or you wouldn't have in -- necessarily in a school setting where people are always trying to perform-- Sonia Sotomayor: That's why you have the other two prongs. Allen Winsor: --I'm sorry? Sonia Sotomayor: That's why you have the other two prongs. Allen Winsor: Well, you have -- you certainly have-- Sonia Sotomayor: And at every juncture when you have a fixed cutoff, you have the ability to defeat the other two prongs, but you're stopping them on a test based on a test score that has a margin of error recognized by the designers of the test. Allen Winsor: --Well, we're not stopping them from putting on -- all we're stopping is the consideration of the other prongs when it's clear that the first prong can't be -- can't be satisfied. So I think there's been, in the briefing, this idea that it necessarily has to be sequenced a certain way, and it doesn't. If someone came in and it were undisputed that he could not satisfy the adaptive functioning prong, for example, then you wouldn't necessarily have to look at IQ. So-- Stephen G. Breyer: Can you-- Anthony M. Kennedy: Please, I-- Allen Winsor: --Yes, sir. Anthony M. Kennedy: --Then I misunderstand the case. I thought the Florida court held, in effect, my words, that the IQ was a threshold in order to make this inquiry, and if you had 70 -- over 70, you could not make a showing. But please correct me if I'm wrong. Allen Winsor: No, that -- that's -- that's correct. And what happened in this case was there was a -- a motion in limine by the State recognizing that the -- that the IQ scores that were at issue here were all above 70. And so it was sort of an ordinary evidentiary motion, you know, if you had a different case where you had to prove causation of damages if there was no evidence-- Anthony M. Kennedy: So you do not get -- if you do not satisfy prong one, you do not get to prongs two or three, period. Right? Allen Winsor: --That's right, Your Honor. But by the same token, if you don't satisfy prong two, you wouldn't get to prong three and -- and so on. So it's -- the evidentiary ruling was certainly a -- simply a recognition that you have to satisfy. Stephen G. Breyer: --What happens if right now, today, under the law of Florida a similar case and there is an IQ score of 71, and the prosecutor points out to the judge that that's higher than 70. And the defense lawyer says: Your Honor, I would like to bring in my test expert here who will explain to you that, even though this test did show 71, there is some fairly small but significant probability of error, and it could in fact be as high as 76, and he would like to explain to you that that's the situation. And therefore, can I have him testify. Does the judge have to let him testify or not? Allen Winsor: If I understand the hypothetical correctly, you have one test score of -- of 71, and so without an attained test score of 70 or below, he would not. Stephen G. Breyer: All right. So then-- Allen Winsor: But he would have-- Stephen G. Breyer: --So then this is a dispute in the case. They would like to present that expert, you would say no? Allen Winsor: --That's right. Stephen G. Breyer: Okay. That brings me back to my -- I just want to be sure. Allen Winsor: Yes. But-- Stephen G. Breyer: Then we get to my first question, which I won't repeat, and this man has been on death row for over 35 years, I take it? Allen Winsor: --Yes, sir. 1978 was the -- was the -- was the act. Antonin Scalia: He didn't raise mental retardation until 10 years after his first conviction; isn't that right? Allen Winsor: That's right, Your Honor. He -- he raised it in the Hitchcock setting in the late '80s and then went back and had some of the same evidence that he's relying on-- Antonin Scalia: How has it gone on this long? 1978 is when he killed this woman. Allen Winsor: --There have been a number of appeals in this case. There have been a number of issues raised, and there was a -- but yes, there is-- Anthony M. Kennedy: But -- but, General-- Allen Winsor: --Yes, sir. Anthony M. Kennedy: --The -- the last ten people Florida has executed have spent an average of 24.9 years on death row. Do you think that that is consistent with the purposes of the death penalty, and is -- is it consistent with sound administration of the justice system? Allen Winsor: Well, I certainly think it's consistent with the Constitution, and I think that there are obvious-- Anthony M. Kennedy: That wasn't my question. Allen Winsor: --Oh, I'm sorry, I apologize. Anthony M. Kennedy: Is it consistent with the -- with the purposes that the death penalty is designed to serve, and is it consistent with an orderly administration of justice? Allen Winsor: It's consistent with the -- with the-- Anthony M. Kennedy: Go ahead. Allen Winsor: --It is consistent with the purposes of the death penalty certainly. Antonin Scalia: General Winsor, maybe you should ask us-- Anthony M. Kennedy: Well-- Antonin Scalia: --that question, inasmuch-- Anthony M. Kennedy: --Well-- Antonin Scalia: --as most of the delay has been because of rules that we have imposed. Anthony M. Kennedy: --Well, let -- let -- let me ask -- ask this. Of course most of the delay is at the hands of the defendant. In this case it was 5 years before there was a hearing on the -- on the Atkins question. Has the attorney general of Florida suggested to the legislature any -- any measures, any provisions, any statutes, to expedite the consideration of these cases. Allen Winsor: Your Honor, there was a statute enacted last session, last spring, that is -- it's called the Timely Justice Act, that addresses a number of issues that you raise, and it's presently being challenged in front of the Florida Supreme Court. But I would like to talk about the 95-- Elena Kagan: General, can I just ask-- Allen Winsor: --Certainly. Elena Kagan: --why you have this policy? Allen Winsor: I'm sorry? Elena Kagan: Why you have the policy. I mean, is it administrative convenience? Just tell me why you have the policy. Allen Winsor: Well, the people of Florida have decided that the death penalty is an appropriate punishment for the most horrific crimes, like the crime at issue. Elena Kagan: No, no, no. Why you have the 70 threshold. Allen Winsor: Well, that -- that's what I was getting at. And that -- and so Florida has an interest in ensuring that the people who evade execution because of mental retardation are people who are, in fact, mentally retarded. And if we apply the rule that the Petitioner has suggested, it would double the number of people who are eligible for the -- for the punish -- or for the -- for the exemption. And that's inconsistent with Florida's purposes of -- of the death penalty. Elena Kagan: Well, that's just to say that it would double the number of people eligible, but some of them may be mentally retarded. I mean, presumably we want accurate decisionmaking with respect to this question, don't we? Allen Winsor: Well, there -- there -- we do certainly. And they are not mentally retarded if they don't have an IQ of 70 or below. And that's a -- that's a position that Petitioner doesn't -- doesn't challenge. Elena Kagan: Who are not mentally retarded if they don't have an IQ score of 70 or below? I mean, you -- you don't believe that yourself, right? This is a tool to decide whether somebody is mentally retarded, and it's a tool that functions in one prong of a three-prong test. Allen Winsor: It is the first prong. The IQ threshold is the first prong. So -- no matter what your adaptive deficits are, you must demonstrate -- and, again, here in this adversary setting, you must demonstrate by clear and convincing evidence that you have an IQ of 70 or below. And what we believe is that if you say, Well, there is a 95 percent chance that my IQ is somewhere between, say, 68 and 78, that you have not satisfied that first prong. And I would like to talk about the 95 percent confidence interval, because it is not the case that you have, say, with a 72 a 95 percent chance that your IQ is 70 or below. In fact, it's a very small chance. What the -- what the confidence interval measures is that you have a 95 percent chance that your true IQ is within five points of the measured thing, the measured IQ, but it's not that you would have an equal chance of having a 66, a 67, a 68. It falls under the bell curve. And so if you take the test over and over again, you are going to score near the -- near the peak of that bell curve most of the time, which is where your true IQ would be. And at the outer ends of that 95 percent threshold are very, very small likelihoods that you -- that that's your true IQ. And -- and then with each additional test you take, the odds -- that -- that's above 70, the odds would go down. And so it's simply not the case that you can say, Well, he has a 72 so he has satisfied or even might have satisfied the first prong because, as a statistical matter, every -- well, as a factual matter, every Wechsler test he has taken that was admitted into evidence was over 70. He had a 71, a 72, 73, 74, and an 80. And so if you want to apply statistics to it, you would have to look and say, well, what are the -- what are the odds that with that group of testing, that his true IQ is under 70? Now, is it possible? Certainly it is possible that it's over 100. You know, you can exceed beyond the 95 percent confidence interval. And nobody disputes that -- that the true IQ is something that is incapable of being measured or incapable of -- and -- but -- but the IQ test is what the community has, and it's the most objective of the three prongs, which is why we believe it's particularly important to focus on because it's the most objective test that we have. Ruth Bader Ginsburg: How many States retain that practice with a rigid 70 cutoff? Allen Winsor: Your Honor, by our count there are eight States that have both a hard cutoff and a -- and a 70 or two standard deviations, which approximates to the same thing, that has been expressly recognized by the States. There are a number of other States that have statutes similar to Florida's, but that have not been interpreted one way or the other that -- that we may or may not-- Sonia Sotomayor: Of those eight, how many actually have a fixed cutoff and how many have a SEM? I thought it was only four that didn't have consideration. Allen Winsor: --No, no. Those eight, Your Honor, all have a fixed cutoff of 70 or two standard -- two standard deviations. Sonia Sotomayor: But by judicial decision, they've considered -- well, we -- that -- that's something that-- Allen Winsor: In -- in most of the instances, Your Honor, they have done what Florida has done, which is they've had a statute that then was interpreted by the -- by the courts. So we-- Sonia Sotomayor: --Exactly. That's what I'm saying. Only four have it interpreted without the SEM. Allen Winsor: --I'm -- I apologize. Sonia Sotomayor: I thought only four had interpreted without using the SEM? Allen Winsor: Had interpreted their statutes without using the SEM? Sonia Sotomayor: Only four, like Florida. Allen Winsor: No, Your Honor, we have eight. We have Alabama, Florida, Idaho, Kansas, Kentucky, North Carolina, and Virginia, and Maryland, which has repealed the death penalty, but -- but that was their standard when they have it. We would ask respectfully that the Court affirm the Florida Supreme Court. John G. Roberts, Jr.: Thank you, General. Mr. Waxman, you have a minute remaining. Seth P. Waxman: In State v. Cherry, which is the -- the Florida Supreme Court decision that established this rule that if you -- if your lowest score or your only score is 71, you are out, and that applies whether you take one test or multiple tests -- here I'm quoting from the Supreme Court's decision in Cherry, that, quote, "It is a universally accepted given, that is that the SEM is a universally accepted given, and as such should logically be considered in determining whether a defendant has mental retardation. " What the Court said was: We have to read the plain meaning of the Florida statute and the Florida statute says two standard deviations. The notion that the Florida legislature or the -- may I finish my sentence -- the Florida legislature or the people of Florida have made a considered decision not to account for the SEM is baseless and is belied by the -- the legislative report that accompanies the statute which said 70 to 75. Thank you. John G. Roberts, Jr.: Thank you, Mr. Waxman, counsel. The case is submitted.

Warren E. Burger: Number 31, Brockington against Rhodes and others. Mr. Sheerer you may proceed whenever you’re ready. Benjamin B. Sheerer: Mr. Chief Justice, may it please the Court. Case number 31 Brockington versus Rhodes today is an election case on appeal from the Ohio Supreme Court. It’s a case that we feel as this Court has said deals with matters closed to the core of our constitutional system. It follows a case previously decided by this Court under the title Williams versus Rhodes. The Williams versus Rhodes case dealt with the right of third parties to attain ballot status in Ohio. This case deals with the right of independent candidates to obtain ballot status in the State of Ohio. We think the case itself raises two main issues. The first issue arises in this manner. Ohio allows independent candidates to secure ballot status through the filing of nominating petitions signed a certain number of qualified voters. Now up to 1952, that number was 1%, that number was 1% for 60 something years. In 1952, the amount was increased to 7%. Now, under the 1% rule which had existed for 60 something years, there was no substantial, no disruptive interference with the election procedure by independents. In fact, participation by independents was slight perhaps even minimal in the Ohio election process. Potter Stewart: Was that 1% rule applicable across the board all independent candidates for any elective office of the state? Benjamin B. Sheerer: Yes, sir that is my understanding. And in fact sir the 7% is likewise -- Potter Stewart: Likewise. Benjamin B. Sheerer: -- applicable across the board. Potter Stewart: Your client is a -- wanted to be an independent candidate for election to the House of Representatives. Benjamin B. Sheerer: Yes sir that’s correct, for 21 first congressional District State of Ohio and in November 1968 general election. Now we say that given that history of no disruption, no substantial interference, no overburdening of election process, the increase, the sevenfold increase in the requirement constitutes a burden on First Amendment, freedoms, a limitation of First Amendment freedoms of association and speech and a burden on the right to cast an effective ballot, a right to participate equally in the election process. Now, the second main issue we see arising is the barrier itself. In our case, for example, my man, Mr. Brockington, the appellant here would have had to secure 5,974 valid signatures to qualify for the ballot. Now as a rule of thumb, any politician will tell you this means get 50% more. In other words, he would have had to obtain 9,000 signatures most likely of which perhaps 6,000 would be valid in order to qualify. Now a party candidate qualifies for the primary for being on the ballot in the primary by simply securing 100 signatures if it’s an office less than statewide, or 1,000 signatures if it’s a statewide office. Potter Stewart: Yes, but then, in order to appear on the ballot in November, he has to win a primary election and get a majority of the people voting on the primary. Benjamin B. Sheerer: That’s correct. Potter Stewart: Which is many, many thousands. Benjamin B. Sheerer: That may be the case. We say however -- Warren E. Burger: Is there any alternative? Benjamin B. Sheerer: To -- Warren E. Burger: To get on the final ballot? Benjamin B. Sheerer: No, sir. There is either through to the party primary or as an independent. Those are the two methods that Ohio allows. Warren E. Burger: Now what I think we were concerned about you said in response to Justice Stewart’s question that he may have to get a majority in his primary. Benjamin B. Sheerer: My main -- Warren E. Burger: Many thousands of votes. Benjamin B. Sheerer: My main response was that, it might be thousands of votes depending on the size. That is the only -- that is true, he would have to prevail on the party primary. I was responding mainly to the size. It might be the required because it might be a small election district, that’s what I meant when I said that. Byron R. White: Well, the -- if the party only puts up one candidate, he doesn’t have to -- those two are primary at all. Benjamin B. Sheerer: I would assume that his name would be on the ballot, that persons could cast right in votes for other people if they wanted to. Byron R. White: How do you get on the primary ballot? Benjamin B. Sheerer: Their primary ballot is secured one or two ways, Your Honor. If it’s a less than statewide office, in other words from a congressional district or something like that. You have to obtain the signatures of 100 party or 100 qualified voters. Byron R. White: Of that party? Benjamin B. Sheerer: Of that party. If it’s for senator for instance which would be a statewide office or Attorney General, you would have to obtain 1,000 signatures of qualified voters in that party, the difference for the independent courses that he must obtain a number equally to 7% of those people who voted for governor in the applicable district in the last previous gubernatorial election. Byron R. White: Do you know -- do you have any idea how often candidates are on opposed to the primary? Benjamin B. Sheerer: No, sir. I would say that my feeling is not often sir. Probably so -- Byron R. White: As a general rule in primary in Ohio is that any significant office, there is competition. Benjamin B. Sheerer: Yes, sir. I think that so. Potter Stewart: This 7% requirement that you attack here. Benjamin B. Sheerer: Yes, sir. Potter Stewart: Which we now know has been reduced to 4 but in any event attacked. Benjamin B. Sheerer: Yes, sir. Potter Stewart: Those can be signatures of member of the Republican Party or the Democratic Party or no party. Benjamin B. Sheerer: Yes, sir. Potter Stewart: Or some other third parties, isn’t it, is that correct? Benjamin B. Sheerer: That is my understanding. Potter Stewart: Not limited to people who have not voted in party primaries for example, is he? Benjamin B. Sheerer: No, it is not. Potter Stewart: The whole field is open to registered voters. Benjamin B. Sheerer: Yes, sir. We think that not only through comparison or disproportion of a 100 signatures for instance approximately 6,000 here but also of the election of the barrier itself. The election of the 7% or now the 4% being offense to the equal protection clause is violative of it. The equal protection clause as in the election area deals with fundamental rights and the classifications that might limit or restrict these rights are carefully scrutinized and closely confined to whatever might be determined to be a necessity of the case. Now, the particular facts in which these case arise are these. As has been noted, my -- the appellant was an independent candidate for the Twenty-first Congressional District in November of 1968. His petitions were good and sufficient except for the signature requirement. The number of signatures required. When he was turned down for a ballot position, this suit was filed for mandamus against various officials of the State of Ohio having to do with the election process. The theory of the suit was this, from the beginning. We have urged in this case that the 7% requirement was unconstitutional as violative of First and Fourteenth Amendment. This being so we said, he does say as prior to 1% requirement. The 7% requirement being unconstitutional, the thing to do is to certify him for the ballot. He met the 1% requirement. The amendment to 7% being held unconstitutional is void and have no effect, the 1% requirement is in effect and he should have been given ballot status. Now, at trial, the trial court agreed that he met the constitutional requirements for the office. Essential facts of the case are admitted on the record in the trial court. The trial court seemed to indicate and it believed that only the legal issue remained the constitutionality of the increase. Nevertheless, in its opinion it ruled against us. Its opinion to me can best be described as opaque. I’m not sure what the basis of the rule. Appeal was promptly taken to the Court of Appeals of our state. We made several attempts to get on the ballot at that point. We asked for a temporary restraining order. That was denied. By this time, this Court had acted in the Williams case and it had placed Governor Wallace on the ballot in Ohio depending upon the determination this Court made. We suggest that the Court of Appeals it do likewise. That is if Mr. Brockington want a suit there, he would be on the ballot, if not, he is to be blocked out. That was denied us. We brought the decision of the three-judge District Court in a Socialist Labor Party case, the Williams versus Rhodes case to the attention of Court of Appeals. Nevertheless, they ruled against us without opinion. We then went to the Ohio Supreme Court. We obtained the prompt hearing there. I think it was October 16. This Court had just decided the Williams versus Rhodes case. I brought that case to the Court’s attention. Nevertheless, that court and before the election dismissed on our appeal sua sponte as involving no substantial constitutional question. We took appeal to this Court, probable jurisdiction was noted. Now since that time, the Ohio legislature has reduced the percentage to 4%. I’m here to urge today that the 4% requirement is unconstitutional that this Court should still act in this case. That the case requires decision and that the appellant deserves a decision from the court on these important issues. Now throughout this case, to my mind the appellees have refused to deal with the constitutional issues. We challenge them in the courts below to do that. I don’t think they have done it at any point. Now, my conclusion is they have not and for this reason that the 7% increase was patently unconstitutional and is unconstitutional and that the 4% requirement is also unconstitutional. I say this for two reasons. First of all, the 60-year history -- the 60-year history of an election system is running without problems under a 1% requirement. Potter Stewart: Before you get to the merits. Benjamin B. Sheerer: Yes, sir. Potter Stewart: If you mention the question of mootness, I missed it, I trust you well before you conclude. Benjamin B. Sheerer: I would be happy to respond to that at this time Your Honor. It is true that the election just passed. Potter Stewart: The relief you asked and I’m looking at page 8 of the appendix, was not for a declaratory judgment but this was an action in mandamus in which you directed yourself to getting your client on the ballot for a specific election, i.e. the election of November 5, 1968 and no other. And there is no request for general declaratory relief. I was wondering if that quite a part from the fact of the statutes now have been amended to reduce the requirement from 7% to 4% quite apart from that. I was wondering if this isn’t moot just by reason to the fact that the relief you ask is now impossible to be accorded to. You didn’t ask that the election be set aside? Benjamin B. Sheerer: No, sir. I would hope not Your Honor and I believe it should not be regarded this moot. First of all, although I’m not sure, I know in Ogilvie versus Moore recently decided by this Court election had passed. Whether prayer was for declaratory relief, I don’t recall at this point. If it was not, I would certainly say as authority at this time. Your Honor, I believe the mootness rule is a rule, a judicial rule not mandated necessarily by the Constitution although perhaps by the case in controversy rule the Constitution. But in any event, we have had in this case, a case that was tested to three lower courts as a completely adversarial proceeding. The appellees here were -- at every proceeding filed briefs, I argued the case, I can assure you it was haughtily contested. Byron R. White: But Mr. Sheerer isn’t this a partial answer to the Ohio Supreme Court did not reach this mootness? Benjamin B. Sheerer: Yes sir, I think that -- Byron R. White: It’s not decided on the basis of remedy. They got the constitutional issue. Benjamin B. Sheerer: I believe they did, Your Honor. Potter Stewart: Well, I understood the Ohio Supreme Court and please correct me if I’m mistaken, decided this before the election for which you asked to relief. Benjamin B. Sheerer: Yes sir, that is correct. Potter Stewart: So obviously it wasn’t moot then. Byron R. White: Did they decide the constitutional issue? Benjamin B. Sheerer: I believe they decided the constitutional issue, Your Honor. The appellees, one of the appellees makes the suggestion that the dismissal there was because they couldn’t grant relief but if that was so, I think they would have said so. They said that they found no substantial constitutional issue involved. I think it has been litigated and litigated solely on the merits through three courts below. Secondly, I like to point out that election cases are treated differently, I believe, than other cases. Election cases are peculiarly difficult to get complete and adequate review on. They just are as effective length. It’s the -- naturally the opponent in election case wants to delay, he wants to get the election over and so it’s just almost impossible to get adequate complete review on these cases and yet the question comes up again. This is not a question that will be finally determined. Now, if this Court does not resolve it, people arise -- Warren E. Burger: Are you suggesting that we now treat it as though you had sought a declaratory judgment? Benjamin B. Sheerer: Yes, sir if that is possible I’m going to request it. Warren E. Burger: On what authority do you suggest we do that? Benjamin B. Sheerer: Well, sir I don’t have specific authority as to the capability of the Court to do that. I do say this that this is not an unnecessary question. That is a question that will come up again and that the mere fact that we did not include an allegation in the court below when this case was submitted should not be determined of this issue. The -- this is not an academic question as I say. It will come up again. Election matters tend to recur and many times the courts have said that where it’s a matter of great and public importance, where it transcends the individual case, we will go ahead and decide this point for the benefit of the public to preserve the electoral process to enhance it and the cases to that effect are cited in our briefs, Your Honor. Thurgood Marshall: But Mr. Sheerer, you have asked the mandamus that’s an action at law. Benjamin B. Sheerer: Yes, sir. Thurgood Marshall: To enjoin the enforcement of the statute is inequitable action, is that right? Benjamin B. Sheerer: I didn’t here the -- Thurgood Marshall: To enjoin the enforcement of a statute would be inequitable action. Benjamin B. Sheerer: Well, sir we -- what we said and what we -- Thurgood Marshall: Well, what do you want us to tell this brave Court of Ohio, to grant mandamus? Benjamin B. Sheerer: We want this Court to say, Your Honor that the courts below were in error that they should have held that the 7% requirement was unconstitutional and that the 1% requirement was in effect. Now, what we are asking is -- Thurgood Marshall: And that he should have -- he should be prolonged about. Benjamin B. Sheerer: That that was what -- Thurgood Marshall: That he should have been prolonged about it? Benjamin B. Sheerer: Yes sir. That he should have been granted valid status. Thurgood Marshall: Do you have any case that suggests that? You can do that in a mandamus action? Benjamin B. Sheerer: Well sir, we do cite -- Thurgood Marshall: You made no effort to change the mandamus action. You got the same prayer now today that you have then. Benjamin B. Sheerer: Yes, sir that is true. However, the thrust of our lawsuit is -- Thurgood Marshall: We could give sua sponte. We could give a declaratory judgment. Benjamin B. Sheerer: Well sir, the thrust of our lawsuit has always been that the 1% requirement was appropriate and the 7% was not. Thurgood Marshall: What about one and a half? Benjamin B. Sheerer: Well sir, the -- we say this. That the 60-year history shows that it had been an existence for 60 years that there was no need for an increase. Now, I’m not suggesting to the court that it sanctify or hold that the 1% requirements constitutional because I don’t think that its quite the issue here because -- and I’m not clear in my own mind whether 1% could be said to be constitutional. Thurgood Marshall: I’ll presume somebody will have to decide that maybe like a legislature, wouldn’t it? Benjamin B. Sheerer: I’m not asking the Court to substitute its judgment for the legislature here. What I we’re saying is this that where there has been this type of history and no interference or disruption, the legislature cannot just increase -- make increase at sevenfold driving independents and minorities parties off the ballot. They cannot show a justification for this increase. Now as to the validity of the 1% requirement itself, I take it that could be the subject of litigation sometime, if so I wanted to litigate it. Harry A. Blackmun: Do you think the 1% -- Benjamin B. Sheerer: I’m not entirely clear on that Mr. Justice, I can -- Harry A. Blackmun: Because my next question was going to be one is, why was it for? Or you’re going to do it alone? Benjamin B. Sheerer: Well, again I have to respond to my historical argument that this was not great participation that it was hardly any independent activity and the raise at sevenfold just about ended independent activity and also as a historical fact -- Harry A. Blackmun: Well, I gather you think four is equally an affirmance in the same reasons. Benjamin B. Sheerer: Yes sir and of course if we cannot prevail here, I’m sure that 4% statute is going to be subject of litigation. We’d like to avoid that if we could. We’d like to avoid another long process litigation when we think the issues could not be presented any differently to this Court if it came back again. I cannot conceive of the question being different at all before this Court if it were brought back again. I think the exactly the same contending issues would be before the Court if it came back. Byron R. White: Is there some contention that the -- that this man was to run again? Benjamin B. Sheerer: I’m not clear, Your Honor whether he will or not. Certainly, in the -- Byron R. White: Or he might run again? Benjamin B. Sheerer: Yes sir, I think it’s possible. He might, he’s had a taste of it and he – it wasn’t very successful. Byron R. White: Or he’s not running? Benjamin B. Sheerer: Well, he was able to run as a write-in candidate of course. Thanks to the relief we got from the three-judge federal court in the Socialist Labor Party case. I’m not entirely familiar with the case Carroll versus Princess Anne recalling that. But I recall that that was a case in which relief could not be granted. I believe it was an injunction case and as to whether or not, that was a declaratory judgment. Prayer in that, I’m not sure but I do remember that was a case in which it was the question as considered of such public importance that this Court decided it. Now, in addition to the history which we believe is a vital importance here. This Court has held in this area, in the area of the election cases three principles I believe. Number one, is that there is sanctity in the individual ballot that every man’s vote is equal the others and that our guarantee is the right to cast an effective ballot. Secondly, that Constitution guarantees free and equal competition in areas, ideas, and governmental policy in the electoral process. The First Amendment in the election process are inextricably intertwined. And finally, that minority and independent candidates are not to be subjected to needless disadvantage. Now in determining whether a statute can pass constitutional master in this area, the Court has said it will look at the facts and circumstances of the law. Look at what the state claims to be protecting and look at the interests that are disadvantaged by the law. And to allow verdicts, there must be a compelling state interest. We suggest no state interest can be advanced, has not been advanced or could be advanced for the sevenfold or the fourfold increase. We hope the Court will act, will indicate that the 1% was a sealing but beyond which the legislature could not go. Help us restore some health to the Ohio election process. Free as -- so that in the oncoming months, the legislature can take further action if they want to or so that independents can participate, minority parties can participate in the election process. Otherwise, the result is going to be -- people will be frozen off the ballot and that there will be a necessity of further litigation on a question that is squarely before the Court on this record. Warren E. Burger: Well, do you say that it is not a permissible or valid state interest to take some measures to preclude multiple splinter parties? Benjamin B. Sheerer: I believe not Your Honor. I believe not. Warren E. Burger: And how many parties at all? Benjamin B. Sheerer: I believe no, I believe there is nothing in the Constitution that requires that. The Constitution is neutral on parties. It does not enshrine them to give them any special sanctity. Now, I do not maintain today that some regulation cannot be placed as to obtaining ballot status, but I say it must be minimal. Warren E. Burger: Do you think if one -- you thought 1% was all right? Benjamin B. Sheerer: Well I say this that -- and I want to be perfectly clear on this, I’m not saying that this Court -- this case requires this Court to say 1% is constitutional. It asks only that this Court to say an increase beyond 1% in view of a history was unconstitutional. Now someday, someone may be able to present a case, litigated case, present a record to a Court which would hold, which will lead it to hold that the 1% is unconstitutional. I’m not asking today for endorsement of that 1%. Potter Stewart: How does this requirement compare to the requirements of other states with respect to independent candidate is contrasted with no parties? Benjamin B. Sheerer: Very, very high. You’ll remember that in footnote 9, in Williams versus Rhodes, the Court noted that 42 other states require 1% for third parties. Potter Stewart: Yes I know but that’s a different situation, is it not? Benjamin B. Sheerer: But if there -- only require parties to require 1%, the party is a structure as to an organization is the one to obtain ballot status. How much harder is it to require 7% from an independent candidate? The other states in our research are much lower. Much lower and -- Potter Stewart: Is that material in your brief? Benjamin B. Sheerer: No sir it is not. I believe that we got in to that question in the Socialist Labor Party brief and I am not -- I am going by memory on that. Warren E. Burger: Thank you Mr. Sheerer. Mr. Macklin. Robert D. Macklin: Mr. Chief Justice, may it please the Court. We would first of all like to point out that the appellees in this case have suggested the element of mootness in this case and of course that is now pending for your decisions. We feel very strongly however that in the event, in the unhappy event, that this Court might want to rule upon the constitutionality of our election statute which is under consideration here. We do recognize the fact that when the Court rules, it affects whatever rule that -- or whatever piece of legislation may then be in effect and consequently feel would have an effect upon our 4% statute which is going to be effective some eight days and today on October the 30th. Notwithstanding, we would like to ask for some silver reflection on the basic law of this particular case. The appellant initially came in to the trial court seeking the extraordinary remedy of writ of mandamus to commend the respondent board of elections and certain state officials to place his name on the ballot as an independent candidate for election to Congress as United States represented from the 21st district in Ohio. Mr. Brockington had failed at that time to comply with the existing statute requiring that he file nominating petitions signed by not less than 7% of the number of electors who were voted for governor in the next proceeding general election in that district. He had filed petitions which are slightly in excess of the 1% which would have been the requirement under the former statute which preceded the 7% statute. In Ohio, by statutory definition, a writ of mandamus commenced the performance of an act which the law especially enjoins as a duty resulting from the office, press or station. In addition, our state law places a burden on the relator to establish a clear legal right to have the writ issued. So implicit, that Mr. Brockington suit was a requirement that he showed the unconstitutionality of the 7% statute such that the court would be correct in reinstating the 1% statute and therefore granting the writ of mandamus. Now the record will show that at the trial court level, there was no evidence introduced supporting our contention of unconstitutionality of the 7% statute. The essence of the evidence was simple that Mr. Brockington had filed petitions with signatures consisting of about 1% rather than the records at 7% and that the respondent board of elections had denied certification because of the insufficiency of the petitions. Nothing more, this was the entire thrust of the evidence which was heard at the trial court in Cuyahoga County in Ohio. It was at that time, and for I know it still is, the rule in Ohio that before, that an act of the general assembly is presumed to be constitutional, and before a court made it very clearly constitutional, it must appear beyond a reasonable doubt the legislation and the constitutional provisions are clearly incompatible. Absent in appearance of such incompatibility in the evidence of the record in this case, it was not unreasonable that our state court should find that no substantial constitutional question existed. And now it’s made that rather than being an opaque determination in the court -- in the trial court, it was quite clear that really they had not carried the burden of showing that he had a clear legal right to the remedy which he ask for. In Ohio, the basic philosophy underline the enactment of a statute requiring independent candidates to support the candidacy with petitions subscribed by a certain percentage of electors whether to be 1% or 4% or 7% is that we feel that for the best exercise of the democratic process, as a matter of principle that a candidate for any office be required to demonstrate that this is not the frivolous injection of its personality and publicity of a political campaign but rather in fact that he is seeking election to that office. It is not unreasonable that he be asked or required rather to show some marked demonstration of support from at least a fraction of the electorate within the area from which he seeks election. We believe that such a requirement is necessary to establish a bona fide intent on the part of the candidate. And in this respect we are supported in our belief in the knowledge that some 44 sister states have some form of similar requirement and either greater or lesser degree. In actual fact I believe there are 11 other states which now would require a greater degree of percentage than does Ohio in view of its 4% statute coming out. Speaker: You don’t have any requirement. Robert D. Macklin: There are five states which had no requirement at all Mr. Justice Harlan. I can tell you, yes sir. There are no provisions in Hawaii or in Delaware and Florida, Michigan or Mississippi. And this is according to our research. Speaker: No provisions for independent candidates? Robert D. Macklin: No provisions for a coming up with a requirement of a certain percentage of electors to sign the petitions or nominations, Your Honor. Speaker: Do they have a provision for independent candidate through states? Robert D. Macklin: Would you please repeat, sir? Speaker: Do they have a candidate for -- do they have a provision for independent candidates in those states? Robert D. Macklin: I’m quite sure they do Your Honor but we only looked at this from the standpoint of whether or not there was a percentage requirement. Speaker: Yes. Robert D. Macklin: In the course of our research. Warren E. Burger: Is that material in your brief? Robert D. Macklin: No, it is not sir. Thurgood Marshall: Mr. Macklin, why the change in one to seven? Robert D. Macklin: I don’t really know Your Honor. This was established by the legislature. I do think that the appellant indicates a long history of a very comfortable arrangement with the 1% requirement. I think it’s conjectural. I think that we might very well ask, what might the history have been with 1-1/2% percent, with a 4% with a 7% and moreover, I think -- Thurgood Marshall: I think difficulty because I would assume in 60 years that the 1% would be much more than it was 60 years ago. Because I assume the population of Ohio has increased. Robert D. Macklin: Yes, Your Honor. Thurgood Marshall: I assume that. So with the population increase and the man with more signatures required why would you raise the percent? That’s my problem. Robert D. Macklin: Well, I can only suggest that this was in the -- within the sole area of the legislature of that time. However, since they have taken another look at it and they have reduced it to 4% and perhaps they have looked at other states and seen what they have but I think it’s purely a matter for the discretion of the legislature and in this case that’s what they did exercise. Potter Stewart: There is no way to get out the -- what we call a legislative history of that change in 1952 from 1% to 7% in the Ohio as there are no committee reports. Robert D. Macklin: No Your Honor there are not, we looked for this. We looked newspapers and everything else. But as you know that the deliberations are not now set out as they were formally in 1852. We believe the requirement of showing some bona fide intent upon the candidate really to be in the best interest of the voter and quite frankly, we believe it to be supportive of the one man, one vote principle. In that, the voters are short that when he cast his vote for candidate he was qualified fro the ballot, his vote will be in effective expression of a preference for a candidate and the vote would be undiluted in its relationship to all other votes cast. Since he will have voted in behalf of a candidate of proof and intent, now we freely admit that our statutes do distinguish between the independent candidate and the candidate who is running for a party nomination. And as I pointed out previously I believe a party candidate is required only to have 100 signatures on his ballot. But we consider that the reason for this distinction lies in the difference, in the path of the party candidate must follow as opposed to the independent candidate. The party candidate is put to great time, expense, although he lays his principles on the line, on the issues which may be before the people of that time and certainly in Ohio party primary fights are very difficult time for the candidates. We feel that to proscribe a parity between an independent and a party candidate would in effect be discriminatory as to the party candidates and this is. But this is not really the issue that’s been raised in this case because the appellant certainly in his briefs openly subscribes to the 1% requirement and this of itself is a greater demand of the independent then it would be of the party candidate. Its only complaint why is the degree of the burden that may be cast upon the independent candidate and he really fails to tell us what increment beyond 1% triggers off the avalanche of unconstitutional invalidity. He would ask this Court to determine some magic figure of percentage and to oppose upon the State of Ohio and quite clear the other states would be affected by this, this Court’s ideas of what that policy might be. We submit that the appellant has not offered guidelines. There are no clear or valid criteria which been presented to this Court which might establish a basis for determining some magic percentage. Speaker: But what’s the state interest precisely that you would say? Robert D. Macklin: The state interest Mr. Justice -- Speaker: 4% or 1% or any other percent. Robert D. Macklin: Mr. Justice Harlan, the state interest that we feel is as far as we can say a compelling state interest is simply that we are requiring that an independent candidate show that he has a valid intent to actually run and that he may -- that he does have the support of at least a fraction of the electorate in furthering his candidacy. Speaker: Am I wrong in taking that that was the objective in the Williams v. Rhodes, that state interest? I thought you have picked your argument in Williams and Rhodes on the proposition that you are to assure against the proliferation in the names on the ballot. Robert D. Macklin: Well this would be a part of it -- Speaker: In many names and what your adversary says here that under the history of the operation, the 1% limitation your experience had only produced a few candidates on the ballots of that argument is not a -- did not tend to show a valid state interest as is going now. Robert D. Macklin: Well, we didn’t particularly feel that Williams versus Rhodes was applicable to this particular case, Your Honor. Speaker: No, it’s a different case. Robert D. Macklin: Different case, a difference proposition. And actually there was no consideration of this particular statute in the Williams versus Rhodes case and we didn’t feel that you completely knocked out the electoral -- Speaker: No, no. Robert D. Macklin: -- machinery in Ohio when this took place. Have I answered your question, Mr. Justice Harlan? Speaker: Well, I guess so. Robert D. Macklin: To go on, we submit that the determination of requirements to qualify an independent candidate for certification of a ballot ought properly to believe -- to be left to the discretion of the legislature where the knowledge of local conditions and special considerations of assessing the validity of candidate intent are really within the sphere of a political question belonging to the State. For these reasons, we respectfully urge that this Court should affirm the decision of the Ohio Supreme Court. Thank you very much. Warren E. Burger: Thank you Mr. Macklin. Mr. Sheerer you have four minutes left. Benjamin B. Sheerer: Thank you Mr. Chief Justice. If I might make some comments, first of all on the statements from appellees’ counsel. I do not believe that a candidate for office has to be able to show that he can win. The three-judge federal court in the Socialist Labor Party case pointed out that the right of free speech is the right also to be wrong. And we said that anybody that manifests a degree of sincerity about this candidacy is entitled to be on the ballot and it does not matter whether other people might consider that candidacy frivolous or pointless whatever. It’s part of our basic framework of our society that everyone is entitled to suffrage and to offer themselves as a candidate. Warren E. Burger: Well did I understand you say before that there is no prohibition against the so-called sticker or write-in candidate under the present law? Benjamin B. Sheerer: That was achieved by the Williams-Rhodes case in the three-judge District Court. That is right. I would point out of course -- Warren E. Burger: So this candidate, your client could be a write-in candidate in any election for any office, is that correct? Benjamin B. Sheerer: Yes, sir with the exception of -- if you are running for president, he would have to -- well now, Ohio requires filing of declaration intent to serve shortly before. Let me point out that Williams and Rhodes notes that write-in is not a comparable to ballot status that Mr. Justice Douglas in his concurring opinion points out it’s a disability, the majority opinion points out that it cannot be compared and that is a definite disadvantage to a candidacy. The reduction of 4% in the Ohio legislature came after this Court and noted probable jurisdiction. The guideline -- the only guideline we are advancing here is when that history is offered. History has pointed out the guideline in this case. Let me point out also this is not a case where the legislature is failed to act as was the case in the reapportionment cases where the legislature failed to reapportion. This is a case where the legislature is acted twice in Ohio and against the interest of independent candidates and minority party candidates. This is a case that particularly requires to relief that this Court can require, can give. There are no independents in Ohio legislature. Potter Stewart: This could be argued that this is not necessarily legislation against or hostile to bona fide independent candidate. In my own experience and observation in this very state that’s where I grew up there. There are such things as people who pretend to be independent candidates when what they’re really looking at for is personal advertising or aggrandizement and they are not bona fide candidates and as the ballot has filled up with people like that with so-called bed sheet ballot of the candidate, of the kind that used to have in Detroit, Michigan. It makes it more difficult for a bona fide or true independent candidate for public office to command the attention of conscientious and responsible voters, isn’t that true? Benjamin B. Sheerer: That could be so Your Honor. In Williams and Rhodes, the Court spoke of it as a remote danger. Nothing in the case that it does exists and cited on Mine Workers case from Illinois. He is saying that these rights cannot be infringed on a speculative danger. I think that the intelligence of the legislature is equal to that sort of problem, if it became a problem. There is no indication whatsoever that it was or will become a problem, and I would hate to defy bona fide candidate for the Court. I think that probably an attack the Court should take this one noted in Williams versus Rhodes, the parties have to begin, people have to begin somewhere. There should be allowed a free and equal chance to engage in a competition of our electoral process. Warren E. Burger: Would you agree counsel of that the excessively long ballots sometimes called the bed sheet ballot has the tendency to discourage people from voting? Would you accept that as a fact of life? Benjamin B. Sheerer: I don’t know, not about him in nature Your Honor but I suppose that it might discourage some people. Warren E. Burger: It’s widely thought that political scientists and other expert servers that is so. Now, assuming them for a moment that that is correct, do you that the state of Ohio does not have a valid interest in preventing that situation for proliferating and standing? Benjamin B. Sheerer: Certainly if there where a showing Your Honor that this was happening. That people were being discouraged from voting or confused to something like that, this case -- the situation will be entirely different. Warren E. Burger: Who must make that showing, the legislature when it fixes a 4% or 3% or 5% or 1%? Benjamin B. Sheerer: That’s right Your Honor. Because the holding of this Court is that where fundamental liberties are involved, the inquiry will be made as to what interest the state is protecting. This Court is the defender of individuals, minority rights and it looks when these people’s rights are burdened or restricted; it looks to the interests that the State is against it. Warren E. Burger: Would you say that in effect that 1% is not unconstitutionally burdensome but the 4% is and in effect you are saying that the judgment of the legislature of Ohio is an erroneous judgment by that difference. Benjamin B. Sheerer: Yes, sir it is. Warren E. Burger: Thank you Mr. Sheerer. The case is submitted.

Warren E. Burger: We will hear arguments next in Webb v. Webb. Mrs. Carden, you may proceed whenever you are ready. Mary R. Carden: Mr. Chief Justice, and may it please the Court: This cases arises on a writ of certiorari to the Georgia Supreme Court. The issue before this Court is not whether full faith and credit should be applied to custody decrees in the abstract but rather whether a decree which meets all requirements for the application of full faith and credit was properly denied such full faith and credit simply because of its nature as a custody decree. Although this-- William J. Brennan, Jr.: Ms. Carden, before you go on? Mary R. Carden: --Yes, Your Honor. William J. Brennan, Jr.: How are you here? Mary R. Carden: Pardon? William J. Brennan, Jr.: How did you get here? Did you raise these federal questions below? Mary R. Carden: Yes, Your Honor. The first time the federal question was raised was in the motion to dismiss in the trial court in Berrien County, Georgia. We specifically requested that the court afford full faith and credit to a final Florida judgment rendered just days before. William J. Brennan, Jr.: Did you cite the Federal Constitution? Mary R. Carden: No, we did not cite the Federal Constitution although we felt and we continue to feel that full faith and credit is such a clear issue, there is no reference to it in the Georgia Constitution or any other statute, and since it was implicit that we were referring to the U. S. Constitution, that that was not necessary. And it was clear, I think it's clear from the finding of the Georgia Supreme Court, and of course we did raise it in our enumerations of error on appeal. Byron R. White: Well, the Georgia Supreme Court didn't say a word about full faith and credit? Mary R. Carden: No, they didn't say a word about full faith and credit although they held that the Florida decree was a final decree and then continued on to say, nevertheless, it had no effect in preempting jurisdiction of the Georgia courts. Byron R. White: And you regard that as a disposition of the full faith and credit argument? Mary R. Carden: Yes, Your Honor, we feel that that completely disposes of the full faith and credit issue since they ignored the-- William J. Brennan, Jr.: Now, you started to say that you raised it in your? Mary R. Carden: --Yes, we raised it in our enumerations of error to the Georgia Supreme Court. William J. Brennan, Jr.: And what form did that take? Mary R. Carden: We requested that the trial court be found in error for failing to accord full faith and credit to the Florida decree. William J. Brennan, Jr.: Again any reference to the Constitution? Mary R. Carden: No, Your Honor. William H. Rehnquist: Doesn't the Georgia Supreme Court rules of practice require that any assignment of error that's not supported by argument or case citation shall be deemed abandoned? Mary R. Carden: There are some very specific rules to which I think the respondent was referring to that do deal with the raising of constitutional issues and the attack under the constitutionality of the statute. Of course, that wasn't the case here. And there are general rules that do say that you must argue your issues in your brief. We felt that the entire brief was based on the full faith and credit issues, and although there were various state issues involved that the whole tenor of the brief was obviously a full faith and credit issue brief. William H. Rehnquist: Are the briefs in the Georgia Supreme Court in the record somewhere? Mary R. Carden: Not the briefs, Your Honor, I don't believe. I believe the Appendix, it contains everything but the briefs. Byron R. White: I thought one of your major points was that the Georgia courts didn't follow the statute? Mary R. Carden: Below, Your Honor, we argued that... and I will get to this in more detail... that the Uniform Child Custody Jurisdiction Act, which was applicable in both Florida and Georgia, also prohibited the Georgia court from assuming jurisdiction, but that was an independent ground from full faith and credit, because the Uniform Child Custody Jurisdiction Act is only-- Byron R. White: You didn't have a separate section in your brief in the Georgia Supreme Court arguing full faith and credit? Mary R. Carden: --No, we didn't, Your Honor. Byron R. White: You just argued the statutory question. Mary R. Carden: We argued that on the basis of the Uniform Child Custody Jurisdiction Act, but also on the basis of the Full Faith and Credit Clause, that the trial court was in error. William H. Rehnquist: Did you cite the Full Faith and Credit Clause of the United States Constitution in your brief? Mary R. Carden: No, we did not, Your Honor. We felt that unlike due process and some other more nebulous terms that may be found in numerous statutes and the state constitution, there was no question as to our reference to the full faith and credit provisions as being the United States Constitution. There is no other reference in Georgia law to full faith and credit. The facts of the case are fairly straightforward. Mr. and Mrs. Webb were divorced in the Superior Court of Berrien County, Georgia, in September, 1977. In November, 1977, the petitioner, Mrs. Webb, who was awarded custody of the minor child, moved to the State of Florida with the minor child and became a resident there. Some 15 months later, in February of 1979, she took a two-day vacation to Miami leaving the minor child, according to her testimony, in the care of her next door neighbor, who was also her cousin. During that two-day absence the respondent came to the State of Florida and removed the minor child from the State of Florida. Warren E. Burger: Weren't there some intervening events? Mary R. Carden: Yes, Your Honor. The testimony of the petitioner in the trial court in Georgia, and the testimony there was restricted to the testimony of the petitioner and the respondent. The petitioner alleges that he went to the State of Florida because of an emergency situation that existed there. His own testimony indicates, though, that when he did get to the State of Florida he found the child with the next door neighbor who was the petitioner's cousin. Warren E. Burger: How did the Florida authorities get into the act in that interim? Mary R. Carden: Your Honor, we are totally uncertain because the only indication that we have that there was any problem at all was that of the respondent's testimony in the trial court of Berrien County. No authorities were present to testify to corroborate his testimony. That was really the first indication we had that there had been, if there was, any real problem there. William J. Brennan, Jr.: Incidentally, Ms. Carden, I gather the youngster is back with her mother now in Florida. Mary R. Carden: Yes, Your Honor, in November of 1980 the respondent contacted the petitioner to pick up the minor child and the petitioner had had the minor child in Florida, although the respondent... pardon? William J. Brennan, Jr.: What's there left to fight over? Mary R. Carden: Well, the respondent has specifically refused to agree to any kind of permanent custody disposition or modification. William J. Brennan, Jr.: But he's turned the child back to the mother? Mary R. Carden: That's correct, but he still-- William J. Brennan, Jr.: Has he indicated that he wants the child back, ever? Mary R. Carden: --He has refused to agree to any modification of custody or to give any written agreement which would give any kind of permanence to this relationship. Of course, that he still has legal custody and would be able to make his claim on the child at any time. William J. Brennan, Jr.: Did he say why he was surrendering the child? Mary R. Carden: No, Your Honor, I do not have any personal-- William H. Rehnquist: Ms. Carden, in the absence of a violation of the Full Faith and Credit Clause in a case like this, there's no federal question for this court to consider, is there? Mary R. Carden: --That's correct. Our sole issue is whether or not this particular judgment of the Florida court was entitled to full faith and credit. After finding that the respondent had removed the minor child, the mother contacted local counsel and filed an action in the State of Florida seeking the return of the minor child, and also seeking a restraining order. The restraining order after an ex parte hearing was granted to the mother on the date of filing in March, 1979, and specifically ordered the father to return the child to the State of Florida pending further litigation on the matter. The father, the respondent, did not answer whatsoever in this Florida proceeding. Instead-- William J. Brennan, Jr.: Service was made on him in Georgia, was it? Mary R. Carden: --That's correct. He was personally served by a law enforcement officer with all the process in Georgia. William J. Brennan, Jr.: Who was the law enforced by, Georgia or Florida? Mary R. Carden: Yes, it was a Georgia law enforcement officer. There has never been any question concerning his having actual notice, nor of the sufficiency of service in this case. But he did not file an answer and instead turned around ten days later and over a month after he had taken the child from Florida and filed an independent action in the Superior Court of Berrien County requesting custody of the minor child. He did not alert that court to any pending proceedings in Florida. Warren E. Burger: Well, what is the real controversy that's remaining, as Mr. Justice Brennan suggested to you? Mary R. Carden: Well, of course, the legal custody of the child still remains. Warren E. Burger: You want us to set aside the Florida decree, I take it? Mary R. Carden: Yes, Your Honor, that is our... for Mrs. Webb to now regain custody she would have to seek a modification, she would have to go back to the Court in Georgia, and since we have a pending proceeding that isn't possible at this time. Warren E. Burger: Well, why not wait until that controversy arises? Mary R. Carden: Your Honor, the respondent right now has every right to go to the State of Florida to remove that child. He would even be able to seek the assistance of law enforcement officers to get the return of the child now, so we are in a very precarious position. William J. Brennan, Jr.: Can he do that under the new federal statute? Mary R. Carden: The new federal statute, the Parental Kidnapping Prevention Act, from everything I can determine is not effective until July 1, 1981. It does provide a series of enforcement mechanisms for custody decrees and it's impossible to say exactly what effect it would have had on this case had it been effective. Obviously, its intent is to provide an enforcement mechanism for custody decrees, even custody decrees that would not be enforceable under the full faith and credit clause because of lack of finality and other problems. But, fortunately or unfortunately, we really at this point do not know what that effect would have been on our case. After the respondent did not answer in the Florida proceeding, and after he had commenced his proceeding in Georgia, the Florida court did hold a full hearing on the issue, even though he was in default. And at that hearing they entertained the testimony of the petitioner and made the following determinations. (1) They determined that Florida had subject matter jurisdiction in that the petitioner and the minor child were residents of the State of Florida and that the minor child's absence from the State of Florida did not affect his status as resident of that state. Secondly, they found that they would recognize the Georgia decree and would establish this decree in the State of Florida. And according to respondent and the amicus curiae, that's all they did. But of course the record indicates otherwise. The court went on and found that it was in the best interest of the child to modify visitation, not just parroting the petitioner's request for modification of visitation, but setting out a full schedule of visitation which really did in no way decrease the respondent's visitation rights. And lastly, and really most importantly, the Florida court reviewed the other provisions of the Georgia decree that were in force at that time and determined that there was no reason to change any of those provisions, that they should remain in full force and effect. And, of course, one of those, the major one of those, was that the custody remained with the petitioner. After the Florida judgement was rendered, the petitioner filed an answer with the Georgia court, or amended the answer she had already filed with the Georgia court and informed the Georgia court that the Florida court had already rendered a final judgment and requested in her motion to dismiss that, as we have indicated earlier, that the Florida judgment be afforded full faith and credit in Georgia. The Georgia court, nevertheless, held a hearing on the matter and as I indicated earlier, restricted the testimony to the testimony of the petitioner and the respondent. After hearing the testimony of the petitioner and the respondent, it entered a final order completely in favor of the respondent, awarding him custody of the minor child. William J. Brennan, Jr.: When did the mother first acquaint the Georgia court with the action in Florida? Mary R. Carden: She filed her answer in March, 1979, and also at that time filed a motion to dismiss, and she informed the court at that time that there was a pending proceeding in Florida. William J. Brennan, Jr.: Had anything occurred in the Georgia proceeding up to that time? Mary R. Carden: No; no. The first thing that occurred in the Georgia proceeding after the filing on March 24-- William J. Brennan, Jr.: You mentioned earlier that the father had brought this proceeding in Georgia without informing the Georgia court of the pendency of the Florida proceeding, but as I now understand it that was of no significance. Mary R. Carden: --No, except to indicate that he had not made that disclosure. William J. Brennan, Jr.: Because, right after the completion of the Florida proceeding you then filed an answer which fully acquainted the Georgia court with everything that had happened in Florida? Mary R. Carden: We had filed an answer previously, but, of course, all we could alert the court to was that there was a pending Florida proceeding and ask them to decline jurisdiction and allow Florida to decide the entire matter. Then, after the final judgment was rendered, we amended that answer, informing them of the final judgment, and at that time requesting that it be accorded full faith and credit. In the Georgia court order it did not mention whatsoever the Florida proceeding or the Florida judgment. There was no ruling whatsoever as to the significance of either and it also found a material change of circumstances justifying its change of custody based on events all of which had occurred months and even, in several cases, a year and half prior to the rendition of the Florida order. From the order of the Superior Court of Berrien County we did appeal to the Georgia Supreme Court and enumerate this error and failure of the Georgia trial court to give full faith and credit to this Florida decree. Thurgood Marshall: Ms. Carden, can you tell me why the Georgia Supreme Court didn't mention the words "full faith or credit"? Either one of those words? Mary R. Carden: I presume they thought that they didn't have to reach that issue because of the state grounds that they dealt with, but they did find that it was a final judgment of the State of Florida, and then they turned around in the next few sentences and said that that had no effect, or did not preempt jurisdiction. Thurgood Marshall: No, it started off by saving that the case was there "on the certain provision of Georgia's Uniform Child Custody Jurisdiction Act, Code Annotated 74501. " That's the first sentence of it. Mary R. Carden: One of my enumerations of error was that the Georgia court just declined-- Thurgood Marshall: Well, why did they just ignore it? My question is, why did they ignore it? Mary R. Carden: --I presume, Your Honor, that they thought they could make a decision on that ground alone and not deal with the full faith and credit issue. That was one of our enumerations of error. Thurgood Marshall: Did you say, full faith and credit of the U.S. Constitution in your brief? Mary R. Carden: No, we referred to the failure of the trial court to give full faith and credit to a final Florida judgment. Thurgood Marshall: You didn't cite any constitutional provisions? Mary R. Carden: No, we didn't cite any constitutional provisions. Thurgood Marshall: So you want us to say you don't have to cite the Constitution in order to invoke this Court's limited jurisdiction? Mary R. Carden: Your Honor, in many cases I think the failure to cite the U.S. Constitution would lead to confusing results. Thurgood Marshall: I'm eagerly waiting for you to give me the citation. Mary R. Carden: Well, in the cases dealing with due process, for instance, this Court has held that-- Thurgood Marshall: What case? Mary R. Carden: --In cases dealing with due process this Court has held that a failure to specify which provision of the Constitution-- Thurgood Marshall: One of the cases... you cite it. Mary R. Carden: --Pardon? Thurgood Marshall: Please cite me one case that says that. Mary R. Carden: That the failure to give the exact provision of the United States Constitution doesn't sufficiently raise a federal issue? Thurgood Marshall: Yes, ma'am. Mary R. Carden: Well, I can cite to you cases which have held that if it is explicit in the entire record that the issue was appropriately raised, then this Court can decide the federal claim. Thurgood Marshall: Was this case... well, where was the article of the Constitution of the United States raised in your case? Never. Mary R. Carden: That's correct. We did not cite to Article IV, Section 1, of the United States Constitution, but we feel that because of the unique nature of the full faith and credit clause, it has no other reference. It's not something that the Court can mistake as being a reference to a state constitution provision for full faith and credit. William H. Rehnquist: I suppose a state court can't simply evade a properly preserved federal question by writing an opinion saying that this case deals with a state law and simply treating state issues. Mary R. Carden: Well, that would be our feeling about the case because, of course, they did indicate, they recognized that the Florida judgment was final, had been rendered three weeks before, and yet then they went on and said, nevertheless, the Georgia court has jurisdiction. So it indicates that their obvious result was that there was no full faith or credit afforded. Thurgood Marshall: Then, why didn't you cite it here? When you came to this Court you did cite it. Mary R. Carden: Well, we understood at that point that we did-- Thurgood Marshall: Was this the first time you heard of it, eh? Is that the first time you heard of it? Mary R. Carden: --No, Your Honor. Of course, in the state court, we had a number of grounds for enumerations of error and here it is our only ground and then of course we've raised it very specifically. Byron R. White: Of course, the whole thrust of the Uniform Act is to, as some point, to persuade some state to respect the judgment of another state, and so that, to call it, it might be perfectly natural to refer to the obligations under the Act as a full faith and credit obligation. Mary R. Carden: Well, of course, the Act specifically refers to itself as being a comity-based statute and does not of course have anything to do with anything related to full faith and credit in the United States Constitution. Byron R. White: Well, it attempts to convince a state it ought to give some respect to a judgment of another state. Mary R. Carden: That's correct; as a matter of comity, by making laws more uniform in order to have it recognized. Speaker: Or as a matter of full faith and credit. Mary R. Carden: Well, we would argue that the Uniform Child Custody Jurisdiction Act, of course, changes state law, but it does eventually allow, mandates for the application of full faith and credit in the U.S. Constitution, and to that extent, yes, but the Act itself does not mandate full faith and credit be given. In rephrasing the issue that we stated earlier, really all we are asking this Court to do is to look at the judgment rendered in this case and to afford it the same measure of full faith and credit as it would render or accord to any other judgment regardless of its nature as a custody decree. We can find no evidence in either Article IV, Section 1, or in the earlier opinions of this Court that would indicate that just by its nature, as a custody decree, it would not be entitled to full faith and credit. Obviously, there's nothing in the exact wording of Article I, Section 4, that says anything regarding custody decrees. In the four cases that this Court has dealt with prior to this time in which a custody decree was sought to be accorded full faith and credit, this Court has examined the custody decree to determine whether it mandates full faith and credit to be applied to other judgments and found that the very custody decree examined did not meet certain requirements and the two that this Court has dealt with previously have been the lack of due process afforded to the defendant in the proceeding and also in the past, the lack of finality that custody decrees were accorded in the state in which they were rendered. William J. Brennan, Jr.: Incidentally, Ms. Carden, I gather this uniform statute, it mandates, doesn't it, that the judge in Florida communicate with the judge in Georgia? Mary R. Carden: Your Honor, I believe the exact language of the statute says that when a court is informed that there is a prior pending proceeding, that the court of the second state is to communicate with the court of the first state, but-- William J. Brennan, Jr.: So that if there was a deficiency-- Mary R. Carden: --That's correct. William J. Brennan, Jr.: --it was on the part of the Georgia judge-- Mary R. Carden: That's correct. William J. Brennan, Jr.: --not calling the Florida judge after he learned of the pendency of the Florida action, correct? Mary R. Carden: That's correct. The Florida proceeding was pending and there has been no dispute that it was pending several weeks before the institution of the Georgia proceeding and the court-- William J. Brennan, Jr.: Have you had any experience with that provision? Mary R. Carden: --Pardon? William J. Brennan, Jr.: Have you had any experience with that provision? Mary R. Carden: Well, I think now the Act is becoming more familiar to judges. They are beginning to communicate with each other and trying to informally resolve these differences. I'm sure that there are going to be exceptions to this. William J. Brennan, Jr.: I wish that had been in effect about 30 years ago. John Paul Stevens: Ms. Carden, didn't the Georgia Supreme Court say both trial courts were at fault in failing to contact the other trial court? Mary R. Carden: That is what the Georgia Supreme Court held. The actual wording of the statute actually says the court of the second state has the obligation to confer with the state in which the original proceeding is pending first. John Paul Stevens: Then, the question is, which is the second state? In a sense, Florida was the second state because the decree was originally a Georgia decree. Mary R. Carden: Of course, but in Georgia... and Georgia may be very unique in this sense, Georgia courts do not exercise any continuing jurisdiction once the decree is rendered, so once the decree is rendered they lose their jurisdiction unless a second suit is instituted under similar residence and venue requirements, so there was nothing pending in Georgia. The Georgia courts don't even construe it to be-- John Paul Stevens: What is your view of what the Georgia court should have done? Supposing the Georgia court had called up the Florida judge and said, well, we've entered this decree down here, there was an ex parte hearing, and the wife testified and so forth. But we really didn't have a full hearing on the question of whether there had been changed circumstances since the original decree. Wouldn't they then have gone ahead and had the full hearing he did have? Mary R. Carden: --If, according to the Uniform Act, the parties had... well, everything had gone as, I think, the Uniform Act considers it, upon learning of the pending Florida proceeding... and the Georgia court did know of that long before the order was rendered in Florida... there would have been communication between the courts concerning which was the appropriate forum and how the best manner in which evidence could be taken could be arranged. John Paul Stevens: Would you agree that in one court or the other it would have been proper then to hold a hearing on whether there'd been changed circumstances? Mary R. Carden: I think that the courts themselves can determine which is the most appropriate forum and upon that decision have the hearing. John Paul Stevens: But if you admit that, then you're not saying that the Georgia court was obliged to enter the same decree that the Florida court had entered? John Paul Stevens: He's merely obliged take it into account in deciding what to do? Mary R. Carden: Had there been... I would say that it would not be impossible for the Georgia court to have had jurisdiction had there not been a final judgment rendered in the State of Florida, without that final judgment rendered in the State of Florida. William J. Brennan, Jr.: Well, that's your full faith and credit argument, isn't it? Mary R. Carden: That's correct. William J. Brennan, Jr.: Tell me, does the statute say... you suggest that it's the Georgia judge who should have called Florida judge under the facts of this case. Does the statute say what happens if the Georgia judge didn't telephone the Florida judge? Mary R. Carden: No, there's no remedy provided in that regard, in the statutory law. William J. Brennan, Jr.: I mean, no suggestion that a failure to call the Florida judge meant a loss of jurisdiction in the Georgia court, is it? Mary R. Carden: No, there's no penalty or remedy provided for the failure to comply with any of these sections. William H. Rehnquist: I think you've made this point clear in an answer to previous question from me, that certainly we have no jurisdiction to construe the Uniform Act unless it runs afoul of the Full Faith and Credit Clause in some way. Mary R. Carden: Yes, I think the only... really the two sections of the Uniform Act that are important to the full faith and credit issue, one, are the provisions which provide for due process to be afforded to the respondent, which of course is required under full faith and credit. Byron R. White: Does the Act address a situation where one state enters a final judgment like the Florida court did here, and yet another state goes ahead, like Georgia did? Mary R. Carden: The Act-- Byron R. White: Does it purport to permit that? Mary R. Carden: --In a comity-based sense the Act says that if one state has rendered a judgment in compliance with the Act, then the other state shall honor it. That's the provision of the Act. Of course, that's based on comity. Thurgood Marshall: The Act is not before us, is it? Mary R. Carden: No, it's not, and the only other provision of the Act, other than the due process provisions which do afford jurisdiction to the-- Byron R. White: Well, that's a Georgia statute. I suppose if a Georgia trial judge, after being informed of a final judgment being entered in a Florida court, if he went ahead and nevertheless entered a judgment of his own, he might be reversed in a Georgia court on the grounds that he's violated the state statute. Mary R. Carden: --That's correct. Byron R. White: So that's obligatory. It just isn't a matter of comity, I mean. The statute says, you must... does it say that? Mary R. Carden: It says "shall". "Shall enforce" the statute. The only other section of the Uniform Child Custody Jurisdiction Act that's really relevant is the section which does make custody decrees final, binding, and conclusive, and does take away the previous status of the law which kept them on the breast of the court, modifiable at any time, and I think those are the only two areas where the Act really has relevance. Warren E. Burger: Ms. Carden, if the parties now stipulated to vacate the Georgia judgment, would there be any case left at all? Mary R. Carden: No, Your Honor. In fact, we had hoped that that would occur after the child was exchanged in November. We had hoped that there would be an agreement be the parties but evidently the respondent has not been willing to do so, and as a result we have no assurance as to the continuing legal status of the child. Warren E. Burger: But if there were a repeat performance after July 1, 1981, there wouldn't be any problem either, would there? Mary R. Carden: I hope there wouldn't be any problem although the new Criminal Kidnapping Prevention Act of course is based in principles of the Uniform Child Custody Jurisdiction Act, and it would be subject to the same kind of interpretation that perhaps has been handled in this case, and there could be similar problems. In summary, Your Honor, really all we're asking the Court to do in this case is to scrutinize this custody decree in terms of the mandates for full faith and credit to any other judgment, and if it meets those mandates for the application of full faith and credit, to apply full faith and credit to this decree and allow... to reverse the judgment of the Georgia Supreme Court, not affording full faith and credit to it. Thank you, Your Honor. Warren E. Burger: Very well. Mr. Brown. Manley F. Brown: Mr. Chief Justice and may it please the Court: As the Court knows from our brief, the primary thrust of the respondent is that this is not, this case is not the proper vehicle for this Court to address the serious constitutional law problems which would be presented by this petition for certiorari. Byron R. White: Well, you certainly didn't held us much in your response to the petition. Manley F. Brown: Well, begging the Court's pardon, I personally didn't file that, in defense of myself. Byron R. White: Well, I know, but I say the state didn't. William H. Rehnquist: We weren't alerted to the fact that-- Manley F. Brown: Well, of course, that's the main problem with this whole case is that nobody, none of the lawyers in the court below ever saw any of these issues. They were never dealt with, they were never properly raised, the Georgia Supreme Court never addressed them, and at the point where I came into the case-- Byron R. White: --But the petition said that the issue had been raised, and we no longer require the filing of records with our petitions for certiorari, like we did historically. And so, nor... it's not unusual to credit a statement of a petitioner if the respondent doesn't say something about it, doesn't challenge it. And it wasn't challenged here. Manley F. Brown: --Well, I thoroughly agree with Your Honor's observation. All I'm saying in defense of myself is that I did not file a response to-- Byron R. White: You're appointed by us? Manley F. Brown: --I was appointed by the Court after the case-- Byron R. White: Yes. Manley F. Brown: --arrived at this level. And at that point I raised every conceivable point that immediately occurred to me, namely, that the point had not been properly raised in the Georgia Supreme Court. Because the portion of the record that fully exposes the fact that this issue was never even thought of in the court below is the motion for rehearing filed by the petitioner. If you look at it at page 52 of the Joint Appendix and take cognizance of the fact that under Georgia law a motion for rehearing addressed itself to telling the court wherein you have made a mistake. It's supposed to be used to point out to the Georgia court precisely what they did wrong. And it's supposed to be to some extent a predicate for a certiorari petition to this Court. If you look at the motion for rehearing, you'll see that it states only that the Georgia Supreme Court ignored relevant Georgia precedent and that it rendered a decision on an incorrect interpretation of the Uniform Act. It never mentioned in any form, shape, or fashion whatsoever the full faith and credit clause of the Federal Constitution, Article IV, Section 1. Now, those words were used a couple of times in the record but they were never used with very much precision, and ordinarily the Georgia Supreme Court would not totally ignore that issue. As you look at other decisions of the Court you see that they have dealt with full faith and credit, and at least they would have graced the contention by saying that it lacked merit. As it is, they didn't even mention it. William H. Rehnquist: Here are two of your three justices dissenting from the disposition of the case, at Joint Appendix on page 53, and none of them refer to the Full Faith and Credit Clause. Manley F. Brown: Exactly. They were complaining that the majority had returned to authorization of child snatching and had misconstrued that. William J. Brennan, Jr.: Why do you suppose your Supreme Court didn't cite it's own rule 45? Manley F. Brown: I have no idea. I imagine they just were never aware that the enumeration of error was intended to even raise a federal constitutional provision, because they regularly cite Rule 45 as to enumerations of error which have not been supported by evidence. William J. Brennan, Jr.: While I have you interrupted, may I ask, Mr. Brown, what about the return by... he's your client now... of the child to the mother? Manley F. Brown: Your Honor, it's my understanding the child is not with the mother but the child is with the maternal grandmother. That's in my brief, the initial brief I filed. I was advised of that by prior counsel in the case. Since that time I have been advised by Mr. Webb... I made that specific inquiry of him last week, because I knew the Court would ask about it... and he advised me again that the child is with his ex-wife's mother, and not returned to the-- William J. Brennan, Jr.: Well, does the mother live with her mother? Manley F. Brown: --No, she lives somewhere else. She lives I think, in Jacksonville, Florida, and the mother lives on in Gainesville, so frankly I don't know exactly what the truth of the matter is, because I haven't seen with my own eyes where the child is. I know the father does not have the child and it's my understanding that the maternal grandmother does have the child. William J. Brennan, Jr.: Did your client say why he didn't want to keep the child? Manley F. Brown: No, sir. And frankly, I don't know, I don't understand. That's one of a number of things about this case, that as a practical matter, as a lawyer, you don't understand. William J. Brennan, Jr.: But you just wonder what-- Manley F. Brown: He doesn't want his wife to have the child back. He's adamant about that, and adamant about continuing in this Court and not entering into the stipulation that they've invited, because I've asked him to do that, because it would have eliminated my job in this Court and would have eliminated the Court's work. Now, in addition to the other points that we raised in our brief, and suggested to the Court, that this case ought not be heard on the merits, I want to suggest to the Court that in connection with this new federal act, the Parental Kidnapping Prevention Act of 1980, it's not at all clear, I don't think, that that particular Act goes into effect only on July 1 of 1981. I think, in being candid with the Court, some argument can be made... and I'm not sure which one of us would win under the Act, but I think a reasonable argument can be made that the Act became effective on December 28 when President Carter signed the Act into law. I say that because the Act was part of some social security amendments dealing with pneumococcal vaccine services and the Delayed Effective Date Act, if you read the language carefully, you see that it refers only to services provided, which clearly indicates that the Delayed Effective Date Act refers to the pneumococcal vaccine amendment and not to the Parental Kidnapping Prevention Act. There are two other delayed effective dates in that legislative package, both relating to other sections. There is no suggestion whatsoever in the Act that the parental Kidnapping Prevention Act of 1980 is to have a delayed effective date until July 1, 1981. William H. Rehnquist: --Where in your brief is that? Manley F. Brown: If Your Honor pleases, the Act was passed sort of at the 11th hour, and I don't think we even had a copy of it until after I filed the brief and the reason I'm mentioning it to you in oral argument is because it's not in the brief, to try to give the Court that information. And if we need to supplement that by way of additional brief, we'll do it, with the Court's permission. In addition to that, the legislative history of this particular Act indicates that it was considered as part of several legislative packages. In none of those legislative undertakings was it ever suggested that the Act should have a delayed effective date. Warren E. Burger: Ms. Carden has conceded... we wouldn't necessarily hold her to that... she has conceded that if the Act were in effect now, there would be no case at all. She said, if it was only a problem between now and July 1... now, if you're telling us that there's no problem even now, between now and July 1, that might be relevant. I suggest that you submit some observations on that subject. Manley F. Brown: With the Court's permission we would submit a supplemental brief on that point, if the Court desires. Frankly, I don't know who wins under the new Act; it's not that clear. William J. Brennan, Jr.: Well, anyway, Mr. Brown, if there is a cullable possibility that the Act is in effect, I suppose what we'd do is send it back for reconsideration under the Act. Manley F. Brown: Well, I think you could look at the Act in connection with the principles of Bradley v. School Board of Richmond, as to whether you would apply an act which came into being while the case was on appeal. Byron R. White: But we wouldn't decide that in the first instance, probably. Manley F. Brown: I don't see any need to do it. I'm just saying that the Court could, if it saw fit to do so. At any rate, if the Act, if the Court concludes that the Act does not come into effect until July 1, 1981, it still has such an impact on this case that it sterilizes the constitutional issues in the case insofar as this particular proceeding is concerned so that it really does not make sense for this Court to get into these constitutional issues when an Act of Congress pursuant to Article IV, Section 1, is purporting to deal with this. Now, I realize that this Act still doesn't cure the monumental, necessarily cure the monumental personal jurisdiction problem that underlies this whole problem between the states, but still it's a step in the right direction. And I think the Court under the doctrine of such cases as Rice v. Sioux Memorial Park should consider that even though the Act is not in effect now, it has such an impact on this case that it would render of isolating significance this particular case. Warren E. Burger: Since you seem to have the matter well in the front of your mind, perhaps you can have that to us by the end of this week? Manley F. Brown: All right, sir. We'll endeavor to do that. William J. Brennan, Jr.: It doesn't have to be printed. Warren E. Burger: No, this can be typewritten, I assure you. Manley F. Brown: Now, there's one other issue that was not adequately briefed that I want to call to the Court's attention and it has to do with a question of cooperation between the Florida and the Georgia courts and what Florida should have done. Frankly, there was a provision of this Uniform Act that's never been mentioned that in preparation for oral argument I came across it, and it said that-- William H. Rehnquist: We really have no jurisdiction to second guess the Georgia Supreme Court on the interpretation of the Uniform Act. Manley F. Brown: --Well, this provision has something to do, I think, with personal jurisdiction and how to go about handling the Act without triggering this type of question and causing it to come to this Court. That's Section 19(b) of the Uniform Act, which is not exactly like the URESA provisions which this Court discussed in Kulko, in the footnotes in Kulko. 19(b) does authorize the Florida judge when a proceeding like this is filed to contact the Georgia judge and ask the Georgia court to initiate a proceeding over their resident over whom they have personal jurisdiction compelling him to come to Florida to participate in this child custody decision and the Georgia Act has the correlative section which is 20(c) which says that if they get a request from a Florida judge, they are bound to exercise personal jurisdiction over their resident and require the resident to go to Florida. So that, what I'm saying is, it was unnecessary to get into the constitutional problems that you have in this case if the petitioner had simply utilized the provisions that were available in the Act. They could have compelled Mr. Webb under penalty of contempt in Berrien Superior Court in Georgia to go to Florida, and this case, I submit, would never be here. And I think that's another reason why this Court should consider just dismissing the case. John Paul Stevens: Mr. Brown, could they do that even now? In other words, could not the mother file some kind of amendment in the Florida action and say, well, there've been changed circumstances in the last six months, the child's back in Florida, you've got jurisdiction over me and the child, please call the Florida judge on the phone and let's have somebody try this thing out with-- Manley F. Brown: Certainly. I think this thing is still a wide-open issue, I think it's the problem that this Court has always seen with child custody decrees, they're never final, there are no vested rights in this area. As a matter of fact, there are changed circumstances, obviously. My client doesn't even have the child now. The child is back with the maternal grandmother. So we're up here disputing about something that is already changed and under Halvey and the other decrees, under other cases of this Court that have recognized that proposition it'd be satisfactory to send the case back to the trial judge and say, judge, find out what happened in this case. What's going on? Why is the child gone? Who has the child, and what disposition should be made? It just means that there's no reason for this Court to get involved in something that raises serious and difficult questions of constitutional law. Warren E. Burger: --If we followed your suggestion of a dismissal, there would be no holding of the Georgia court on any federal question. Manley F. Brown: Absolutely not, because the Georgia court never followed the federal question. If you look at the Georgia cases we have cited, where they've dealt with the Uniform Child Custody Jurisdiction Act and attacks on that Act of a constitutional nature, you'll see that they have always addressed themselves to the full faith and credit question and they've merely said, we aren't concerned with full faith and credit as a matter of Georgia law because we are enforcing this Act under comity. That's what this Act was designed to be, it was a cooperative effort between the states. Georgia didn't buy this act with a view toward having this Court telling them that they had to construe the Act a certain way, by virtue of Article IV, Section 1. If you read-- William J. Brennan, Jr.: This is not a uniform act that the Congress consented to, is it? I mean, it's not a compact? Manley F. Brown: --No, sir. William J. Brennan, Jr.: An interstate compact. Manley F. Brown: It's just a uniform act-- William J. Brennan, Jr.: Among the states. Manley F. Brown: --Somebody lobbies in each legislature, and if they want to pass the thing they put it into effect, and that's exactly what Georgia has done and they didn't accept it on the basis of any mandatory full faith and credit type of compulsion, and the... Commissioners noted that, specifically to Section 12, which has to deal with the binding effect of res judicata, and Section 13 states that it's not intended to establish personal jurisdiction over a nonresident. It's based on the philosophy of Justice Frankfurter in his concurrence in, I believe, May v. Anderson, where he said a state may not be bound to do certain things, but it may do it if it wants to. That's all that the Act is based on and it's right in the Commissioner's notes and it makes no sense to me at all to try to apply the mandatory standards of full faith and credit to a comity-based act. Now, this case to some extent is like the Halvey case. It's virtually like it factually in that you have a Florida decree which was not recognized in a sister state. In Halvey New York didn't recognize the Florida decree and what this Court said there was that under Florida law this decree could have been changed even by the Florida court on the basis of changed circumstances. So New York didn't do anything Florida couldn't do, and we say that Georgia didn't do anything that Florida couldn't do. The decisions are in our brief at Footnote 25, three cases have not been superseded by the Uniform Child Custody Jurisdiction Act. They continue to be cited by the Florida courts right up to this very minute. They're still good law. The Florida court didn't hear about this lady's trip to Miami, when she left this six-year-old child at home alone untended, unattended, and Georgia did hear that evidence and the trial judge didn't like it. That's exactly the fact that caused him to take the child away from her. Now, if you accepted their argument, it would mean that no court could ever hear about her misconduct. No court could ever make that decision because all you do under the Uniform Act is run next door and file a decree, you don't even have to file under other proceedings. In a couple of decisions that this Court has suggested in the past, I think Riley and Williams v. North Carolina, that you have to file another action in order to make a judgment of one state the judgment of another state. But this Act allows that to be done by the simple act of filing. And it would be a terrible precedent if a parent used this Act-- Thurgood Marshall: The Act is not before us. Manley F. Brown: --It certainly is not. But what I'm saying, if you did what the petitioner wants you to do, if you made the application of full faith and credit that the petitioner wants, then you are giving the petitioner, or you are establishing a precedent where an heir apparent can hide his misconduct right behind this decree, and we submit that that's not-- Thurgood Marshall: Do you want us to get rid of full faith and credit? Manley F. Brown: --Do I want you to get rid of full faith and credit? Thurgood Marshall: Yes, sir. Manley F. Brown: No, sir, I don't want you to apply it in this case. I think it has its place. Warren E. Burger: You'd just like them to raise it? Manley F. Brown: Certainly, I certainly agree with that. I think a lawyer ought to be held to a lawyer's standards, and that includes raising an issue at the earliest possible time, and if they mean Article IV, Section 1, of the Constitution of the United States, they got to say that. That's our position in that regard. The irony of this situation is, in effect what they're saying is, Georgia, you have to give full faith and credit to your own decree. And, that does not make sense to me, in any way whatsoever. This was a Georgia decree. They went through a perfunctory type of proceeding in Florida where changed circumstances weren't even considered, just adopted the Georgia Act and turned around and told Georgia and said, now, you've lost all rights to deal with your prior decree. That's not what the Full Faith and Credit Clause was intended for. If you look at the new act, Section (d) of the new act, the new federal act, is designed to protect the decree of the original court, because it provides in that act that there shall be continuing jurisdiction in the court which renders the original decree and it forbids another state such as Florida, in this case, from dealing with an act, dealing with a prior decree from a sister state. And finally, I'll just mention, and I don't think the Court is of a mind to ever get to this, but if you got over the problem that the petitioner wants to get over, the problem's about not properly raising this question, you finally get around to the merits. Then you get into this first class question of personal jurisdiction. And under Kulko it doesn't look like the Court is going in that direction. It would require a liberalization of what the Court said in that case. And we submit that very definitely there is no reason to do that; you would have to repudiate May v. Anderson, and the Court, in Mr. Justice Marshall's opinion in Kulko, cited May v. Anderson, so it gave the case a pat on the back. It didn't lock like you were getting ready to repudiate, because you recited it in that decision. And our basic position is, there's no reason to get that far and to get into that type of difficult problem in this case. Under this new act the issue may be back to this Court. It'll certainly be in a different form, it'll be in connection with the new act, there will be no risk of the Court handing down an opinion which might conflict with the terms of that act, and it just makes good sense to essentially dismiss this case on the grounds that the writ of certiorari was improvidently granted. Thank you, Your Honors. Warren E. Burger: Thank you, counsel. Do you have anything further, Ms. Carden? You have two minutes remaining. Mary R. Carden: I'd just like to make a few remarks in response to Mr. Brown's comments. First of all, of course, comity as we mentioned before doesn't demand full faith and credit and in this case Georgia did not afford full faith and credit to the Florida decree, regardless of the Uniform Child Custody Jurisdiction Act. So no decision in this matter even thought Georgia may have not said, we don't think Article IV, Section 1, does not apply, the opinion still is there that Georgia under precedent of Webb v. Webb does not have to give any kind of importance or consideration to a final judgment of another state on the basis of that decision. Also, he mentioned the case of Halvey v. Halvey. And at that time Florida law provided that custody decrees could be modified even on the basis of facts that were not before the court at the time of its original decree, and I believe that was the reason that this Court had such a difficult time applying full faith and credit to Halvey. Since that time that law has been changed with the Uniform Child Custody Jurisdiction Act, and the only possibility for modification does deal with a material change of circumstances occurring after the original decree. One cannot go back and question the decree. Finally, he mentioned that there was, as he called it, kind of a rump hearing in Florida. Well, his client, the respondent, was given every opportunity to appear and to raise any problems or any of the facts that he thought were there. Obviously, the Florida court knew of the events, at least from the mother's perspective in February, because the restraining order was issued on the basis of the facts that appeared before the court at that time. So they... and they held a full hearing, the fact that the father didn't appear shouldn't give him the right to go to another state and file a new action. Warren E. Burger: Thank you, counsel. The case is submitted. Speaker: The honorable court is now adjourned until tomorrow at 10:00.

Warren E. Burger: We'll hear arguments first this morning in Number 73-6336, Rogers against the United States. Mr. Parnell, you may proceed whenever you're ready. Ralph W. Parnell, Jr.: Mr. Chief Justice and may it please the Court. This is a cause which arose in the District Court in Louisiana as result of a statement that was made by one George Herman Rogers on March 23, 1972. At the time the statement was made, Mr. Rogers was in a Holiday Inn in Shreveport, Louisiana at approximately six o'clock in the morning. As result of the statement, Mr. Rogers was charged with a violation of 18 U.S.C. (a) 871 (a) which reads as follows: “Whoever knowingly and willfully deposits for conveyance in the mail or for delivery from any post office or by any letter carrier of any letter, paper, writing, print, missive, or document containing any threat to take the life of or to inflict bodily harm upon the President of the United States, the President elect, the Vice President or other officer next in order of succession to the Office of President of the United States or the Vice President elect or knowingly and willfully otherwise makes any such threat against the President, President elect, Vice President or other next officer in succession to the Office of President or Vice President shall be fined not more than $1,000.00 or imprisoned not more than five years above.” The statement or statements that Mr. Rogers has been charged to have made as I said were made at six o'clock in the morning, initially made in the presence of three waitresses at this particular Holiday Inn. The reaction of the three ladies that heard the statement, they're all describing as being odd, irrational, something wrong within. The statements that were charged in the indictment were taken out of context, they were taken out of a discussion that Mr. Rogers was trying to have with the three waitresses. Mr. Rogers had expressed to all three that he was very much upset about at the time President Nixon's trip to China. This event took place immediately after President Nixon's trip to China. Mr. Rogers in his comments said that he disagreed with President Nixon being in China, that the President was consorting with our enemy. He did not like the communist, he did not like the red Chinese, he was very upset with our President selling us out and for that he was going to Washington to beat his ass. This in essence is what Mr. Rogers is charged with. He said these allegedly on five occasions, the words being the same. Potter Stewart: In five occasions, three of them on that morning in the Holiday Inn resident dining room and that two were later to the police officers, isn't it? Ralph W. Parnell, Jr.: That's correct. That is correct. Potter Stewart: Substantially the same statement each time? Ralph W. Parnell, Jr.: Substantially, the same statement, also substantially the same conversation each time. Warren E. Burger: Was there something said about killing the President? Ralph W. Parnell, Jr.: This was said I believe, Your Honor, to the police officers. That is correct. Each time that Mr. Rogers tried to engage in a conversation or discussion of the political topic of the day which was President Nixon's trip to China. He was rebuffed. Nobody was really looking and listening to him. One of the witnesses -- one of the gentlemen that heard the statement said that he was somewhat irritated by Mr. Rogers' disturbance. He was disturbing, this man was a businessman. He was trying to get ready for his day's work and Mr. Rogers was disturbing him from thinking about his business of the day. All witnesses said that they initially thought that Mr. Rogers was intoxicated. One witness, one of the waitresses said that she smell the faint odor of alcohol on Mr. Rogers' breath. She also said that in her conversation with Mr. Rogers, that it was raining and that she said that she wished that it would stop raining. And at this point, Mr. Rogers informed her that he could make it stop raining. And she said that she laughed at this and thought that maybe we have to leave that to higher power, and Mr. Rogers informed her that he was that higher power that he was Jesus Christ. These statements taken in this context we feel like are not and cannot be prosecuted under the statute that I read under 18 U.S.C. (a) 871 (a). This statute is a good statute. Certainly, the United States has a paramount right and duty to protect its highest officer, the President of the United States. It would not -- if we do not protect our highest officer from a serious or true threat and we would certainly be jeopardizing not only his life but his enforcement or his duties or keying out his duties. The purpose of the statute or at least the history of it -- the legislative history of it indicates that in 1916, at the time the statute, was passed that the President was having some difficulty with written threats. Mr. Webb in arguing for passage of the legislation stated that the written documents that the President was receiving was annoying to him, was irritating to him, was causing the President to trouble. So, they -- he said, “We need to enact this law to prevent people from writing to the President and threatening him.” I do not believe that at the time this law was passed that the legislators intended for it to be carried as far as it's being carried today particularly to Mr. George Herman Rogers. The law was passed in a tranquil period of time. It was first interpreted during World War I when the atmosphere of the country was somewhat storming. The early cases are all very similar in the utterances which were prosecuted to the ones that Mr. George Herman Rogers made. I truly believe that had those three men -- or had the people or the men in the early cases have they've been tried today that they certainly would not be convicted under the statute for the statements they made. I think this -- their utterances towards President at the time Wilson in no way under today's interpretations of the law would be considered a true threat against the President of the United States. This Court has expressed its views on threats or statements or utterances against the President of United States in only one occasion and that was in the case of Watts versus United States. And in that case, this Court said that, first of all, there must be a true threat made before it can be threat against the President of United States. I believe that we we're here this morning to try to define what a true threat is. I think that this Court must lay down now guidelines for the fact finders to determine what a true threat is within the meaning of the statute. The statute was passed to at that time what was I suppose a true threat against the country and that was that anybody the theory was that anybody that spoke out against the President or against the man in authority was in someway being disloyal to the United States, was trying to incite others to maybe carry out the Act. And we don't believe that under the First Amendment of the United States that this law can be applied to the facts before the Court. The First Amendment -- William J. Brennan, Jr.: Mr. Parnell, are you going to deal with the suggestion of the Solicitor General we ought not reach this question? Ralph W. Parnell, Jr.: No Your Honor, I'm not. William J. Brennan, Jr.: So what your reaction to it? Apparently, the Government is saying, they don't want to retry this man and that this conviction ought to be set aside. Ralph W. Parnell, Jr.: Certainly, Your Honor as defense counsel I would adopt any argument that the Solicitor General may have towards releasing my client or acquitting him on any basis, I certainly would. Warren E. Burger: He's given you a very good opening on the subject suppose you address yourself to that question briefly. William H. Rehnquist: You didn't ever raise that question yourself did you in the Court of Appeals or feel it was sufficient to call either to the attention of the Court of Appeals or to this Court? Ralph W. Parnell, Jr.: No, we did not raise that issue. It's before -- it has been raised for the first time before this Court. Byron R. White: Mr. Parnell, out of -- is it incarcerated now or is he out on bail? And has he served anytime at all? Ralph W. Parnell, Jr.: Your Honor he was sentenced to five years, he -- the Fifth Circuit expressed some concern about the sentence. The District Court then cuts the sentence back to three years, he has served some two years of that sentence. Presently, Mr. Rogers is in the hospital being treated for alcoholism. As the brief states, Mr. Rogers has a serious history of chronic alcoholism. He has over 100 arrests in the past 10 years for being simply drunk. Your Honor, as far as your inquiry as to our position on releasing Mr. Rogers due to the communication that was directed from the jury to the Court and back to the jury. Again, I would say that of course we would have no objection whatsoever this case turned on that. However, we feel like --I would suppose you support it.Sir. William J. Brennan, Jr.: I would support -- suppose you would support. Ralph W. Parnell, Jr.: Yes very definitely, we would support it anyway. William H. Rehnquist: Well, if you would support it and thought it was of any importance at all? Why didn't you raise it either to the District Court when you found out about it or to the Court of Appeals? Ralph W. Parnell, Jr.: Because we did not find that about it until -- I would assume until we got to the Court of Appeals or even after that. William H. Rehnquist: Well, if you find out about when you got the Court of Appeals, why didn't you press that there? Ralph W. Parnell, Jr.: To be honest with you, we felt like that the issues involved as far as Mr. Rogers was concerned we thought that we had a better argument on the law than with this technical violation of the other law. We didn't know about it to be honest with you. We did not know that the Court had talked to the jury. We didn't know it. William H. Rehnquist: I know but on the Court -- when the Court pulled the jury you had some implication of it, didn't you? Ralph W. Parnell, Jr.: We had some indication in, yes we did. William H. Rehnquist: And you still did nothing about it? Ralph W. Parnell, Jr.: No. Warren E. Burger: But, counsel suppose we hear from your friend and you can reserve some time for rebuttal if that's seems desirable to you? Mr. Tuttle. Allan A. Tuttle: Mr. Chief Justice, may it please the Court. As counsel has indicated this is a prosecution under 18 U.S.C. 871, threatening a life of the President. The arguments of counsel on appeal have been principally that the threats uttered were not true threats or that the trial court misconceived the statute or finally that if the trial court did not misconceived the statute, the statute as applied violated the First Amendment. We disagree with all of these contentions. We believe that the threat was true threat. We believe the trial court's instruction was correct and we believe that the statute as applied did not offend the First Amendment. However, as the Court has raise in questions now, there are some procedural difficulties with this conviction which might justify this Court in reversing the conviction. However, I would stress that these procedural problems have nothing to do with the facts of the case, the evidence before the jury, the instructions or the law on the merits. In order to understand the facts of the case and the procedural problem that arose, I would like to elaborate in just a few words some of the facts of the circumstances and the evidence introduced at the trial. I want to elaborate on that because I think it's important to realize that although for instance it is true that Mr. Rogers had a history of alcoholism, every witness testifying on the matter at trial with respect today in question testified that Mr. Rogers was not drunk at the time he made the statements in question. Moreover, there was expert testimony at trial from a qualified psychiatrist as to the competence of Mr. Rogers at the time he made the statements. I'd also like to stress that the record is replete with threats to kill the President, to take the life of the President. There are counts in which Mr. Rogers -- Thurgood Marshall: Well, are those threats made to any private individual or were they're made to the police? Allan A. Tuttle: They were made to both, Mr. Justice. I can give you record citations for killings as for threats of killing as they were made to private individuals. Thurgood Marshall: Now that I've interrupted you. You interpreted, when is he going to kill the President? Allan A. Tuttle: He said he was going to do that in Washington DC. Thurgood Marshall: And he was in Shreveport which is a little ways away? Allan A. Tuttle: He was in Shreveport. Thurgood Marshall: It's a little ways from Washington. Allan A. Tuttle: That's no question, it's a little way. On the other hand, it's also true that the President travels in many directions and goes to many states. Thurgood Marshall: Is it also true that when he goes in those direction they lockup and that's like him. Allan A. Tuttle: If there is a knowledge of the threat and if the Secret service has adequate advanced information they would take precautions. But I do suggest that the President travels widely. I suggest for instance that Shreveport is not very far from Dallas. Lewis F. Powell, Jr.: Did Mr. Rogers say he was going to walk to Washington? Allan A. Tuttle: He said that and I construe that as meaning that he was going to hitchhike because in the statement to the police officer. He said that he was going to hitchhike to Washington and later on the same officer testified he said he was going to walk. In his conversations with a customer Mr. Buchanan, he asked about hitchhiking and I construe those words to mean hitchhiking. Although, in fact, he did say he was going to walk. Lewis F. Powell, Jr.: And the police did not elect to arrest him or take him in custody? Allan A. Tuttle: The police did in fact take him into custody, Mr. Justice. Lewis F. Powell, Jr.: But didn't they release him or that any bond? Allan A. Tuttle: The record is not entirely clear on that. The testimony of the arresting officer is somewhat at variance with the testimony of the detective at the police station. The arresting officer testified that he was taken to the Veterans Administration Hospital and had a pull placed on him which merely means that the hospital attendants would notify the police at the time he was to be released. Lewis F. Powell, Jr.: Was there any charge lodged against him by the Shreveport police? Allan A. Tuttle: No charge was lodged against him although the Shreveport police did notify the Secret Service of the fact of this threat and it was on at the behalf of the Secret Service that Mr. Rogers was then arrested. Thurgood Marshall: Was it agreed that he hadn't violated any Louisiana law? Allan A. Tuttle: I can only testify -- I can only recount what the record states. The record states that no charge was lodged against him. Now, that may have been an inference on the part of the police that no Louisiana law was violated or it may have been a feeling on the part of Louisiana police that the crime if any was not a crime against the State of Louisiana and if it was to be punished, it should be punish by the federal authorities. Again, I wish to stress that in many -- in several of these conversations there were in fact threats to kill the President and they were unconditional threats at least in the words given. When the police officer inquired about the question whether there have been threats, the defendant Rogers again made a threat to kill the President saying, “I'm going to Washington, I'm going to beat his ass off better yet I'm going to kill him.” The police officer testified that he was not scared by these remarks but he said he was shook up because he said we had presidential assassinations and we've attempted assassinations and I didn't know whether he was mad or whether he was serious. All of the witnesses testified that the defendant appeared serious when he made the statements he made. Potter Stewart: By mad, do you think he meant angry or crazy? Allan A. Tuttle: I think that would be an inference on my part but I would assume he meant crazy. Of course, a person being crazy does not necessarily mean that he is not a threat to the lives of other people. William J. Brennan, Jr.: Mr. Tuttle, your suggestion that this conviction we set aside be accompanied where the statement that if it is set aside, the Government will not retry him some of the things you were saying seem however inconsistent with that determination. Why is it you would retry him if you set aside? Allan A. Tuttle: Well, that judgment has been made on reflection on the facts of the case, on the -- William J. Brennan, Jr.: Well, this is what the Government also thinks, did it not? Not a real threat. Warren E. Burger: I suppose -- Allan A. Tuttle: I didn't -- Mr. Justice, I didn't say that anybody thought it was not a real threat. That -- that matter was submitted to the -- William J. Brennan, Jr.: I know you didn't. I'm suggesting that -- is that -- if you're not going to retry him there must be some element of a judgment that it is in fact and not -- not a real threat. Warren E. Burger: I suppose also the Government is taking into account that he is been in prison for two years or more already. Allan A. Tuttle: He has been imprisoned for more than two years. He served his sentence under the original judgment of the conviction. And that is a consideration that the Government has taken into account. William H. Rehnquist: Was he still being confined other than separately for some alcoholic problem? Allan A. Tuttle: Well, he is on -- the sentence to included a five-year condition of sentence of probation which included as a condition thereof participation in the Alcoholics Anonymous Program. So, the case is not moot. He has that constraint. Thurgood Marshall: Well, why would a man who was not under the influence of alcohol wasn't drunkard, why was his probation put on Alcoholics Anonymous? Allan A. Tuttle: Because the man has a history -- a chronic history of alcoholism. The question -- Thurgood Marshall: But I mean he is a chronic alcoholic. Allan A. Tuttle: There is evidence to that effect. Thurgood Marshall: And -- Allan A. Tuttle: And yet there is evidence that he didn't -- Thurgood Marshall: Well, there must be something wrong with anybody to goes into it jail -- I mean, a precinct, the station of police and confesses to a crime that the only way he could commit it was by confessing to it. Allan A. Tuttle: But the crime we're dealing with -- the crime that presents the background to all of these law and in our concern is the crime of presidential assassination and I would assume we would all agree that any one who -- would even contemplate such a crime would be in some sense unstable and then some sense are not. Thurgood Marshall: Well, he doesn't been offered not to go in and then confess, wouldn't he? Would he be a great aim that to just go in and say, “I insist” and you emphasize the factors that overrule here, I'm going to kill him, I going to kill him, I going to kill him. He say, “Please lock me up and put me some place” isn't it? I don't understand how you can do that and come here to say you're not going to retry him. Allan A. Tuttle: We are not going to retry him because of all of the circumstances of the case. There are circumstances, Mr. Justice, which I haven't get to mention which include the fact that there is a question in this case as to whether the jury returned an unconditional verdict. Thus, we're not even absolutely sure that we have a fact finding by a jury that these were serious threats. That is another considerations and addition to the ones I've already mentioned. I would like to, if I may, turn to those particular circumstances because they color the question that the Court is asking and I think the Court should be aware of the circumstances which lead us to believe that the conviction in this case may in fact not have been an unqualified conviction. After the trial judge instructed the jury, we believe, correctly instructed the jury, the jury deliberated for two hours and then sent the trial judge a note. The note asked the Court whether the Court would accept a verdict of “guilty as charged with extreme mercy of the Court.” Upon receiving that note, the trial court without consulting counsel instructed the marshal that the Court's answer was in the affirmative. This note in the Court's answer appears at page 52 of the appendix. Five minutes after receiving the Court's answer, the jury returned the verdict of guilty in the form I've just discussed, guilty as charged with extreme mercy of the Court. Ordinarily, it would be the Government's view that a recommendation of mercy of this kind is mere surplusage could be discounted and would not affect the validity of the verdict. Here however, we have in addition to the form of the verdict the fact that it was arrived at by a unilateral communication from the District Court to the jury. In our view, the jury's question about whether the Court would accept such a verdict was in effect a request for further instruction and we think that the proper instructions to be given under those circumstances would have been that the jury has no sentencing function that it must reach its verdict without consideration of the matter of sentence and that any recommendation it did make would not be binding upon the trial court at the time of sentencing. Moreover, we believe that before any response is made, counsel should be informed and counsel should be heard from. Warren E. Burger: I suppose you're suggesting that any alert defense counsel in those circumstances would have insisted on an unqualified verdict in order as he would hope that this would force a verdict of not guilty? Allan A. Tuttle: I would assume so, Mr. Chief Justice, because if the jury is talking about mercy, he may feel that they are taking the possibility of punishment into the account to break a deadlock or to resolve a question in favor of guilt. And that's why we think it's important that counsel should be heard from and we feel as a textural matter that a response without informing counsel arguably will in fact does deprive the defendant of the right to be present at every stage of the trial as is guaranteed by Rule 43 of he federal rules of criminal procedure. William J. Brennan, Jr.: So, I gather Mr. Tuttle your view is that this falls within the category of plain error which maybe addressed even though objection was not made. Allan A. Tuttle: And that is our view, Mr. Justice, and for the reason that precisely because this was a unilateral communication to the jury which counsel was not informed about, they were not in the position to object to it and not knowing about it, it is hard for us to say that they knowingly waived any objection that they might have to this circumstance. We pointed out in our original papers on the petition the form of the verdict as raising a question all by itself and suggested that arguably it was waived. It was in the preparation of the brief on the merits that we discovered that in addition to the form of the verdict. There was the fact that it have been arrived at by a unilateral communication from the judge and those two things taken together raised in our mind a substantial question is to whether the verdict was in fact unqualified. And we offer those facts for the Court's consideration. I am prepared if the Court desires to discuss the Court's trial instructions. The elements of the offense as we believe them to be, because we believe that Court correctly instructed the jury, and I am prepared if the Court desires to discuss the First Amendment implications of the case. I would ask the Court whether it has any questions in any of these areas or desires to hear from the Government further. Warren E. Burger: You're free to submit on briefs on those questions counsel unless there are any questions from the bench. William H. Rehnquist: Well, I have a good deal of question Mr. Chief Justice. I take it that you're here arguing in support of affirmance and that there have been First Amendment questions raised I would like to hear your presentation of them. Allan A. Tuttle: Well, very well Mr. Justice, I'm prepared to proceed with that. Byron R. White: Well, why wouldn't you -- I think we heard the government more effective condition (Inaudible)? Allan A. Tuttle: I don't understand your question Mr. Justice, excuse me. Byron R. White: Well, I've just remarked you, I've never heard the Solicitor General's office take position like this in this Court asking the Court if it has any questions and otherwise we won't argue the case. Allan A. Tuttle: Well, Mr. Justice -- Byron R. White: Have you -- have you heard it before? Allan A. Tuttle: Mr. Justice, I apologize if my suggestion is an inappropriate one to the Court. Byron R. White: You don't use the -- except the cases on briefs. Allan A. Tuttle: I -- the reason why I made the suggestion was merely because we thought the case would probably be disposed of on the ground that we had raised. Byron R. White: Well, it wasn't. Allan A. Tuttle: It was not and therefore, I suggested that I was prepared to proceed and I apologize for putting it in the form of a question rather than a continuing presentation. The trial court instructed the jury that the -- on the elements of offense in stating to the Court inconsistent with the -- stating to the jury consistent with the Watts decision that only a true threat would be a threat within the contemplation of the statute and that a political argument or idle talk or a jest would not violate the statute. On the question of intent which is the central question in the case, the Court instructed the jury that a threat is a willful if the maker voluntarily and intentionally other's words is a declaration of an apparent intention to carry out the threat. The Court also used the words and I'm leaving out a few words here that the defendant intentionally made the threat that a reasonable person would foresee would be interpreted as a serious expression of intent. The Court instructed the jury that actual intent to harm was not an element of the offense. In our view, these are correct instructions. As we have seen the issue in this case, the issue particularly in the light of the verbal conflict amongst the Circuits given circulation by the Patillo decision. The issue was whether the statute requires a subjective intent to harm the President or whether the statute prescribes words which objectively considered would appear to be serious. Petitioner's reply brief, however, does not urge this distinction and does not urge that actual harm to the President ought to be an element of the offense. Rather, they urged that the specific intent required has specific intent that the threat be communicated to the President. We don't think that either of these elements are in the statute either by congressional intention ought to construed as a matter of constitutional limitation. We begin with the words of the statute, the words “punishes a person who knowingly and willfully makes a threat to take a life favor and flick bodily harm upon the President of the United States”. The words “knowingly and willfully” these adverbs modify and refer to the act of making the threat and textually in any event do not require that the maker have an inward desire either to harm the President or to have the threat communicated. We believe that the harm caused by a threat is caused by the mere utterance of the threat in circumstances where it would generally be considered serious. If two persons are similarly situated then utter the same words which are apparently serious threats, the effect of these words are the same even if one of them harbors an inward desire to harm the President and the other does not. Where a threat is objectively serious it can't be ignore and requires a responds from those charges with the protection of the President. In fact, it could endanger the President by diverting those resources. If we -- we don't think that the sole purpose of the statute was to prevent harm to the President by convicting people who threaten to kill the President with an intention to carry it out. The House Report on a 1916 Bill which became the law states the purpose of the President -- states the purpose of the statute as protecting the President from threats or violence which would restrain or coerce him in the performance of his duties. That restraint or coercion to the extent that it occurs, occurs whenever the words are objectively serious and that restraint and coercion is neither augmented nor diminished by the subjective intent of the speaker. Where the threat is apparently serious, the secret service has to investigate and to the extent that it is sidetracked by a bluff is diverted from the supremely serious business of defending and protecting the life of the President of the United States. Our view that the term “willful” refers to the intent to make the threat rather than an intent to harm the President is we believe supported by the legislative debate on the Bill which became the law which is the predecessor to 871. Among the things you will find in that legislative debate is a discussion of an example of an individual who finds a document containing a threat and mails it to someone as a matter of news. Congressman Volstead urged that the word “willful” be retained in the statute in order to assure that such a person sending -- knowingly sending such words but not intending a threat would be beyond the scope of the statute. In our view, therefore, Congress' intent was to punish one who knowingly and intentionally makes a threat under circumstances which objectively viewed would be considered serious and sincere. Warren E. Burger: I suppose that provision that Mr. Volstead request on the Congress would also protect the newspaper or that in these days a radio or television commentator who repeated the -- Allan A. Tuttle: As a matter of news, I think that would fall precisely within that discussion and that shows the point of having the word “knowingly and willfully” in the statute in our construction of the statute. Of course, the statute does punish the utterance of mere words and therefore has to be waived against the First Amendment's guarantee of freedom of speech. Thurgood Marshall: Well, before you get there Mr. Tuttle, during the two years he was in jail, suppose he made the same threat, will he violate the statute? Allan A. Tuttle: I would have to -- before I could answer that question, know the circumstances under which they were made. If the statement was, “As soon as I get out of here, I'm going straight to Washington.” Thurgood Marshall: The exact same statements you made here. Allan A. Tuttle: I'm going to Washington. Thurgood Marshall: No sir. The exact same statements he's charged with making. He repeated that in the jail. Allan A. Tuttle: If he repeated them as a matter of saying, “I was convicted for the following words" or in circumstances which led -- which the fact finder -- Thurgood Marshall: Mr. Tuttle, I said he says the exact same words and nothing else. Now, can I get an answer? Allan A. Tuttle: I would think that those would probably be words of repetition of explanation of what he had said before and would not constitute a true threat. But I do believe that a person who was in custody and under restraint could in fact make a true threat. In the hypothetical you put, my judgment would be that that would probably not being a threat. Thurgood Marshall: How about now where he is now in a place as nicely called an alcoholic place, suppose he repeats in there and when you leave there I'm going to take you to the cell and so. Some place I think he can say it's not a threat, am I right? Allan A. Tuttle: That's correct. The example I gave -- you gave I suggest that it was probably not a true threat under the circumstances that you have hypothesized. Returning for the brief for moment to the First Amendment issue in the case which we do not consider a serious one. It has long been clear that the First Amendment does not confer absolute protection for all utterances in all circumstances and at all times. Some words by their very utterance create an evil against which the legislature can act. A classic example and one that shows that the subjective intent of the maker is not always relevant to the consequences of speech is Justice Holmes's example of a man who falsely shots fire in the theater and causes a panic. This Court said the Chaplinsky case, there are certain well defined and narrowly limited classes of speech the prevention and punishment of which have never been thought to raise serious constitutional problems. In our view, if there is any such class of speech, it includes true threats to kill the President of the United States. A true threat is not advocacy, it's no part of the exposition of ideas, it doesn't seek to persuade and is not neutralized by a verbal response. It thus does not implicate the central policy of the First Amendment which is that speech can rebut speech and propaganda answer propaganda. A true threat is punishable because it creates an evil which Congress can prevent. As I've indicated, a threat demands a response from those charge with the President's protection. It diverts the resources of that agency and the process tends to limit the President's activities or in the words of the House Report “restrain or coerce him in the exercise of his constitutional duties.” There is a perhaps another consideration. The federal laws concerning threats are not limited to threats against the President of the United States. 18 U.S.C. Section 875 and 876 for instance forbids the interstate communication in mailing of threats to do bodily injury. Threats of this kind and I would submit a fortiori threats to do bodily harm to or kill the President of the United States are punishable because of the anxiety, the fear, the turmoil and the potential for violence that they create whether or not they are heard by the intended victim. Advocacy is wholly different in our view. Advocacy is protected by the Constitution even when it creates anger or resentment or uncertainty or unrest. But threats are different in their consequences. Threats are different in the emotions they evoke and in the anxiety that they create. Potter Stewart: As that well that would be true about threat they communicated to the target of the threat but is it going to be true of a threat against acts when made to A, B and C? Allan A. Tuttle: I believe it is. In fact, we cite in our brief some cases which have been decided under the statutes I've just mentioned where the threats have been communicated to third parties. One in the case of threat to a mother to harm her son and another case they call to the FBI with a threat to kill some third party. I think that these threats do create a climate of anxiety particularly a threat to kill the President of the United States in mind just speaking of a true -- Warren E. Burger: You're speaking of an established procedure that whenever such threats come to the notice of local police they are required -- refer them to the FBI and the Secret Service? Isn't there something in the report of the Warren Commission on President Kennedy's assassination to that effect? Allan A. Tuttle: The Warren Commission report does indicate that threats to the President constitute a serious drain on the resources of the commission. And we feel -- I beg your pardon, I simply misspoke. A serious drain on the resources of the secret service in responding to these threats and investigating them and trying to determine whether they're serious and of course in most instances the answer is you cannot tell whether they're serious or not. In our view, threats are simply not part of the area of protected speech. The Constitution requires that the public debate be robust and uninhibited and wide open as this Court said in the New York Times case. But there is no place in the public debate for true threats to commit murder. The evil against which the statute is aimed is truly a grave one and the restrictions which the statute imposes on speech are quite minor to the extent that the statute causes people to avoid language which might be objectively considered a threat. We submit that the incursion on protected speech is minor and permissible. I've already indicate -- Potter Stewart: Has any court ever taken the view in construing this statute that it applies only to communications directed to the President or the other -- Allan A. Tuttle: No, very early on in the very earliest cases on rulings on demurs to the indictment. It was established that there was no requirement of communication to the President and no court has so required to the extent that my research has developed. I thank the Court. Warren E. Burger: Do you have anything further Mr. Parnell? Ralph W. Parnell, Jr.: Yes, Mr. Chief Justice very brief in reply to counsel as to he inferred that the facts are going to speak for themselves the record will speak for themselves. He inferred that Mr. Rogers was hitchhiking to Washington when in fact he was trying to hitchhike to Texarkana which is where the man resided at the time. He was not arrested by the local police department in Shreveport. Warren E. Burger: What crime could he have been arrested for in Shreveport? Ralph W. Parnell, Jr.: Disturbing the peace is as close as we could pen it down. Warren E. Burger: Until after Mr. Kennedy was assassinated, was there any federal statute making at federal crime to kill a president? Ralph W. Parnell, Jr.: Until -- Warren E. Burger: Until after Mr. Kennedy was killed? Ralph W. Parnell, Jr.: To actually kill a president? Warren E. Burger: -- yes. Ralph W. Parnell, Jr.: I believe that's correct, Your Honor. Further, counsel would have this class of speech in its purest form, the words “I will kill the President” thrown out from under the umbrella of the protection of the First Amendment wherein his brief on page 19. He says that a declaration or announcement for example that “the President must be killed and I will do it” may take on a different character when made during the political speech. It is to be sure accrued offensive way for the speaker to make his point of political opposition. We feel like that Mr. Rogers own this particular raining morning in March three years ago was doing no more than very crudely chastising President Nixon for his trip to red China and that under the situation -- under the circumstances that he was not a true threat to the President of United States. He did not utter a true threat to the President of the United States and certainly should not be convicted under the statute. I thank the Court. William H. Rehnquist: Mr. Parnell, would you turn to page 52 of the brown appendix if you have that in front of you that has that entry entitled handwritten note then apparently the foreman's signature and then below that what appears to be Judge Dawkins response to it. Now, I take it as the appellant from the District Court's judgment of conviction you were responsible for preparing the record in the Fifth Circuit, were you not? Ralph W. Parnell, Jr.: That's correct, Your Honor. William H. Rehnquist: And I presume this was a part of the record that you've prepared for the Fifth Circuit? Ralph W. Parnell, Jr.: Your Honor, I don't believe it was in the record at the Fifth Circuit. William H. Rehnquist: Well, how did it get into the record then? Ralph W. Parnell, Jr.: I never knew that this note existed. In fact, I only saw this note for the first time when we were preparing this brief here. It's the first time I saw it. William H. Rehnquist: How are records prepared on appeal from the District Court to the Fifth Circuit? Ralph W. Parnell, Jr.: Your Honor, we had a problem with that -- with what you're brining up right now. The procedure was somewhat confused. In fact, at one point we had a problem in locating part of the record. William H. Rehnquist: Just couldn't find it? Ralph W. Parnell, Jr.: Couldn't find it. William H. Rehnquist: So far as you know, you did not designate this is a part of the record. Ralph W. Parnell, Jr.: No. William H. Rehnquist: And you have no idea how it got -- Ralph W. Parnell, Jr.: To the Fifth Circuit. William H. Rehnquist: Yes. Ralph W. Parnell, Jr.: No. William H. Rehnquist: And you have no idea how it got to be here? Ralph W. Parnell, Jr.: No, I do not. William H. Rehnquist: And for that matter, you're not sure that really is genuine, I suppose? Ralph W. Parnell, Jr.: I would not doubt the genuineness of it, no. William H. Rehnquist: Why not if you never seen it before? Ralph W. Parnell, Jr.: I have seen it. The first time I saw it was when we begin preparation of our brief to the United States Supreme Court. And it was at that time a part of the exhibits that were introduced, and that's where I found it. William H. Rehnquist: The exhibits introduced where? Ralph W. Parnell, Jr.: At trial. William H. Rehnquist: Well, but I would thought this would've occurred after the trial? Ralph W. Parnell, Jr.: Yes, Your Honor. We had two separate if I may -- we had two separate files. We had the actual record which was the printed word or the transcript of what transpired. And then we had another file that had exhibits in it that were introduced in the file such as I believe we introduced the psychiatrist report. We introduced the -- William H. Rehnquist: You offered to the judge and goes to the jury and submit them. Ralph W. Parnell, Jr.: Right, evidence. That's correct. And it was in this file that I found the note for the first time. Harry A. Blackmun: Mr. Parnell, were you present at the time the guilty verdict was brought in? Ralph W. Parnell, Jr.: Yes. Harry A. Blackmun: On page 3 of the appendix is the list of relevant docket entries and it recites the return of the verdict and then says this. “The jury ordered told verdict ordered entered and so forth” the Court ordered the note from the jurors signed by the foreman regarding the verdict to be rendered ordered file in the record. The defendant released on his present bond. You have no recollection of that? Ralph W. Parnell, Jr.: Your Honor, I do not. Harry A. Blackmun: And you have -- you didn't examine the Court's, these docket entries in your preparation for appeal to the Fifth Circuit? Ralph W. Parnell, Jr.: Yes, I did. Harry A. Blackmun: But you didn't see this? I do not see that. I thank the Court. Warren E. Burger: Thank you gentlemen. The case is submitted.

Warren E. Burger: We will hear arguments next in Local Number 93 International Association of Firefighters, against City of Cleveland. Mr. Summers, I think you may proceed whenever you are ready. William L. Summers: Mr. Chief Justice, and may it please the Court, petitioner here questions whether or not the District Court below is empowered by the Congress of these United States to award quota relief and promotions to a class of persons none of whom had ever been shown to be specific victims of any past promotional discriminatory practices of the City of Cleveland. Reviewing the decisions of this Court together with the clear and absolute legislative intent of Congress, it seems to us, as we have steadfastly maintained, this court ordered remedy below was not lawful. This is purely a question of statutory construction. There was in fact a consent decree in this matter. That consent decree was negotiated from the very beginning between the city of Cleveland and the Vanguards. The matter was filed in District Court in the fall of 1980, and intervention was not sought as a matter of right by the intervenors, the local which I represent here today, until the spring of 1981, and it was in fact granted together with the filing of our responsive pleading. Negotiations continued between the city of Cleveland and the Vanguards to the exclusion of Local 93 until roughly November of 1981. In November of 1981, a proposed consent decree in draft form was presented to me as counsel for the intervenors, and a quick meeting thereafter was held in the chambers of the United States District Court. Initially it was said to have "approved the fairness of the proposed consent decree. " At that time, the United States District Court said, wait a minute. I have allowed this union in. I want this union to participate, and I want them to have full participation. We did in fact have full participation in the negotiation process to our knowledge from that point on. In the fall of 1982, due to the illness of our trial judge, the magistrate took over the negotiating process and, yes, long and arduous, as both briefs have stated, discussions, negotiating sessions were had towards the possibility of a consent decree. I might add to you, however, that from the very beginning the position of this local union was the imposition of quota remedy relief against any of its members was in fact an unlawful exercise of Title 7. While it was not articulated as such, they said that they felt that the quota relief in any form in preference, racial preference of any individual over another was not lawful, and that that... certainly the lawfulness of that would be derived from 706(g). This court order became a consent decree in the absence of the signature of this local. The membership of that local, almost 90 percent of it, rejected this consent decree because of the very quota relief which was contained therein. It was entered over their objections, and I add to you that in seeking the imprimatur of the District Court by way of an attempt to utilize the District Court, its attendant jurisdictional powers, its contempt powers, and everything else, the City of Cleveland, certainly with a keen interest in not having any back pay awards, chose to settle the alleged discriminatory wrongs in the past on the backs of the innocent non-minority firefighters. We felt that was wrong. We feel that is wrong as we stand before you today. Warren E. Burger: And who consented? William L. Summers: The consent, Mr. Chief Justice, was entered by the City of Cleveland and the minority firefighters, being the Vanguards. Signature was withheld on behalf of my client. That was done by mandate, the mandate of the membership, if you will. Harry A. Blackmun: Would an individual member of the union have had the veto power under your theory? William L. Summers: Sir, not really veto power. First of all, I believe under case law, the Vukovich case out of our circuit, that once this became a matter within the District Court, once this became a court order under Title 7, that collateral attack was precluded by anyone, and therefore a... in comparing it, if you will, to Weber in the private sector, that challenge by Brian Weber was not precluded because that affirmative action plan entered into between that union and that employer did not preclude collateral attack, and Brian Weber in fact did make his collateral attack, but here, where you have it as a court order, certainly collateral attack was prevented. Harry A. Blackmun: Would you answer my question. Could an individual member of the union have done what you wanted the union to be able to do? William L. Summers: Yes, he would have been able to... had he not sought intervention, I am assuming your question has within it, Mr. Justice. Harry A. Blackmun: Even if he had intervened. William L. Summers: If he had intervened, no, he would not. He would have been precluded from challenging, since intervention was granted on behalf of his collective bargaining representative. Sandra Day O'Connor: Would you explain how the union is bound by the consent decree since it didn't consent? William L. Summers: It is bound by the consent decree... first of all, any state or collateral attack... for example, there was a collective bargaining agreement in this that is recited, and I have lodged that just recently with this Court. The collective bargaining agreement said that the city was bound to follow all of the specific rules and regulations of the Civil Service Commission which therefore became attendant upon the charter of the City of Cleveland and the constitution of the State of Ohio. Once this became a United States District Court order, that was precluded. Sandra Day O'Connor: What if the union had consented to the decree? Would it then have been valid in all respects in your view? William L. Summers: Then I believe that you still must look at the fact... well, that would be a more close situation to the Weber matter, Your Honor, and in that situation you have full, really full representation, and you have really full consent, ergo the minority firefighters negotiated and consented, the City of Cleveland negotiated and consented, and Local 93 would have negotiated and consented. Absent that consent, you don't have a real consent decree, but you certainly do have an order of court. Sandra Day O'Connor: Would it have been valid had the union consented to it? Could you just answer that question? William L. Summers: Yes. Byron R. White: Even as against those members who voted against confirming the consent decree? William L. Summers: In all honesty, Mr. Justice White, I would certainly think that if a union president were to affix his signature there in the face of a 90 percent rejection-- Byron R. White: No, no. Say a majority of the union voted for him. William L. Summers: --Yes. Byron R. White: But dissenters, would dissenters be bound? William L. Summers: They would be bound, but yet the remedy is still above the scope of-- William H. Rehnquist: All right. Well, go ahead. Are you saying they would be bound so that none of them could bring an individual action if they claimed there was a violation of either Title 7 or of the Constitution? William L. Summers: --Well, they would certainly be more precluded, if you will, than in the situation that we have at hand. William H. Rehnquist: Yes. That is probably a pretty good answer. Interesting. William L. Summers: I do the best I can, Judge. Byron R. White: May I ask a little question? William L. Summers: Yes. John Paul Stevens: I must confess, I don't understand it. It seems to me either the statute is an obstacle or it isn't, and I don't know why the union's agreement makes any difference to the minority or the absence of the union agreement makes any difference if the statute is not violated. I don't understand your argument. William L. Summers: In all due honesty, Justice Stevens, if the remedy is improper, the remedy is improper wherever it is handed. John Paul Stevens: And that would be true if you agreed to it, and if it is proper the fact you didn't agree to it doesn't make it improper. Isn't that correct? William L. Summers: That's correct. Sandra Day O'Connor: So you want to change your answer to my earlier question? 0 [Generallaughter.] William L. Summers: I guess I am going to have to. The court order here, there has been great light made of whether or not this court order is the same court order as if there had been a full adjudication of the underlying discrimination. I think that is a question that this Court not address at this time. I think the question... and for purposes of these facts of this case, the petitioners in assumption fashion will assume that there would have been an underlying general finding of discrimination. First, you have to have that, whether it is by agreement or whether or not it is by a fully litigated matter. If you have a fully litigated matter, you certainly have the opportunity at a later date under Teamsters and Franks versus Bowman to come back and individually identify victims. If you just have a mere caving in, if you will, as the city did here, to bargain away the rights of the innocent non-minorities' promotions, instead of paying back pay, then you certainly do not have the parameters and the specific acts of violation which an innocent minority could come in and say, look, I was harmed, and here is how I was harmed, and the District Court would have before that that adjudication, that finding hearing wherein there were specific examples shown, and the court would certainly have that background before it to make that determination. The claims of the... as I say, this is not a Weber type agreement, because Weber in fact did have all the parties represented and all the parties agreeing. As I said in the list line of the introductory paragraph to my presentation, we stand before you today. We think we understand what this Court's majority ruled in Stotts. We think we understand the language that was written in Franks versus Bowman. We believe truly that we understand the language in Teamsters. This legislation... and the question was made of the comments of Senators Chase and Clark. For the record, in 1964, and, of course, Senators Clark and Case were captains of Title 7 in the Senate, they stated in an interpretive memo, "No court order can require hiring, reinstatement, admission to membership, or payment of back pay for anyone who was not discriminated against in violation of this title. " This is stated expressly in the last sentence of 706(g). The chief sponsor, who appeared in the House as well to discuss it, Senator Humphrey, "Contrary to the allegations of some opponents of this title, there is nothing in it that will give any power to the Commission or to any court to require hiring, firing, or promotion of employees in order to meet a racial quota or to achieve a certain racial balance. " "That bugaboo has been brought up a dozen times, but it is nonexistent. " He introduced an explanation of the House bill in the Senate which he said had been read and approved by the bipartisan floor manager of the bill in both Houses of Congress, and in pertinent part the explanation provided, "The relief available is a court order enjoining the offender from engaging further in discriminatory practices, and directing the offender to take appropriate affirmative action, for example, reinstating or hiring employees with or without back pay. " "The title does not provide that any preferential treatment in employment shall be given to Negroes or to any other persons or groups. " "It does not provide that any quota systems may be established to maintain racial balance in employment. " Harry A. Blackmun: Are you still quoting Senator Humphrey? William L. Summers: Yes, I am. Harry A. Blackmun: I can't help but ask the question, if he were here today, on which side of this case do you think he would stand? William L. Summers: Mr. Justice Blackmun, that is a very difficult question, but I think that the principles that Senator Humphrey stood for were strong enough that if he felt the necessity for quota relief in 1985, he would do everything within his power on the floor of Congress to see that those words were in fact added to this title, and in explaining on so many occasions before that very same Congress that Congress was not giving that power to the courts of this United States nor to the Equal Opportunity Commission, I think he made it very clear what the intent of that bill was at that time, and in knowing his job the way he knew it, if it were necessary to change it, he would see that the possibility would have every opportunity to come about, and would certainly not expect this Court to do so. Going on to paraphrase, the relief available, and this is Senator Humphrey again, is a court order enjoining the offender from engaging further in discriminatory practices, and that is by necessity what must happen in the employment of quota relief. Discrimination must go on, and directing the offender to take appropriate affirmative action, for example, reinstating or hiring employees with or without back pay. The title does not provide that any preferential treatment in employment shall be given to Negroes or to any other persons or groups. I reemphasize this. I repeat this because he said it. Great light has been made, and I say to you, by various amici that in 1972, for example, the failure of the Ervin amendment signaled the defeat of the proposition. Could it possibly in defeating an amendment to a bill, Congress not speaking, could it possibly defeat the intention of Congress so specifically stated in 500 and some pages of Congressional record for the enactment of Title 7 that Congress through its normal means, through the means of negotiation, enacted this bill, and this bill was to provide make whole relief. In 1972 they chose to include state and federal governments, and they added, yes, a sentence at the end. That sentence at the end did in fact mean appropriate relief to take whole victims of past discrimination where they truly have been identified. I have reserved five minutes at the end, and I would concede to Mr. Reynolds for the Justice Department. Warren E. Burger: Mr. Reynolds. William Bradford Reynolds: Mr. Chief Justice, and may it please the Court, as Mr. Summers stated, the question that is raised by this case is purely one of statutory construction, whether a judicial order entered with the consent of the employer is subject to the remedial limitations imposed by Section 706(g) of Title 7. Section 706(g) prescribes all remedial orders, all remedial court orders that grant preferential treatment to nonvictims of discrimination. This victim-specific limitation on a court's Title 7 remedial power is in no way relaxed where the employer consents to the entry of the decree. Neither the language nor the legislative history of Section 706(g) lends itself to a selective reading of the phrase, "no order of the court", and it is simply not the case that the explicit statutory constraint on a court's authority to order into place one discriminatory selection process to counteract another, that that constraint can be bargained away at the expense of innocent third parties by an employer who considers it to be in its interest to consent to a decree that provides for discrimination in reverse. Byron R. White: Of course, you still have to convince us as to what the last sentence of 706(g) means. You said it, but-- William Bradford Reynolds: Mr. Justice White, I... I am sorry. Byron R. White: --Do you think it is subject to some other construction? William Bradford Reynolds: There had been proposed in some of the briefs some different ways to parse the words that might suggest that it doesn't mean that there is a limitation on-- William J. Brennan, Jr.: Well, Mr. Reynolds, apart from the briefs, Congressman Seller was the sponsor of that last sentence, wasn't he? William Bradford Reynolds: --The no order of the-- William J. Brennan, Jr.: The last sentence of 706(g). William Bradford Reynolds: --706(g). He was one of the sponsors. William J. Brennan, Jr.: Yes, and he suggests that that bars any relief except for some victim of discrimination. William Bradford Reynolds: That's correct. William J. Brennan, Jr.: But that wasn't his view of it, was it? William Bradford Reynolds: I believe that was his view, and that was the view of-- William J. Brennan, Jr.: That is the last sentence, bars an order of hiring or otherwise for anyone suspended or discharged for any reason other than discrimination on account of race. Doesn't that mean it bars... or rather addresses the situation where an employer refuses to hire for some reason other than race? Isn't that what it says? William Bradford Reynolds: --I think the legislative history of that sentence and the discussion in the Senate-- William J. Brennan, Jr.: I am addressing my... I am asking, isn't that what Representative Seller said? William Bradford Reynolds: --I think Representative Seller made a number of comments about this sentence and what it means in the legislative debates, and I think that the overwhelming import of what his understanding was is that this sentence barred the awarding of relief to those who were not victims of discrimination. There was a delicate balance that was struck by Congress in 706(g). It was a balance that was designed to ensure that those who were victims of discrimination were made whole, but also to ensure that you would not discriminate against those who were not victims. The fundamental purpose of the statute has... this Court has recognized time and again. Byron R. White: You mean discriminated in favor of those who were not-- William Bradford Reynolds: It was, you would not discriminate in favor. Byron R. White: --Of those who were not-- William Bradford Reynolds: Who were not victims. That is correct. The purpose of the statute was... the primary purpose was, one, to eradicate discrimination, and the secondary purpose, as this Court has recognized over again, was to make whole victims of discrimination. Preferential selection arrangements such as the one here go contrary to both those purposes. They do not eradicate discrimination, but they instead promote discrimination and further discrimination. They are themselves discriminatory. They are not aimed to make whole relief. Indeed, they a re wholly indifferent to make whole relief for victims. Byron R. White: --Do you suggest that giving relief, a court's giving relief to nonvictims itself violates Title 7? Or is it just an excessive remedy? William Bradford Reynolds: I don't think that the Court can give relief to nonvictims of the discrimination. Byron R. White: What if it does? Is it just an invalid remedy, or does that violate Title 7? William Bradford Reynolds: If a court orders it? If a court requires that you give relief to somebody who is not a victim of the discrimination? Byron R. White: Yes. William Bradford Reynolds: I think if that is the specific requirement of the order, that it is invalid under 706(g) and the-- Byron R. White: It is just an invalid remedy. William Bradford Reynolds: --That is right. It goes beyond the authority of the court. It will indeed be the case that the court can fashion relief that is neutral as to race, that will have the benefit of advantaging some of those who have not been victims of discrimination. For example, an affirmative action recruitment program that reaches out to those people who were not reached before and allows them to come in and compete will give them an advantage they didn't have when they were excluded from the recruitment. That certainly would be a permissible remedy, but I don't think that the courts can order relief under Title 7 that gives an advantage to somebody who has not been victimized by the discriminatory conduct, and do so within the authorization that Congress gave by the statutory provision. Lewis F. Powell, Jr.: Mr. Reynolds, would you describe exactly the effect of the consent decree on the promotion of people who already were in the union? What effect did it have on the promotion of union members who were white? William Bradford Reynolds: The effect of the decree and its operation would, I think, deny to some union members who were eligible for promotion the ability to be promoted solely by reason of their race. It would exclude them from promotions because of race. Lewis F. Powell, Jr.: Did it apply to promotion of blacks who did not possess the requisite qualifications for promotion by whites? William Bradford Reynolds: I think that this decree does require that you promote blacks without regard to their qualifications. Lewis F. Powell, Jr.: There were specified numbers of promotions that were to be made to each office, weren't there? William Bradford Reynolds: Specified numbers, well, percentages. Lewis F. Powell, Jr.: Those goals or quotas had to be met even if there were better qualified whites at the time? William Bradford Reynolds: That is the way that the decree was written and it was to operate, and indeed the way it did operate. Lewis F. Powell, Jr.: Does the record show that? William Bradford Reynolds: The record of this case in terms of how it has operated, I think that this case comes to court before the time... the record was developed in this case before the time the promotions actually took place. So that as to what happened with regard to the promotions under this decree, that is not part of the record that is before this Court. John Paul Stevens: Mr. Reynolds, can I ask you another question about the text of the last sentence of 706(g)? It refers to no relief for a particular individual, and then it defines the kind of individual for which the relief shall not be given as "if such individual"... the "such" refers back... "was refused admission", and so forth, "for any reason other than discrimination on account of race. " Is it your contention that the black officers who were promoted here had been refused advancement for some other reason within the meaning of that section? William Bradford Reynolds: I don't know, Mr. Justice Stevens, but it certainly would be within... it certainly would be very possible that there were black officers who had not been promoted by reason of qualifications, that is, for some reason other than race, who would by virtue of this decree, would indeed have the promotion award to them in order to fill the percentages. John Paul Stevens: --If that were true, if they had been denied promotion because of lack of qualification, you would say the language reads directly on them. My question really is, does this language read on other "nonvictims" unless they meet that test? William Bradford Reynolds: Well, I think this language... as I say, I think one can parse this language in several different ways which requires us to turn to the legislative history. I think it is clear from the legislative history what the intention was of this language, and that it was in 706(g) to ensure that you would not have courts giving preferential treatment for purposes of achieving or maintaining racial balance. John Paul Stevens: But you do not really contend that it is a plain language case, but rather it is an ambiguity case, and we must then look at the legislative history. William Bradford Reynolds: I certainly think that we do need to look at the legislative history. My own reading of the language itself leaves me with less doubts, but I can understand that it can be parsed the way you are suggesting, and I think the legislative history removes all doubts on that score. I believe my time is up. Warren E. Burger: Very well. Mr. Stege. Edward R. Stege, Jr.: Mr. Chief Justice, and may it please the Court-- Warren E. Burger: You may raise the lecturn if you would like and find it more convenient. Edward R. Stege, Jr.: --Thank you for reminding me. I took a look at Mr. Reynolds' size before I approached the lecturn, and I thought that I would not have to do this, but apparently he forgot to raise it. The plaintiff and the defendants have different perspectives in this case, and therefore we have agreed to divide our argument, and the Court actually granted that motion. I would like to speak to two points. When Congress... Vanguards here assert two points and I will address both. When Congress enacted Title 7, it gave the federal courts broad authority to remedy discrimination, including the authority to use race-conscious remedies in appropriate circumstances, and second, this Court should treat a consent decree, which includes race-conscious affirmative action as voluntary action in accordance with Weber not as court-imposed relief, and it does not make a difference that the petitioner did not consent. Now, before turning to the merits of my argument, I would like to address a couple of factual points that came up during the preceding 30 minutes. First, there is simply no dispute on the record that for years the City of Cleveland has discriminated against minorities and that a remedy was appropriate. There is no argument also that this remedy is unreasonable. In response to Justice Powell's question earlier, there is clearly nothing in this decree that requires the promotion of unqualified individuals. As a matter of fact, passing a promotional examination is a prerequisite to minority and non-minority promotion alike. In addition, I would point out that there is nothing on the record to show that this particular remedy, this particular affirmative action plan actually denies any non-minorities any promotions. One thing is clear from the record. That is, the city created substantially more promotions, and this is conceded by the petitioner. The city created substantially more promotions to accommodate the interests of both minorities and non-minorities alike, and there is no indication that any particular non-minority was denied a promotion in favor of a minority. William H. Rehnquist: But ordinarily if the city created more promotions, as you refer to them, they would have gone to people next in line, would they not have? Edward R. Stege, Jr.: That's correct. To that extent, Justice Rehnquist, the remedy does affect who gets the promotions. My point is simply that without this consent decree, the non-minorities would not have received the promotions anyway. They would not even have had a chance for the promotions. What this consent decree did was not only create some promotions for minorities, but it also created many more non-minority promotions. Lewis F. Powell, Jr.: You mentioned examinations. Would the grades made by the applicants be taken into account in determining who would be promoted? Would the grades made on the examinations? Edward R. Stege, Jr.: They would to the extent to which the grades control your ranking on an eligible list. That is correct. Lewis F. Powell, Jr.: Yes, but assuming that ten people passed, and some were much higher in grade scores than others, and only five positions were to be filled, would they be filled in accordance with the grade scores or not? Edward R. Stege, Jr.: They would be filled in accordance with the grade scores except insofar as the court... the affirmative action plan embodied in the consent decree requires otherwise. So in theory-- Lewis F. Powell, Jr.: How far is that? Edward R. Stege, Jr.: --Well, it depends on the given list. There is no question but in a given situation a non-minority with a low score could be promoted-- Byron R. White: Would have to be. Would have to be promoted. Edward R. Stege, Jr.: --That is correct. No question about that. This is not... to speak to qualifications, no one achieves a place on the eligible list without passing the examination. Byron R. White: So they all have... you can all say that they are minimally qualified but they are ranked. Edward R. Stege, Jr.: More than minimally qualified, Justice White. Only 20 percent, for example, on the '84... 20 percent of the applicants passed the 1984 promotional examination. I think that is enhanced qualifications, if anything. Not only that, but under 706(g), the City of Cleveland, the rights, the prerogative of the City of Cleveland under 706(g) to object to the promotion of any single individual in the last sentence of 706(g) was retained. Byron R. White: Did seniority have anything to do with who was entitled to a promotion? Edward R. Stege, Jr.: No seniority system is involved in this case. Byron R. White: All right. Edward R. Stege, Jr.: Much has been said about 706(g) previously this afternoon. I would like to add a couple of things. First of all, 706(g) simply... the last sentence of that paragraph simply has no application here. That sentence was not designed to deal with situations such as we have here, which is systemic discrimination over the years both at a hiring level, at an assignment level, and also at a promotion level such that the violation was keyed to classes rather than individuals. The court found that an entire class had been discriminated against, and I don't think 706(g) was intended to reach this situation. However-- Sandra Day O'Connor: Counsel, if there had been no voluntary agreement, and if there had been no consent decree, but the case had gone to trial, do you think the court could have ordered precisely the same remedial scheme as was developed here for the consent decree? Edward R. Stege, Jr.: --Absolutely, Justice O'Connor. The limitations would be equitable limitations. Sandra Day O'Connor: And you don't see anything in the Stotts opinion that would be contrary to that? Edward R. Stege, Jr.: No, and there is no argument that there are equitable... the equitable limitations of the court have been exceeded, and there is nothing in the Stotts opinion that speaks to the contrary. The Stotts opinion in our view is a competitive seniority opinion. Competitive seniority is not involved in this case. Byron R. White: Stotts does talk about the policy, the remedial policy of 706(g), doesn't it? Edward R. Stege, Jr.: That's correct, Justice White. Byron R. White: And it says at least that its result is consistent with that policy, which is as follows. Edward R. Stege, Jr.: That is correct, and there is nothing that we quarrel with in that discussion because what 706(g), what the last sentence here does is preserves management's prerogative in the individual case to say that Person X is not in fact qualified. It reserves that prerogative. William H. Rehnquist: Did the District Court make any finding as to past discrimination on the part of the City of Cleveland in making the decree? Edward R. Stege, Jr.: Yes, it did. It found past discrimination. The city admitted past discrimination. The city admitted not only past discrimination but a long history of discrimination, and the court found it, and Local 93 didn't challenge it. The only... they put on one exhibit, which spoke to the remedy question, the fairness of the remedy. It put on one witness who testified to the fairness... the alleged unfairness of the remedy. They went up to the Court of Appeals on purely an abuse of discretion ground. They argued that the Court exceeded its equitable powers and abused its discretion in approving this particular consent decree, but they do not advance that challenge here. There is no serious debate that this is a reasonable approach to a very, very serious problem. And I would point out in response... and I am coming back to 706(g) for a moment. The last sentence of 706(g), Justice Brennan, is supported by what Congressman Seller intended. Congressman Seller did sponsor the last sentence of 706(g). It is clear that that sentence was originally a for cause sentence, and that for cause language arose from a 1947 amendment to the NLRA, and if one looks to the legislative history of that particular provision, it is clear that it was designed to preserve management's prerogative to object to the lack of qualifications of any single individual. We believe that this is a plain language case, that there is nothing in the plain language or in the legislative history for that matter of 706(g) that prevents this particular relief, but I would point out that in addition to that, it is simply... what we have here is not a court order. It is our contention that if it is a court order, it is purely law. But it is-- Sandra Day O'Connor: Well, it has effects different from a voluntary settlement, doesn't it? Edward R. Stege, Jr.: --Certainly it does. It is a hybrid. I mean, I think we have to concede it is a hybrid. Justice Rehnquist, I noted in his dissent from denial of cert in the Ashley versus City of Jackson case, described a Title 7 consent decree as little more than a contract between the parties formalized by the signature of a judge. But we concede that it has aspects of a court order. The court signed a decree. Thurgood Marshall: This wasn't an agreement of the parties at all, one party did not agree. Edward R. Stege, Jr.: Well, that is totally irrelevant under these circumstances, Justice Marshall. Thurgood Marshall: They found a particular motion in the court and said, one, we don't agree with this, and two, we don't agree with anything that is involved in affirmative action. Edward R. Stege, Jr.: Absolutely-- Thurgood Marshall: On the next page the court issues a consent decree. Edward R. Stege, Jr.: --Your Honor-- Thurgood Marshall: Who consented? Edward R. Stege, Jr.: --Your Honor, they-- Thurgood Marshall: Who consented? Edward R. Stege, Jr.: --The consent was between the plaintiff and the defendants. Local 93-- Thurgood Marshall: I thought the defendant said he didn't. Edward R. Stege, Jr.: --The original defendant... the original defendants, the city defendants consented and the plaintiffs consented. Local 93 did not consent. Now, Local 93... what happened was, initially... an initial consent decree was-- Thurgood Marshall: Was Local 93 a party? Edward R. Stege, Jr.: --They intervened as a party. If I may explain, initially there was... initially after the action was brought negotiations ensued between the plaintiff and the defendant. During those negotiations, Local 93 intervened. What emerged from that was the first proposed consent decree. The District Court held... that was not the same as the consent decree that was ultimately approved. Thurgood Marshall: That was the 45. Edward R. Stege, Jr.: No, it was a more strenuous consent decree but it was not a 45 percent consent decree. What happened was, evidentiary hearings were held on that first proposed consent decree for four days. Local 93 participated. At the conclusion of those... at the conclusion of those hearings, the court suggested strongly to all three parties that they sit down and they attempt to work out a three-way settlement, and that is what we did. We negotiated a three-way settlement. That is when the city created all these additional promotional positions. We thought we had Local 93's agreement. They submitted to their membership, and the membership said no. At that point the District Court clearly did approve that same three-way negotiated consent decree over the objections of Local 93, and we contend that that issue, their lack of consent is in essence a red herring. I mean, let's look at the alternatives for a moment. Does an intervenor whose legal rights are not affected, merely whose interests... there were interests clearly, but does an intervenor whose legal rights are not affected have the right to block a settlement between two principle parties? William H. Rehnquist: Is this case in any different posture than if the City of Cleveland had voluntarily decided, I think we will go ahead and do this because of our past employment practices? Edward R. Stege, Jr.: The Weber decision, we submit, is controlling. William H. Rehnquist: But the Weber decision did not apply to a public body. That was a private firm. Edward R. Stege, Jr.: That is not a question that is argued by petitioner. William H. Rehnquist: You say the Weber decision is controlling. And I am saying to you, one thing that strikes me is different is the fact that the Weber decision involved Kaiser Aetna, which is a private firm. This case involves the City of Cleveland, which is bound by the Fourteenth Amendment. Edward R. Stege, Jr.: My response is, there is no serious... this plan meets the Fourteenth Amendment requirements, Number One. Number Two-- William H. Rehnquist: Do you think the City of Cleveland could just as a matter of course decide that we are going to hire 60 percent blacks and 40 percent whites because of, say, the political situation in the City of Cleveland? Edward R. Stege, Jr.: --No, this Court has spoken to that question, or very closely to that question in Fullilove and also in Bache. There are procedures under the Fourteenth Amendment that must be followed. The City of Cleveland clearly here... the District Court made findings of a long history of discrimination. There is no question but what there were findings. Byron R. White: So you are justifying this on the basis of a remedy for past discrimination. That is your argument. Edward R. Stege, Jr.: That's correct. That is absolutely correct. And I would point out... my response on the question of public versus private, Number One, there is no argument here from the other side, from the Justice Department or from Mr. Summers that it makes a difference, and secondly-- Harry A. Blackmun: As a matter of fact, I think they stipulated to that effect. Edward R. Stege, Jr.: --They in fact stipulate that question away. But the amici, I would draw Your Honor's attention... particularly the City of Atlanta brief addresses that question head on in the history of the extension of Title 7 to the state and local governments in 1972. It seems clear that there was no intent by Congress to draw distinctions in terms of the ability of an employer, whether he be public or private, to engage in voluntary compliance. What we have here is voluntary compliance at root. William H. Rehnquist: Yes, but Congress can't have the final say on what an employer can do as to voluntary compliance when you are talking about a public body. Edward R. Stege, Jr.: It can under Section 703. There is no 703 claim here. It cannot, obviously, under the Fourteenth Amendment. It has no final say. But there is no serious debate about a Fourteenth Amendment issue here. It is nowhere to be seen in petitioner's briefs, for example. This is a voluntary compliance case. What the city did here... no one held a gun to their head, and admittedly the consent decree has some aspects of a court order. There is no question about it. But there are very strong reasons why this Court should apply the Weber standards to... should treat this as purely voluntary action. The pivotal fact in Weber, namely that the employer voluntarily agreed to the plan, is present here. Secondly, it does not affect whether the Weber standards are applied. Whether this is treated as a court order, a consent decree, or is a voluntary affirmative action, it really does not impact on Local 93's right. They have the same right to challenge the lawfulness of the plan in either instance. In the purely voluntary plan situation, for example, they bring an independent action, and once they bring that action and they litigate those issues, they can't file a second action and relitigate them. Similarly here... I realize that my time is up, Mr. Chief Justice, and I would simply add, if I may, and I have the understanding of my colleague that I may complete my thought, it simply does not make a difference to third parties whether they file a separate independent action or whether they frame their objections as they did here within the context of an intervention, in a fairness hearing, in framing their lawfulness objections, and they are precluded from relitigating and filing a second action to relitigate those same issues. There are advantages to a consent decree, and consistent with the strong views of Congress in Title 7 to favor and encourage voluntary compliance with the Act, we urge this Court to treat this particular affirmative action plan as a measure of voluntary compliance. Warren E. Burger: But the validity of a consent decree depends upon the jurisdiction of the court to enter it, does it not? Edward R. Stege, Jr.: Mr. Chief Justice, that is absolutely correct, and there is no question about the court's jurisdiction here. There is a question raised about the applicability of the last sentence of 706(g) to a consent decree, and I would merely point out that if one construes the last sentence of 706(g) to preclude a consent decree in this context, if you adopt... if you take literally the argument that is being advanced by the other side in this case, and you look at the last sentence of 706(g), you will conclude that even if Local 93 had consented to this particular decree, it would have been barred, and I suggest-- Byron R. White: Well, suppose 706(g) said that no court order may include A, B, C, which is precisely what this consent decree included. You would say under your argument the consent decree is nevertheless valid. Edward R. Stege, Jr.: --My interpretation is-- Byron R. White: Isn't that right? Even if 706(g) expressly prevented what is in this decree, you would say the consent decree must stand. Edward R. Stege, Jr.: --Well, I would say that, but it is clearly not necessary to reach that question, because 706(g) is not-- Byron R. White: Well, it is if we agree with the government on what the construction of 706(g) is. Edward R. Stege, Jr.: --Well, there are two issues on the construction of 706(g), Number One, whether it authorizes this as a matter of court-imposed remedies, Number One, and Number Two, whether there is anything in 706(g) that bars the parties from voluntarily agreeing, and on that latter question, I would urge the Court to take into consideration the fact that if Local 93 were to have even consented to this consent decree, that under their interpretation the last sentence of 706(g) would bar it. I apologize to the Court and to Mr. Maddox for taking part of his time. Thank you. Warren E. Burger: Mr. Maddox. John D. Maddox: Mr. Chief Justice, and may it please the Court, petitioner and the Department of Justice would resolve this case as a simple one of numbers. The number they want you to impose is zero, no race-conscious relief. That is their preference today. I am here to tell you what the City of Cleveland and state and local governments' perspective is on the numbers that are important, I think, to understanding this case. In 1972, when Congress extended the reach to state and local governments and empowered the Justice Department, the Justice Department in the next eleven years settled 88 percent of those cases by a consent decree like the one we have today. That is not quite right. Not like the one we have today, and the reason is, if you look at the materials filed with the Court, the favorite number of the Justice Department in all those years was 50 percent. That is the ratio they liked. That is the race-conscious relief they liked. As a matter of fact, as recently as 1983, in the San Diego County case, the Justice Department approved 60 percent race conscious relief. Warren E. Burger: How does that bear on the issues that we have here now, Mr. Maddox? John D. Maddox: I think, Your Honor, that in looking at the governmental authority which Congress has delegated to enforce the statute and their construction of the statute, that helps the Court in formulating what Congress' intent was. Another example. In this case every governmental amicus has filed on behalf of the side of the City of Cleveland. Not one has filed on behalf of the side of petitioner. The City of Cleveland during that time was just like many of the other cities confronted with meeting its obligations under federal law. For 14 years, as is indicated in this record, we had the Sealco case filed in 1972, we had the Heddon case, which was firefighters, in 1973, adjudications by Federal District Judges of violations of the Thirteenth and Fourteenth Amendments in 1981 and 1983, Title 7 not involved in those cases. In 1977, Judge Manos also made such a finding, so when this case was filed in 1980, the City of Cleveland had eight years at that point of litigating these types of cases, and eight years of having judges rule against the City of Cleveland. You don't have to beat us on the head. We finally learned what we had to do and what we had to try to do to comply with the law, and it was the intent of the city to comply with the law fully in entering this consent agreement. We were faced again with claims under the Thirteenth, Fourteenth Amendments, 1981, 1983, and Title 7. We had already been adjudicated under all of those other provisions not included in Title 7 of discrimination, and the exact type of relief afforded in this case was imposed on the city. The question here is, can cities and local governments and defendants be able to settle these types of cases? I submit that it is essential that we be able to settle them, and I don't think we can with the construction of 706(g) which is being urged by the Department of Justice. I think the 706(g) construction of the legislative intent regarding 706(g) was best expressed by the Justice Department in 1979 in their brief in this case, in Weber. In that case, they said, Section 706(g) provides substantial support for the proposition that Congress intended numerical race-conscious relief is available under Title 7 to remedy employment discrimination. That is the Justice Department's brief in Weber at Page 35. This is a case to remedy the effects of discrimination. That is not make whole relief under which there is any sort of limitation under 706(g). The plain reading of 706(g), I think, supports that. The focus has been on the last sentence. I do not believe that proper statutory construction allows one to ignore the first sentence. In the first sentence it says, if the court finds that respondent, focusing on the employer. The first sentence doesn't talk about individuals. It is talking about a different problem. It is talking about race-conscious prospective relief. If the court finds that respondent has intentionally engaged or is intentionally engaging in unlawful employment practices, and I paraphrase and skip down, affirmative action... that term is used in dealing with respondents... as may be appropriate, which may include but is not limited to, and it lists certain types of affirmative action, or any other equitable relief as the court may deem appropriate. It is clear to me, I believe, as it was to the Justice Department in 1979 that Congress did not mean to strip Federal District Courts of their equitable authority to deal with these types of complex problems. How complex are they? This type of remedy, as is evident from the record in this case, has been used regularly and has been approved by every single Court of Appeals. Not one has said that race-conscious prospective relief is inappropriate either under Title 7 or under 1981 in the Thirteenth and Fourteenth Amendments. Now, the policy that is being urged that there can be no prospective race-conscious relief in my opinion reduces Title 7 to little more than an employment torts claims act. They talk about make whole, victim-specific. None of that language appears in 706(g). If you take that approach, it will severely hamper, I think, Congressional intent that the federal agencies charged with the responsibility of alleviating such discrimination of the state and local governments who they encourage to resolve these matters of courts' abilities to deal with these problems, all would be severely handicapped in terms of eliminating systemic historical discrimination in institutions. This cannot be the policy I do not think that this Court should find underlying and not expressed. Congress wanted to eliminate the effects of historical discrimination. What would be the result of saying there could be no race conscious prospective relief? One, I think, it would frustrate Congress's intent as set forth in this-- Byron R. White: Do you think that is the submission of the other side, there may be no race-conscious-- John D. Maddox: --Yes, it is, Your Honor. I believe that is their suggestion. There may be no race-conscious prospective relief to eliminate historical discrimination. Certainly that is the Justice Department. It is not clear from Mr. Summers-- Byron R. White: --I hadn't understood they went that far. They certainly are saying relief should be given only to victims. John D. Maddox: --That is correct, Your Honor, but that is contrary and not consistent with race-conscious prospective relief, which does not focus on the victims, but focuses on the respondent, as is said in the first sentence of 706(g), focuses on the institution and what steps must be taken to alleviate discrimination in that institution. Now, I think-- John Paul Stevens: Do you agree that the black officers who get the benefit of this decree are non-victims? John D. Maddox: --Some may be. Some may not be. It was not necessary to determine that in this case because the plaintiff class voluntarily gave up any claim to make whole relief, although they put it in their complaint. They wanted the prospective race-conscious and the city after two years of negotiations agreed with that tradeoff, Your Honor. Byron R. White: So we could assume and it may be true that all of them are non-victims, or that all of them are victims. John D. Maddox: You could assume either way, Your Honor, and that particular point is not relevant to race-conscious prospective relief. Byron R. White: But for you to win you should win on either assumption. John D. Maddox: That is correct, Your Honor. Now, the ramifications of reaching the Justice Department's result in my opinion will be an increase in the judicial workload, one, because there necessarily will be more cases filed, and we won't be able to settle these cases. Warren E. Burger: But back to your previous point, who takes care of the 90 percent of the union and those in the union who have never themselves participated in any discrimination? John D. Maddox: Your Honor, I believe that the negotiations resulted in a very fair allocation of any sort of burden. As a matter of fact, if you compare the first consent decree with the second consent decree, we added more than the number of non-minority promotions to make up for the number of promotions that existed under the prior consent decree. Not one non-minority did not get promoted in the initial waves of promotions because of that consent decree. The city took the burden. We made more promotions than we wanted to make. We made more promotions, in fact, than we needed to make in order to work with the trial judge to accommodate and minimize the burden in this case. I think other potential ramifications here will be an increased disruption, and that is the most important thing to us here today, the disruption of state and local governments' ability to run a fire department, as happened in this case. The judge impounded the examinations for two years. In other cases, we have had preliminary injunctions for two years. You cannot run and operate a safety force by having such judicial disruption, however well justified or intended. This consent order alleviated that for the period of four to five years, so that we could attempt to make the promotions that both minority and non-minority wanted here. I do not think this Court wishes to adopt a procedure or policy which will inhibit defendants from settling these types of cases. It is clear to me that Congressional intent was and should be to settle these cases, to work those problems out at the local level. Judge Lambrose, who handled this case in the trial court, was very experienced in handling these cases. As is evident in Williams versus Vukovich, he denied a consent order, and the Court of Appeals affirmed that denial. So, he is not a judge that is not very considerate of the equities to everyone, and he certainly was very sensitive to them in this case. In summary, I think this Court should adhere to the language in Milliken that the court in fashioning a remedy should be sensitive to the needs of state and local governments. The trial court did that here. We believe this Court should do that also. The court below should be affirmed. Warren E. Burger: Thank you. Mr. Summers. William L. Summers: Mr. Chief Justice, Mr. Maddox on behalf of the City of Cleveland seems to look towards the position of the Justice Department and allow singularly our claim to be one of... not that important, but it certainly seems to me that from the beginning and in the complaint which is in this joint appendix which prayed for dollar back pay relief, this City of Cleveland, he, the law director of the City of Cleveland, saw a way around it. I will give the jobs away of the innocent non-minorities, and I won't have to pay any back pay awards. He didn't answer that for you. When he says to you that we made more-- John Paul Stevens: Well, he did in part. William L. Summers: --Pardon me, sir. John Paul Stevens: He did in part, and I would like to hear your answer. He said they created more jobs, which obviously would have increased the budgetary responsibility of the city, which made more jobs available to your client. So is that true or not? William L. Summers: Who knows what is true? 0 [Generallaughter.] First of all, Mr. Justice, if it please you, they have the sole and exclusive right to decide how many lieutenants, how many captains, and how many battalion chiefs. In the order it says that manning and staffing shall never be considered in this affirmative action plan, so they can make as many jobs as they want. But in the footnote to our reply brief, I would ask that you look at it, Page 17. In 1976, there were 26 percent of the fire force were in the officer, promoted officer ranks. In 1986, there is 26 percent promoted rank membership on that fire service. Now, the old saying about figures can lie and liars can figure, there is the same percentage of individuals in the promoted ranks in the fire service in the City of Cleveland this year than there was ten years ago, so where's all these new jobs? Those jobs that they are talking about, and I have added one page to my reply brief, was because there is some illusion here that maybe some litigation, and maybe even it was affirmative action litigation, kept promotions from happening. Not true. And testimony produced by the plaintiff in this matter shows that that wasn't true. There was a bad, mechanically bad test given. That was contested in state courts and held up the promotions because the city didn't give promotions between 1972 and 1975, and then again between '75 and '81, even though the law says that every two years upon the expiration of a list they should do so. Now, when they assert to this Court that, well, we made more jobs and therefore what was the wrong, the wrong is, in every single individual, minority or non-minority, if his job is taken away from him by the operation of 706(g) interpreting a court order to say, you won it, you won it fair and square, but you are not going to get it, that is not what 706(g) meant to say. And, Mr. Justice Brennan, you questioned the meaning and the intent of Representative Seller. In the government's brief on Page 9, he is quoted there that he expressly responded to the charge that federal courts and agencies would order quotas and other forms of preferential treatment under Title 7. Noting that a court order could be entered only on proof, he was quoted as saying that the particular employer involved had in fact discriminated against one or more of his employees because of race. Representative Seller emphasized even then the court could not order that any preference be given to any particular race, but we would be limited to ordering an end to discrimination. The citation to the Congressional Record is there. Folks, I started off by saying this is a question of statutory construction. Does that statute provide for make whole relief in the forms of quotas? We honestly believe it does not. It is Congress's job. Congress should not put that job before this Court. In construing that statute, we believe it is clear, we believe the Stotts opinion is clear, and we ask your indulgence to rule in that manner. Thank you very much. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Earl Warren: Mr. Johnson, you may continue your argument. Helmer R. Johnson: Thank you, if the Court please. Before the recess, Mr. Justice Harlan asked me about El Paso and Lexington Bank except that these cases reemphasized a necessity of market determination and measuring the effects of the merger in those markets. I don't think they have any clear relation to the case before the Court here. El Paso dealt with a market which where the market was clear, Natural Gas. Now, there was a direct elimination of a competitor or of a potential competitor in a well-defined market. Lexington Bank, also the -- at least one of the lines of commerce there, the commercial banking was obvious. The market was defined quite closely and there was an elimination of direct competition and of course the percentages there were high. I have no reason to believe that the District Court would have decided this case any differently than he did in the light of those cases. Byron R. White: Even on the -- even assuming that the Commerce Clause (Inaudible). Helmer R. Johnson: Yes, sir. The record here, as I was saying is, there's -- there is nothing in this record to indicate any anticompetitive effect whatsoever, notwithstanding as the District Court considered everything he could think off and all the arguments that were raised that indicated any likelihood, reasonable likelihood of anticompetitive effects. He went down the line, prior acquisitions, the intention of the parties, likelihood of suppression of products lines, elimination of competition, weakening of the companies in their respective lines, advantages resulting from the acquisition, concentration, change in market position, effects on competitors, ease of entry, tendency of the word monopoly. He found nothing. He indicated any reasonably probable anticompetitive effect, and the Government here points to nothing that would indicate a reasonable probability of anticompetitive effects. They argue that this should be assumed. But why should they be assumed? Reasonable probability is subject to proof perhaps not as precisely as past events but enough to guide our lives. We know quite a bit about the cause and effect and in trying to evaluate the probability of anticompetitive effects without any facts to go off, I guess it's completely useless. The Government in its brief and its arguments has mentioned concentration and dominance. They don't say what they mean by this or how they should be used in the application of Section 7. Surely, in the light of the legislative history of Section 7, from the rulings of this Court, they cannot be serious about an automatic application of the statute simply to something that is big. When I say just their word about statistics, the Government here admittedly has had difficulty with its statistics but they keep on using. They apologize for them -- in their brief. They still keep on using them. They'd tried here to add statistics that couldn't be added. Metal Working Industry, the can industry, reports to the Bureau of Census in terms of based boxes of steel used, they don't report in terms of the number of containers made. The glass container industry reports to the Bureau of Census in units. No one has ever seen fit to combine the statistics, so far apart of the industries. The Government here tried to do it. The Government clerk knowing nothing about the industries whatsoever, made certain assumptions. He assumed that all cans were the same size. He assumed that all cans were the same product mix. How wrong he was? The record shows for example that approximately 14,000 evaporated milk cans can be made up from this ton of steel. Approximately 2800 lard cans can be made from a ton of steel. He ignored all products. He tried to add the two together and came up with some figures which have no relation whatsoever to reality. The Government mentioned some figure of Continental having 23%, Hazel-Atlas, 3% of something. The figures could be varied by as much as you like depending on the hypothesis used. The District Court considered this very carefully and concluded that he states in his opinion that the combinations were predicated on implausible hypothesis, not supported by the record. Their figures are worthless. Your Honors here, we have a case that was carefully tried by the District Court. There was careful pretrial, careful analysis of the evidence down to minute details, or carefully prepared findings and opinions. I submit, this decision of the District Court should be affirmed. Earl Warren: Mr. Spritzer. Ralph S. Spritzer: Just a few brief points, Your Honor. Mr. Johnson asked how I was able to state to the Court that the record shows a narrow differential or relatively narrow differential in the price as between tin cans and glass containers. Apart from the numerous statements in memorandum of companies like the Continental Can and Hazel-Atlas Company which discussed the danger of shift in business if price is altered. There are other exhibits which indicate that the range of differential is relatively narrow. I would like to refer the Court to a study made of can versus glass by Owens-Illinois which is in the record at 2458. That gives in graphic form relative prices for beer, detergents, polish, vegetables, baby food, coffee and aerosol, a wide range of the general categories of product for which the containers are used. The prices which appear on that graph give the figures the price per gross, per 144. For example, in vegetables in the 26 ounce size down in the right hand corner, it would appear that the price is roughly judging by that graph about $8 of gross for the can and about $9 of gross for the glass. Now, Mr. Johnson stated to the Court that he find has no difficulty in observing the existence of direct competition as between milk bottles and the plastic containers in which milk is sold. But the competition which he finds typical of that between glass and metal cans is said to be tangential or indirect. I find this astonishing because one can go to the supermarket shelves as to the investigators in this case and list dozens and dozens and dozens of items which appeared side-by-side in glass and in metal cans, but I go further than that. One can find the same manufacturer putting the self same item in both so as to get the customers who like it in glass and the customers who like it in can. We had in this record the testimony of one such packer, a fairly large company which packs various types of apple products known as the Muscle Man Company. Their purchasing agent testified. He said that his company puts the following items in both cans and glasses, the self same item. Apple sauce, spiced apple rings, apple based jellies, apple butter, apple juice and the sorted pie fillings. Byron R. White: Where is that? Ralph S. Spritzer: That testimony appears at record 479 and following the witnesses name Brown. Mr. Johnson asks how we know that for most uses, as I put it in my opening argument, glass and metal alone are practicable. Well, it was testified and without contradiction by a food expert that for purposes of food canning, these are the only containers that can be used. There is also a testimony which is uncontradicted that for beverages, carbonated beverages and beer. The only containers which can be used are glass and metal. Those two items standing alone, soft drinks and beer on the one hand and all cans for food canning on the other, total over 33 billion items out of a combined total production of 60 billion cans and glass containers. So without going any further and discuss -- Byron R. White: (Voice Overlap) Hazel-Atlas? Ralph S. Spritzer: Hazel-Atlas' production was small. What I've been trying to show -- Byron R. White: Beer. Ralph S. Spritzer: Yes. In beer it was, though it could have -- it had the capacity next year or the year after to expand that if it chose. We don't know. I've been attending to show from the inter-industry's standpoint that is to the entire range of commodities involved, there is the opportunity and ability on the part of each major company to compete with the others in the -- in the other line. Hugo L. Black: We have the breakdown of beers (Inaudible) Ralph S. Spritzer: Well, my recollection is (Inaudible) that the can had something like 40% at the time this record was closed. I would have to check that to be sure of my figure. Hugo L. Black: (Inaudible) Ralph S. Spritzer: I think it went in, in more time. The figures and I won't stop to try to examine them, are set out on beer at 2970 of the record, Your Honor. Now, we're told also by Mr. Johnson that the price is no factor so far as the glass makers and the can makers are concerned and he relies on the fact that on the stand, glass manufacturers when asked on cross-examination whether they competed, said that they stoutly competed. I've earlier mentioned numerous exhibits -- just take one moment to finish this please Your Honor if I may. I've earlier mentioned numerous exhibits which show that Continental Can itself regarded price as a factor and I would like in closing to refer to one more such exhibit which appears at record 2544 in the third volume. This is an internal memorandum of Continental Can said -- said, "Serious consideration should be given to sales department recommendations for reducing the quoted price on number 5 round single friction cans from the present price of $67.38 per thousand to a price in the neighborhood of $60 in order to reduce a potentially dangerous spread in favor of glass jars." Thank you.

Warren E. Burger: We will hear first this morning Pennhurst State School and Hospital v. Halderman and the consolidated cases. Mr. Warshaw, you may proceed whenever you are ready. Allen C. Warshaw: Mr. Chief Justice and may it please the Court: This action was commenced in May of 1974 by a resident at Pennhurst State School and Hospital. By her original complaint that plaintiff sought damages and sought improved conditions at Pennhurst. Pennhurst is one of ten state-owned and operated institutions for the retarded in Pennsylvania. It is located approximately 30 miles from Philadelphia in a rural setting and facilities range from modern modular buildings to old renovated hospital-type buildings. At the time of trial it had a population of approximately 1,230 patients. That was down from 4,000 in the mid-'60s to 1,900 in the early '70s, to 1,200 in 1977. At the same time it's staff was approximately 1,500. Of its population, approximately 75 percent of that population was severely or profoundly retarded. That means an IQ of below 36, as compared to the general population of the retarded where only five percent fit into that classification. That is a number which increased drastically as the population of Pennhurst decreased and deinstitutionalization occurred. While by the original complaint plaintiffs sought only damages and improved conditions at Pennhurst, subsequently there were two additional parties who joined by intervention. One of those parties, the Pennsylvania Association for Retarded Citizens, added statutory claims, added additional parties... namely, the counties surrounding Pennhurst... and in addition changed the request for relief to one requesting the closing of Pennhurst, and an order requiring the counties and the state to create and fund community placements for all residents at Pennhurst and all those awaiting placement at Pennhurst. At approximately the same time the second intervenor was, of course, the United States, which mirrored the constitutional claims of the original plaintiff. At about the same time the district court certified a class which consisted of those at Pennhurst and those on the waiting list at Pennhurst, approximately 2,000 persons, and in addition anyone who might in the future be admitted to Pennhurst. In December of 1977 after trial in the spring of 1977, the district court issued its opinion and finding, finding that Pennhurst did violate the constitutional and one statutory right of the plaintiffs. The statutory right was Section 504 of the Rehabilitation Act. Byron R. White: Would that have been dispositive in itself or not? Allen C. Warshaw: Section 504? I believe, as decided by the district court it would have required the closing of Pennhurst. It mirrored its equal protection finding which was that Pennhurst as a large, isolated institution-- Byron R. White: Would the result have been the same if the constitutional claim had not been reached? Allen C. Warshaw: --I'm not sure that there would have been a right to treatment under 504. I think there was simply a right not to be excluded from community activities and federal programs-- Byron R. White: So the right to treatment is constitutionally based, is that the holding? Allen C. Warshaw: --By the district court. Potter Stewart: But, you've indicated that the district court relied on the Equal Protection Clause of the Fourteenth Amendment. Allen C. Warshaw: Yes, sir. Potter Stewart: What if any other provisions of the Constitution did the court rely on? Allen C. Warshaw: The Due Process Clause and the Quid pro Quo Theory of right to treatment. Potter Stewart: Due Process Clause of the Fourteenth Amendment? Allen C. Warshaw: Yes, sir, and also the Eight Amendment in terms of cruel and unusual punishment. Potter Stewart: As incorporated in the Fourteenth. Allen C. Warshaw: Yes, sir. Potter Stewart: Of course, we're not reviewing that judgment, are we? Allen C. Warshaw: Those holdings in our understanding are not before the Court today. Because the... well, I should also describe the order of the district court. The order of the district court was that Pennhurst be closed, that the State and counties create community placements for all those at Pennhurst, and all those 2,000 on its waiting list; and that a master supervise and direct those activities as well as the interim operation of Pennhurst. The Court of Appeals broke entirely new ground. It asked for a separate briefing on and decided the case under the Developmental Disabilities Act, the Developmentally Disabled Assistance and Bill of Rights Act. William H. Rehnquist: Mr. Warshaw, with respect to the Court of Appeals' opinion, what power to legislate do you understand it thought that Congress was acting under when it passed this Developmental Act? Allen C. Warshaw: As I read the opinion, it found it unnecessary to reach the Fourteenth Amendment question and found that the spending power had been exercised. William H. Rehnquist: If it's simply the spending power, isn't the ordinary remedy for the violation of the spending power the cutting off of funds? Allen C. Warshaw: That is part of our position, certainly. The violation here is to use federal funds and violate the conditions of those federal funds. Therefore the remedy is to cut off the federal funds, if in fact a violation is found. That is our position on the remedy; yes, sir. Warren E. Burger: If the State of Pennsylvania simply threw up its hands and said, this whole problem is just insoluble; we can't cope with it. So, we'll close all the institutions and let things be cared for as they were 100 years ago or 150 years ago, would you think a constitutional question would arise? Allen C. Warshaw: No, sir, I think, both the courts... as I understand it, certainly the district court recognized that there is no affirmative constitutional right to provide treatment. What it said was, in essence was, if you do, you must meet certain standards. I think the answer to that is, no, there would be no constitutional problem if Pennsylvania decided... as it is not likely to do, of course... that it would drop mental retardation services. Potter Stewart: Did the district court rely at all upon the Developmentally Disabled Assistance and Bill of Rights Act? Allen C. Warshaw: Excuse me? Potter Stewart: Did the district court rely at all upon that statute? Allen C. Warshaw: No, sir. It was in the final amended complaints of one of the intervenors and the original plaintiff. It was, so far as I know, not briefed post trial. It was not briefed post trial and it was not briefed-- Potter Stewart: And there was no basis in the district court? Allen C. Warshaw: --It was considered by the district court. Byron R. White: Well, the new statutory basis was briefed in the Court of Appeals, though? Allen C. Warshaw: Yes, it was, on the request-- Byron R. White: At the request of the Court of Appeals? Allen C. Warshaw: --of the Court of Appeals. None of the parties asserted it in their original briefs. Byron R. White: Well, in any of the briefs, at that stage, was there any claim that the Developmental and Disabled Act rested on any power other than the spending power? Was there any claim that it was a congressional effort to enforce either the Eighth Amendment or the Equal Protection Clause or the Due Process Clause? Allen C. Warshaw: I don't think anybody... there are references to Katzenbach, which of course would be the relevant decision in the series of voting rights cases. I don't read the briefs to expressly assert the exercise of that power. Byron R. White: You read them that way here, though, don't you? Allen C. Warshaw: Excuse me? Byron R. White: You read the briefs here to make that claim, don't you? Allen C. Warshaw: Yes, sir, I do. I think at least one of the respondents certainly claimed that this was an exercise of the Fourteenth Amendment power. Once again, not directly, they cite the case and in that particular brief, which is the PARC brief, the Pennsylvania Association for Retarded Citizens brief; they refer to Katzenbach. And as I understand it, as they go along they then contend that this is a statute which sets conditions for all federal funding. I don't think-- Byron R. White: Do you feel compelled to respond to that argument here, as stated? Allen C. Warshaw: --To the constitutional argument? Byron R. White: To that very argument that you just are reciting. Allen C. Warshaw: The argument that it is a condition of all federal funding? Byron R. White: No, that it's a... that this statute is an exercise of some power other than the spending power. Allen C. Warshaw: Your Honor, yes. First of all, on the basis of statutory construction, and that is that the statute will not stand that construction. In finding... and perhaps it's best to discuss the statute... in finding a right to treatment in this statute, the Court of Appeals focused on a section entitled "Congressional Findings Respecting the Rights of the Developmentally Disabled. " I think the most important point to remember is that this Court has never found substantive rights in congressional findings. Congressional findings set a predicate for congressional action and for the courts they provide a means of interpreting the substantive provisions of congressional acts. They do not create rights in and of themselves. Certainly as this Court noted in Southeastern Community College v. Davis, when Congress intends to impose rights, it knows how to do so. And generally, as this Court also noted, in Harris v. McRae, when it does so it provides funding to assist in the implementation of those obligations. In this case it did neither, as to Section 6010. In stark contrast, when it imposed obligations... and once again, this is my point: the obligations in the Act do not, on its face, go beyond the funding. William H. Rehnquist: Though those are really two discrete questions, aren't they? Allen C. Warshaw: Yes, sir. And I think you have to answer the first adversely to us, which is a point I can't reach, I just don't think you can answer that first question adversely to us, namely that the Act goes beyond the funding under the statute before you even reach the constitutional issue. And that is the power, if Congress had wished to impose conditions beyond funding under the Act, could they have done so? And we contend, first, that they did not. And, secondly, that they could not. Potter Stewart: General Warshaw, where is the text of 6010 upon which the-- Allen C. Warshaw: It is cited throughout the briefs. I was referring in there to the Joint Appendix on the Writ of Certiorari, which was submitted as the appendix, as part of the appendix in this case. Potter Stewart: --Where, if you know, the page? Allen C. Warshaw: Excuse me. It's on page 198(a). It is also cited in more complete text at page 171(a) of the intervening petitioners'-- Thurgood Marshall: What was that first number? Allen C. Warshaw: --In the blue appendix, it would be at page 171(a), and that is the more complete version. Once again, in stark contrast to Section 6010, when Congress intended to impose conditions under this Act and impose obligations, it did so clearly, it did so by... and it also provided funding for those obligations. It did provide funding for protection and advocacy systems, saying that the developmentally disabled should have available counsel and advocacy services to protect their rights in social security matters, in constitutional matters, in the federal courts and the state courts, and administrative hearings, and they required the states to meet certain conditions in establishing that program. But they did provide funding for that as well. And, explicitly, the conditions of that funding are attached to the funding. Secondly, they provided for certain kinds of special projects. Once again conditions of those specials projects are conditioned on receiving funding and the conditions are explicit. Finally, they provided funding for states which wish to participate in the planning, coordination, and provision of services advantages of the Act. And they say, if you want these funds, you must submit a state plan. And that state plan must comply to certain requirements. And if it doesn't comply, you don't get the state money. And those conditions are very specific. And in addition in every one that is program-related, it is additionally limited. It is limited specifically to programs assisted by funds received under the Act. The creation of an individualized habilitation plan, which was described by trial and I believe in the legislative history as a crucial element of treatment for the retarded, is explicitly made a requirement only for those who are in-program, receiving assistance under the Act. And the legislative history makes clear that we are talking about a specific habilitation program, not the generic mental retardation program. The conference report is explicit on that. We are talking about an individual person's program, and that program must meet that requirement, not the generic program. The second requirement which has some relevance in this case is the requirement that the rights of persons in programs assisted under this Act be protected consistent with Section 6010. I submit to you those two provisions would be meaningless if 6010 had some broader application or had any application in terms of creating rights. The Act does do important things. It helps the states to plan and coordinate their services, it helps them to work through demonstration models to improve their services for the retarded. The planning and coordination aspect is probably what Congress has focused on most, in terms of gap-filling, in terms of the failure of certain programs to meet the needs of the retarded. The Act serves an important purpose. It does not serve the broad purposes attributed to it by the Court of Appeals. It does not impose the kinds of obligations that that court found. Finally, I think there are two additional points. First, when this Court interprets federal statutes, I think it does defer to the view of the Federal Government, but when it does so the view of the Federal Government that it defers to is the view of those which are charged with implementing the statute. And if you look at those views as manifested by how they implemented this statute, there are several problems. Indeed none of their activities, none of their actions support the view of the Court of Appeals or the view of the respondents in this case. First of all, Pennsylvania has received uninterrupted funding under the Developmentally Disabled Act. Certainly HHS does not believe we violated that Act. Secondly, the regulations provide no support for the proposition that 6010 is mandatory. It describes those, its references to deinstitutionalization are directory, and it has no references to standards for institutions. Thirdly, to the extent that anybody can argue in this case that Medicaid funds or other federal funds are conditioned on compliance with the terms of the Act, HHS again does not agree and neither do we, because they have supplied uninterrupted and substantial funding for Pennhurst. Finally, at the time of trial, and perhaps even today, to the extent that the thrust... and this provided a thrust, or is argued to provide a total thrust for federal funding, the Federal Government was making it extremely difficult... and the record is clear on this... if not impossible to receive funding for community placements. Byron R. White: Is your argument that if the administrative agency charged with enforcing the Act that the Court of Appeals construed and applied, if the administrative agency charged with that enforcement had done, had ordered what the Court of Appeals ordered as a condition for federal funding, would you say that they would have exceeded their powers in this area? Allen C. Warshaw: Yes, sir, I would have. But I think the important-- Byron R. White: Assume that they wouldn't, assume that if the administrative agency, if it had ordered that, that would have been within the Act. Then, I suppose someplace you've got to have... a court somewhere has got to tell an agency or has got to tell a state what is... to settle disputes as to what the Act-- Allen C. Warshaw: --Certainly. If they'd attempted to cut off our funds, there is an appellate process and I suspect we would have utilized it. They did not though, and the point I'm making-- Byron R. White: --You would have ended up in a court somewhere. Allen C. Warshaw: --I believe that appellate process ended up in court. Byron R. White: But you say an agency couldn't have done. Allen C. Warshaw: They could not have done what the Court of Appeals did here. And they did not attempt to. Their regulations simply don't attempt to. And that's the point I'm making. If you look at their actions, interpreting the Act... in 1977, I believe, their regulations were published... they clearly didn't read the Act the way the Court of Appeals did. They did not view it as being mandatory. Byron R. White: I suppose your argument also is that even if the agency could have done it, the proper way of enforcing would be through the agency rather than a direct suit in court like this? Allen C. Warshaw: Yes, sir. That is our position. One final point, if I may, and that is, at trial it was clear... and, in fact, in the Halderman respondents' brief it is conceded, Pennsylvania has been a leader in the creation of community programs. It has created them well, it has monitored them well, it has moved people reasonably well. If this Act was intended to put our community placement programs under direct court supervision... and let me point out that this was not a conditioned right, this was not a phased-in right. Under the Court of Appeals holding, this right went into effect immediately upon passage of the Act, this obligation. So, theoretically, immediately upon enactment we were subject to court supervision. If we were subject to court supervision as a leader in this field, what did that mean for 49 other states? And is that what Congress intended, to have the courts become case managers, in essence, for the mentally retarded? I don't believe it is and I don't believe this Court will find it is. Thank you. I would like to reserve my remaining time, if I may. Warren E. Burger: Mr. Kittredge. Thomas M. Kittredge: Good morning, Mr. Chief Justice, and may it please the Court: I'm here on behalf of the counties surrounding Pennhurst. I think in the first instance it's necessary to focus on the express language of Section 6010(1), which was relied upon by the court below in the 3rd Circuit. That language speaks of right, it doesn't speak of duties or obligations in the states. Yet it is precisely those duties and obligations which the court below has in fact found, not only in the states but in their political subdivisions. If you look at the legislative history, having first posited that in fact Section 6010(1) creates the obligation in a state and its political subdivisions to provide community living arrangements to all developmentally disabled persons, except for those rare cases that Judge Gibbons in the court below mentioned. And then look at the legislative history. There are very anomalous things that immediately appear. The legislative history is clear in the 1975 conference report. It speaks in terms of assisting the states in monitoring, in developing plans, in coordinating services. Nowhere does it say anything with respect to imposing on the states an obligation such as found by the 3rd Circuit. Potter Stewart: It was under Professor Hohfeld's analysis, whenever, there's a right, whenever anybody has a right, somebody else has a duty. Thomas M. Kittredge: I think this Court dealt directly with that question, with respect to-- Potter Stewart: Do you remember that? That's a little old-fashioned now. That was very much in style when I was in law school. Thomas M. Kittredge: --I think this Court has found that, for example, that there's a constitutional right to abortions. I think in Harris v. McRae, however, the Court made it very clear that the-- Potter Stewart: No, there's a freedom, there's a freedom. That's precisely what the Court has not found, in my view, that there's a right. There is a difference. I think it's important, sometimes, to be a little bit accurate in momentous analysis. Thomas M. Kittredge: --What would be the right, then, that was found by the 3rd Circuit? It would be the right to an entitlement, to have the states pay for something, to provide a service. I submit to the Court that that's a very different thing than saying, for example, that someone has the right to free speech, or freedom of the press. Potter Stewart: It's freedom. If somebody has a right, somebody else has a duty. At least that's the way I was taught. Thomas M. Kittredge: If that is so, and if that was the intention of Congress, I submit, sir, that they would have plainly said so. And I don't think that they did intend that, and certainly they never plainly said so. John Paul Stevens: Mr. Kittredge, what do you think Section 6010 does mean? Thomas M. Kittredge: I think that 6010 is an expression of what the Congress regarded as a statement of the obvious, that the mentally retarded do have a right to receive humane, decent, appropriate treatment and services. John Paul Stevens: What kind of right is it? Is it a state law right, a federal statutory right, or a constitutional right? Thomas M. Kittredge: I don't think it's any of those, sir. I think it is their human right and it was not meant by the Congress to be anything more than expression of a right such as that people have a right to clean air, for example. That doesn't necessarily mean-- Potter Stewart: Is it the expression of or the creation of? Thomas M. Kittredge: --Pardon, sir? Potter Stewart: According to the Court of Appeals, it was the creation of a right, a statutory creation, a congressional creation of a right-- Thomas M. Kittredge: It in fact-- Potter Stewart: --not manifested before. Thomas M. Kittredge: --If, in fact, Congress meant to create a right... "create", in an operative sense-- Potter Stewart: Correct. Thomas M. Kittredge: --they wouldn't have said, as they did in the 1978 amendment, that they were describing. The 1978 amendment to Section 6010 says, that it's "the rights described in this chapter. " not the rights created in this chapter. They didn't view those rights as operative things entitling people, all of the developmentally disabled in the United States, to receive appropriate services, treatment, and habilitation. They were expressing, I think, a hortatory view on all of those, the Federal Government and the states, who are responsible in our society to provide services to those who need them. Granting the Developmentally Disabled Assistance and Bill of Rights Act... and if I can, I'd like to refer to that as the DD Act, simply because the other is so long... discrete obligations were imposed on the states. In fact, the Congress did so very distinctly and explicitly. And Mr. Warshaw has already mentioned Section 6011, where the individualized habilitation plan requirement was imposed on the states for those persons receiving services from programs funded by the DD Act. And in 6012, with respect to the creation of a system to protect and advocate the rights of the disabled. In 1978, when it was amended-- John Paul Stevens: Before you leave the Section 6010, is it not correct that Section 6010(3) describes an obligation? Thomas M. Kittredge: --It does indeed; yes, sir. John Paul Stevens: Do you just... you construe that as creating a new obligation or merely a prefatory-lire 6010(1) and (2)? Thomas M. Kittredge: That's exactly right, quite; I do, sir. I think you can at least logically make some kind of a distinction between 6010(3) which at least does speak in terms of obligations, and 6010(1) and (2), but I do not believe that that section 6010(3) creates an obligation in the states either, other than those obligations which are already in the states, with respect to Medicaid regulations, for example, and so on. John Paul Stevens: Well, is it correct then that under your reading of the statute... and it may well be right... that the statute has the same right-creating and duty-creating effect if 6010 were totally eliminated from the statute? Thomas M. Kittredge: That's correct. If you look at the legislative-- Potter Stewart: Of course, even if you're quite wrong and even if Congress purported to create rights and duties, there's a question of its power, isn't there? Thomas M. Kittredge: --Oh, absolutely, sir. Absolutely. The Court of Appeals in its discussion of the constitutional predicate for this particular section as it was construing it mentioned both the spending power in Section 5 of the Fourteenth Amendment... I must confess it is not clear, at least to me, which of those predicates the 3rd Circuit relied on. In any event, it makes no sense at all to rely on the spending power, because if in fact the spending power is the sole predicate for that enactment, there are two results. First of all, there's no showing for a finding by the district court that any of the counties are recipients of DD Act funds. And secondly, even if you assume that everybody involved in this litigation was in fact a recipient of DD Act funds, the result of the finding, a reading of 6010 such as in the court below, would simply result in every state disdaining DD Act monies from now on. They would walk away from it. They would look at the enormous obligations created by what the 3rd Circuit has declared, they would look at the de minimis funding provided under the DD Act, and I mean that in a relative sense, and they would simply say, no, thank you. Potter Stewart: How many states have accepted these funds? Thomas M. Kittredge: I believe that all 50 have. Potter Stewart: One recently, I think, withdrew, did it not? Thomas M. Kittredge: I believe, in Saturday's paper, it was reported that the State of Virginia has told the Federal Government that it can keep its DD Act money. William H. Rehnquist: Isn't the second ground of the Court of Appeals, which purported to avoid the constitutional questions, really necessarily implicating constitutional questions through the back door? Thomas M. Kittredge: If you assume that the constitutional predicate of 6010 as found by the court below is the Fourteenth Amendment and the enforcement power in Section 5 of the Fourteenth Amendment, then you have to determine what it is, what is the Fourteenth Amendment right that is being enforced? Now, there have been some courts in this country who have found a right to treatment to arise from the liberty interest implications, placing a person in the custody of the state. But all of those have been focused on institutionalized persons. No court of which I'm aware, at least, has ever found a generalized right to treatment in all persons developmentally disabled or mentally retarded persons, in the United States, whether they are in institutions or not. I would point out to you that in the 1978 Amendment it is expressly declared that there are more than two million developmentally disabled persons in the United States. Approximately 150,000 of those are in public institutions. If you speak in terms of a right to treatment under the Fourteenth Amendment, as I understand the rationale of that right to treatment, you have to focus on those who are in public institutions. The remainder, the vast majority of the two million, no court so far as I am aware has ever found to have a Fourteenth Amendment right to treatment. Thus-- William H. Rehnquist: And the 3rd Circuit has not, then, avoided a constitutional question by its second holding? Thomas M. Kittredge: --I don't believe it has, sir. No; and I think it's important that the Court recognize that in fact the holding of the 3rd Circuit is not restricted to Pennhurst. The Solicitor General in his brief for Respondents here suggests without quite saying so that the focus of this case is the people at Pennhurst. I submit that that's not true, that if you look at the holding in the 3rd Circuit, that's not what the 3rd Circuit said. Moreover, the relief granted by the district court in this case directed the creation of community living arrangements, not merely for the 1,000 people at Pennhurst, but for the 2,300 people on the Pennhurst waiting list who have never been in Pennhurst, who are not now in Pennhurst, who are not subject to state institutionalization, and whose Fourteenth Amendment rights certainly have never been implicated. Not only that, the 3rd Circuit in the person of Judge Gibbons specifically said that its holding in that case applied to future applicants for services, not simply those currently receiving services. It is, I think, therefore quite clear that Judge Gibbons was finding a 6010 right to treatment for all developmentally disabled persons. If you read the section that is being relied upon, it says, "Persons with developmental disabilities have a right to appropriate treatment. " etcetera. It does not say, institutionalized persons with developmental disabilities have a right. The district court in South Dakota on September 26, 1980, found in the case of Henkin v. South Dakota that the State of South Dakota under the DD Act as construed by the 3rd Circuit in Halderman, had an obligation to fund the placement in a private facility of a 24-year-old retarded citizen of South Dakota. Harry A. Blackmun: This was a federal district court? Thomas M. Kittredge: Yes, sir, it was. Harry A. Blackmun: Do you know who the judge was? Thomas M. Kittredge: I don't offhand. If in fact, in 1975 or 1978, the Congress had meant to impose this kind of a fiscal burden on the state, to provide these services to all developmentally disabled persons, I submit there would have been some mention of it in the legislative history. Certainly Congress is fully aware of the fact that the fiscal resources available to the states and the counties are very limited in nature. There would have been some discussion, certainly, at least, as to how much all of this was going to cost. Yet there is no such discussion anywhere in the legislative history. I don't believe that the Congress could reasonably have blinded itself to the effect of what it was doing in a fiscal sense. And I think, if you read the statute as we have suggested it should be construed, you avoid that problem. Thank you. Stanley Reed: Have you cited that South Dakota case in your brief? Thomas M. Kittredge: I believe it's cited in an amicus brief. I don't have a citation simply because I got it from Lexus. Warren E. Burger: If it isn't there, will you supply it to us? Thomas M. Kittredge: I shall be glad to do so, sir. Warren E. Burger: If you're not sure that it's in the amicus brief. It might be helpful if you'd give us a copy of it if it isn't published formally in Fed. Sup. Warren E. Burger: Mr. Klein. Joel I. Klein: Mr. Chief Justice, and may it please the Court: Mr. Justice Stewart, I agree that the issue is the rights and the concomitant duties, and I think the question here is legally enforceable rights as distinguished from the variety of vague ways in which the term is used. I think it helps in understanding the analysis to take a precise look at what the Court of Appeals found as to the legally enforceable rights under this statute. First of all, it found that for each person at Pennhurst as well as on the waiting list, you have to have an individual determination by a court or master as to the appropriateness of an institution as compared to a community facility. This has to be court or master-determined. Secondly, in that determination there is a legal presumption in favor of community placement. Now, as a practical matter, the way this works in Pennsylvania is, the court has established a Master's Office. This is not a master. This is an office of more than ten people that is now operating the system in Pennsylvania. To date it has cost approximately $2 million to fund that office, and its budget is $60,000 per month in the future. This office reviews all the actions at Pennhurst itself-- William H. Rehnquist: Where do those funds come from? Joel I. Klein: --From the State of Pennsylvania. The district court ordered the State to pay those monies and the State is currently paying them, sir. This office has an office at Pennhurst and it reviews all the actions out there. In addition, it has devised a systemic community placement program. It also works with the parent, a member of the treatment team at Pennhurst, a friend-advocate also authorized by the court, as well as others, to devise community services for each individual. They actually get a place in position in the community. When that is done, if there is no objection, with the masters' approval a person is put in the community facility. If there is objection, there is yet a second master who has been appointed, called the hearing master. Then you go before the hearing master and you have to prove if you object to the community placement, that this community placement would be worse than Pennhurst. At the hearing master's hearing you have a variety of due process rights, including the right to subpoena people. The hearing master has paid attorneys' fees to people appearing before him, also charged to the State of Pennsylvania. Some of these hearings have gone on for several days. Now this is the duty that the Court of Appeals found in the statute, and we suggest, every state has institutions with people housed in them now, so what the court was finding is a massive, nothing short of a massive federal takeover of the state systems. I would suggest that that was not only not contemplated by Congress but indeed would raise the gravest of constitutional issues, which I'll come to in a second. Now, the court found this mandate, this broad mandate, in the two findings of right. And again, there is nothing unusual about this process. Congress often describes findings and then goes on to implement them. And here it makes broad statements of rights, clearly not legally enforceable rights, but it went on to implement them in the statute in a way different, perhaps, from that which the respondents would urge, and in a certain way more modest, but in our view much more sensible. First, as to the issue of deinstitutionalization, that is, the Court of Appeals felt that Congress wanted these individual determinations and virtually everyone in the community. Congress in 1975 had two very specific requirements. First, it asked the states as part of their plan to devise a plan to eliminate inappropriate institutionalization and also to improve conditions for those for whom institutionalization was necessary. At that point Congress said, the states have an obligation under this Act, a concrete legal obligation to devote at least ten percent in 1976 of their monies for deinstitutionalization under the Act; that is, ten percent of the federal grant, and in later years they have to devote 30 percent of the federal grant. And Congress realized that deinstitutionalization was costly and the legislative history says, in fact, we therefore appropriate additional funds so that the states will have the monies from their ten percent and in later years 30 percent. Now that is an important and by no means insignificant step which, nevertheless, is not the one the Court of Appeals found. However, the legislative history goes further, because in 1978 Congress amended the Act... this was before the Court of Appeals decision in '79. It did two very significant things for present purposes. One, it eliminated the mandate for a plan for deinstitutionalization. They had had three years, the institutionalization had taken place; again, at a rate, perhaps, different than the Respondents would prefer. But it had taken place. Second of all, they eliminated the earmark provision. Rather, they said, now-- Potter Stewart: Eliminated what? Joel I. Klein: --The earmarking funds for deinstitutionalization. They said, rather, you've got four priority areas under the DD Act, and you can put your money in any one of these, sixty-five percent of the federal grant. And the four areas were case management services, child development services, community living services, or non-vocational social development services. Without going into the details of what those are, it's clear that the states in '78 forward could continue to target DD monies for deinstitutionalization. It's also clear that they could move in entirely different areas, and indeed the Court of Appeals, of course, has moved them in exactly the opposite direction. Congress made it clear that all the monies under the DD Act could be used for institutional improvements, and the quote from the legislative history is "increasing the capacity of institutions and agencies to provide or coordinate services or to train personnel. " So it's very clear that Congress spoke on the issues that the Court of Appeals tried to extrapolate upon, only it spoke in a way that declares very different policy than others might have. Warren E. Burger: Could Congress have prescribed all of the conditions and limitations which the Court of Appeals has laid down? Joel I. Klein: I think, Your Honor, Congress could describe conditions as a condition of funding, so long as those conditions in themselves were not unconstitutional. I have no question that so long... that is, Congress, I assume, like the rest of us, could say, if you want federal funds, you have to meet certain conditions. Now, the remedy there is the question Mr. Justice Rehnquist raised. From Rosado forward, this Court has made the clear the remedy is to give the choice to the states. And I don't want to look at it as a fund cut-off, because that puts the moving hand on the federal government. Rather, the remedy is to the state. Either you comply with the conditions or you withdraw from our program. Now, Rosado... Justice Harlan made this very clear... in Rosado you're dealing with welfare payments, where the Federal Government is involved for a lot of money, unlike the DD Act. And, second of all, in Rosado it was a discrete dollar amount. Here you're talking about a massive takeover of the state system, the right to treat-- Byron R. White: Well, Mr. Klein, you say this is just a conditional program, a grants-on-condition. But are the conditions directly enforceable in your view, in court, without action by the agency? Joel I. Klein: --Mr. Justice White, if the conditions are as I describe them, they're not directly enforceable in court. Of course, the welfare conditions in Rosado are enforceable, but the remedy is different. If the conditions are as the Court of Appeals for the 3rd Circuit said they were, then I think under Thiboutot you can enforce those. However, we don't think those conditions, we don't think this statute confers entitlements, and I'm making an alternative argument that, if it did, contrary to our opinion, that nevertheless the relief should have been as designed in Rosado. Now, going on in terms of what those conditions were, if you look at the conference report, the legislative history in '75, Congress made clear that the bill of rights and the sections that follow it... you see there were three titles to the bill; Title II came out of the Senate bill, and it was a bill that had elaborate standards for all facilities. The House had no such provision. They compromised and the compromise came out with a three-section Title II: Section 6010, which was these findings; 6011 on the individual habilitation plans; and 6012 on creating a protection and advocacy service. And Congress specifically said in the conference report, 6010... and this is the language... "specifies rights, requires habilitation plans, and requires protection in advocacy. " So I think it's quite clear that Congress understood the difference between a declaration or description and the imposing of a legal right or a legal duty. Moreover, in the report, it talks about the discrete standards of 6010(3), as Your Honor, Justice Stevens, asked about, and it says, as to those: "In themselves we realize they will not insure quality treatment or habilitation. " "Therefore, we have no intention to displace or supplant other higher standards either required by the Medicaid statutes or other state statutes. " So, again, throughout, Congress saw the limited purpose that was involved here. Now, I think the final, if there were any doubt about the inappropriateness of what went on below, Congress right in the opening sections of the statutes specifically eschews any desire to take over the operation of a state plan. It makes that clear, that there should be no federal takeover. What we have here is a massive federal takeover. One last point, Mr. Justice Rehnquist, I think you have raised the constitutional issue in a variety of contexts, and I think that's an issue that comes up in part because in order to make this a mandate that's enforceable other than for the option of fund cutoffs, it would have to be pursuant to Fourteen and five, it seems to me. Now, it's clear that the Court of Appeals somehow thought it didn't have to reach that issue. Of course, this Court needn't reach that issue, or the constitutional issue, if it agrees with our reading of the statute. I would only say that the law, it seems to me is clear, and we would certainly welcome resolution of the constitutional issue rather than a remand. We could not bring it to this Court because the Court of Appeals rested its opinion on a narrow statutory ground; respondents chose not to seek the Constitution as an alternative ground for affirmance. But I think it is clear that the United States Constitution does not require the states to devise an alternative system of care and to invoke any such requirement as the least restrictive alternative. In 1970, in State v. Sanchez, this Court dismissed for want of a substantial federal question that issue. No federal district court... and the Court is aware that federal district courts have been active in this area... no federal district court has ever upheld a right to create alternative facilities for the mentally ill or the mentally retarded in a disputed case. It has never happened, and as I say, this Court has summarily rejected it. So I think this Court, if it deems it appropriate, has to reach an issue, can go right ahead to each issue, and we welcome resolution of it. Thank you, Your Honor. Warren E. Burger: Mr. Ferleger. David Ferleger: Mr. Chief Justice, and may it please the Court: The monumental inhumanity of our nation's institutions for the retarded cannot be encompassed in any recital of the abuse and neglect which the lower courts found at Pennhurst. Because the enforced inactivity, the unbroken aloneness, pale beside the central fact that brings us to this court, and that fact is the affirmative regression and harms caused to people at Pennhurst xx but the fact that people at Pennhurst there for retardation habilitation go backwards; people became more retarded. People lose skills that they had when they entered the institution. That tragedy in essence is a lack of life, a lack of the challenges and changes and questions that life presents to us that we need, and retarded people equally need, to develop. That denial for the retarded is what is called the denial of habilitation. William H. Rehnquist: Mr. Ferleger, you say that it's this situation which brings you to this Court. Would you say you would be in this Court in the same posture had it not been for the congressional enactments of '77 and '78? David Ferleger: We would have been in this Court on constitutional grounds had Congress not enacted the Act after I filed the lawsuit in 1974. William H. Rehnquist: Well, in other words, you're saying that the Constitution requires each state to provide some sort of care for the type of people you describe? David Ferleger: We're saying that the Constitution requires the states to provide protection from denial of particular constitutional rights, which include the right to habilitation. William H. Rehnquist: Well, what provision of the Constitution do you get that from? David Ferleger: The sorts of rights I'm discussing are rights enunciated in this Court in Rodriguez, the right to more than zero education. The right-- Potter Stewart: Where are they enunciated in the Constitution? I think that was my brother Rehnquist's-- David Ferleger: --In the Fourteenth Amendment, the Due Process and Equal Protection Clause, and in the Eighth Amendment, Mr. Justice Rehnquist. Warren E. Burger: --Then you don't agree with your friend that the State of Pennsylvania could, or any other state, could close all of its institutions and simply say, people will have to take care of their own, as they did 100 or 200 years ago? David Ferleger: Well, a denial of a right to care once someone is in a retardation program is, I think, different than a refusal of the state to create such a program. What we have here are people institutionalized, already harmed by the state, already subjected, in Jackson v. Indiana's words, "to institutionalization the purpose and the nature and duration of which have no relation to its purpose. " But even-- William H. Rehnquist: What if, unlike Jackson v. Indiana, the state simply had never set about to create any sort of institutions for the mentally retarded? Would you say that the federal Constitution required them affirmatively to set up such? David Ferleger: --No, I would not. I would not make that argument. Byron R. White: But you won on your constitutional argument in the district court? David Ferleger: That's correct. Byron R. White: With respect to the people who hadn't been institutionalized? David Ferleger: That's correct. And it's our position-- Byron R. White: And are you defending the judgment below on that ground? David Ferleger: --Yes, we do. We join in defending the court below. But, of course, this Court need not reach that particular issue, because under the standards enunciated most recently in Fullilove and related cases, this Court has found that Congress may elaborate on Fourteenth Amendment protections through enforcing the Amendment under the Section 5. And that sort of enforcement, remedial enforcement, is exactly what the Congress intended to do in enacting the Developmental Disabilities Act. Throughout the legislative history it's clear that the Congress intended to enforce and remedy violations of the Constitution, including the Fourteenth Amendment. Harry A. Blackmun: Mr. Ferleger, in view of your comments, do you disagree with General Warshaw's comment that Pennsylvania has been a leader in this field? David Ferleger: Pennsylvania has been a leader in this field. Pennsylvania has created as of 1976 community services that had served more than 3,000 individuals. So that, for Pennsylvania, the expansion and transfer of resources to the community has not been and will not be a difficult task. We're not talking, Mr. Justice Blackmun, about creating new services. We're talking about a retardation program that needs its resources shifted. There already is in Pennsylvania millions of dollars of funds available and unspent for community services, unspent since 1970. There is available in the country more than $3 billion today in federal money going to retardation services, all of which can be used to continue to provide the services but now provide habilitation, and not custodial care, not regression. William H. Rehnquist: But we have to presumably write a principal opinion, if we sustain your position. And it can't be on the basis that the State of Pennsylvania has millions of dollars unspent that it could just as easily transfer to the kind of facilities you wish. It has to be something applicable to all fifty states. David Ferleger: I don't agree. I think that this Court can find, and in fact it appears from the argument so far to be conceded, that people at Pennhurst have been denied habilitation. Once that judicial determination of liability is made, the next question is remedy. And as to remedy, I believe, as we explain in our brief, that the remedy for each state is going to be different. The nature of the creation, the way in which it proceeds, will be different in the various states. Pennsylvania, it happens, has funds available, has a program in place, and the creation of an IHP, individual habilitation plan, and services, is something that Pennsylvania is doing; the federal court is not doing it, the special master is not doing it. Pennsylvania is doing it and has done it, and from all indications in the record intended to close Pennhurst by 1983. So that the remedy question in this case, I submit, is an easy one, and the liability question appears to be virtually conceded. Congress was not content with prohibiting abuse or enhancing the institutions. Congress instead demanded that people not be dumped from inadequate institutions into more inadequate care in the community. Congress did not create a right to lose your abilities by leaving the institution. Congress required an affirmative right to habilitation. This is an anti-dumping case. This case seeks to assure services, not to deny services to people. Potter Stewart: Mr. Ferleger, assuming the statute says precisely what you submit it says, your position is, I gather, that Congress had the power to enact this statute under Section 5 of the Fourteenth Amendment? David Ferleger: Yes, and Mr.-- Potter Stewart: You don't rely at all upon the spending power of Congress? David Ferleger: --Both the spending power and the Fourteenth Amendment, as the Court... Chief Justice Burger's opinion said in Fullilove, Congress used an amalgam of its power. And I want to correct a statement earlier. At pages 117(a) to 118(a), the 3rd Circuit's opinion, they exclusively held that the rights of 6010 come from the Fourteenth Amendment. Potter Stewart: Not from spending power? David Ferleger: They said that because they rested it on that they don't have to reach the more difficult questions-- Potter Stewart: The spending power generally is, it's well established, that Congress can grant, as to a state... a state helps, say, in building a bridge, so long as the bridge meets certain specifications. And then if the state accepts the federal help, the bridge has to meet those specifications, same as they do with a highway or a welfare program or whatever. David Ferleger: --That is correct. And that is true here, because the State has failed, and the facts are not contested. Potter Stewart: I know, but the offer is not nearly so explicit here, is it? You will at least concede that? That the offer of federal aid under this program is not nearly so explicit as the conditional done accepting the conditions? David Ferleger: That's not correct and let me explain why. Congress was very clear in '75 and again in 1978 that its intention-- Potter Stewart: My only point is that before you answer, the money expended by the Federal Government under this program is very inadequate to meet the so-called conditions of the grant. David Ferleger: --And that is why Congress said, we are creating the DD program to meld, in Congress's words, "into a cohesive client-centered thrust" all the other multi-habilitative programs. Potter Stewart: So, including Medicaid and all the rest? David Ferleger: Medicaid, Medicare, vocational rehabilitation, right to education for the handicapped... Congress noted all those in-- Potter Stewart: You think this is a post-Medicaid imposition of a condition on the receipt of Medicaid, for example? David Ferleger: --This is a requirement that the funds under Medicaid, funds which go to Pennhurst, for example, be used to provide habilitation, not to make people regress. Potter Stewart: So your position is that any state that accepts medicaid is bound by what you say, 6010 of this statute requires? David Ferleger: Yes. William H. Rehnquist: But even if that be true, what do you do with Justice Harlan's language of Rosado v. Wyman, where he says that if you don't like it, just don't take the funds? David Ferleger: He doesn't quite say that. He says in Rosado v. Wyman that the plaintiffs below are entitled to an injunction saying, no funds. Nowhere in that opinion does Justice Harlan say that that's the only remedy. And in fact the district court had in that case issued an order to the state regarding the benefits and the question of whether to funds is the only remedy was not before the Court in Rosado. William H. Rehnquist: Wouldn't you say the strong implication of the Rosado opinion is just a cutoff of funds? David Ferleger: I don't think so, Your Honor, because in Lau v. Nichols the Court said... and Chief Justice Burger's opinion in Fullilove in a separate section repeats the language... that affirmative relief is possible and required even though there was a cutoff remedy available to provide education for the Chinese students. William H. Rehnquist: But that was something that was based not just on the spending power? David Ferleger: Oh, that's... I'm talking about a Section 5 case, not simply the spending power case. In this case I think we have both. And I agree that there are constitutional difficulties with imposing affirmative obligations under the spending power. I think the Section 5 power is what gives-- Byron R. White: So, Rosado is irrelevant if you're right on the Section 5? David Ferleger: --Section 5? That's correct. Potter Stewart: Well, there are all sorts of affirmative obligations if a state voluntarily accepts the conditions of of welfare, of a highway program, or or building a bridge. But the state has an option to accept the federal grant under those conditions or not to accept it at all. David Ferleger: That's correct. Potter Stewart: That's established. But here the conditions were hardly made clear when Medicaid was enacted, for example. David Ferleger: For example. But under the DD Act Congress can create obligations. Potter Stewart: After, after the original grant? David Ferleger: Well, Medicaid is one example, and it seems-- Potter Stewart: Can Congress in 1960 say, we grant you X million dollars on these conditions and the state accepts the money on those conditions and complies with the conditions, and then in 1970 can Congress come along and impose additional conditions upon the 1960 grant? That's the question here, isn't it? David Ferleger: --No upon the 1960 funds, but upon all the funds that continue... $3 billion this year... to pour into these institutions, Congress can impose those conditions, and change the conditions, as Congress does frequently. Lewis F. Powell, Jr.: May I ask a question along those lines? May a state withdraw entirely, now, from any federal support for this sort of program? David Ferleger: That's a difficult question, Mr. Justice Powell, because-- Lewis F. Powell, Jr.: What is your answer to it? David Ferleger: --Although it's not raised by this case, my answer would be that a state could only withdraw if it assured that the people who had been and are being benefited by the funds are not harmed. The difficulty that that would-- Lewis F. Powell, Jr.: How would it do that? David Ferleger: --The difficulty of the question is that people currently receiving services, I think, would need to be assured of a lack of further harm for the state to withdraw. Lewis F. Powell, Jr.: I've understood you to argue that, you're talking about constitutional rights, if they are constitutional rights, even if a state withdrew, do you suggest a federal court would be obligated to construe and apply those rights? David Ferleger: I think a court would be obligated. Lewis F. Powell, Jr.: Even if the only funding came from a state? David Ferleger: Excuse me? Yes. Lewis F. Powell, Jr.: Even if the only funds for these institutions and for these patients came from the State of Pennsylvania, do I understand you to say that the rights you have described would still be enforceable by a federal court? David Ferleger: Yes, they would. In this case, because Congress was remedying violations of the Fourteenth Amendment, Congress can make determinations as to remedy of the Fourteenth Amendment without this Court having to find a specific constitutional right. Warren E. Burger: What if Congress cut off appropriations for the 6010-type programs? David Ferleger: If Congress cut off appropriations? Warren E. Burger: Just stopped appropriating money? David Ferleger: Then, Your Honor, we'd be back in the Court of Appeals on the constitutional issues. Thurgood Marshall: And what would you ask Congress... what would you make Congress do? Appropriate the money? David Ferleger: In that situation, in Pennsylvania, for my clients at Pennhurst-- Thurgood Marshall: I'm talking about the Chief Justice's hypothetical. Congress cut off the money. And you say you'd go into court. For what? David Ferleger: --No, no. We would be in court on the constitutional issues, Mr. Justice Marshall. Thurgood Marshall: Well, what would you go into court for if they cut off the money? David Ferleger: Not against the Congress, not against the Federal Government, but against the state-- Speaker: Against the State of Pennsylvania. David Ferleger: --for denying people's rights at the institution. Thurgood Marshall: But you wouldn't go against Congress, would you? David Ferleger: No, of course not. Warren E. Burger: Now, the state then must assume all the burden on? David Ferleger: It's not assuming the burden; states have the burden. Warren E. Burger: No, the dollar... I'm talking about the dollar amount. David Ferleger: I'm talking about the dollar amount also, Mr. Chief Justice. The uncontested facts in this case show, and the national information in the amicus briefs is identical, and Congress found it to be true, that the institutional care would more than cover the community care. There's no new dollars being demanded from the states. The money is there, in Pennsylvania and across the country, the state money that already is supporting the institutions. Warren E. Burger: Now, then, take it one more step. When the State of Pennsylvania stops appropriating money, just says, we can't afford this program, or we think it's wasteful, or whatever, the Legislature just doesn't give it any more money. What then? David Ferleger: The issue then would be whether... whatever the state did in that case to the retarded individuals would continue to be a harm to them, in which case I think the Constitution would be violated. Warren E. Burger: And what would be the remedy? David Ferleger: And in that case I think the Court could affirmatively require a protection from harm, the sorts the compensatory relief that the Court found justified in Milliken v. Bradley. The counseling, the assistance, the same sorts of relief in Milliken. Byron R. White: Could I ask you, what is the usual pattern for any of these patients at Pennhurst having been put there in the first place? Are they civil proceedings that have institutionalized them? David Ferleger: Half the residents are committed by a court. About half, according to the record, are committed through application of parents or guardians. However, all-- Byron R. White: But you don't... aside from your claims about treatment and habilitation, you don't suggest that the institutionalization of any of these patients has been unconstitutional? David Ferleger: --The procedures? Byron R. White: Yes. David Ferleger: No, we do not challenge the procedures. All but two of the residents are over 18. All but two of the current 1,000 residents of Pennhurst are adults. Byron R. White: But you say about half of them have been sort of voluntary, so-called voluntary institutionalization occurs? David Ferleger: Were originally committed that way. The difficulty is-- Byron R. White: And the other half is that they were-- David Ferleger: --Committed by a court. Byron R. White: --At the request of? David Ferleger: Of various parties. Byron R. White: And based on findings that they are of danger to themselves or others? David Ferleger: The current law, because of Goldy v. Beal, a case striking down the commitment statute, the current law cited in my brief, Goldy v. Beal and implementing regulations, is that no one can be committed by a court to Pennhurst or any other retardation institution unless there's a finding that no community service can be made available. That is a state regulation and a consent decree issued by a federal court. Byron R. White: But we should judge this case on the assumption, I gather, that except for your claims about habilitation and treatment, these people have been properly institutionalized? David Ferleger: Committed in accordance with the statutes in effect at the time. However, the district court found that for those residents who say, I want to leave, Pennhurst goes to court to commit them. If you don't say anything, even if you're 50 or 80 years old, then Pennhurst assumes you still want to be there. So that the district court found, and the Court of Appeals upheld, that every resident is there involuntarily. William H. Rehnquist: What court was it that decided Goldy v. Beal? David Ferleger: A three-judge federal court in Middle District of Pennsylvania. William H. Rehnquist: So it was not a Pennsylvania court? David Ferleger: It was in Pennsylvania court. William H. Rehnquist: I mean, it was not a state court? David Ferleger: It was not a state court; it was a federal court. John Paul Stevens: Mr. Ferleger, may I ask one question before you finish? You started by pointing out that in your view the central fact is that the residents of Pennhurst are in fact harmed by being residents of Pennhurst. Judge Seitz in his dissent ends up by saying that it remains open to you to show that the particular mode of treatment is not rationally related to the state's purpose in confining people at Pennhurst. Have you, in your view of the record, already proved that as to every resident of Pennhurst? David Ferleger: Your Honor, we have proved that five times over. The state has-- John Paul Stevens: Now, if that's true, Judge Seitz's view of the law requires the same result as the majority? David Ferleger: --Yes, it does. Absolutely, Mr. Justice Stevens. John Paul Stevens: Just a different legal predicate for the same relief? David Ferleger: That's correct. We have shown and there's no contest that for every person at Pennhurst, community life is not only possible, but there is someone with the same disabilities now living in the community and getting proper community services. John Paul Stevens: But the difference, I suppose, is that it would remain open to your opponents to make sufficiently dramatic changes in Pennhurst so that the purpose of confinement would be fulfilled? David Ferleger: That's correct. And they have never suggested that they could do that or that they would want to do it. Byron R. White: The Court of Appeals doesn't require Pennhurst to be closed anyway. David Ferleger: The Court of Appeals requires an individual determination, as Congress expected, of what people need. And that is-- Byron R. White: But it doesn't necessarily say, close down Pennhurst? David Ferleger: --In fact, it specifically says they are not finding that Pennhurst must be closed. Thank you. Warren E. Burger: Mr. Days. Drew S. Days, III: Mr. Chief Justice and may it please the Court: While many members of the Court have addressed questions to my colleagues about the extent to which the DD Act and the rights recognized under 6010 flow from the Constitution, particularly the Fourteenth Amendment and Section 5, it is the position of the United States that insofar as this particular case is concerned the spending power is the only issue before the Court, and there is no reason to address the extent to which Section 5 of the Fourteenth Amendment might justify the affording of the rights that are contained in 6010. Congress passed the DD Act because it wanted to insure that federal funds were not used to maintain developmentally disabled persons in custodial institutions under conditions that produced regression and brought affirmative harm to such persons. It decided upon the course that it took in 1975 based upon over a decade of efforts to encourage, if you will, the states and recipients of federal funds to move toward deinstitutionalization, to move toward community habilitation of people otherwise institutionalized. The thrust of 6010 can be understood, we submit, only by looking at the legislative history, looking at what the two houses of Congress initially attempted to achieve and how the compromise that produced the DD Act came about. The Senate in 1974 and '75 was concerned with the extent to which people in institutions like Pennhurst were having their rights, both constitutional and civil rights, violated. It made these determinations based upon court decisions such as Judge Johnson's decision in the Wyatt series of cases, decisions with respect to Willowbrook, and other institutions around the country. It also had legislative hearings and debates that focused on this question of the rights of people in institutions and how they could be protected. The Senate bill ultimately contained the section called Title II, and it was entitled, the bill of rights. It contained detailed specifications with respect to standards for the provision of care, not only to the institutionalized, but to people in community-based services for the developmentally disabled as well. This section, Title II, called 400 pages. The House version, in contrast, was very consistent with what Congress had done in the past, since 1963, in response to a message from President John Kennedy that there was a need to move away from institutionalization of mentally retarded people to community treatment in which, essentially, what the Government did was provide funds to the states that they were willing to accept certain conditions. It was clear that if those conditions were not met, then the funds would be cut off. So this focus was on how to provide additional funds and how to insure that those funds provided under the DD Act would be adequately utilized. But I think the legislative history reflects the fact that both houses were concerned about conditions in institutions where individuals were subjected to inhumane conditions and nonhabilitative situations. In reviewing the legislative history of the DD Act, one need only substitute the name IQ points instead of gaining IQ points by being institutionalized, and where they are-- Warren E. Burger: Is there anything, Mr. Days, is there anything in the evidence that demonstrates that it is the custody that has caused that, or is it possible that that was the natural course of the unfortunate condition? Drew S. Days, III: --This record, Mr. Chief Justice, speaks very strongly to the point that however Pennsylvania officials have tried to fix up Pennhurst, the conditions recur. There have been efforts since 1950 to paint up and fix up Pennhurst, but as the experts and other observers who testified in this case revealed, there is something about that isolated congregate facility that tends to produce the conditions that time and time again were found by people who visited Pennhurst. It was not something that-- Warren E. Burger: The point I was inquiring about was, what is there in the record to demonstrate that a particular patient who has suffered regression, may not have suffered that same regression if they had stayed at home, or been somewhere else? Drew S. Days, III: --I think there is evidence in this record, Your Honor, that the fact that people in Pennhurst were not cared for, were not attended to, produced the type of regression that they experienced. There were children who went into Pennhurst who were able to say a few words before they went there and when their parents came to visit them a couple of weeks or a couple of months later, they could not speak. There were children who could walk who were left in positions on the floor such that their limbs atrophied. That was caused by Pennhurst. Those people were able to function, they were able to do very rudimentary reasoning steps that no longer were available to them after they were in Pennhurst for awhile, and of course the physical harm that people suffered was clearly the result of the institution... bitings, attacks by inmates, by persons in the institution upon other persons, by staff upon the residents, these were things that were produced by the institutionalization, not a natural consequence of the lack of development of those persons in Pennhurst. The record reflects that had they stayed at home they probably would have been in better position now than they have been after, as the record shows, an average of 21 years in an institution. Warren E. Burger: Do the experts really know whether this regression... and take the child, the younger person... comes from the environment or comes from a sense of abandonment by the parents? Do they really know which? Drew S. Days, III: I think that the experts have testified uniformly that it does not come from the abandonment, it comes from conditions in the institution. And if I may emphasize, Mr. Chief Justice, we are not here urging this Court, or in fact the lower courts, to make policy determinations, to make technical medical determinations. What we argue before the Court is that Congress made these determinations after over a decade of considering these problems. After some four years of hearings about conditions in these institutions, it had reached the judgment that something more than providing funds had to be done by the Congress, there had to be an affirmative effort to protect the rights of people who were found in institutions like Pennhurst. William H. Rehnquist: General Days, in Section 6011 of what has been referred to as D&D, it starts out with the statement, "Conditions for receiving state allotment: The Secretary shall require as a condition to a state's receiving an allotment under subchapter 3 of this chapter that the state provide the Secretary with satisfactory assurances. " Was that complied with in each year subsequent to the adoption? Did the the Secretary receive assurances and did she approve them, or, did he approve them, whoever the Secretary was? Drew S. Days, III: The habilitation plan submitted by the Commonwealth of Pennsylvania? William H. Rehnquist: Yes. Drew S. Days, III: It's my understanding that while there was paper compliance with some of these requirements, there was not the indication that in all respects habilitation plans had been provided. And of course, in Pennsylvania, contrary to what Mr. Kittredge said, the record reflects that the counties received $600,000 in I believe '75 or '76 under the DD Act. Many of the funds did not go to, or in fact, none of the funds went to institutions like Pennhurst. They went to services to people who were outside institutions. Byron R. White: Well, General, was there ever an indication by the Secretary that the state's compliance with the conditions of the statute was unsatisfactory? Drew S. Days, III: Not that I'm aware, Your Honor. There was a reference to the fact that the agency that's responsible for administering this program has never raised any questions about what was going on there. Byron R. White: Well, that's true, isn't it? Drew S. Days, III: It is true, but I think one has to view that in the context of the particular action of the United States in this case. After all, the United States came into this litigation to represent five-- Byron R. White: Well, are you representing the agency that administers this program or not? Drew S. Days, III: --We are representing the United States and to the extent that we're representing the United States, we represent the agency that's involved in the transferring of funds. Byron R. White: Whether it wants you to or not? Which is a perfectly-- Drew S. Days, III: Well, with all due respect-- Byron R. White: --Perfectly recurring situation. Drew S. Days, III: --That's right. The Attorney General-- Byron R. White: You're just doing your duty, aren't you? Drew S. Days, III: --Well, we've always understood-- Byron R. White: Whether, you disagree with the agency or not? That's characteristic. Drew S. Days, III: --Mr. Justice White, we have always-- Byron R. White: Well, I've been there. Drew S. Days, III: --Am I preaching to the choir in this regard, Mr. Justice White? Byron R. White: Just about; yes. Then you're representing the Congress that enacted this legislation? Drew S. Days, III: That's right, because, we think that the Congress did what it was supposed to do. But the point I want to make about-- Byron R. White: Whether or not the Congress knows you are, or not. Drew S. Days, III: --I have a distinct impression that the Congress does know that I'm here, but the point I wanted to make was to rebut something that was said by Mr. Warshaw. We did get into this case before the DD Act existed, and that was known to HEW, it was known to the Secretary. And secondly, it is not true that the agency has continued to provide Medicaid funds to Pennhurst unmindful of the terrible conditions in that institution. As I think the briefs reflect, only 16 of the 40 units at Pennhurst have been certified under Medicaid, and what the Commonwealth of Pennsylvania wants to do is spend $4 million to try to fix up the institution so it can qualify for Medicaid funds. So it is not a situation where the only thing that's been happening insofar as the Government was concerned was this lawsuit that-- William H. Rehnquist: But the Commonwealth isn't challenging the Secretary's determination. Drew S. Days, III: --Excuse me? William H. Rehnquist: The Commonwealth isn't challenging the Secretary's determination. Drew S. Days, III: No. My remark was simply to indicate that contrary to Mr. Warshaw's suggestion, it is not just the Attorney General of the United States that has expressed a concern about the conditions in Pennhurst. The Secretary of HEW and now HHS has taken action to try to improve specific conditions in that institution. John Paul Stevens: But, General Days, is it not correct that in this litigation the United States did not raise any issue with respect to the violation of this statute until after the 3rd Circuit on its own motion brought the issue into the case? Drew S. Days, III: That's correct, Mr. Justice Stevens. We intervened in the case before the statutory issues were presented. John Paul Stevens: And in your intervention you did not allege a violation of the statute? Drew S. Days, III: That's right, we did not. What we did was simply argue, as did the original plaintiffs, that there were violations of the Constitution reflected in the conditions in the institution. And after all, at that time, as counsel for the Commonwealth has pointed out, there was no request for deinstitutionalization. It was simply a request to include a condition. But we took the position before the district court and in fact argued before the Court of Appeals that there was enough in this record to establish a violation of constitutional principles. But as I think all of us have recognized, the Court does not have to reach those issues in this case. The Court of Appeals has relied upon the statute, the statute reflects congressional policy with respect to people in institutions, and the decision ought to turn on that particular statutory construction. Potter Stewart: Well, what if we disagree with you on the statute and with the Court of Appeals? Drew S. Days, III: As we suggested in our brief, Mr. Justice White, if the Court believes that the DD Act does not provide an adequate basis for the relief below, we think that a remand is appropriate, so that the Court of Appeals can address the constitutional questions. Getting back to the legislative history of this Act-- Lewis F. Powell, Jr.: Mr. Days, before you proceed, perhaps you can help me on this question. Is the Government's only interest the result of federal funds being implicated? I'm talking now about a legal interest? Drew S. Days, III: --That's correct. Lewis F. Powell, Jr.: Is it your position that that's entirely on the statute and the acceptance by the government of federal monies? Drew S. Days, III: That is correct. Lewis F. Powell, Jr.: In other words, you're not making any constitutional claim at all? Drew S. Days, III: Let me explain our intervention, Mr. Justice Powell. We intervened expressing the various interests of the United States and the interest of the United States was in the fact that substantial amounts of federal funds were going to the Commonwealth of Pennsylvania under circumstances that appeared to produce harm for the people in the institution. So that was our reason for becoming involved; we did not go into the case merely because we were theoretically interested in constitutional questions. William H. Rehnquist: But Mr. Days, couldn't you have prevented that somehow within the executive branch? If one arm of the executive branch was doling out these funds and the Justice Department felt that it was in violation of constitutional rights, couldn't that have been corrected short of the federal courts? Drew S. Days, III: Mr. Justice Rehnquist, we try to accomplish that on a daily basis. It's not always possible and in any event, as this Court well knows, Congress has acknowledged how difficult it is for an agency to cut off funds to people who are in need of assistance. In many instances the preferable approach would be to go to court to try to establish the rights and get specific performance, if you will, as opposed to going through a process that would cut off the funds. In any event, under this particular legislative arrangement, even if the funds had been cut off under the DD Act, Medicaid funds and other funds would continue to flow. What we think the DD Act represents is a compromise between the Senate and House versions. The Senate wanted to cut off all federal funds if there were not compliance with the 400 pages of detailed standards. The house did not want to do that. The compromise is, cut off funds that flow to the recipient under the DD Act. If there are other funds flowing, it does not indicate that the Secretary can cut off those funds, but it does provide the predicate for a person who believes that he or she is being harmed by a particular situation to go into court and get relief. And that is the nature of the compromise. Thurgood Marshall: Mr. Days, so that when you went in, you were also interested in enforcing the Act of Congress in that area? Drew S. Days, III: I would take... absolutely. It became clearer and clearer, Mr. Justice Marshall, particularly after the Court of Appeals asked for a specific briefing, that the DD Act was the issue before the Court. Lewis F. Powell, Jr.: General Day, just to clarify my thinking, are you saying that the federal Act would not have any applicability whatever, the DD Act, unless federal funds were being provided under it? Drew S. Days, III: That's not exactly correct, Mr. Justice Powell. There are two parts of this. If funds go to the Commonwealth under the DD Act and the Commonwealth rejects the DD Act funds, then that takes out of the picture the administrative process, that is, the requirement of planning, the review of the plan by the Secretary, imposition of the plan, and then some review by the Secretary to determine whether there has been compliance. If there is noncompliance, the funds are cut off. And that's what happens if funds are flowing under the DD Act, or if they cease to flow. But that does not affect the right of a person under 6010 to get relief if non-DD federal funds are flowing to the recipient state. Lewis F. Powell, Jr.: You're saying, if Medicaid funds are flowing, the obligations of 6010 would apply? Drew S. Days, III: That's absolutely our position, Mr. Justice Powell. There has been a suggestion-- Potter Stewart: Well, then, if... and then, you take that position, you also take that position that 6010 was enacted by Congress in the exercise of its spending power? Drew S. Days, III: --That's correct, Your Honor; we are not here-- Potter Stewart: Even if there's no spending under the statute? Drew S. Days, III: --Even if there were no spending under this statute, as long as there was spending under other federal programs. Potter Stewart: Under some other, auspices? Drew S. Days, III: That's correct. The counsel for the Commonwealth and for the counties and for the Parents-Staff Association argue that these rights contained in 6010 are prefatory. Nothing could be further from the truth, if one looks at the record. The Senate was really trying to establish rights that would be recognized in the handling of federal funds. It has said so in many instances; it said so in the introductory provision, general findings; then it got to specific findings of the rights. At the end of 6010 there is a comparison between the rights that are created under 6010 and other constitutional and similar rights. There is the application of 6010 to the state plan provision. The Congress has time and time again in the statute indicated that it's talking more about wish fulfillment. In fact that is the history of Congress's original attempts in this regard, since 1963, trying to encourage, trying to prod. And what the legislative history reflected was that it was not working. In fact, Senator Javits referred to the fact, not only that states weren't doing a sufficient job, and that the Congressional will was not being satisfied in these programs, he pointed to insensitivity on the part of federal agencies with respect to this, that the agencies were not doing enough to recognize these rights. So, that this is far from a prefatory standard of Congress. We believe-- Byron R. White: Mr. Days, could I ask, is there any evidence whatsoever, that the agency administering this statute had a view about the reach of the statute as applied to the Pennhurst situation? Is there some construction of the statute by the agency one way or the other? Drew S. Days, III: --There is certainly nothing definitive. I think counsel for the other side is correct in indicating that the agency has spent its time encouraging through its regulations and dealing more with what the Court of Appeals referred to as presumptions against institutionalization, and the need to move people out of these institutions as quickly as possible. John Paul Stevens: General Days, what is your response to the argument that if this is just an exercise of the spending power, the amount of money appropriated by the federal government is wholly inadequate to achieve the purposes that your construction of the statute would require? Drew S. Days, III: My response, once again, goes back to the legislative history, that Congress on several occasions referred to the need to use DD funds to leverage the use of other federal and state monies to provide assistance to the developmentally disabled. So Congress was really thinking in terms of the entire pot of federal money going to assist developmentally disabled people. And I think there are references in the briefs of, the brief of PARC and of Halderman, to the fact that there are some $3 billion being spent by the Federal Government to assist states in meeting the needs of the developmentally disabled. Potter Stewart: Don't you think that part of the established validity of the conditional spending power assumes that there shall be a knowing acceptance of the conditions on the part of the state, rather than a hidden, the acceptance that they only learn about afterwards. Drew S. Days, III: Certainly it's preferable for Congress-- Potter Stewart: Well, don't you think that the whole validity of the concept depends upon that? Drew S. Days, III: --I don't think that the whole validity depends upon that. I think that the states were not-- Potter Stewart: The spending power is based upon the proposition that a state is free to accept or to reject the offer of federal funds, conditioned upon meeting certain requirements. And doesn't freedom of choice imply knowledge of what the conditions are? Drew S. Days, III: --I think what Congress has said in 6010 is not that the states are going to have their other federal funds terminated under the DD Act; that's perhaps another lawsuit. What Congress said was, insofar as those funds are flowing to the state, then individuals who are in those institutions may have a right to bring suit against you, recipient of those other federal funds. So, in terms of the administrative process, I don't think there's any surprise associated with the DD Act. Potter Stewart: Well, Pennsylvania seems to be quite surprised in this lawsuit. Drew S. Days, III: Well, perhaps I should say, no reasonable surprise associated with that arrangement, particularly during this long relationship between the Congress and the states in terms of effort to assist the developmentally disabled. This is not a statute that came out of the Congress like a phoenix from the ashes. It's part of a continuum of relationship between states that have received billions of dollars over the years from the federal government. So, for one, I don't think that the Congress has in any way abused or violated its spending power. It's done what it felt was appropriate, given the lack of movement in this regard over such a long period of time. Thank you very much. Warren E. Burger: Mr. Gilhool. Thomas K. Gilhool: Mr. Chief Justice Burger, and may it please the Court: This is a case of statutory construction at each point dispositive of the issues here. The Congress having studied over 12 years, from 1963, and then intensively over four legislative years, 1972 to 1975, came to certain conclusions about the situation of severely retarded people, about their human possibilities, about the necessary conditions for realizing those possibilities, and about the persistent destruction large isolated institutions impose upon retarded people. 6010 is both a deinstitutionalization statute and an anti-dumping statute. What is required in the statutory language are residential programs designed to maximize developmental potential and in the least restrictive setting. The states must move severely retarded people out of large isolated institutions and, more, they must provide structured habilitative residential programs in their stead. The Congress did not leave the states naked in the face of this duty. The Congress, as my colleagues have adverted, was aware, and indeed legislated with particular awareness that there were massive amounts of federal funds being spent upon residential facilities and for retardation services, and they legislated to redirect those funds as well as the state funds being so spent to community care. Mr. Justice Powell, Justice Stewart, the Congress used the phrase, 6010. And whenever the Congress has used that phrase, rather than "federal financial assistance", it has done so advisedly to reach both the full run of relevant federal funding strings, and state and local funds as well. It comes, Justice White, perhaps more easily to my lips than to General Days', to point out that the Congress was moved in significant part to act in Section 6010 because of its impatience with the federal executive's actions with respect to these institutions. William H. Rehnquist: But doesn't Congress have budgetary control over the federal executive institutions and oversight powers too? Thomas K. Gilhool: Yes, indeed they do, Justice Rehnquist and 6010 in the four years immediately before its development came significantly from what the Congress had learned in the course of exercising that budgetary oversight. Senator Javits in introducing the bill, and his statement pervades the legislative history, said it was intended to end, to change and to end the insensitive federal financial support for facilities which provide inhumane treatment to retarded people. Byron R. White: I take it, when you speak about... the way you spoke about public funds, you are relying on the Fourteenth Amendment enforcement power? Yes, you are. Is that right? Thomas K. Gilhool: Yes, Your Honor. Byron R. White: You're just not speaking to the spending power, as General Days is? Thomas K. Gilhool: Your Honor, the spending power is perfectly adequate to reach-- Byron R. White: Not to reach state funds except as tied to federal? Thomas K. Gilhool: --Precisely, Your Honor. Byron R. White: All right. Thomas K. Gilhool: And in Harris v. McRae, this Court pointed out that not only are state funds which match federal funds reached, but the Congress has on occasion, in Title XIX, for example, and here, I suggest, also reached to state funds which are not matching funds but which are invoked for, similar purposes to those that the federal-state funds would be invoked for. In January, 1975, at argument here, a Justice of the Court raised the single question asked in O'Connor v. Donaldson about retardation, and made an observation that I think vividly showed what it was that Congress did nine months later in Section 6010. The observation... and I quote... was, "States have said, we're going to institutionalize these people in order to give them the best custodial care we can, that is, decent and civilized care, but they're untreatable, and we're just going to keep them in an institution indefinitely. " I continue with the observation: "Presumptively, these people in the then state of the art were not curable. " "Retardation was a permanent condition and one of indefinite duration, and the ideal was to provide decent custodial care to relieve the families of the economic, social, and psychological damage which might follow from the presence of the retarded person in that household. " I close the quotation with the observation: The state of the art has changed; the Congress has so found, and legislated in 6010, as well as in the Education of All Handicapped Children Act and in several other-- Byron R. White: When was 6010 passed? Thomas K. Gilhool: --Pardon me, Justice-- William H. Rehnquist: When was 6010? Thomas K. Gilhool: --1975, Justice Rehnquist. It was signed-- William H. Rehnquist: And when was this comment that you have referred to? Thomas K. Gilhool: --In January, 1975. William H. Rehnquist: It was sometime during the year 1975 that the state of the art changed? Thomas K. Gilhool: No, sir; oh, no, sir. For many long decades, as the Congress found, the technology had been such that retarded people, severely retarded people in particular, were known to have the capability to learn and grow and develop in the presence of the proper education and training technology. It was not a new fact; it was quite an old one. The Congress found that fact as a predicate for acting in 6010, as in the related statutes of the early 1970s. The situation, therefore, as the congressional judgment again indicates, is that the choice is no longer warehousing on the one hand, of severely retarded people, or on the other, imposing damage upon families. There is a third choice, which affirms the humanity and citizenship of retarded people, and it is the choice which the Congress required the states to make in Section 6010, namely: to provide habilitating residential programs. The Congress prohibited custodial care, and required developmental services. That is plainly the case on the face of 6010, and the Senate report accompanying the bill of rights said, expressly, custodial care, which is predicated on the assumption that certain individuals are essentially incapable and "must be rejected". Now, with this prohibition of custodial care, of warehousing, and the requirement of habilitation, large isolated institutions lost any reason they might have had for being, let alone the invidious reasons which prompted their original creation some seven decades ago. At their very best, large isolated state institutions for the retarded had been custodial. Lewis F. Powell, Jr.: May I interrupt long enough to ask you a question about how you think 6010(3) would actually operate under these circumstances? Let's assume it would take $100 million for the state to comply with the obligations, the conditions, the requirements of 6010(3). And let's assume further, the Federal Government was willing to put up $1 million, leaving $99 million to be put up by the state legislature. And let's assume the state legislature said, we don't have $99 million, we have... say... $79 million. May a federal court issue an injunction against the state legislature to borrow the money and put the additional funds up? Thomas K. Gilhool: Your Honor, Mr. Justice Blackmun's concurring opinion in Usery may have spoken to the question. Of course, there is a point, both in terms of the magnitude of the federal funds made available under the spending power, and in terms of the relationship between the purpose the Congress undertakes, and the purposes for which those funds were appropriated in the first place, which, if not present, would void the statute. Lewis F. Powell, Jr.: Where would you draw the-- Thomas K. Gilhool: Well, Your Honor, I think this case does not raise that question for two reasons, both reflected in the legislative history of this Act, and in the record of this case. First, Your Honor, as the court below found, the cost of providing, habilitating small-scale, family-scale residential programs in the community to the people at Pennhurst is less than the cost of the destructive care at Pennhurst. Lewis F. Powell, Jr.: --But I'm asking what is a hypothetical question. I want to know under what circumstances may a federal court issue an injunction against the Legislature of Pennsylvania to provide such additional state funds as may be necessary to meet these standards? Thomas K. Gilhool: Your Honor, under no circumstances, it would be my view, could a federal court to issue an injunction against the Legislature of Pennsylvania. Lewis F. Powell, Jr.: But what happens? Would all funds be cut off to these institutions in those circumstances? Thomas K. Gilhool: One remedial alternative for the district court would be to enjoin the use of federal funds, which are well in excess of $150 million in Pennsylvania. Lewis F. Powell, Jr.: I understood you to say that 6010(3) authorized the federal courts to cut off those federal and state funds. Did I misunderstand you? Thomas K. Gilhool: No, Your Honor, on the contrary. And, forgive me, but the question you are raising, I take it, goes to whether, as petitioners assert, without really a very clear basis in Rosado itself, that the district court is limited from issuing affirmative relief to perform the purpose, to overcome the evil that the statute was intended to overcome, or is limited to an injunction to cut off funds. No, Your Honor, it is not our position that the district court would, could, or should issue an order cutting off federal or state funds. Rather, Your Honor, as the series of cases under the Social Security Act following Rosado that were often before this Court, Townsend and Swank and the rest, I think show, the federal district courts do properly enjoin the performance of the required behavior. Of course, it is open to the state at any point to come forward and say, we quit, not just the DD Act program, but Title 19 and Title 20, and then, that of course... if there is any question at all, it is that very difficult constitutional question left open in the Prince Edward County case. William H. Rehnquist: But then, wouldn't that be a violation of the statutory act, the bill of rights, if the states simply say they quit and are not providing these mental patients with any of the bill of rights that Congress has announced they have? Thomas K. Gilhool: Yes, Justice Rehnquist, I think a strong argument can be made that such would violate the right declared in Section 1, in terms quite like the Civil Rights Act, 1982, where Title I of the Civil Rights Act-- William H. Rehnquist: Which horn of the dilemma do you choose? Thomas K. Gilhool: --Well, Your Honor, I think we are faced with neither horn of the dilemma in this case, and the Court is not required to reach that question. Potter Stewart: Well, if 6010 was enacted exclusively under Congress's spending power, then I suppose the state could withdraw, and not accept any federal spending. Thomas K. Gilhool: Yes, Your Honor, that is-- Potter Stewart: If on the other hand it were enacted under Section 5 of the Fourteenth Amendment, then perhaps a state couldn't withdraw. Thomas K. Gilhool: --Yes, Your Honor. Speaker: And that's your position? Thomas K. Gilhool: Yes, it is. Potter Stewart: They cannot quit. Well, he doesn't need to take a position. Thomas K. Gilhool: Exactly, Your Honor, and-- John Paul Stevens: But he has taken a position. You are arguing, are you not, that there is an affirmative obligation comply with the statute, regardless of the spending power? That's the way I understood your argument. Thomas K. Gilhool: --Yes, Your Honor, I take that position as a matter of reading the statute. That question, I think, is not raised by this case. William H. Rehnquist: I thought you answered Justice Stewart's question a moment ago that no federal court could enjoin the Pennsylvania Legislature to appropriate funds to implement it? Thomas K. Gilhool: Yes, I did. And I thought Justice Stewart and I were both pursuing it in the question he and you raised that the statute is based also in the Section 5 power as well as the spending power. John Paul Stevens: You did? Well, I'm not sure your answer to Justice Powell really confronts the problem, because admittedly you might not, a federal court might not enjoin the legislature. The question perhaps should be, could they enjoin these parties requiring that it do just what the district court did, in the face of a showing that the money isn't there? It seems to me your answer is, yes, they could. Thomas K. Gilhool: However-- John Paul Stevens: It's not a defense to a constitutional violation or to a violation of a federal statute that I don't have enough money to comply. Thomas K. Gilhool: --Exactly, Your Honor. And assuming that this is a proper exercise of Congress's plenary powers, the answer must be, yes. Warren E. Burger: Let's take it one more step. How do they enforce it? Thomas K. Gilhool: How does the court enforce it? Warren E. Burger: How do the courts enforce this? By contempt? Thomas K. Gilhool: Well, Your Honor, ultimately; of course. The federal courts-- Warren E. Burger: Now, let's assume the money, this state money just stops, and no more state money is available, and what's the remedy then? Thomas K. Gilhool: --Your Honor, in that eventuality I think a court would be hardpressed to find... to invent... to create benefit. The federal courts' remedial powers are broad, flexible, and most deep, and in the circumstances which this case, like most Civil Rights or Social Security Act cases present, the problem of no funds, the problem of a complete inability on the part of the state to discharge the statutory duty is not present, as it is not present here, and the Congress knew and expected it would not, for, the Congress, dating back several decades, has been providing rich federal funding streams for retardation services. The states' own spending for retardation services dates back to the first decades of this century. The commitments, political and otherwise, on the part of the political branches of the Government, make it unlikely that circumstance would arise. In any event, with respect to this case, the provision of habilitative residential services is well within the range of the very Pennhurst budget itself, were that budget, as we suggest 6010 requires, redirected to the provision of habilitative residential arrangements. Thank you. Warren E. Burger: Do you have something? Joel I. Klein: Mr. Chief Justice, if it's possible for the Court-- Allen C. Warshaw: I'd like to yield my time to Mr. Klein to present rebuttal on behalf of the petitioners, if that would be acceptable to you. Byron R. White: Mr. Klein, I was about to ask your colleague before he ceded his time whether he agreed that the money was available? Joel I. Klein: --Maybe. I'd better let him answer that. Byron R. White: The claim is that one justification for the injunction is that the money is there and the state just refuses to spend it in accordance with the Act. Allen C. Warshaw: Your Honor, there are two branches to that argument. One finds-- Byron R. White: Well, did the Court find the money was available? Allen C. Warshaw: --If found that there was $18 million which had not yet been spent, but it had been committed to projects. It was committed to creating community service projects as opposed to community living arrangements. Byron R. White: Is there a short answer to my question? I guess there isn't, really? Allen C. Warshaw: There isn't. We would contest the proposition that every CLA is cheaper than residential placement, and we would say, we don't know whether the total cost of the entire community placement program would exceed that of residential placement. And we would contend that there is a substantial transition cost, because Pennhurst so long as one person is there is still going to have a substantial overhead. So to talk in terms of comparing costs and the facilities costs, there is no simple answer. Warren E. Burger: I guess there isn't a short answer. Thank you. Would you agree... well, let me pursue that. Would you agree that... if the state money, the state has money available, which is subject to the conditions of the federal grant, that a federal court could direct and require to be spent to implement and carry out the federal conditions? Allen C. Warshaw: I don't think on a federal grant statute they can tell us how to spend our funds. I think they can condition the expenditure of federal funds and say in order to accomplish the purposes of this Act-- Warren E. Burger: They can only stop the federal flow of funds, is that it? Allen C. Warshaw: --Yes, sir. I don't think there can be an affirmative order against the state to spend its funds. The remedy is to cut off the federal funds. Potter Stewart: Oh, no, no. But they can make you a grant of aid for a highway program or a welfare program or whatever, based upon the program's meeting certain specifications, and you have to spend your funds to meet those specifications if you get federal aid. Allen C. Warshaw: Yes, sir. The federal government in condition of a grant can say to you, we give you this much, you must supplement that with your own funds. Potter Stewart: And if you accept this, your program has to meet these specifications. Allen C. Warshaw: Yes, sir. I understood the question, though, to go to the power of a federal court in enforcing that condition and order us to spend-- Byron R. White: You're saying, when the government grant comes, it's your money, and then the only way to enforce it is to enjoin its use, except in compliance with the Act. Allen C. Warshaw: --Yes, sir. Joel I. Klein: That takes me back to what I think the starting point is, and I think it was not fully addressed. I am reminded of Professor Cox's statement when one talks about the right to appropriate treatment. I was thinking, as I listened to the argument today, that right, once loosed, is not easily cabined. And of course the respondent would fill it up in a way that suits their view of the state of the art, or the current knowledge. I think Congress was much more specific in how it did it. Two critical points: nowhere in the legislative history or in the Act is there empower of federal court to make individualized determinations and nowhere does it require a legal presumption of deinstitutionalization. To the extent that Pennhurst is deficient... and every institution, of course, will have deficiencies; I think we live in the real world... Pennhurst should be improved. But I think a very telling point has been omitted by my colleagues. They have a philosophy. I represent the parents, virtually all the parents and the guardians of people at the facilities who are strongly opposed to deinstitutionalization for the very severely and profoundly retarded people. Harry A. Blackmun: Mr. Klein, you say "virtually all". Are there some that you do not represent? Joel I. Klein: There are some parents who are not members of the organization, Your Honor; yes, that's correct. The organization has most of the parents. One small point: the named plaintiff in the case withdrew from this case precisely because she opposed the philosophy. But the key point is that these parents, despite the shortcomings of Pennhurst... and Lord knows, they'd like to see them improved... they want to have their children remain there, their adult children even. And these people are being put through, under this statute, lengthy hearings to defend their philosophy. I suggest there is no way that Congress has the power to force them to do that. Thank you. Byron R. White: Mr. Klein, could I just ask you... I should have asked General Days. What is the authority for the Federal Government to intervene in this case, do you know? Is it provided for in the Act? Joel I. Klein: That issue... no, that issue was raised. In fact, the court declined to grant certiorari on the issue. The United States Courts of Appeals were split at the time over the standing of the United States to participate... United States v. Solomon, United States v. Mattson... had rejected it. The 3rd Circuit upheld it as a general enforcement provision. To some degree, on a going forward basis, Your Honor, the issue is moot because Congress has passed a statute authorizing the United States in the future to participate. And the issue was raised by the State of Pennsylvania in its petition for certiorari in this Court's finding. Byron R. White: Is that a general statute? Joel I. Klein: That is a general statute. It's called something like, 1980, Your Honor. Thank you very much. Warren E. Burger: Thank you, gentlemen. The case is submitted.

John Paul Stevens: We'll hear argument now in No. 05-1056, Microsoft against AT&T. Mr. Olson. Theodore B. Olson: Thank you, Justice Stevens. May it please the Court: The limited monopoly granted by U.S. patent laws protects against the making, using or selling a patented invention within the United States. Section 271(f) also makes it an infringement to make components of a patented invention within the United States and then simply ship them abroad for reassembly. Antonin Scalia: Mr. Olson, before you get into the merits I have a question, a preliminary question. I understand from AT&T's brief that there has been a stipulation entered into between the parties after the judgment below which preserved Microsoft's right to appeal and prescribed different dollar amounts that Microsoft must pay AT&T depending on the outcome of the appeal. Does that raise any, any muteness problem? Can you sort of wager on the outcome of an appeal that way? Theodore B. Olson: No, I don't believe so, Justice Scalia. Antonin Scalia: Well, suppose two parties just, you know, parties that otherwise do not have a case or controversy, bet each other that the district court will come out one way or the other way in, in a trumped-up suit. Does that create a standing-- Theodore B. Olson: This is by no means a trumped-up suit. It's a very serious suit. The outcome, the judgment, the amount of damages that must be paid is not a matter of wager. It depends upon the decision of a matter of law of an interpretation of a statute of the United States. Antonin Scalia: --Well, you could say the same thing in the hypothetical I gave. It is a matter of wager, which way the Court will come out. Theodore B. Olson: This is an entirely legitimate, I submit, means by which parties may preserve a legal issue depending upon how a legal question is decided. The only thing that's been resolved is the amount that will be paid as damages depending upon the outcome of the appeal. Antonin Scalia: Do you know of any, any precedent for that? Theodore B. Olson: It seems to me, Justice Scalia, that it happens frequently, especially in criminal cases where there is... someone pleads guilty in and preserving a right to appeal a certain issue. I don't have a case to cite to you but it strikes me as quite understandable that the parties might agree if the outcome of the legal question that the judge might decide is going to be X, then the consequence will be a liability for Y. If it's... if it's of the opposite outcome, the outcome will be different. That's-- Anthony M. Kennedy: Suppose the amount were trivial and you just wanted to get a resolution of this-- question? Theodore B. Olson: --Well, I think that if the amount-- Anthony M. Kennedy: Then there would be a case-- with a controversy problem, I should think. Theodore B. Olson: --I don't know what the Court might mean by the word trivial, Justice Kennedy, but this is a very significant major amount involved in this case. There is no question that the parties are very serious. It's a very significant legal question with respect to the interpretation. Antonin Scalia: That's so, but is there a lot of money involved depending on whether you win or lose? Theodore B. Olson: Yes. Antonin Scalia: Okay. Theodore B. Olson: In this case, notwithstanding the limitation of in Section 271(f) that the components, there's... liability of the components are created here, and reassemble the broad. The Federal Circuit held that foreign made tangible reproductions of computer operating code installed in foreign-made computers may be components which are deemed or essentially supplied from the United States, because copying is part and parcel of software distribution, and thus subsumed in the act of supplying. Under this ruling, U.S. companies may be held liable for patent infringement whenever their products are copied or replicated abroad. This... the court of appeals decision and the position of Respondents requires reworking several words in the statute. The statute says supplied from the United States. The court of appeals said, well, it might be deemed supplied from the United States after it's copied abroad. The Respondent takes the words "such components" in the statute and reads them as not the same components. John Paul Stevens: Mr. Olson, isn't one of the questions whether the software is really being copied when it's transferred from the golden disk to the new manufacturer, or whether it's actually being supplied? Theodore B. Olson: It is being copied. There isn't any question that it's being copied, Justice Stevens. The stipulation which is in pages 44-A through 47-A of the petition appendix contains the words... this is words to which respondent stipulated... foreign-made copies replicated object code, foreign manufactured copies, foreign replicated object code. What happens, Justice Stevens, is that the golden master of the disk which contains the physical manifestation of the object code is read by a machine somewhere outside the United States, looked at and then copied onto another physical medium, either a hard drive or a disk. Many hard drives, many disks. Those foreign replicated physical tangible copies are then installed in computers and they become components of those computers. Anthony M. Kennedy: Is the master disk a component? Theodore B. Olson: The master... well, AT&T has taken two positions on that. We-- Anthony M. Kennedy: What's your position? Theodore B. Olson: --Our position is that it's not a component of the final product computers that are made abroad. What is a component is a replication, a copy of a new hard drive or a new disk that's made a part of those computers which, without which-- Anthony M. Kennedy: Just the disk but not the information on the disk is the component. Theodore B. Olson: --The information on the disk is of no use to the computer unless it's made into a physical machine readable document... object. Ruth Bader Ginsburg: That... Mr. Olson, that is the position of AT&T as I understand it, that what you call the object code appears in the... in the computer that it's... that is what is sent, along with the master disk, and the object code is the critical component, according to AT&T. In fact, wasn't that the first question that you raised, whether digital software code, an intangible sequence of 1's and 0's may be considered a component of a patent, patented invention? Theodore B. Olson: If I understand your question, Justice Ginsburg, let me answer it this way. AT&T has taken two positions. The most recent position is that it's the intangible object code, the series of 1's and 0's, or instructions to a computer switch to be on or off, that is a component. They also took a position earlier in the case and which is referred to in the stipulation that it was the golden master, the physical manifestation on the... on a master disk that went abroad that was the component. Anthony M. Kennedy: But I still would like to know your position. The golden disk is or is not a component? Theodore B. Olson: It is not a component-- Anthony M. Kennedy: But copies of the golden disk are or are not components? Theodore B. Olson: --The copies, the physical manifestation on a hard drive-- Anthony M. Kennedy: Physical manifestation? Theodore B. Olson: --Our components of the foreign manufactured computers. Those components are not supplied from-- Anthony M. Kennedy: I suppose if you could, if you made 99 copies, those would be 99 components. Then if you used... if you're going to make 100 machines. If you used for your disk the master disk for the last copy, then that would have been... that would... then the master disk would be a copy, a component of the last machine. Theodore B. Olson: --If... well, I think, if I understand your question, if you make... and it depends upon where you make it, where you transfer-- Anthony M. Kennedy: You make them abroad. Theodore B. Olson: --If you make it abroad, that... and it's... that is where the component is supplied from. Copies are made abroad. There's no question about that and-- Anthony M. Kennedy: But if the disk, if the golden disk itself after they finish the copies, were used-- Theodore B. Olson: --If the physical-- Anthony M. Kennedy: --in a hardware, then that would be a component. Theodore B. Olson: --If that physical golden disk were actually put into a computer and used without more. John Paul Stevens: Well, I'm a little confused, because I thought the golden disk was just one method of getting the software into the new computers. And I thought it was the software which was arguably the component, not any physical manifestation. Theodore B. Olson: Well, that's why I said AT&T has taken two positions. Here's the position that they took in their brief before the court of appeals. Three decades of patent jurisprudence have authoritatively recognized software to be a physical and structural component of patented machines. The problem, Justice Stevens-- John Paul Stevens: But do you... what is your view on whether or not software is a component? Theodore B. Olson: --The... if I may answer that by saying that people use the word "software" in two different ways. One of which, they use it as the intangible series of 1's and 0's. We submit that the correct way to understand the word "software" is the physical manifestation of that what is called source code, which is made into object code, which is made into machine readable code. Antonin Scalia: Or at least the correct way to understand component. Theodore B. Olson: It is the correct way to understand the-- David H. Souter: And the component then would be either a disk which is put into a computer or the portion of the hard drive to which the code is transferred. Theodore B. Olson: --Yes. As I understand it, Justice Souter, and I think the stipulations make this clear, there's a reference in the stipulations to encoded transmissions but there's a... but the parties also agree that's the same process as the golden disk. The golden disk is sent abroad. That is read by a machine and then the machine understands... it's almost as if you were to read physically any other type of document, read it to a machine. The machine understands what is said, puts it into a physical manifestation on a disk or on a hard drive. Many copies are made in that fashion. They are installed in computers made abroad, sold to foreign purchasers. Anthony M. Kennedy: So are you saying that neither the source code nor the compilation are a component? Theodore B. Olson: Of the foreign? The language of the statute is the foreign manufactured product. Those are the computers that are sold abroad. It is our position that the only components that are in issue in this case are the physical manifestations of the object code on a hard drive or on a disk. Anthony M. Kennedy: So that neither the source code nor the compilation are a component, save as, the compilation is put on a disk? Theodore B. Olson: That's correct. And the... the thing that's on the disk in the foreign-- Anthony M. Kennedy: That seems odd. I mean, Microsoft doesn't say please buy our disk because it's the prettiest disk in the business. Theodore B. Olson: --Justice Kennedy-- Anthony M. Kennedy: It says buy our program because the program means something. Theodore B. Olson: --But the program is nothing until made into a physical manifestation that can be made by the computer. John Paul Stevens: What is patented? Is the physical object patented or is the software patented? Theodore B. Olson: The AT&T patent-- John Paul Stevens: Right. Theodore B. Olson: --The '580 patent is a program, as I understand it, that's married to a computer, has to be married to a computer in order to be patented. Antonin Scalia: You can't patent, you know, on-off, on-off code in the abstract, can you? Theodore B. Olson: That's correct, Justice Scalia. Antonin Scalia: There needs to be a device. Theodore B. Olson: An idea or a principle, two plus two equals four can't be patented. It has to be put together with a machine and made into a usable device. The bind that AT&T is in here is that the components that make the machines run that are produced abroad are not supplied from the United States. They are made in Belgium or Frankfurt or something. Ruth Bader Ginsburg: That depends on what you consider the component. They define component as including the, what you've been calling the abstract. Theodore B. Olson: They have attempted, Justice Ginsburg, with respect, to have it both ways. They've said that it is a physical and structural thing, something that's on the golden master disk. And then they say it's just the binary code in the abstract, but that in the abstract never becomes a part of the computer. Ruth Bader Ginsburg: What did the Federal Circuit say? And I read the opinion a couple of times and it was, it seemed to me ambiguous whether the Federal Circuit was identifying the component as the object code itself or the master disk. Theodore B. Olson: Yes. I agree with you. The Federal Circuit was ambiguous, in part because there were two separate decisions. The court considered the component issue in the Eolas case and then when this case came along, said we've already decided the component portion of the statute; now we must decide the supplied from. So the language which the Federal Circuit used is a bit confusing. Basically what it said, though, is that the act of supplying embraces the act of copying. That means that any, any company sending a machine or a patented product abroad, that that machine must be copied in order to be mass produced abroad. It might be a pill. It might be a mousetrap. It might be a Buick. That exact identical copy if replicated abroad does not violate the statutes, the patent laws, it doesn't constitute an infringement. Anthony M. Kennedy: Suppose you had a patent on a biological organism and it was contained in a little vial, and you shipped it abroad. Just by doing nothing at all, it grew, and it had... it grew into 100 different parts. Theodore B. Olson: If it reproduces itself, Justice Kennedy, somewhere outside the United States-- Anthony M. Kennedy: Right. Theodore B. Olson: --What you're suggesting is that there is a pattern or a recipe or a template or a mold. It could be the same thing. If it's reproduced outside the United States by some laboratory outside the United States, then the components are not being sent from the United States for reassembly abroad. Samuel A. Alito, Jr.: Isn't this an artificial distinction in... when you're talking about the making of a tangible part, there's at least some cost involved in doing it here or doing it abroad, and some time involved. But with, with software, the Federal Circuit's point was that it is so easy and inexpensive and fast to copy it that simply sending the information abroad, sending the object code abroad in the form of the golden disk, is tantamount to manufacturing copies overseas. Theodore B. Olson: I think there are three answers to that. Surely the patent laws cannot be determined according to whether it's easy or fast or efficient to replicate something. There has to be a line that makes some sense. Number two, it may be fast and efficient but there are certainly costs involved in taking the machines to do it. Number three, where would that take us? A design... every product contains its own manifestation of its design. That would take us everywhere, because any product can be copied abroad. However... and maybe there are going to be fast ways to produce other things. These are replicas, reproductions, copies. These are not such components that are supplied from the United States. If I may reserve the balance of my time? Thank you. John Paul Stevens: Mr. Joseffer. Daryl Joseffer: Justice Stevens, and may it please the Court: It might help if I could start by putting this case into its context in both the United States and international patent law. Section 271(f) is a limited extension of normal territoriality principles that is designed to shore up the prohibition against actually making a patented invention in the United States, but it does not take the further and extraordinary step of applying United States law to the conduct of copying parts abroad for assembly and sale abroad conduct is properly the subject of foreign law. As a result, in the context of traditional manufacturing, for example, it has always been understood pursuant to the statute's text, that while companies cannot make parts in the United States for final assembly abroad... that's too close to making it here... they may make copies in a foreign country by, for example, sending the design to the foreign country or sending a specific part to the foreign country that can be copied there. That distinction between copying in the United States and copying in the foreign country has two critical dimensions. The first is that it protects the foreign government's sovereign prerogative to establish the rules of competition that will govern companies that wish to compete in that foreign country's markets by copying their products abroad, assembling them there and selling them there. The second, which is the flip side of that point, is that it enables United States companies to compete on an even playing field abroad against their foreign competitors by manufacturing, assembling, and selling parts abroad, subject-- Ruth Bader Ginsburg: Mr. Joseffer, to the, to the extent that you are claiming that there are foreign nations that would have an interest in this, usually when that is so, hear from them and in this case there is a strange silence in that regard. Daryl Joseffer: --I think that... I can say... a couple points I can make. One is, this case has, has been viewed because of the Federal Circuit's attempt to tie this to software on the grounds that software can easily be copied abroad, I think this case has been somewhat narrowly viewed as a software case. But in truth, there's no basis for distinguishing software from anything else, and if the Federal Circuit's decision was actually taken to its logical conclusion I have no doubt that other nations would be quite concerned, like in... in two ways. One is we have looked, not exhaustively but we have looked, and we have not been able to find a single other country that would apply its law in the circumstances if they were reversed. In other words if a German condition wanted to compete in the United States subject to German law by making copies here, assembling them here, selling them here, Germany would stay out of that because it's the United States' prerogative. Also there are significant differences between the nations' patent laws. For software in particular, the United States is much more bullish on the patentability of software-related inventions than many other countries. But even for more mundane reasons, if we were talking about anything... it could be that the foreign government doesn't think that an invention is particularly novel, it just disagrees with us about that, or it doesn't think there is sufficient advance in the prior art sufficiently inventive to warrant patent protection. And if the foreign country is going to make that determination regarding competition policy in its own borders, it's entitled to make that determination. Ruth Bader Ginsburg: Let me ask you about a domestic law question. One side is telling us it's the component that's supplied, whether it's the master disk or the object code. And the other side says this is just like a blueprint, like a mold, like a template. Can a blueprint be patented? Can a mold be patented? Daryl Joseffer: Not ordinarily. I mean... I'm sorry. Stephen G. Breyer: Copyright. You normally copyright. Daryl Joseffer: You can certainly copyright something like that. Ruth Bader Ginsburg: Yeah, but patent-- Daryl Joseffer: Well the... no, but the... I think the most important point here is that the components of patented inventions do not have to be patentable. Many patented inventions are comprised of a bunch of parts where the parts themselves would not be patentable because say they were standard off the shelf parts. Anthony M. Kennedy: Well, there can be a process patent. Daryl Joseffer: Yes, and we don't... I mean, process patents, a process patent is a series of steps or acts for performing a certain function, such as turning rubber into a tire. We don't think process patents are relevant... are, are covered by this statute for a couple of reasons. And it's not-- John Paul Stevens: What, what is your view of what the component is in this case. Daryl Joseffer: --The component is the, is the actual machine readable copy of software that is inserted in-- John Paul Stevens: The software is the component? Daryl Joseffer: --Well, but the, the... but like with anything, you could say a computer is also the component, but it's the actual computer, not you know, any copy of the same computer. David H. Souter: But in this case, you're... but Mr. Olson said the component is either the disk or the portion of the hard drive to which the, the coded instructions are transferred. Daryl Joseffer: Right. David H. Souter: Do you accept that? Daryl Joseffer: The United States view... I'm not sure exactly how much we disagree on this... but the United States view is that, for example, a blank disk is not a component of this invention because you don't need a blank disk to practice this invention. The... the actual component is the physical substantiation, the physical copy of the software that's inserted into a computer and if you get a disk-- David H. Souter: In other words, the disk plus the... plus the coded instructions. Daryl Joseffer: --Yes. And again the coded... the software could be on a disk or it could be on some other technology. It doesn't matter how it-- David H. Souter: It could be on the hard drive. Daryl Joseffer: --And once it's copied on to the hard drive, then the copy on the hard drive is itself a component. Stephen G. Breyer: I take it that we are operating under the assumption that software is patentable? We have never held that in this Court, have we? Daryl Joseffer: No, but as I was saying before-- Stephen G. Breyer: So what should we do here? Should, if we are writing this, since it's never been held that it's patentable in this Court-- Daryl Joseffer: --I think if-- Stephen G. Breyer: --If I were writing something, should I say on the assumption that it's patentable? Since the issue isn't raised? Daryl Joseffer: --No. I think, I think the reason that's not relevant here is that the patented invention in this case is not software. It's computer that has software loaded into it. And the components of a patented invention do not themselves have to be patented. Anthony M. Kennedy: Can have you have a copyright on a program? Daryl Joseffer: Ah, if you wrote it out, yes. If I wrote out a string of 1's and 0's I could copyright the strings of 1's and 0's that was... that was written out on a piece of paper. But the... in terms of what the component is here, the other things-- Antonin Scalia: Can I ask you, the point I don't understand when you say the... the component is the disk that contains material, I understand that because here is a separate piece; it's a disk. You plug it in; it has the information on it. But then you say, if you put it on the hard drive it becomes the component. But the hard drive is not a separate thing like a disk. And when you say you put it on the hard drive you have nothing there but... but... but ons and offs. You have nothing there but the... but the thought. Daryl Joseffer: --Well-- Antonin Scalia: How can you call, you know, what? Is it a separate section of the hard drive? No. Daryl Joseffer: --Well, you could go later in and delete that software off the hard drive which confirms that the software does have a separate physical existence in there. But the main point is that the... the component is the, is the physical substantiation of the software. The actual copy of the software. It doesn't matter if it's on a hard disk; doesn't mean it's on a disk; it doesn't matter if it's in the air in wireless transmission. It's just the physical copy of the software. And you could have a situation where there are multiple copies of that same component in a computer. One-- Samuel A. Alito, Jr.: If these... if these computers are built abroad and are sold with Windows installed, the component is the electrons on the hard drive? Is that what, that's your position? Daryl Joseffer: --It's the physical embodiment of the software which in some instances is manifested by... by those electrons. Now AT&T's contrary view is that the abstract code in the abstract is the component. The reason that can't be is that object code in the abstract is just a series of 1's and 0's. In theory I could memorize in my head or write down on a piece of paper. But that's not going to combine with other, with other parts to make a patented invention. And if I could illustrate that with a simple lock and key example, a key has a series of ridges on it that enable it to open a lock. And that series of ridges can be denoted by a sequence of numbers, bigger numbers for deeper ridges. But the component is the key that actually turns the lock, not the abstract sequence of ridges on the key. And you can then say that about anything; you can always say that any physical product, any physical part, is a physical manifestation of its abstract design. Anthony M. Kennedy: Is that analogous to the source and the compilation, the source being the design, the compilation being the key? Daryl Joseffer: No. The source code and object code are just different computer languages for expressing the same thing. There is no... there's no difference between them. One is words and one is numbers, but they mean the same thing. There is no reason to treat them differently. The point is just that if you treat the... either the source code or the object code as the component, that's just the design of the actual physical software that goes into the computer. If you did that you'd have a vastly different statute because any physical part has a design, but the whole point of the statute is to prohibit copying of parts in the United States while permitting copying of parts abroad for sale abroad. But if the design itself was a component then you could never copy parts abroad when something was designed in the United States, because something designed abroad would always infringe because the something designed abroad would itself be the component, and that would be a vastly different statute there's no reason to think Congress intended here, especially because of the extraterritorial consequences. Ruth Bader Ginsburg: --Windows wasn't around when this statute was passed. Daryl Joseffer: Well, the statute was enacted in 1984 when software was certainly present. It's fair to say that Congress was not thinking of software, but that's further caution for not expanding the statute beyond traditional territorial reaches. Because first, this Court has cautioned, has said that it should be cautious in applying existing electrical property statutes to new technologies. And in addition it's emphasized in Deepsouth that the caution against extraterritoriality applies in this very context. So Congress is writing against the backdrop of normal territorial principles, which are the making, using or selling inventions of foreign countries subject only to foreign law, and against the backdrop of Deepsouth, which has specifically held that Congress has to speak clearly to enact of statute like this. Ruth Bader Ginsburg: I thought it was the position of the Federal Circuit that Deepsouth has to be brought into an electronic era, and so the... the Federal Circuit was taking a statute that had a shrimp deveiner in mind and saying well, this is how that notion should apply to an electronic world. Daryl Joseffer: Right. And the reason that doesn't work in the statutory text and policies is that the component that we are talking about here is the specific part that goes in the machine. And if... and if... and under the statute you have to let the company send the design abroad to manufacture it abroad, both to protect the company's ability to compete abroad and to protect the foreign government's prerogatives. Otherwise it's just a vastly different statute than the one that Congress enacted. That's really our terms of the politics. John Paul Stevens: Your time is up, but I want to ask you one yes or no question. In your view is software patentable? Daryl Joseffer: Standing alone in and of itself, no. John Paul Stevens: Thank you. Mr. Waxman. Seth P. Waxman: Mr. Justice Stevens, and may it please the Court. There is no question that Microsoft supplies the Windows object code, that is the precise, machine readable sequence of commands that instructs a computer's processor. From the United States, that is paragraph 7 of the stipulation. There is likewise no question that it does so with the intent that precisely the same sequence, which runs to millions of lines of binary digits, will be installed and stored... those are Microsoft's words... in foreign computers precisely so that they may practice AT&T's invention. Those facts resolve this case because it is thus entirely consistent with the ordinary meaning of the words of the statute to say that Microsoft has quote, AT&T's invention. Now let's look at-- Stephen G. Breyer: Suppose I send someone to the Patent Office-- Seth P. Waxman: --Excuse me? Stephen G. Breyer: --Suppose I send someone to the Patent Office, goes there, picks up the patent, and this patent is written very, very, very concretely and specifically. Gets on the phone, phones somebody in Germany and reads it to him. And that person, having an excellent memory, takes everything in and now he has the precise instruction necessary to change the machine around or put various things into it. So now it is a precise copy of the machine in the United States. Seth P. Waxman: That's not the-- Stephen G. Breyer: Is that... how is that different from this? How is it different? Seth P. Waxman: --That is very different than this case because what... first of all, we all agree that software code in and of itself, removed from a physical structure, cannot be patentable and when software... when some... when an invention that is practiced with software is patented, at the most what you will see is preferred embodiments of the source code which is language that humans understand and which computers do not. A lot of work has to be done in items of debugging and testing and compiling to create what is, by stipulation, at issue in this case, which is the precise, machine readable sequence that commands a computer's CPU millions of times a second. Source code would do nothing. Source code has to be worked on overseas. Stephen G. Breyer: No, no. We have a genius... we have, as they used to have to get all the stuff that we stole from England, with the... with the... remember the weaving machines and the cotton spinners and so forth? This genius comes over here; he looks at a really complex machine; it is now stored in his head, the precise details that nobody else could do. He runs back to Germany, and he builds it. Well, he has absolutely stolen the precise, incredibly complex details of this machine. Seth P. Waxman: Well-- Stephen G. Breyer: Now, does it matter, if instead of sending the individual, we send the machine to Germany. This genius looks at it in Germany and there he makes the copy. Are they any different? Seth P. Waxman: --When you're talking... when you're talking about sending designs over or blueprints or management instructions or a high level version of, gee let's have a code that will perform the following functions, and you have people design and make and compile and test and debug that code overseas, of course that component, the component is the object code, the precise commands that reside in the computer and continually interact with the hardware of the computer in a way I'm going to describe and is not disputed, millions of times a second. Let's take this case. Okay. Is it... the question is, is it a component and whether what was supplied was in fact combined. That's, that's... that's what this case boils down to. As to the component. We have something, software program, the NetMeeting and sound recorded program that can in its object, its machine readable command form, is developed, bought and sold entirely separately from any hardware that it commands. David H. Souter: And that is what is on master disk. Seth P. Waxman: And that is what is either on the master disk or, although either side obscures this, that is what is represented in the electric... electronic transmission, that is another means by which the code is supplied. And in paragraph 7 of the stipulation Microsoft acknowledges that it supplies the Windows object code by transmitting it to manufacturers overseas. And the way that happens is the code, the machine language, is resident in Redmond, either in the pits and lands of a CD or on the varying magnetic orientations of a hard drive, and a, some engineer from Microsoft presses a button and it is essentially, it is taken and converted into photons which stream whatever it is, 7,000 miles, under the land and under the Atlantic Ocean and emerges into a machine, a computer, a bit of otherwise inanimate parts that are sitting there in Dusseldorf, where it is loaded onto the hard drive, it's converted from photons to a series of electrical pulses. John Paul Stevens: Is that really what happens? As I understand it there is an intermediate step. They don't send it directly from the United States to each of the individual computers in Germany. They send it to a central point which then redistributes it. Is that not right. Seth P. Waxman: Well, I think that paragraph 7 of the stipulation, it doesn't specify one way or the other, but their case, Justice Stevens, depends upon the following. Because if I-- John Paul Stevens: If you're correct that they're just sending from New York direct to the 500 different machines all on one transmission from New York, there's no lawsuit here. Seth P. Waxman: --Let me give you two examples-- John Paul Stevens: Is that what you're trying to tell us, that they do send it directly from New York to 500 different recipients in Germany? Seth P. Waxman: --No, no, no. And it wouldn't... what I'm saying is there is at least one violation of 271(f) here. 271(f) looks exclusively at what is done in the United States. It is entirely irrelevant to 271(f) what, if anything, is done overseas. The Federal Circuit has made this clear in the Waymark case and it's consistent with the language. John Paul Stevens: Would it be a violation if they sent, if they sent the golden disk abroad and nobody ever copied anything off the golden disk? Seth P. Waxman: If they sent the golden disk abroad or if the Microsoft engineer-- John Paul Stevens: Would you answer my question? Seth P. Waxman: --I think I am. The answer is-- John Paul Stevens: If they send the golden disk abroad and never use it, would that be a violation? Seth P. Waxman: --If they had the necessary intent and purpose. They had to have had the specific intent and purpose that it be combined in order to create a device that wouldn't-- John Paul Stevens: Suppose it is never, it is never combined? Seth P. Waxman: --It wouldn't matter. David H. Souter: So you... and the reason it wouldn't matter on your view is that the component is-- the object code on the disk, not the disk itself? Seth P. Waxman: That's right. David H. Souter: All right. Then why doesn't that get you-- Seth P. Waxman: It could be-- David H. Souter: --Why doesn't that get you right back to the point that Justice Breyer was making? You are saying, I think, in essence if you send a blueprint... this is like a blueprint. It tells, it tells a machine which may be in Europe how to put the object code on other disks or on hard drives. The machine in Europe is following instructions just the way an artisan would follow a blueprint. Seth P. Waxman: --Here's the difference. David H. Souter: What is the difference? Seth P. Waxman: And it's nicely embodied in Microsoft's reply's use, repeated use of the word "antecedent". A blueprint or a design is a precursor to the actual device. It is the instructions about how to make something. It's not the thing itself. And here what we have is the object code that is the precise commands that, unlike design information, interact continuously with the hard drive and with the processor in order to make physical changes on an ongoing basis. David H. Souter: Yes, but the "continuously" does not describe the process of going from the master disk to what you claim to be the infringing computer sold in Europe. There is no continuous process there. As I understand it, what happens is... let's just take the master disk and forget the photon for the moment. The master disk functions like a blueprint. They send, from the United States they send the blueprint to Europe. The blueprint is put in some kind of a machine in Europe. And by the use of the blueprint the machine puts electrical charges on a disk or on a hard drive, and that it seems to me does bear out the blueprint analogy. And if it does, then any export of a blueprint or indeed the simple export, the simple sending of the '820, if that's the right number, patent in this case would be a violation. Seth P. Waxman: I have to disagree, Justice Souter, because the blueprint... the patent is not the actual series of commands that runs the machine and neither is the blueprint. The blueprint is instructions, to be sure, and it can be reflected in intangible code, but it's instructions about how to make something and once it's made it's done. You can say, as Mr. Olson did, that the design is embodied in the thing that is made. The blueprint for a semiconductor chip in some sense is always reflected in that chip. But if you don't like the chip you have to get rid of it. Software can be... if you don't like Microsoft Word, you can download it and you can delete it and download WordPerfect and use that. And what happens in the computer... and I think this does bear on what the nature of the component is and why in the ordinary sense of the word "component" and the ordinary sense of the words "supply" and "combine", they apply naturally to what Microsoft does. I mean, is a disk, is a typewriter, is a screen, is a hard drive, is a CPU a component? Are they components when they have the code embedded in it? Of course. But that doesn't... a tire doesn't become not a component of a car just because a tire with a wheel attached to it is also a component. The question is-- Anthony M. Kennedy: But suppose, suppose you had a machine that makes another machine, and if you ship that machine to Europe... and there's a patent for the machine that makes it. If you ship it to Europe and it starts making another machine, the statute is not violated; and isn't that just what's happening here? Seth P. Waxman: --No, no, no. This is not a machine tool. The thing that was violated, the machine readable object code, is precisely what is installed on the computer and precisely what is moved from one part of the computer to another in different forms as the computer operates and it continually instructs. This is dynamic. It's not-- Stephen G. Breyer: How would you, how would you... go back for a second, please, because, if you're finished with that, because I don't see how to decide for you without at the same time permitting a person to walk over to the Patent Office, to read that application and the description, which after all at least can be a very highly detailed set of instructions of how to make a machine, getting on the phone, explaining that just like the blueprint which it is just like to somebody in Europe. They then make it. And that on your reading would violate the statute. It can't be right that that would and you don't even think it would. Seth P. Waxman: --I don't because-- David H. Souter: And so what's the difference between that and this case for you? Seth P. Waxman: --Justice Breyer, there is a long, long spectrum with respect to software that goes, goes from high level system architecture to all the way down through component architecture, pseudo code, source code, which is, which is a description that humans understand, and the actual machine language that a computer will understand. Invention... patents do not specify machine language. The machine code is totally dependent on what type of processor it's relating to and somebody who takes source code... I could make an argument that if you take, steal the Microsoft source code, which is the crown jewel, it is the greatest trade secret of this country, it will not be sent overseas, but if somebody took it with a bunch of smart engineers and said, you know, convert this into, convert this into something a computer will understand that will combine with a computer, that involves a question of whether what's going on overseas is manufacture as opposed to assembly. Look at it from the perspective... maybe this helps. Let's look at the question from the perspective of Microsoft, the OEM, and the user overseas. Object code is the end of Microsoft's manufacturing process. That is what they make. They don't make hard drives, they don't make disks, they don't make computers. They fully finish their product, the Windows operating code, and then send it overseas. The OEM is-- Antonin Scalia: That, that code is not patentable, you've said. Seth P. Waxman: --The code is not patentable. The expression is copyrightable. AT&T has not sought to get a patent on the code. AT&T has a patent on a system that can be practiced, among other ways, through the use of software. David H. Souter: But what is it that they export and send overseas? Seth P. Waxman: They export in a variety of different physical forms-- David H. Souter: Right, it's a thing. It's an object of some sort, isn't it? Seth P. Waxman: --It is an intangible sequence of commands that is carrying-- David H. Souter: It is an object that has coded onto it, transferred to it in a readable way, those commands. But it's an object, isn't it? Seth P. Waxman: --Well, it's not necessarily an object. I don't know whether you would call a stream of photons that is constantly repeated under the Atlantic Ocean an object. Ruth Bader Ginsburg: Mr. Waxman, this may, this may help focus that question. Suppose the master disks were made abroad. You would be taking the same position, would you not? Seth P. Waxman: If... that depends how it were made. If it were-- Antonin Scalia: I hope we can continue calling it the golden disk. It has a certain Scheherazade quality that really adds a lot of interest to this case. [Laughter] Seth P. Waxman: --Justice Ginsburg, the question is what is made. If making it means somehow creating, reconfiguring the precise sequence of commands-- Ruth Bader Ginsburg: No. That's given by Microsoft to one of its offices in Europe. But the golden disk itself is made abroad. Seth P. Waxman: --If the, if the object code itself, the very precise sequence that can't be changed, is supplied from the United States-- Ruth Bader Ginsburg: Yes. Seth P. Waxman: --the act is implicated. Ruth Bader Ginsburg: So the only thing-- Seth P. Waxman: Regardless of-- Ruth Bader Ginsburg: --The only thing supplied is this, one side calls it abstract, one side calls it something else. But anyway, it is the series of 0's and 1's; that's the only thing that's supplied from the United States? Seth P. Waxman: --That's right. Ruth Bader Ginsburg: Any physical manifestation of it is done abroad. You would still be taking the position that you're taking, is that not so? Seth P. Waxman: Well, yes, except that the intangible sequence of commands can only be carried in the form of, by attaching it to a physical platform or a bucket. John Paul Stevens: Yes, but it doesn't have to be-- Seth P. Waxman: Even a radio wave. Microsoft has patent claims for software. John Paul Stevens: --The physical object does not have to originate in the United States. Can they not transmit the commands to a physical object in Germany and have that be the substitute for the golden disk? Seth P. Waxman: Well, of course, and they do that. John Paul Stevens: Yes. Seth P. Waxman: They press a button and they have an electronic transmission that sends a stream of protons under the Atlantic Ocean and are changed into electrical impulses that are used to inscribe the precise code onto a hard drive in the form of electromagnetic pulses. John Paul Stevens: But that they now send to some central point which redistributes them. They send one copy to, say, the wholesaler, who then makes 500 copies that are sent to the retail customers, isn't that correct? Seth P. Waxman: That may be. We don't-- John Paul Stevens: Which is exactly what happens in this case? Seth P. Waxman: --It's one of the things that happens in this case. We have a stipulated record that is not very detailed, but in that instance there is only one violation. John Paul Stevens: My question is if that is what happens, when the retransmission takes place when one copy is converted into 500 how can those 500 all be components rather than copies of the single component? Seth P. Waxman: Well, the only... I have two answers to that question, both of them I think directly answering your question. First of all, the statute is violated only when the precise object code is expatriated from the United States, when it is supplied from the United States. That's the violation. The other issues are damages, what damages are you entitled to. What is combined with the computer is the precise thing that is supplied because it is the precise sequence of commands. Stephen G. Breyer: But is there any precedent for that sort of thing? That is, I understand your point now, I think, but however you put it, it has to come down to the fact that this very, very complex and detailed thing that is being supplied is an abstract set of numbers. And I can understand how the patent application does not itself contain that set of numbers, but rather contains an instruction as to how to generate that set of numbers. But I then would be quite frightened of deciding for you and discovering that all over the world there are vast numbers of inventions that really can be thought of in the same way that you're thinking of this one, and suddenly all kinds of transmissions of information themselves and alone become components. So I'm asking you, is there any outside the computer field analogous instance where the transmission of information has itself been viewed as the transmission of a component? Seth P. Waxman: I'm not aware of any. In the lower courts, Microsoft was arguing that the biotech industry was an analogy, but there is some very obvious differences between what is supplied in terms of object code that instructs a machine and a, you know, a sequence of nucleotides, the abstract sequence of nucleotides. But I think we need to be quite precise here. We are not complaining that the component is an idea. We're not complaining... we're not arguing that a component is some form of information. What we're saying here is... I mean, nobody is paying billions of dollars from an idea. When the commands are loaded onto the hard drive of a computer in the form of electromagnetic orientations and when you press a button saying give me NetMeeting, and the processor says... and this is what electrical engineers say... fetch the instructions, fetch the commands to the random access memory where it's... where it is there reflected in a... in a form of patterns of electrical charges. And when the code then moves back and forth, the instructions move back and forth from the CPU and RAM, they... they... millions of times a second they are replicating themselves. Anthony M. Kennedy: Well, is it an answer to Justice Breyer, or maybe it isn't, that we have no conceptual problem saying there would be liability if this happened within the territorial limits of the United States? Seth P. Waxman: Absolutely not. Anthony M. Kennedy: And so there shouldn't be a greater conceptual problem if you prevail, in applying it abroad. Seth P. Waxman: That's-- Stephen G. Breyer: Well, sure, there is. It's a bigger-- Seth P. Waxman: --If I can, I just want to make sure I answer your question. Stephen G. Breyer: --But it's totally different in that of course it violates the patent in the United States. The whole question here is whether or not the person has to go get a patent in Germany, which he can do or not do. And the... the concern that I'm worried about is in the future it might be outside your field, it might be in biology, but if you suddenly say that the transmission purely of information is the transmission of a component, no matter how detailed, I can easily see in biology or medicine where a patent has an instruction and indeed, that instruction is an instruction to create other detailed procedures, processes, dishes, Petri dishes, I don't know what it is, and we transmit that detailed information abroad. Then suddenly it's our patent law and not the foreign patent law that would govern. That's why I asked for precedent. Seth P. Waxman: Okay. First of all, this statute does not reach anything that is done overseas. It doesn't reach what the German OEM does. It doesn't reach what anybody does overseas. It... it makes liable as an infringer somebody who supplies... who is in the United States who supplies from the United States a component with the intent, with the express intent that that component be combined in a way to create a device that would practice a U.S. patent. Now I don't believe... I firmly am confident that if you look at what's at issue in this case, there may be all sorts of questions about what is or isn't a component. I might think that a design is a component or it isn't a component, but think of these three features: One, this is something that is totally modular. It is developed, bought and sold entirely independent of any of the hardware to which it is, with which it is combined, and between which it moves continuously as it operates. Number two, it can be removed or updated entirely independently of the other components. And it is dynamic, unlike designs, unlike molds, unlike instructions about how to make something, all of which are exhausted. They have done their work when the thing is made. That's why those things are called hardware. David H. Souter: All right. But-- Seth P. Waxman: These are instructions not about how to make something. They are instructions about what the other things that are made should do and how they do it. David H. Souter: --You can perfectly well say that in this case. You can say that the instruction is exhausted once the golden disk has sent its information through an intermediary machine onto the new disk that is made. Seth P. Waxman: You could not say that because if you take the information from a golden master or a stream of photons and put it on a hard drive, unless that continues to move and change in form, the computer will not work. The computer operates by having you press a button saying do this function. The central processing unit then says where are my instructions on how to do it. It says find them and put them in random access memory, where it is then replicated in the form of patterns of electrical charges, quite a different physical form than it exists on the hard drive. And the program counter-- David H. Souter: That simply means that after the... the... the... the idea as you put it, has been placed on the hard drive, certain other processes must take place too before we get the result that people are buying computers to... to obtain. But it's still the case that the... that the code on the golden disk is exhausted once that has been transferred from the disk through an intermediary machine on its way ultimately to a working computer just... and my only point is... just the way you can say that the blueprint in effect is exhausted once the house has been built. Seth P. Waxman: --It's not because the blueprint has no further work to do. It was something that-- David H. Souter: Sure. You can use it again. Seth P. Waxman: --Something you teach, has no further work to do with respect to the infringing device, but the object code works continuously and gives continuous instructions to the various hardware components completely unlike. But let me go to-- David H. Souter: The object code has several jobs. One job when embodied on the golden disk is tell a... is to tell a machine how to make disks or how to put a message on a hard drive. Another job that the object code has is when the object code gets on the resulting disk or the hard drive. But in fact, the manifestation of the object code on the golden disk and the manifestation of the object code on the resulting disk are separable, just as the blueprint is separable from what is constructed. Seth P. Waxman: --Justice Souter, just taking your... taking that as... that as the case, the United States in footnote 2 of its brief repeats what Microsoft argued in the court of appeals and the district court, which is that if it took instead of one golden master, but 100,000 CDs, which is what a golden master is, one for each computer, that would be a 271(f) infringement. But that also requires copying and transforming the code that is on the CD-ROM which is in the form of physical pits and lands and indentations, and downloading it into the hard drive where the same exact sequence is manifested as varying orientations of electronic, electromagnetic fields, and that is no different whatsoever than this case. If you say, well, what destroys you in this case is that the code has to be copied, replication, precise instantaneous replication is simply how software works. It's not just how it's supplied. It's not just how it's combined. It's how it interacts dynamically within the computer. And that's why we say it's a component. Let me just be clear about what the statutory interpretation question here is. It's not as whether our conception of the component as the code... as the... as the command is better than their conception of the component as a CD or a light wave or a telephone wire that contains that. The question is, there may very... it may very well be both things. The question is whether the word component naturally applies to what we do. And our... we have given dozens of references to the use of intangible software, program software as components. We have given you the dictionary definition with an example from Webster's. They have not responded with one counter-example. The only dictionary example they provide you relates to the word 5. But they have given you not the first definition of such under Black, in Black's Eighth, they have given you the second one. The first one is, of this or that kind, she collects a variety of things. And that definition, under that definition it wouldn't matter whether you said, well, the component has to be physical or, you know, it could be either. Because even if it has to be physical-- Samuel A. Alito, Jr.: Can you think of any machine... can you think of any machine other than a computer that has a component that is not a physical thing? Seth P. Waxman: --I can't. And that's why it seems to me, I mean... and there are... there are machines that have nonphysical things in them but not that operate in the sort of same dynamic way. We gave the example of the intangible text of Moby Dick in a book. And they give the example of, you know, an incredibly complicated series of circuits on a... on a chip. But those don't continue to operate and interact in the way that this paradigmatic component does. Thank you. John Paul Stevens: Thank you, Mr. Waxman. Mr. Olson, you have, let's see, four minutes. Theodore B. Olson: Thank you, Justice Scalia. I-- mean Justice Stevens. [Laughter] I was about to address Justice Scalia and recite the case... cite the case Nixon versus Fitzgerald, which is directly responsive to the question Justice Scalia raised at the very beginning of the audience, that a stipulation with respect to damages does not make a case moot. And also with respect to a question raised by Justice Scalia, or a comment made by him, it doesn't have to be gold. It's a master disk. Antonin Scalia: I'm sorry. Theodore B. Olson: What this essentially comes down to is something that Mr. Waxman repeatedly said. It is the commands that are a component. The commands to the individual foreign made computers. Those are... those commands cannot be understood and cannot be used by that computer unless they are in a physical medium that is created as a copy of the master disk that sends abroad... that's sent abroad. As I said at the beginning, the stipulation is full of the word "copies", foreign replicated copies. That's what we're talking about here, something that is recreated. And Justice Breyer, your question about someone who's got a really good memory and can go abroad and recite the 1's and 0's, pictures can be taken, copies can be made in lots of different ways. And in response to Justice-- Stephen G. Breyer: His answer to me is that... that... it's sort of misleading to think of this as if it's just information, because it's really a method that switches things at a level of detail that is impossible to put in a patent application. It's taking the information in a patent application, it's transforming it into what we think of as 1's and 0's, but they're not really even 1's and 0's. What they are is things that happen with electricity. Theodore B. Olson: --That's right. Stephen G. Breyer: And it's putting that on the disk and then it makes other things happen. Theodore B. Olson: I agree. Stephen G. Breyer: It's putting something physical on a disk, pits and lands, instructions that are copied from the master disk and then put into either a hard drive or a disk, it's the same thing. It's something that is into the computer that will make the computer operate. You're right, Justice Ginsburg, that the court of appeals for the Federal Circuit thought it was bringing this statute up to date and it even said so. We are making an extension of the statute to keep up to date with the technology. That is not for courts to do. This Court is-- Anthony M. Kennedy: Are you saying that the infringement act that happened in the United States involved no components? Theodore B. Olson: The infringement that happened in the United States which was under Section B, which provides Section B inducement liability for making copies domestically of... the same thing that happened here. Copies of the object code were put on physical mediums and sent to domestic manufacturers. Domestic reproduction constitutes infringement under Section 271(b) but foreign reproduction is not a violation of Section 271(a) or 271(b). Hence, we're talking about the two sections where-- Stephen G. Breyer: --So they had a license to do that, because if they didn't have a license to make the master disk here in the United States, the making of it would have violated the patent; is that right? Theodore B. Olson: --The making of the master disk if actually used in a computer with a microphone and a speaker, and that's the liability that existed in the stipulation under 271(a). Making copies is liability domestically under 271(b). If it's going to be liable for foreign made replications, then it must be under 271(f). The language of the statute, we submit is clear. Physical things must be components under 271(f) because they must be supplied from somewhere. Ideas have no physical from. They're in the air. The words used, "supplied from" tells us that it must be a physical thing combined with. Ideas don't combine with physical things to make a patented invention. Physical things do. Thank you, Your Honor. John Paul Stevens: Thank you, Mr. Olson. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 87-1437, Melvin Blanton v. The City of North Las Vegas. Mr. Graves, you may proceed whenever you're ready. John J. Graves, Jr.: Thank you, Your Honor. Mr. Chief Justice and may it please the Court: Blanton and Fraley were arrested and charged with driving under the influence in the City of North Las Vegas, Nevada, in July and June, respectively, of 1986. Blanton made a written demand for a jury trial in the municipal court, and that demand was denied. We took a petition for a writ of mandamus to the district court, our court of general jurisdiction, and that request was denied. And we took an appeal to the Nevada Supreme Court. Mr. Fraley, in the North Las Vegas municipal court made a written demand for a jury trial that was denied. He entered a plea of guilty to the charge. He took an appeal of trial de novo to the district court and the demand for a jury trial was granted. From that granting of the demand for a jury trial, the City of North Las Vegas took an original writ of certiorari to the Nevada Supreme Court. William H. Rehnquist: The Nevada Supreme Court made no point about Fraley having pleaded guilty. John J. Graves, Jr.: No, sir, they did not. The Nevada Supreme Court construed the Baldwin case rather strictly, wouldn't we... woodenly we think, and stated that the Baldwin standard of six months and $500 was the only standard that it would stand on. And as a result of that, the request for a jury trial in driving under the influence cases was denied. In its decision it also indicated certain policy reasons. Part of this was expense of the jury trials, general inconvenience in rural areas, non-lawyer/judge problems. And it finally concluded by suggesting that it was up to the legislature to resolve this problem. Antonin Scalia: Well, it didn't stand that strictly on it because wasn't the fine... wasn't the possible fine here more than $500? John J. Graves, Jr.: Yes, sir. It was $1,000, but it-- Antonin Scalia: So, it wasn't really all that wooden. John J. Graves, Jr.: --Sir? Antonin Scalia: It wasn't all that wooden. John J. Graves, Jr.: No, sir. The $1,000 fine has been in the law in the State of Nevada for several years now, but I think that in most of the lower court cases I believe that the fine of $500 has been abandoned by most of the courts. I think even in this Court. I think in Muniz v. Hoffman you indicate that it's not talismanic. So-- Antonin Scalia: Selectively wooden. John J. Graves, Jr.: --It was partially wooden, yes, Your Honor. All right. As this Court knows, this country is at war with drunk drivers. In the State of Nevada that offensive has taken this shape. Upon conviction of a first offense, there is a mandatory fine of $200 and a maximum of $1,000. There is a mandatory incarceration of two days or 48 hours of community service while dressed in distinctive garb identifying the person as a DUI violator. And with the permission of the Chief Justice and the Court I would ask to be able to show you this distinctive garb here today. It has been described in our brief at pages 14 and 15. William H. Rehnquist: Go ahead. John J. Graves, Jr.: Thank you. This is the front of it. It looks much like a prisoner's uniform. Property of North Las Vegas Court. We received the permission of the city, by the way to leave this with the Court. On the back is a rather large circle, DUI offender, with a skull and crossbones and a bottle of liquor with it looks like a hatch mark thing... you, you can't... you can't drink. Not exactly a designer, but-- Speaker: And how long do you wear it? John J. Graves, Jr.: --For 48 hours, sir. It's not as if it were just two days, but it says-- Speaker: You could stay at home, couldn't you? John J. Graves, Jr.: --No, sir. You'd want to stay at home with this. Byron R. White: Well, I know, but where do you wear it? John J. Graves, Jr.: You wear it in the community where you're working the 48 hours of community service. Byron R. White: Oh, I see. I see. John J. Graves, Jr.: It's actually like six eight-hour days or eight six-hour days. It's actually 48 hours. It's not like two eight-hour days. Byron R. White: But-- John J. Graves, Jr.: So, while you're working typing or whether you're sweeping the road or whether you're sweeping a hall in a public building-- John Paul Stevens: --But, Mr. Graves, do you... do you... if you get a jail sentence, do you also have to do this? John J. Graves, Jr.: --No, sir. John Paul Stevens: So, this... but your position is... is this even worse than six months in jail? John J. Graves, Jr.: Most of my clients want to go the jail time. They don't want to be caught-- John Paul Stevens: They'd rather go to jail for six months than wear this for 48 hours? John J. Graves, Jr.: --Not for six months, but for the two days. First offenders normally don't go to jail for six months. They'll... normally just the minimum-- John Paul Stevens: But... but how is this a more severe penalty than six months in jail? John J. Graves, Jr.: --I'm not sure that this is a more severe penalty than six months in jail. I think that-- John Paul Stevens: Well, if they got six months in jail, that would be the maximum under the statute, wouldn't it? John J. Graves, Jr.: --Yes, sir. John Paul Stevens: Then why... why isn't this case squarely controlled by Baldwin? John J. Graves, Jr.: Well, it's our position that... I'm not sure that we can make that analogy exactly, Your Honor, because most of the time in most of the offenses that I have anything to do with, it's two days in jail or the 48 hours wearing this particular uniform. xxx. William H. Rehnquist: But that's... that's the choice of the defendant, isn't it? John J. Graves, Jr.: Yes, sir. It is the choice of the defendant generally. The courts would prefer... most courts... it's a mixed bag. Some of the courts have said that they are going to make the choice and the defendant will do the community service because they would rather have the defendant out in the community working as opposed to sitting in jail. And that's the decision that most of the courts make, although sometimes the defendant can make a choice of going to jail for two days. John Paul Stevens: But supposing the statute made the maximum penalty two days in jail or, alternatively, wearing this for two days, would that violate... would you then be entitled to a jury trial? John J. Graves, Jr.: That would be a little bit closer case. I think that this is a badge of dishonor. John Paul Stevens: Well, I understand that, but you... what, what's your answer to my question? Do you think you would be entitled to a jury trial? Say that was the only penalty. You have to wear this thing for two days. John J. Graves, Jr.: If this was the only penalty and you had to wear that for two days? John Paul Stevens: Yes. John J. Graves, Jr.: I don't think so. John Paul Stevens: Well, isn't that what the only penalty is for most people? John J. Graves, Jr.: No, sir. You've got a mandatory minimum fine of $200 up to $1,000. John Paul Stevens: Well, say there was... this... wear this for two days plus a $1,000 fine. That's the maximum penalty. Would that entitle you to a jury? John J. Graves, Jr.: That would be a closer case. That might entitle to us to a jury trial. Byron R. White: You think so? John J. Graves, Jr.: Because it's just... it's, it's just something that most of my clients don't want to be seen in, and it's a badge of dishonor. Antonin Scalia: Well, I... I sympathize with that, but I... you're telling me something new now. I thought that under these statutes you couldn't force anybody... a judge could not force anybody to wear that, that it's... it, it has to be at the defendant's option. John J. Graves, Jr.: Not always, sir. The courts are split on that. Sometimes a judge will require the defendant to do community service. Sometimes-- Antonin Scalia: Well, what does the statute say? Doesn't it... I thought the-- John J. Graves, Jr.: --It just has an option, Your Honor. I don't think it specifically says who has the power to require-- Antonin Scalia: --It just says it's an option. It doesn't say who has the option? John J. Graves, Jr.: --I don't believe so. The courts have construed it in different ways. William H. Rehnquist: When you say the courts, you mean the various courts in Nevada-- John J. Graves, Jr.: Yes, sir. Speaker: --the district courts? John J. Graves, Jr.: I say the lower courts that are dealing with this problem on a daily basis. There is-- Speaker: xxx. John J. Graves, Jr.: --There is normally a choice. I have had clients... I don't want to try to mystify you on this, but I have had clients that have wanted to serve the two days in jail as opposed to wearing the uniform, and the courts have allowed them to do that. It's not a hard and fast rule, but they must do one or the other. Antonin Scalia: Where is the statute? How does it read? I'm sorry... this point is important to me. I'm... where-- I think we have a different case if, if somebody can be forced to wear this thing for however long. At least I think it's different. 0.... Well, if it's going to take a lot of time, you, you can do it on rebuttal if you like. I, I didn't mean to... I thought you'd have it right at hard. John J. Graves, Jr.: Thank you, Your Honor, if we can do that, please. I just can't lay my hand on it right away. In any event, with the mandatory fine, the mandatory incarceration, or dress for 48 hours in this distinctive garb, there is as well a mandatory education course on alcohol abuse. There's also a, a mandatory license revocation for 90 days, the second 45 days of which a driver may request a hardship or restricted license. Of course, additionally this particular crime is hedged around with the additional conditions of being non-negotiable by the prosecutor and, of course, the court has no jurisdiction to reduce the jail time of the incarceration. Thurgood Marshall: You, of course, don't recognize the rule that any charge that is less than six months does not need a jury trial. You, you just don't recognize that rule? John J. Graves, Jr.: No, sir. We, we recognize-- Thurgood Marshall: xxx? John J. Graves, Jr.: --We recognize that rule and we in our briefs have indicated to the Court that we don't think you need to abandon that rule because it has served well for 20 years and we don't want to-- Thurgood Marshall: Now, explain to me again why this is different. John J. Graves, Jr.: --Because what the State of Nevada is doing is that they're pecking underneath the line. Your rules have said and the State of Nevada has said it's six months. You puncture that particular incarceration, and then you go into a serious crime. The State of Nevada is staying underneath the line, but it's increasing the punishment so that all they have to say is, well, ladies and gentlemen of the Supreme Court, all... we don't have more than six months. All we have is six months. What we're saying is that they're pecking under the line and making other kinds of penalties that will... ultimately, especially in this kind of case, that will require a jury trial. We, we don't ask you to abandon your-- Thurgood Marshall: Well, would six months and two days of house arrest be bad? John J. Graves, Jr.: --I'm sorry, sir. I did not understand you. Thurgood Marshall: Two... six months and two days of house arrest. John J. Graves, Jr.: Would that require a jury trial? Thurgood Marshall: Yes. John J. Graves, Jr.: That probably would require a jury trial. Thurgood Marshall: It's... what's the difference between that and this one, because he can stay at home with that. He doesn't have to wear that. John J. Graves, Jr.: Well, he can't. In the State of Nevada, he can't go... he can't go home. He must go to a jail for two days. Besides, there are additional penalties here. Thurgood Marshall: But didn't you say he could wear that for two days? John J. Graves, Jr.: Yes, sir, but he has to do community service. Thurgood Marshall: But he doesn't... he has to be out on the street. John J. Graves, Jr.: Yes, sir. You can't be at home doing this. You can't be dusting your furniture. Thurgood Marshall: And so, that's enough for a jury trial? John J. Graves, Jr.: Yes, sir. I think so. Thurgood Marshall: That is the only difference. John J. Graves, Jr.: Not the only difference, no, sir. There are other penalties here. One of the other penalties is a-- Speaker: Let me have them. John J. Graves, Jr.: --Sir? Thurgood Marshall: Let me have the other penalties. John J. Graves, Jr.: The additional penalties are loss of your license for 90 days, 45 days of which are non-suspendable and you cannot drive for 45 days. The other 45 days, at the tender mercies of the Department of Motor Vehicles in Nevada, you can have a restricted license. John Paul Stevens: May I ask on that suspension? If you go to jail for six months, can you have the 90-day suspension concurrent with the time in jail? John J. Graves, Jr.: There is no provision for that that I'm aware of. John Paul Stevens: You mean-- John J. Graves, Jr.: The penal and the administrative are different. No, sir. John Paul Stevens: --But... but say you're convicted on January 1 and the judge enters an order, sends you to jail for six months. When will your license be suspended? John J. Graves, Jr.: It will be... it'll be probably suspended even before you go to trial or even before you enter a plea of guilty. They are very, very rapid-- John Paul Stevens: So, you... the suspension... what I'm trying to find out, the suspension would have been completed before you finished your six months in jail. John J. Graves, Jr.: --Yes, sir, under one way or the other. Yes, sir, it would. Upon his second conviction of driving under the influence in the State of Nevada within seven years, it's a 10-day mandatory jail time and a $500 mandatory minimum fine and a one-year loss of license. And there's no restricted license there. The third conviction within seven years is one year to... to six years in the Nevada State prison. It's a felony. It carries a mandatory minimum $2,000 fine and three years' loss of license. Harry A. Blackmun: But we're speaking only of the first conviction in this case. John J. Graves, Jr.: Yes, we are. But what we're suggesting is that the second and third convictions are conditions and provisions that this Court can take into consideration to gauge the seriousness of this crime in the minds of the people of the State of Nevada through their legislators. Harry A. Blackmun: Well, It is pretty serious, of course. John J. Graves, Jr.: Yes. Harry A. Blackmun: Incidentally, your statute is in the petition for cert, if you need it. John J. Graves, Jr.: Thank you. Just a moment. This Court has historically used two types of tests for gauging the seriousness of a crime. One of those is nature of the offense, and the other is the penalty of the offense, and then there is sort of a subtest which is the actual numbers of states which-- Sandra Day O'Connor: Mr. Graves, didn't the Baldwin case really move to a... a more bright line test? John J. Graves, Jr.: --Yes, ma'am, it did. Sandra Day O'Connor: And why should we get away from that? John J. Graves, Jr.: You don't have to get away from the bright line test except that this case doesn't have a bright line holding. You have gotten away from bright line tests in the past in your Franks case... in the Frank case. Sandra Day O'Connor: Well, this meets Baldwin in a sense. John J. Graves, Jr.: It does. It meets baldwin, and if... if the Court sends a message to the states that you can have other penalties besides the six and five, which is what we used to call it when I was in municipal court, six months in jail and a $500 fine, then we're going to have all sorts of things that are going to be happening underneath the line because as long as the state doesn't puncture the line and move into the serious area, then we can have all sorts of penalties underneath. Antonin Scalia: Well, don't you think we have to adjust the $500 for inflation? When did... when did we... what's the inflation rate since we picked $500? I mean, I know the Constitution says how many dollars for a... for a civil... civil jury, but I really don't think our Court opinions are as written in stone as the Constitution is. John J. Graves, Jr.: I don't think so. Antonin Scalia: So, $500... maybe $1,000 is the equivalent nowadays of $500 before now. John J. Graves, Jr.: I... I do not stand on the fact that the... the $500 is written in stone. It could be $1,000 or it could be even $2,000. I just... again, I agree with the Court. I don't think it's talismanic and we... we really don't hold to that. William H. Rehnquist: Baldwin didn't say anything about a fine, did it? John J. Graves, Jr.: No sir. I think it was pretty much the incarceration factor. Speaker: Six months. John J. Graves, Jr.: And I think you pretty much stood on that. But the nature of the offense. The bright line test lived in Baldwin and in... and in the Duncan cases. But you've got a residuum test that lives beyond that, which is the nature of the offense of the test, and the lower courts have found... many lower courts have found... there are some that have not... have found that this is, in fact, a serious crime, that the nature of the offense is serious. In Baldwin, for example, in footnote 6, any incarceration in excess of six months carried the right to jury trial. And in that footnote, per Justice Whiter there was no overruling of Clawans or Colts. And in Duncan, which preceded it by two years, sentences up to six months if the offense otherwise qualifies as a petty offense. And even as late as 1976, in Ludwig v. Massachusetts, it's a petty offense usually defined by reference to the maximum punishment. And as far as the nature of the offense, of course, although it's sui generis, this Court still uses the nature of the offense in contempt cases. So it's certainly a test that is viable and is usable. And we have cited cases that the lower courts have found driving under the influence to be a malum in se crime. It was not apparently indictable at common law, although there was one case, United States v. Hart-- Thurgood Marshall: I, I assume you'd be satisfied if the penalty was a minimum of 25 years and you were given a jury trial. John J. Graves, Jr.: --I would not be satisfied with that, sir. I wouldn't want this to get out of hand. Thurgood Marshall: Well, I was just wondering the way you were going with your argument. John J. Graves, Jr.: Well, sir, I don't... I can't make a general statement. I just know that under the... the statute that we have here, sir, that we feel that this particular crime is serious not only because of the nature of the offense, but also because of the penalty and because 30... or 43 or 44-- Speaker: xxx. John J. Graves, Jr.: --Sir? Thurgood Marshall: If it's serious, then the penalty should be more. John J. Graves, Jr.: Yes, sir. And in-- Thurgood Marshall: Is that your argument? John J. Graves, Jr.: --No, sir, I'm not-- Thurgood Marshall: Well, we can't raise the penalty. John J. Graves, Jr.: --I'm not suggesting, sir, that the penalty ought to be more and then grant us the right to a jury trial. I'm suggesting that the crime per se carries the right to a jury trial because it is malum in se and has been so held by the lower courts. What I'm suggesting to the Court is that 20 to 22 states, in fact, do punish first offense driving under the influence by one year: New York, Alabama. There are places that punish driving under the influence first offense by one year, and they give you a right to a jury trial. And if the Court reviews its cases in this regard... and you take Callan, for example, 1888. Is... it is an offense of a grave nature affecting the public at large. That's DUI. Schick, 1904 it is a crime true of moral delinquency. Colts, 1930, it is a grave offense. That is DUI. And then when you take a look at the mala prohibita crimes, the Colts in 1930... for the Court to characterize reckless driving, or in this case DUI, as a petty crime, would be to shock the general moral sense. And this... this Court may write a decision that says that driving under the-- Antonin Scalia: In fact, this is a malum prohibitum, isn't it? What's the alcohol level here? Is it the case that everyone who has this... this amount of alcohol in his blood is necessarily impaired? I thought the level was set at such a point where someone could be, and so even if you have a greater immunity, the effect of alcohol on some other people, if you get picked up, it's your tough luck. And I would consider that a malum prohibitum. I mean, to be fall... falling down drunk when you're driving is malum in se, but to have your alcohol level above a certain point where someone else might be affected but you aren't, do you consider that malum in se? John J. Graves, Jr.: --Well, yes, sir. But I'm not sure that you can make the distinction between an alcohol level and whether somebody else is going to react differently to alcohol than anybody else. In the State of Nevada-- Antonin Scalia: Well, you're saying it's malum in se to have point whatever the... the thing in your blood is? John J. Graves, Jr.: --Well, what I'm saying is that that is the, the considered judgment of the legislature of the State of Nevada that there are two ways to convict in the State of Nevada for driving under the influence. One is.10 or greater, and that's per se. It's presumptive that you're driving under the influence. The second one are the factual, that if you refuse a test, for example, then if you're weaving down the road and if your... your breath is wreaking of alcohol and there are other physical attributes, then... I think that in any event, that it's malum in se. Antonin Scalia: Is it-- John J. Graves, Jr.: The same penalties. Antonin Scalia: --You're saying if the legislature makes it unlawful, it's malum in se. John J. Graves, Jr.: No, sir. Antonin Scalia: Well, then, then, then you have to convince me that having.10 in your blood necessarily... that, that no reasonable person, no... no honorable person would consider driving with.10. I don't know that that's true. I think that's... that's a number picked with a good deal of, of, of safety margin to... to embrace some people who may, indeed, not be affected at that level. John J. Graves, Jr.: Well, as a practical matter, they are tried together. The.10 and also the physical characteristics, of course, are all tried together. But in any event, the.10 and the driving under the influence both carry the same penalties. So, no matter how you prove the case, you're still subjected to the same sentence and the same conviction of driving under the influence, and I don't think that the.10 or whether it was a.15 would make that much difference in, in the analogy. Perhaps I... I'm missing the question, but I don't-- Antonin Scalia: xxx I'm trying to figure out I guess how heinous this, this crime is viewed by, by the citizenry and if to be convicted means you were falling down drunk when you were driving, yes, I'd say that's pretty... a pretty heinous thing. But suppose the state passes a law that says we don't want people on the roads who have had anything to drink and they set the level, you know, real minimum. You shouldn't drink any alcohol within three hours before you drive. Now, would you consider that malum in se to violate that law? John J. Graves, Jr.: --I'm not... just for the fact of driving three hours before... or drinking three hours before you-- Antonin Scalia: That's right. The state says we're taking no chances. Nobody should have any alcohol in the blood. No drinks within three hours of driving. John J. Graves, Jr.: --So, any amount of alcohol in the blood then is going to be a malum in se? Antonin Scalia: Yes. Would that be malum in se? John J. Graves, Jr.: I don't think that that would be malum in se. Antonin Scalia: Well, then you've got to tell me why.10 is... you, you have to convince me that.10 really means that, that the average... at least the average person is, is seriously impaired-- John J. Graves, Jr.: Are we talking about driving and drinking at this time, the three hours before? All I can tell you, Your Honor, is that the... the State of Nevada has picked.10. Thirty-nine states have picked that level as presumptively under the influence, and that's the standard that we have to work with. And I'm sorry that I can't answer your question any more specifically, but if we're moving back from the area of driving under the influence to drinking three hours before you get onto the road and that is going to be a crime, just drinking three hours, that is a petty crime. That's malum prohibitum. But once you get behind the wheel, then you trigger this offense. There is no driving impaired in the State of Nevada. It's just driving under the influence. Antonin Scalia: --[inaudible] call it driving under the influence would be any alcohol in your blood. John J. Graves, Jr.: That... that probably would be a malum prohibitum crime because it is just too low. After three hours it would be in any event. The penalty provision... the... of this crime is not just the fine and incarceration as in Baldwin. As the Court has seen, the State of Nevada has moved away from just the fine and imprisonment and has moved on to other areas. Basically, what the state wants is to have their cake and eat it too. One of the, the penalties that I think is the most important of this particular crime is losing your license because you're losing the right to use the public highways. And the State of Nevada... and we're only talking about the State of Nevada. William H. Rehnquist: Is your license revoked in the criminal proceeding, or is it a separate administrative proceeding? John J. Graves, Jr.: It is a separate administrative proceeding. William H. Rehnquist: Well, that really isn't a criminal penalty then in many senses of the word. John J. Graves, Jr.: Yes, sir, it is because as soon as you are convicted of driving under the influence, then the court sends notice to the Department of Motor Vehicles and they will automatically revoke your license. William H. Rehnquist: Well, I, I thought you said a moment ago that your license could have been revoked before trial. John J. Graves, Jr.: Yes, sir, it can. There are two provisions in the State of Nevada. One of the provisions administratively is that as soon as you are arrested, if you have.10 or greater blood in your... of, of alcohol in your blood, then your license is revoked because of that. Then later on-- Speaker: That doesn't make... that doesn't make it a criminal proceeding. John J. Graves, Jr.: --No, sir. Speaker: Not so far. John J. Graves, Jr.: No. No, sir. And then we move on to when there is a conviction. And then when you are convicted, they revoke your license on the basis of the conviction. Now, they do give you credit for the time that you served over here. So, if your blood was.10 or greater and you got a 90-day suspension, you're convicted, and then over here you have a revocation because of the conviction. You are given the credit for the 90 days you have here over here. But there's still a penalty involved because you've got... the actual revocation is on your record at the Department of Motor Vehicles. So, they've got two chances to revoke your, your license, but we don't particularly speak about the first one since that really doesn't have anything to do with the criminal case unless you're actually convicted. In summation, I would... I would advise the Court that we think that you should apply all three tests and not to abandon the Baldwin standard. Now, it may be presumptively petty if the Baldwin standard is not breached, but we feel that in this particular case that all three should be utilized by the Court for this particular offense. My own opinion is that driving under the influence is really sui generis. There is no other crime of which I am aware that is really vying for serious status... none. And I've been in this area for probably six or seven years, and although, of course, defense attorneys always try to get jury trials as a... as, as a practical matter, they don't get them. This case... the lower courts... this type of offense... the lower courts are riddled... riddled... with instances where the, the courts have given jury trials in these types of cases. And, of course, this Court has said that there is, indeed, a commitment to jury trials. I mean, when you consider the types of offenses that this Court has denied jury trials in... the Clawans case; selling the unused portions of railway excursion tickets; and the Schick case, failure to stamp the oleomargarine; Natal, a private market six squares from a public market... those are trifling offenses. This is not a trifling offense. The cost of this-- Harry A. Blackmun: Now, when you say the courts are riddled with these cases, you're speaking of Nevada courts? John J. Graves, Jr.: --No, sir. I'm talking about... no, sir. Harry A. Blackmun: Let's talk about Nevada, shall we? John J. Graves, Jr.: All right. The State of Nevada... there is no right to trial by jury in a driving under the influence case. Now, in the lower courts, state and federal, many courts have allowed the right to jury trial in DUI cases. That's what I'm saying. If this Court were to rule for us, for the Petitioners, and allow a jury trial in the State of Nevada, this is probably what's going to happen. The state legislature is going to move this offense into the district court. Just like Ludwig v. Massachusetts, you're going to move it right... it's going to be moved right up there. There's a great waiver factor. I mean, we've shown that in our opening brief that there's a great waiver factor, not only in misdemeanor cases generally, but in DUI cases in particular. And it is also true in the Baldwin case. I mean, even in the State of Nevada, they're giving DUI jury trials in Washoe County, but we don't have them in Clark and the rest of the surrounding areas. So, even in the State of Nevada itself, we're granting jury trials. And lastly, I think that since the Court has ruled on punishment other than incarceration-- William H. Rehnquist: Washoe County granting jury trials after the opinion of the Supreme Court of Nevada in this case? John J. Graves, Jr.: --Yes, sir. It's my understanding from the ACLL's amicus curiae brief that... that in fact they are... I'd have to defer, but I think they're still granting jury trials. They just feel that it's coming, and they're going ahead and preparing of it... for it. And I think in 1987 they only had 12 at a cost of $4,000. Thurgood Marshall: We can't take judicial notice of facts in an amicus brief, can we? John J. Graves, Jr.: No, sir. Thurgood Marshall: Well, what are you telling us that for? John J. Graves, Jr.: Well, I'm just... I'm just indicating to the Court that I feel that... that may be true. I cannot persuade the Court otherwise, but that's just what I'm led to believe. But in any event, I would sincerely urge the Court to grant us jury trials in driving under the influence cases in the State of Nevada. And I would reserve the rest of my time if I could. William H. Rehnquist: Thank you, Mr. Graves. Mr. Zalaoras, we'll hear now from you. Mark L. Zalaoras: Mr. Chief Justice, and may it please the Court: At the outset, I wish to point out that the issue raised earlier with regard to the DUI punishment provisions in Nevada is set out... the statute, the punishment statute in full, is set out in the Nevada attorney general amicus brief, Appendix A, pages la and 2a. And essentially what that provides is it is the court's discretion whether to allow the defendant, the convicted defendant, to perform 48 hours of community service wearing the distinctive garb or whether to serve the minimum two-day jail sentence. That is literally what the statute provides. In, in-- Antonin Scalia: Why, why, why do you think they have that... wear that distinctive garb with that thing on the back of it? I... isn't that great indication that this is a shameful thing? Mark L. Zalaoras: --I think it's a-- Antonin Scalia: I mean, you... it wouldn't mean anything to have somebody wear that kind of a thing and it says I sold the unused portion of a railroad... railway ticket. That wouldn't-- [Laughter] That wouldn't get, get anybody to think less of you particularly, would it? Mark L. Zalaoras: --No. It... clearly it serves a couple a functions, one of which is-- Antonin Scalia: It's shameful, isn't it? Mark L. Zalaoras: --deterrence to the others. I would submit it would be to the person wearing it, yes. Antonin Scalia: It's shameful. Now, what if a state decides we're not getting enough conviction... convictions in child molestation cases because the, the young witnesses get intimidated by the courtroom and the jury and all of that, and we think that the real punishment in a child molestation case is just being convicted because that will ruin you. So, we're going to reduce the sentence from five years to six months and we're going to provide for trial of all child molestation cases without a jury. We're sure we'll get a lot more convictions, and that will be worth it. What do you think? Could a state do that? Mark L. Zalaoras: Is Your Honor's question would that offense still a serious offense in the-- Antonin Scalia: That's right. Mark L. Zalaoras: --constitutional context? Antonin Scalia: Yes. Mark L. Zalaoras: Not under the rulings from this Court, no, it would not. Antonin Scalia: You think... do you think that's what we'd hope... we'd hold? Mark L. Zalaoras: I believe that's what the Court would hold under the present-- Antonin Scalia: You would like that result that, that people could be convicted of child molestation without a jury trial. And you think-- Mark L. Zalaoras: --Not particularly. Antonin Scalia: --that's what the Framers really thought they were doing. Mark L. Zalaoras: Not particularly, but I seriously doubt, although I accept your hypothetical, that a state would make such a serious offense... if I may, by way of analogy to the state statutory scheme in Nevada, we have a misdemeanor annoying a minor offense, and that characteristically is prosecuted where there was no physical harm or no physical touching of the child other than perhaps exterior. We then have more opprobrious offenses providing a higher punishment than the six-month misdemeanor line. So, by way of example to the Nevada statutes, I believe what Your Honor is referring to is child molestations where there's some physical violation of-- Antonin Scalia: You would acknowledge that if I don't think that I would hold that way in the case of a child molestation statute that's reduced from five years to six months, then my concern in this case would be more than just the six months. It would also be whether this is a shameful crime or not, wouldn't it? Mark L. Zalaoras: --I, I don't see that that is analogous to this situation when you make it with reference to the distinctive garb. I would respectfully submit that it's not. Antonin Scalia: Just arguing about how shameful it is. Mark L. Zalaoras: Well, clearly it's shameful, but there are many misdemeanors for which a penalty such as provided in Nevada in the DUI law are also shameful. I would submit that domestic battery, for example, is a shame... shameful conduct. So is... in Nevada we have a scheme by which possession of drugs can be given misdemeanor treatment. That's shameful. Petty larceny, a crime of moral turpitude, is shameful So... and there's more moral turpitude in the mens rea involving a petty larceny offense than there is in a DUI offense. The Respondent submits that the decision below was compelled by the holding in logic of this Court's decisions in Duncan, Frank and Baldwin. There are three major points to this presentation. First, the bright line test of Baldwin established six months' incarceration as the threshold between petty and serious offenses. This rule is easily identified and ready... readily applied. It lends itself to uniform application throughout the-- John Paul Stevens: May I interrupt for just a moment because is the quest... the constitutional question I guess is whether this is a criminal prosecution within the meaning of the Sixth Amendment. Mark L. Zalaoras: --That's correct. John Paul Stevens: That's where the... what, what we're boiled down to. The six months was the decision in the Baldwin case. And your position is this is not a criminal prosecution. Mark L. Zalaoras: Oh, no, Your Honor. It's clearly a criminal prosecution under Nevada law, but it does not break the threshold established in the Baldwin case, which necessitates under the command of the Constitution, as this Court has interpreted it, for a jury trial. John Paul Stevens: Now, it would be a criminal prosecution within the meaning of the Sixth Amendment if the right to counsel were at stake, wouldn't it? Mark L. Zalaoras: The Sixth Amendment right to counsel that Your Honor alludes to clearly applies. John Paul Stevens: To this case. Mark L. Zalaoras: Yes, it does. John Paul Stevens: Because it's a criminal prosecution-- Mark L. Zalaoras: No. John Paul Stevens: --because that's exactly... the Sixth Amendment begins in all criminal prosecutions these different rights obtain. Mark L. Zalaoras: That's true, but more specifically because there's jail time that in fact has to be imposed. John Paul Stevens: But what you're really saying is that there are some criminal prosecutions that, that... some prosecutions are criminal within the meaning of the Sixth Amendment for one purpose but not for another. So, the same words have different meanings depending on what the right you're asserting is. Mark L. Zalaoras: No. The level of the criminal offense, as defined by the severity of the maximum authorized penalty, determines the jury trial question, not whether it is or is not a criminal prosecution. John Paul Stevens: Well, but that's not, of course, what the text of the Sixth Amendment says. Mark L. Zalaoras: That's true. William H. Rehnquist: Perhaps you could refer justice Stevens to the reasoning of the court in the Argersinger case to explain why the word "criminal prosecution", at least in the eyes of the court, could be read differently for one purpose than for the other. Mark L. Zalaoras: The... there is a parallel... and this is a point I wish to make in my argument... between the Sixth Amendment right to counsel and the Sixth Amendment jury trial right. That parallel... the key factor is incarceration. There is a distinction between the two as they are... have been accepted in our interpretation of those provisions. First, the right to counsel... it has been held that that is a key element whether the offense is a minor one, such as a misdemeanor in Nevada would be, or whether it's a more serious offense where a jury trial would come into play, that the accused is entitled at least to understand the nature of the proceedings and have the assistance of counsel. It's more important in the incarceration area... excuse me... the... where jail time is in the offing than it is when you get to the Sixth Amendment right to jury trial. There is great historical precedent that even predates our country for having non-jury adjudications where classified as petty offenses. This is the teachings of this Court's case precedent. The second point to which I refer this Court is that there is no constitutional mandate to provide jury trials for persons accused of drunk driving. To create such a right would extend the present limit of the Sixth Amendment right to jury trial, as applied to the states via the Fourteenth Amendment Due Process Clause, beyond the scope of that imposed upon the federal courts. John Paul Stevens: May I ask one other question along justice Scalia's lines? Supposing the... the judge had the authority under this statute to... not to put anybody in jail for six months, but just, say, make them wear this... this jacket for six months, do you think they'd be entitled to a jury trial? Mark L. Zalaoras: No, clearly not. And that I submit is an appropriate... although whether one personally agrees with it or not, I think it's an appropriate sanction that a state may impose. John Paul Stevens: What if they asked him to wear it for seven months? Mark L. Zalaoras: No, because incarceration... that is, the deprivation of liberty... is the essential point to the Six... Sixth Amendment jury trial right, and that does not provide deprivation of liberty, for the same reason the fine amount is not a significant factor in the determination of the jury trial right. John Paul Stevens: Six... six months and a million dollar fine, which would pretty much pauperize whoever is, is hit with that. That would not entitle you to a jury trial. Mark L. Zalaoras: Would that even be the case, the court... no court demands a million dollar payment or a hundred dollar payment on the spot at the moment of conviction. I would submit that a million dollars excessive. Whether it calls under the jury trial issue or not is another question. And I respectfully submit that's not before the Court at this time. However, to answer Your Honor's question, even that exorbitant fine is ameliorated by the ability of the defendant to pay it in installments or to work it off in community service. However, in Nevada... and this is why the million dollar fine, if worked off in terms of community service, would, would not match the million dollar amount. It's because the community service is limited to 120 hours in a misdemeanor. John Paul Stevens: I'm not talking about the particulars of Nevada. I'm talking about the principle you're asking us to adopt. I mean, we, we... we've said six, six months as a general matter, but you're saying that six months in prison is the only test. No matter what else you do to somebody, a fine of enormous amounts, making them wear jackets or anything else, no... nothing counts except six months in jail. Mark L. Zalaoras: That is the primary or the most relevant criterion-- John Paul Stevens: Why? Because we've said that. Mark L. Zalaoras: --No, because it... the Court has focused on deprivation of liberty. The restraint on liberty is the key that triggers the Sixth Amendment jury trial right, just as it triggers the right to counsel under the Sixth Amendment. That is the key. William H. Rehnquist: How about the liberty to wear what kind of shirt you want? Mark L. Zalaoras: Well, I would submit that that is... it pales in significance to incarceration of the person where they're forced to wear the jail garb and their, their liberty is, is confined to the cell in which they reside at the time of their incarceration. The Petitioners collateral consequences approach... and this is my third major point I wish to make... in reliance on the nature of the offense test are untenable. These concepts lack definable boundaries. They fail to provide courts with a clear-cut guideline to follow, and this is because of their vulnerability to subjective interpretation. The bright line test established six months as the maximum term of incarceration beyond which the jury trial right is triggered. Below that, the Court has held, a jury trial right is, is not invoked by the constitutional provisions. In Duncan, this case extended that jury trial right to the states through the incorporation doctrine of the Due Process Clause of the Fourteenth Amendment. However, there is a limitation on that extension. It applies to the states only to the extent that that jury trial right is imposed in federal courts. Should this Court rule in Petitioners' favor, in fact, there will be extended a greater constitutional right broader in scope than that that is imposed upon the federal courts. This is in direct violation to the Duncan ruling. It also-- William H. Rehnquist: Why... why do you say it will be greater than that imposed for the federal courts? Mark L. Zalaoras: --Because the Petitioners have relied upon not the six-month incarceration rule, but these collateral consequences of the conviction. In the federal courts, the... well, this Court has determined that in a federal case, Frank v. The United States, that a three-year probationary term, which has more onerous restraints or the defendant than does the statutory scheme of DUI in Nevada, resulted in the Court finding in Frank that it was not a serious offense in the constitutional context of that term. William H. Rehnquist: So, what, what, what you're saying in effect is that if we rule for the Petitioner here, we will, in effect, overrule the Frank case? Mark L. Zalaoras: That's correct, and, and the Duncan ruling. The application of Duncan, that Duncan made of the Sixth Amendment to the states, is limited to the extent to which it is applied in federal courts. I submit that that... that would be the only alternative. You'd have to overrule... you'd have to extend it beyond that provided to the states. Now, I think Frank illustrates the point. Frank was a federal criminal contempt matter. And the court in sentencing... rather, suspended sentence on Ben Frank and instead imposed a three-year term of probation with, and I wish to note, the specific probationary conditions imposed on Mr. Frank. First, he was not allowed to travel outside the state without permission of the probation officer. He was required to work regularly, secondly. Thirdly, he has required to report any changes in his work schedule with his probation officer. He was told he could only associate with law-abiding persons. And he was to maintain reasonable work hours. I submit that those conditions placed on the probationer in the Frank case are much more forceful restraint on liberty than are the collateral consequences to which the Petitioners rely. I believe this puts Petitioners, in, in essence, in a checkmate position on their argument out of which they cannot come without overturning that... the basic ruling of Duncan. Again, the critical distinction in the Sixth Amendment jury trial and Sixth Amendment right-to-counsel cases is the deprivation of liberty, the punishment. Specifically, with regard to some of the collateral consequences to which the Petitioners allude, I think a short analysis is appropriate and especially in comparison with the probationary provisions in the Frank case. The mandatory jail provision is ameliorated by the fact that the defendant could perform the 48 hours of community service. It's further ameliorated by the fact that characteristically courts credit the individual for the time he served in jail at his arrest and do not require an additional two days, if in fact he served two days before he came before the magistrate for his initial appearance. Secondly, Petitioners have referred to the enhancement aspect of the DUI statute; that is, that for second and third offenses, the penalty rises, and on the third offense it would become a felony. That is not an unusual statutory scheme, because of the habitual criminal act we have in Nevada and that many states provide. For example, after the third petty larceny, it becomes a felony upon prosecution and conviction of the fourth petty larceny if the, the district attorney determines to file it as a felony. And that calls for a mandatory minimum of ten years in prison with a maximum of 20 years. Moreover, in the petty larceny realm still, after the fifth petty larceny conviction... that is, upon the sixth petty larceny... the statute provides for life imprisonment in Nevada. Cannot the same argument be made, unlike what I think counsel for Petitioners has suggested, that someone may come before this Court, if they're able to reach this level, and argue in a petty larceny case that, well, I'm subject to enhanced penalties, and if I commit five more petty larcenies, I'll go to prison for life, therefore, it's serious in the constitutional context? I believe this is analogous to their argument regarding enhancement. It also holds true for the domestic battery situation, with regard to enhancement and also with regard to the claim that the social program that accompanies the conviction for DUI is somehow significant enough to elevate what is otherwise a petty offense into the serious category. For example, in domestic battery in Nevada, the officer must make an arrest if there was a battery committed between persons who are related by blood or marriage and there is some other evidence, such as physical evidence, to indicate that that crime has occurred. That person cannot make bail for 12 hours. It's a non-bailable offense, which at this point of, course, is merely an accusatory stage. In addition, there are other collateral consequences. Once a, a battery conviction results, the court has the ability to require the person to attend a counseling program, and if the victim is over... is 65 years of age or older, the Nevada statutes provide for, in effect, a doubling of the punishment, in which case it would arise into a serious offense and a jury trial right would have to be provided. But what these illustrate, these examples I've explained, is the fallacy in taking the Petitioners' approach of viewing the nature of the offense. The clear-cut guideline established by the objective approach that Baldwin indicates by looking to the maximum authorized penalty is, to paraphrase the Frank decision, the only objective criterion by which a line could ever be drawn on the basis of the possible penalty alone is how we separate petty from serious offenses. John Paul Stevens: May I ask you one other question about the way the statute works? The statute provides, I gather, the judge can sentence him to two days in jail, no, no... not less than two or more or to perform 48 hours of work for the community while dressed in distinctive garb. Could, could the judge pick the distinctive garb that the judge thought appropriate, or is there a statutory description of it? Mark L. Zalaoras: There's no statutory description for it. What is in the statute is all we have in terms of guiding the court. John Paul Stevens: So, if the judge thought that this wasn't distinctive enough, the judge could maybe add a dunce cap and a few other foolish looking things to the uniform? Mark L. Zalaoras: Well, as I say, the statute doesn't speak to it, so in theory, yes, it could. I would hope that some decorum would be engaged by any court in such a... such an endeavor, however, And-- John Paul Stevens: But supposing the judge really took something, the most outrageous... made people work in their underwear with a dunce cap or something crazy, that would still be... that wouldn't trouble you either I suppose. Mark L. Zalaoras: --It may trouble me as a prosecutor and an officer of the court. It certainly would. But it does not call into question the jury trial right. William H. Rehnquist: Was the defendant... were either of these defendants sentenced to this particular form of... of punishment? Mark L. Zalaoras: Bianton is... is still not in a convicted status. Fraley is, and I don't recall offhand if his two-day jail sentence was a matter where he was given credit or if he chose community service. He took an appeal, so in fact the... the conviction... the judgment following the conviction has never been enforced. William H. Rehnquist: Well, has the Supreme Court of Nevada ever approved the sentencing of someone to do their two days' community work in this kind of an outfit? Mark L. Zalaoras: No, it hasn't addressed the issue. William H. Rehnquist: And the statute says nothing about it. Mark L. Zalaoras: That's correct. The opportunity I suppose existed in the decisions below, but it was not addressed as the type of garb that was worn. Regarding the nature of the offense test and the... the reason I think why it's too subjective is best illustrated by language from Clawans which was reiterated in the Frank opinion, wherein it stated that doubts must be resolved not subjectively by recourse of the judge to his own sympathy and emotions, but by objective standards such as may be observed in the laws and practices of the community taken as a gauge of its social and ethical judgments. One other point I wish to make with regard to the national standards test to which Petitioners refer, and that is what I call the head count of states. I don't believe that has constitutional significance. Although it appears as though 44 states provide jury trials for persons accused with a first-offense DUI, they do so for one of three reasons. First off, their state constitution requires it; or secondly, their state statutory scheme requires it; and thirdly, the other reason why they provide jury trials is because the maximum authorized penalty exceeds six months. It exceeds the Baldwin bright line anyway. So, I don't believe that that is... it's in essence a red herring to argue that 44 states provide it and therefore Nevada should in this case. Morever, in Martin v. Ohio, this Court held that there was no constitutional dimension to the fact that 48 states had a particular approach to a criminal procedure, in that case the self-defense argument, and which side has the burden of proof. In that instance, Ohio and South Carolina were recognized as the only two states that placed the burden of proving self-defense on the defendant. And the Court there found that there was no constitutional dimension to the fact that 48 states did so. Without further questions, I thank the Court. William H. Rehnquist: Thank you, Mr. Zalaoras. Mr. Graves, you nave two minutes remaining. John J. Graves, Jr.: Thank you, Your Honor. I'll be brief. William H. Rehnquist: You'll have to be. John J. Graves, Jr.: Yes, sir. This Court has ruled in several cases, not per se on the jury trial issue, that the offense of driving under the influence is, is quite serious. Justices White and Rehnquist, now Chief Justice Rehnquist, of course, in that decision, Welsh v. Wisconsin, and in other cases have found-- William H. Rehnquist: Could you speak up a little bit, Mr. Graves? John J. Graves, Jr.: --I'm sorry, sir. Have found... this Court has, has painted the offense of driving under the influence in very somber tones. Responding quickly to the clear-cut guideline test, the only thing that I can tell the Court is that the lower courts have been applying all three tests for years. Even in the Landry v. Hoepfner case in the Fifth Circuit, which does not rule in our direction, applied all three tests. And I think with respect to them that it was afraid not to because you can't just say, well, it doesn't apply to Baldwin or it doesn't fit the Baldwin rule and therefore we... we're going to deny the right to jury trial. The-- Thurgood Marshall: Do you want us to change Baldwin? John J. Graves, Jr.: --No, sir. No, sir, not at all. Baldwin has worked well. Counsel spoke about the Frank case and having to overrule Frank. I would think that losing a driver's license is more serious than living the life of a normal citizen in the community. If you lose your license for 45 days, you may lose your job. And if you don't get a restricted license, you're going to lose it for 90 days. And I think that's... that's pretty serious. William H. Rehnquist: Yet, you can use... lose your driver's license by just driving with a... an expired license. I mean, it wouldn't have to be a criminal proceeding at all. John J. Graves, Jr.: No, sir, that's true. But in, in this... in this particular case... and I'm out of time. In this particular case, it is a direct result of the penalty. William H. Rehnquist: Thank you, Mr. Graves. The case is submitted.

William H. Rehnquist: We'll hear argument now on number 01-6978, Gary Albert Ewing versus California. Mr. Denvir. Quin Denvir: Mr. Chief Justice, and may it please the Court: In March 2000, Gary Ewing walked into a Los Angeles pro shop, took three golf clubs, stuck them down the pants legs, and walked out. He was quickly apprehended for that crime. For that crime-- William H. Rehnquist: What was the value of the golf clubs? Quin Denvir: --Because the value of the golf clubs was approximately $1200, it was grand theft under California law. For grand theft, as a general matter, California provides a maximum sentence of three years. It also... because Mr. Ewing had served a prior prison sentence, he would be subject to a recidivism enhancement of one year, so the maximum sentence that he would have faced under California law, but for the so-called "three-strikes law", would have been four years in prison, which could have been reduced by one-half by his conduct in prison and his work in prison. However, because Mr. Ewing had a prior conviction for first-degree burglary, which has been classified as a serious felony by California, and for robbery, which has been classified as a violent felony by California-- Antonin Scalia: Was it armed robbery? Quin Denvir: --He was armed with a knife at that time. And because of those two convictions, he came under the California "three strikes and you're out" law. And as a result of that, he received a sentence of life imprisonment and with a... with an added bar that he could not even be considered for parole for 25 years. Anthony M. Kennedy: Would it be fair to add that another reason for the sentence was that the judge did not disregard the priors, and that was because the judge had the record in front of him and the record showed other... a history of other offenses? Would that be a fair statement? Quin Denvir: It is correct, Your Honor. It... the judge did have discretion to strike the priors or to reduce this wobbler offense to a misdemeanor. She declined to do so, partly on the basis of his prior record. His prior record were all misdemeanor convictions prior to that time. But-- Anthony M. Kennedy: They were all misdemeanors? Quin Denvir: --Yes, Your Honor. All his... he had... the prior convictions that he had were felonies were four felonies, all occurred within one year, in 19... in one month, in 1993. There were three first-degree burglary convictions, and then there was one robbery conviction. He had other-- William H. Rehnquist: Well, now, those surely are not misdemeanors. Quin Denvir: --No, Your Honor. I was... I thought Justice Kennedy's question was directed not to the... what they call the "strike priors", but to the fact that he did have other-- William H. Rehnquist: Oh, other than-- Quin Denvir: --previous crimes that were misdemeanors. William H. Rehnquist: --other than the burglaries. Quin Denvir: I think that's... the sentencing judge relied on that, to some degree, in denying him any discretionary-- William H. Rehnquist: Now-- Quin Denvir: --relief. William H. Rehnquist: --it actually went back to 1984, didn't it, with grand theft in '84, grand theft in '88? Quin Denvir: Your Honor, the grand theft actually was a misdemeanor, as we've shown in the appendix to our reply brief. There was... there was a misconception that that was a felony. And in fact, it was a misdemeanor in Ohio, the first-- Ruth Bader Ginsburg: That was the Ohio offense. Quin Denvir: --I-- Ruth Bader Ginsburg: The-- Quin Denvir: --I'm sorry. Ruth Bader Ginsburg: --the one that was alleged to be a felony, I think, in the government's brief-- Quin Denvir: Is in-- Ruth Bader Ginsburg: --I think that it was only a misdemeanor. Quin Denvir: --In fact, we've attached the governing court records as an appendix to our reply brief that shows it was a misdemeanor. Antonin Scalia: How many... how many convictions in all, felonies plus misdemeanors? Quin Denvir: Your Honor, I believe that he had the four... the four prior convictions... the strike convictions, the felonies, and I think he had another nine misdemeanors, and then this present offense. I think that's the-- Antonin Scalia: And the purpose of the three-strikes law, as I understand it, is to take off of the streets that very small proportion of people who commit an enormously high proportion of crimes. I forget what the statistics are, but it's something like, you know, of those convicted, 20 percent commit 85 percent of the crimes. It sounds to me like your client is a very good candidate for that law. Quin Denvir: --We got... we got-- Antonin Scalia: I mean, if that's a reasonable law. It seems to me this is precisely the kind of person you want to get off the streets. He's obviously going to do it again. Quin Denvir: --Your Honor, we believe that the law, in itself, is not unreasonable and it could result in a proportionate sentence. It did not in this case. Under this court's decision in Solem versus Helm, the Court has said that you can look to the prior record as relevant to the sentencing decision because it aggravates the present crime, but the focus must remain on the present crime. William H. Rehnquist: Well, Solem stands with Rummel and with Harmelin. They're really three different points, and Solem is probably the case that favors you most. But certainly Rummel is good law, and Harmelin is good law. And I think those cases don't favor you. Quin Denvir: Well, Your Honor, I believe that Rummel... the Court said in Solem... the majority opinion said that Rummel would be controlling only in a similar factual situation. We do not believe we have that here. And as far as Harmelin was concerned, the basic principles of Solem were reaffirmed by seven justices in Harmelin and, we believe, when applied here, will show that this is a grossly disproportionate sentence. Ruth Bader Ginsburg: Mr. Denvir, would you clarify whether your challenge is strictly as applied? Because some of the... some of the points that you make seem to be going to the statute wholesale. So, for example, you talk about it... the statute's infirm, because it has no washout for aging offenses, but there was no such offense at stake here. The strikes were all rather recent. Quin Denvir: That's correct, Your Honor. And-- Ruth Bader Ginsburg: So-- Quin Denvir: --and to answer your question, we are challenging only the sentence that Mr. Ewing received for the crime that he committed, that he was sentenced at. There's much discussion on both sides of... as... I... as the background of the three-strikes law. We have no doubt the three-strikes law could result in a... in a constitutional sentence. It did not, in this case. So however the scheme is that reached this sentence, this life sentence for stealing three golf clubs, that sentence is... falls under the Eighth Amendment, in our view. Ruth Bader Ginsburg: --But we... so we should leave out things like no washout, that someone who never served any time would subject to the three strikes-- Quin Denvir: I think that's correct, Your Honor, that they don't play into this case. And I think that... as I said, that the three-strikes law is merely... it's the process that produced an unconstitutional sentence. It could have been produced by a different sentencing scheme, also. Anthony M. Kennedy: --Well, when we're examining the constitutionality of the three-strikes law, as applied to this sentence, we should take into account, should we not, the purposes of the California law, which was to have a law which was... gave simple, clear notice of the three-strikes policy? And if you want us to take case-by-case, then that whole policy is undercut, it seems to me. Quin Denvir: Well, Your Honor, I don't... I don't think that's true. In Solem v. Helm, the Court made very clear that it was looking only to the sentence that was imposed on Mr. Helm. Anthony M. Kennedy: Yeah, I was going to ask you about that, because you had said that the principal focus has to be on this sentence. I'm just not sure what your authority for that is when we have a recidivist scheme of this kind. Quin Denvir: Well, Your Honor, the... in Solem versus Helm, the Court, of course, had a recidivist scheme. The focus there was on number of prior offenses, as opposed to the nature of the prior offenses. The Court said that the defendant, under double-jeopardy principles, cannot be punished for those prior crimes; however, they are relevant to the... to the sentence imposed for the present crime. And the... and the reason they are relative... and the Court said this best in Gryger versus Burke... is what they... what they... what they authorize is a, quote, "stiffened penalty for the latest crime, which is considered to be an aggravated offense because of repetitive one. " That's at page 8 in our reply brief. But what Solem v. Helm made very clear is, although the prior crimes are relevant, the focus must remain, when judging proportionality or gross disproportionality, on what this... what this defendant did at this time, what he is being sentenced for at this time. Anthony M. Kennedy: I'm just not sure how that works. What am I supposed to do with recidivism as a factor in analyzing this sentence? Quin Denvir: Your Honor-- Speaker: Give it some weight, but not controlling weight, or something like that? Quin Denvir: --I think that what the Court can say is that his prior crimes are relevant, in the sense that they make this crime a more aggravated crime than a crime committed by a first offender-- William H. Rehnquist: Well-- Quin Denvir: --and that there can be a reasonable enhancement for that. But in this case, he has been sentenced to... he has... his sentence has gone from a maximum of three years for a first offender to life, all based on the recidivism. William H. Rehnquist: --Well, why-- Quin Denvir: At that point-- William H. Rehnquist: --why can't the State say that... where a person has a string of convictions like this man has, that it's time to get him off the street, as Justice Scalia says, that he simply cannot conform to the law? Quin Denvir: --Your Honor, if he, in fact, committed a crime at this point that was a serious or a violent crime, they may have a basis, but what the Court has said very clearly is that-- William H. Rehnquist: What-- Quin Denvir: --is the focus remains on this, because otherwise-- William H. Rehnquist: --What-- Quin Denvir: --he's being punished for the prior crimes. I'm sorry, Your Honor. William H. Rehnquist: --Well, what's the reason for saying that though... that you can only... that the focus remains on this crime, but others are relevant? I mean, that really is kind of meaningless, it seems to me. Quin Denvir: Well, I don't think so, Your Honor, because, as I say, what the Court has said over the years is that the important part about the prior crimes is that it shows that this is a repeat offense. And the fact that he has committed offenses in a row makes this particular offense worse. The fact that he has committed worse offenses in the past does not aggravate this crime. I... this is... this still remains shoplifting three golf clubs, regardless if he had been a triple murderer or anything else, and that's what he's being punished for. Because if he's being punished because of those prior crimes, their nature, there's really serious double jeopardy-- Antonin Scalia: What do you think would be enough? Thirty years? Would you like 30 years for walking off with three golf clubs? Quin Denvir: --Your Honor, I... the... if you... if you look at our-- Speaker: I mean, if you're going to look on it as just stealing three golf clubs, and cast a blind eye to his long record of criminal activity, I don't know why you can give him any more than, you know, a couple of years. Quin Denvir: --Well, Your Honor, if you look to our... to the comparison with other jurisdictions... and I just don't think this has been highlighted in our brief... there are only... there are only five jurisdictions that would have allowed a life sentence. There's only one additional jurisdiction, Montana, that would have allowed a term of years as great as the minimum sentence here, and that's... Montana allows... is five to a hundred years. And most states allow for either grand theft or recidivist grand theft-- Speaker: But we said-- Quin Denvir: --ten years at the most. Speaker: --we said in Rummel, there's always going to be some state that punishes more harshly than others. And certainly it was not intimated that that state, therefore, would... it was cruel and unusual. Quin Denvir: No, that's correct, Your Honor. In Solem v. Helm, the Court noted that he could... that Mr. Helm could have received a comparable sentence in one other state, and nevertheless held that it fell under the Eighth Amendment. Speaker: Well, just help us one more time. The prior history is relevant, but then how relevant? Quin Denvir: Well, Your-- Speaker: You say the principal focus has to be on the three golf clubs, like we're some judges out of Victor Hugo or something and that's all we have to focus on. But this... there's a... there's a long recidivism component here, and that's the whole purpose of the California law that you're asking us to ignore, it seems to me. Quin Denvir: --Your Honor, and... what I'm saying is... I'm going back to what the Court said in Solem v. Helm in its analysis, which I think is controlling here. It made... it made the point that the... the prior convictions... he cannot be punished for those, but they do aggravate this present crime that he's being punished for. And the way they aggravate it is that... is that this shows that it's a repetitive offense. Now, he can have a reasonable enhancement of the normal penalty for grand theft based on the repetition aspect of it, but at some point it becomes unreasonable. And it becomes unreasonable if you go from three years to life based on his prior crimes. At that-- Speaker: Why isn't is reasonable to say if he commits another felony... he's committed, you know, three already and nine other convictions... "One more felony", California tells him, "and you go away for life. " Why isn't that reasonable? And this... and this was a felony. Quin Denvir: --Because of the nature of the crime that he committed, which is stealing three golf clubs, a crime that is not deemed either serious or violent under California law. Speaker: But is a felony under California law. Quin Denvir: It is a felony. It's actually a wobbler and could be charged either way. Speaker: Why-- Quin Denvir: But in this case, it's a felony. Speaker: --Why can't California decide that enough is enough, that someone with a long string like this simply deserves to be put away? Quin Denvir: Well, Your Honor, if that were true, then there would be no limiting principle on recidivist laws under the Eighth Amendment. It would... at that point, you could say the mere fact that he broke any law... if he broke a traffic offense... a petty offense would show that he couldn't follow the law and could get a life sentence. Speaker: Oh, I'd be with you there, if it was a misdemeanor or, you know, some... but this is a felony under California law. Quin Denvir: It is a felony, and it's one of the least grave felonies in California. Sandra Day O'Connor: But we have given... we've said, at least, here, that we are going to give great latitude to state legislatures in determining how many years to give, and how to categorize an offense. Why don't... why don't we look to the Harmelin case for the standards, rather than Solem? Speaker: Harmelin came later. Quin Denvir: Well, Your Honor, I think you do, because, as I understand the Harmelin case, if you take the dissent and the plurality, they both agreed on the basic principle here, which is that there cannot be gross disproportion between the offense and the sentence. And the reason I go back to Solem versus Helm is that it was a recidivist case and there was some further information. I don't... as I read the Court's opinion, at least the plurality opinion, in Harmelin, the big change was that you would... you would not look automatically to intra-jurisdictional or inter-jurisdictional comparisons. You would first have to find an inference of gross disproportionality before you'd go to the second... the other two steps. That's what I understood to be the major... the major refinement of Solem v. Helm that was in the plurality opinion. Stephen G. Breyer: I'm slightly stuck on this, because I... I'd like... there is some relevant information that I can't get a hold of, and you may some in your experience, but it isn't in the brief. Imagine... let's take the set of people who have committed at least two serious crimes or more, maybe 50 serious crimes. They're very serious criminals. And they're warned, "If you do anything again, you've had it. " So think of that set of people. Now, I would like to know, in light of that set of people, now one of the members of that set commits a crime equal to stealing $1200... whether they steal $1200 or equal to that; that's a very subjective judgment... what's the longest sentence such a person has ever actually served? Here, they are going to 25 years, real years. And the second question I'd like to know is, What is the least bad crime that such a person ever committed who did serve 25 real years? Quin Denvir: Well, Your Honor-- Stephen G. Breyer: I'd like to know both of those things. And, obviously, they're find-outable. Quin Denvir: --I... let me see if I can answer your question. As far as under the three-strikes law, there is... because it sets this absolute minimum of 25 years... it's a life sentence, but it adds a kicker to it which says, unlike other life sentences, you have to wait at least 25 years before you can even be considered. So we... since this law was passed in 1994, we have no experience with this law. Stephen G. Breyer: Obviously, I don't want experience-- Quin Denvir: Right. Stephen G. Breyer: --under this law. That would be circular. Quin Denvir: Well, Your Honor-- Stephen G. Breyer: What I'm looking for is, in the absence of this law-- Quin Denvir: --Oh, I'm sorry. I understand-- Stephen G. Breyer: --in the absence of this law, what is the longest sentence a person like yours... and I'm defining 1200. And there's loads of records... I mean, in the California Adult Authority before this law was passed, et cetera. And the second question is, What is the least bad thing such a person who really served 25 years did? Quin Denvir: --Your-- Stephen G. Breyer: That... those are empirical questions, and you're talking about this being unusual. Speaker: I don't know if it's unusual unless I know what happened to other people. Quin Denvir: --Well, Your Honor, I don't... I... there's nothing in the record that would answer that, but let me see if I can answer it in a different way. But for the three-strike law, Mr. Ewing, with his record, could receive no more than four years. Now, there are other recidivist laws in California besides the three-strike law. Stephen G. Breyer: Under the California Adult Authority, which was only the law in California for 70 years, people could receive very, very, very long sentences. Quin Denvir: They could, Your Honor, and California is-- Stephen G. Breyer: And... not this long for this thing, but... but... but-- Quin Denvir: --I think that's right. I think the long sentence... the... California substituted determinate sentencing law for indeterminate in 1977, and... but under the old indeterminate sentencing law, my clear recollection is that those long, indeterminate sentences were always triggered by serious or violent felonies, and that is something that-- Stephen G. Breyer: --No, they... I've looked it up, actually-- Quin Denvir: --No? Stephen G. Breyer: --and you're quite right that this is not as... you couldn't get this long a sentence, but you could get a pretty long one for being a third offender and committing a property crime. Quin Denvir: And-- Stephen G. Breyer: But I... that doesn't tell us how long the people actually served. Quin Denvir: --Well, Your Honor, if you look for the question of parole in California, which the... which the State suggests is... saves his life sentence, the Court looked at this in 1995 in the case California Department of Corrections versus Moralez. And what the Court said at that time was that 90 percent of all defendants who came up for their first parole hearing were found unsuitable for parole and that 85 percent were found unsuitable at subsequent hearings. Now, that has not improved any, because, as you'll see in the amicus brief of Families Against Mandatory Minimums, at page 18, as of 2000, the Board of Prison Terms, which is the... which is the parole authority... their official records show that they only recommended parole in 1 percent of the 2000 cases that came before them with a life sentence. Speaker: Mr. Denvir, can't the people of... this thing, by the way, was not adopted by the legislature, was it? It was adopted by plebiscite, of the people of California-- Quin Denvir: By both, Your Honor. Speaker: --By both. Quin Denvir: Both by legislature and by-- Speaker: By plebiscite. So the people of California decided, "We want to be tougher". Why do we have to be bound by whatever the more permissive scheme was earlier? The people of California knew that scheme, and they decided, "This is no good. " "We still have too much crime. " "We're not punishing people enough, or we're not keeping them... keeping them incarcerated long enough. " Why do we have to be bound by whatever the previous record was? Quin Denvir: --Well-- Speaker: It seems to me the question before us is, Is it unreasonable to put away somebody who has this record? Quin Denvir: --Your Honor, first of all, as to the question of initiative versus legislation, it is my understanding that the Court, in other areas, has said that there's no greater deference given to one than the other. But the other question is, there's no doubt that some deference has to be paid by this Court to legislative judgments or initiative judgments in the questions of punishment and in dealing with recidivists. The Court has made that very clear. But it is that deference that has led to the Court setting a very forgiving standard. The Court said that it would not require, in this area, or as excessive fines, strict proportionality between the crime being punished and the sentence. It has said it was only when there was a gross disproportion, and that's a very deferential standard. That is a standard that allows the legislature to make many reasonable judgments, but says that-- Ruth Bader Ginsburg: So how do you decide-- Quin Denvir: --some judgments are unreasonable. Ruth Bader Ginsburg: --how much is too much? Quin Denvir: Well, Your Honor-- Speaker: What's the-- Quin Denvir: --life imprisonment for... for the crime of stealing three golf clubs, we believe, is cruel and unusual punishment. Stephen G. Breyer: --It's not life imprisonment. Speaker: But we're just doing-- Stephen G. Breyer: --It's 25 years. Quin Denvir: Your Honor-- Stephen G. Breyer: It's 25 years that he'll really serve. We know that. As far as... what happens after those 25 years is a matter of parole or a decision by other people. Quin Denvir: --Your Honor, the sentence that he's been given is life in prison. He's been consigned to die in prison unless some administrative agency determines to let him out. And as I've just quoted you-- Stephen G. Breyer: But I mean, parole, in all the cases you're citing, is relevant, so you can describe it as you want. We both know what the facts are. The facts are he has to be in jail for at least 25 years, and then he might be paroled. Quin Denvir: --And he might be, but on... there is no... there is nothing in this record that would suggest he has a reasonable expectation in that regard. In fact... in fact, what's before the Court would suggest that there is not a reasonable expectation, particularly if the animus that drives... that drove the passage of this law continues for 25 years and they still think, "Well, gee, if they committed these prior crimes, they ought to be locked up for life, because they may commit other crimes. " Ruth Bader Ginsburg: In the statistics that you were quoting, though, those were not three-strikes cases. Quin Denvir: Those are not three-strikes cases. Speaker: Those are cases where people might have gotten reduced time for good behavior-- Quin Denvir: That's correct. Speaker: --none of which is... and one question I wanted to ask you, In view of the infirmities of Mr. Ewing... is he still alive? Quin Denvir: He is alive, Your Honor. He is-- Speaker: Counselor-- Quin Denvir: --he's lost... he's aged and has lost eyesight in one eye as a result, but he's still alive at this point-- Speaker: --How old was he at the time of sentence? Quin Denvir: --He was 38 years old. He's 40 years old now. So-- Speaker: Counselor-- Quin Denvir: --as a practical matter... I mean, this... 25 years is probably a life sentence for him, unless there's some major medical development that-- David H. Souter: --Mr. Denvir, you conceded a moment ago that the prior offenses can be considered for purposes of treating this offense as an aggravated offense, given the prior record; and yet when you answer... you've done this more than once... when you have answered the question of going to disproportionality, you have said, "It's 25 to life for stealing three golf clubs. " I don't think you can have it both ways. Either your argument is it's 25... the appropriate comparison is... or the appropriate characterization is "25 to life for three golf clubs. " in which case you, in effect, are telling us, "Ignore the priors; they don't aggravate. " or you've got to say, "It's 25 to life for stealing three golf clubs when you have a prior record. " --whatever it was, nine prior offenses, including four felonies, in this case. Which is it? Because I assume it may well affect the result. Quin Denvir: --Your Honor, I... if... I misspoke. What we say is the focus must be on the present offense. It is an aggravated offense. He is a repeat-- David H. Souter: But when you said that-- Quin Denvir: --a repeat offender. He is a repeat offender. He is someone who committed this offense with a prior record of offenses. David H. Souter: --Is it inconsistent with your position... when you say, "The focus must be on this offense. " is it inconsistent with that to say, "This offense... is stealing three golf clubs worth $1200 by somebody with a prior record of nine offenses? " Is that consistent with putting the focus on this offense, in the terms that you're using? Quin Denvir: I think it is, in the sense that it shows that there has... there has been some... there has been a series of repetition. But what I'm suggesting to the Court is that regardless of the repetition, the fact that it's a repetitive offense, if the focus remains on what he did now, the triggering offense, which, under Solem v. Helm, is the focus, then no matter what he has done in the past, no matter how much repetition, it is... it is grossly disproportional to sentence him to a life sentence. At that point-- David H. Souter: A hundred prior instances of stealing three golf clubs would not affect the analysis then on your view? Quin Denvir: --Your Honor, if there... if there were a... if there were a series of crimes of the same nature... for instance, if there-- David H. Souter: Well, I've just... I've just given you one. Quin Denvir: --Yes. David H. Souter: A hundred prior... three golf clubs every time, a hundred times... would that justify the treatment that he has gotten? Quin Denvir: Your Honor, I think that that would... that would show a propensity to steal golf clubs, but, again, I don't believe-- Speaker: I would concede that, but the-- [Laughter] Quin Denvir: --I don't believe-- Speaker: Posit further that his score has not improved. [Laughter] Quin Denvir: --He shouldn't be penalized for that. That may be beyond his control. David H. Souter: Okay, but if we... if we've got our crazy example of a hundred priors exactly like this, and we follow your verbal criterion at least of focusing on this event as aggravated, would this be disproportionate, grossly? Quin Denvir: I believe that life is, because it is still... the crime that has to be punished... I mean, and this is what the Court said in Solem v. Helm... this is-- David H. Souter: Well, maybe we were trying-- Quin Denvir: --you know, in Solem v. Helm-- David H. Souter: --maybe we were trying to have it both ways verbally because we were imprecise. But with respect, I think that's what you're trying to do. Because on the one hand, you concede, yes, it may regarded as an aggravated offense in light of the priors, and then in the next breath you say, "But the focus has got to be on this offense. " Quin Denvir: --Your Honor, I... Your Honor, there's no doubt that the prior record... and the Court has said that is relevant to the punishment for the present crime, and it does aggravate it. But there are limits to how aggravated shoplifting three golf clubs can be, no matter what has happened before-- David H. Souter: Even with the hundred prior instances? Quin Denvir: --Your Honor, it's still three... it's still stealing three golf clubs. It's not robbery, rape, murder, or something of that nature. I mean, it is... it is still there. I mean, the... to raise your question, what if someone had a long history of jay-walking and had seven or ten or a hundred convictions for jay-walking and jay-walked again? I think the Court would not say you could get a life sentence for that just-- Speaker: I don't-- Quin Denvir: --because it's repetitive. Speaker: --I don't think it would. And the reason it wouldn't is... I assume you would concede... is that jay-walking does not hurt other people the way 100 instances of stealing golf clubs worth $1200 hurts other people. Quin Denvir: It hurts in the sense that it's a property crime and causes-- Speaker: Well, you know, and-- Quin Denvir: --a loss, that's correct. Speaker: --and may lead to something beyond property crime. Isn't grand larceny much more likely to result in physical confrontation and-- Quin Denvir: Your Honor, I-- Speaker: --physical injury than jay-walking? Quin Denvir: --Your... it is... it is, Your Honor, and I think-- Speaker: Which is why it's a felony. Quin Denvir: --and I think that if there had been some... some violence that had actually occurred out of this, then he undoubtedly would have been punished under a different statute with higher-- Speaker: It's a serious crime, in part because of that... in part because of the risk of physical confrontation that he poses. Quin Denvir: --But Your Honor, California determined that when it set the ranges for grand theft-- William H. Rehnquist: Would you like... would you like to reserve time, Mr. Denvir? Quin Denvir: --If the Court has further questions, I'd rather answer the questions-- William H. Rehnquist: Very well-- Quin Denvir: --than reserve time. William H. Rehnquist: --Very well. You asked for it, you-- Quin Denvir: California considered that when they set the penalties for grand theft. And they set the penalty as a maximum of three years in prison. If they set different penalties for grand theft from a person, and for robbery, there is... there is... all those things are taken into consideration here. And the fact that this could have eventuated into something else, the fact of the matter is that it did not. And in fact, if anything, Mr. Ewing seemed to be doing everything he can to be... to get out of there undetected, if that... if you look at the facts of this crime. Speaker: --I'm curious about one thing. Was he really a very tall man, or were these irons rather than wood? [Laughter] Quin Denvir: Your Honor, to tell you the truth, I have no idea how he could have done that. It seems to me a miracle that he could have... actually got out the door, but he apparently did. He's not a very tall man, as I recall. Speaker: It is a good thing that walking is not an essential part of golf, because otherwise walking with those-- Quin Denvir: I think-- Speaker: --golf clubs in his pants would have been very difficult. [Laughter] Quin Denvir: --I think he was planning on removing them before he used them, I take it-- Speaker: He took a golf cart out to the car. [Laughter] Quin Denvir: --Your Honor, I would reserve any additional time, unless there's additional questions. William H. Rehnquist: Very well, Mr. Denvir. Quin Denvir: Thank you. Speaker: Mr. De Nicola, we'll hear from you. Donald E. De Nicola: Mr. Chief Justice, and may it please the Court: First, I think, in answer to Justice Breyer's question, I don't know what the statistics are under the old indeterminate sentencing law that was in effect in California until 1976. But in a way, I think the... Your Honor's question triggers an issue that I think is central here. The ISL, the old California law, was premised very explicitly on a penological theory that emphasized rehabilitation of the offender. I think the question that's raised in this case, and it's a question that's particularly apt in light of the Harmelin opinion, is, When can a state decide that they're going to move away from a more lenient policy of rehabilitation or extending leniency to a first-time offender, and move toward a policy, a tougher policy, of incapacitation? Stephen G. Breyer: So, tell me, am I fair to say assume there never, in the history of the United States, has been a person who... of the set... I'm only... I don't want to be pejorative; I want to characterize it your way, and I'll characterize it as taking the set of very serious criminals with very serious records, and a person in that set commits another crime, and the other crime is approximately theft of $1200... and am I fair in saying there hasn't been, ever, a sentence in the history of the United States in the last hundred years anywhere close to this one? And I base that on my knowledge... which you could get; it's public... of 35,000 real cases in the federal system where to get a sentence like this one for a prior offender, you had to... you have to now, you know, hijack an airplane, commit murder, something really serious beyond belief compared to this, and that the worst sentence you could get for something like this is about four, five years. And then I look to the California Adult Authority, and I see, under that sentencing, nobody could have gotten more than ten real years, and, indeed, the average was somewhere around five. And you have all those records, and you have come up with nothing in your brief. And therefore, can I say... my assumption is, this is by an order or factor of two or three times higher than anyone ever was sentenced before in the United States for such a thing? You see, I'm making a very extreme statement empirically, and I want to know what the response is to my statement, and I want to know why I shouldn't hold you to my statement since you have the information, and why I shouldn't say that's just way too much. Donald E. De Nicola: Well, again, Your Honor, I... the... my answer is that I do not know what those records would have shown. Speaker: I guess he shouldn't hold you to it, since you don't have the burden of persuasion here, do you? I thought you're defending a... a decision below. Donald E. De Nicola: Yes, and I did interpret the issue to be a proportionality issue rather than an unusualness issue. But I do... something in the recesses of my mind tells me that we had a three-time loser statute in California, and I think that put people away for life without parole. Stephen G. Breyer: Well, all right, how do we decide... how do we decide if you say, of this serious set of criminals, you go to jail for life if you jay-walk... I mean, the next time. Is that... is that disproportionate? How am I supposed to say what is or was... is not if I don't look to the empirical facts? And I'm not holding you to present empirical facts. I'm just saying, Why shouldn't I decide on the basis of empirical fact that is available? Donald E. De Nicola: Well, in our view, the most prominent, kind of, objective factor that this Court could look to in weighing this sentence is what the legislature has said are felonies. What California has done in this case is, they've narrowed their target to a subclass of felons who have committed what the legislature has deemed to be... and I think what, on the face of it, can reasonably interpreted as being... serious or violent crimes. Speaker: What's the limit for being... what is dividing line between grand theft and petty theft in California? Donald E. De Nicola: Four hundred dollars, Your Honor. Speaker: When I went to law school, it was $100, except if it was citrus that you stole, it was $50. [Laughter] Donald E. De Nicola: Now it's $100 if it's citrus. [Laughter] But once there is that predicate of serious or violent felonies set in place, then what the three-strikes law does is, I think, reasonably moves toward a policy of incapacitation upon the commission of, not just any new crime, not a misdemeanor or an infraction, but a new crime that the legislature has-- Speaker: One of the things that puzzles me about the statute... maybe you can enlighten me... I thought that if there were two priors that were violent but not related to property, such as murder and rape, that the third related to property wouldn't trigger the statute. Donald E. De Nicola: --No, Your Honor. The way the statute is written is that if the prior felonies meet the statutory definition of being serious or violent... if you have two of those, then any new felony triggers the three-strike sentence. Speaker: Even if you... if you had, say, a murder conviction and a rape conviction and then you committed a wobbler that was a property crime? Would the statute treat that as a third strike? Donald E. De Nicola: Yes, because wobblers are felonies, by definition, in California, and any felony qualifies. Speaker: Regardless of the character of the first two strikes. Donald E. De Nicola: As long as the first two strikes meet the level of being serious or violent, which-- Speaker: I see. So... and there's no requirement that it be related to property. I misunderstood. Donald E. De Nicola: --No, Your Honor. Speaker: All right. Stephen G. Breyer: Also, I don't know how to work with felony and misdemeanor, because, across the nation, my impression is that those are classified in very different ways, and they are classified sometimes according to the prison that you serve in, as in Massachusetts, and sometimes you can find a felony that, in ordinary common sense, is a lot less serious than certain misdemeanors. That's why I'm very pushed to know what to work with unless you work with empirical fact. Donald E. De Nicola: Well, we... in California, the felony is defined by the... not just the locus of where the term will be served, but also by the length. It's more than a year. And we think that that's a traditional line of demarcation between offenses that, over the course of time, society deems to be of elevated seriousness. Speaker: I think some of our constitutional jurisprudence makes it... makes... turns upon the distinction between felonies and misdemeanors, doesn't it? Donald E. De Nicola: Yes, Your Honor, I think that is so, and there are political restraints on the legislature in enacting laws in general applicability. There are certainly economic restraints on a legislature in deciding to set a punishment scheme that provides for long terms of imprisonment. That's costly. And that to... for a court to second-guess that, comes, we think, perilously close to the court suggesting that the legislature can, in some instances, not declare a certain crime to be a felony, but must declare it to be a misdemeanor, and we don't think there's anything in the Court's jurisprudence that would... that would support that type of an intrusion. Ruth Bader Ginsburg: Mr. De Nicola, there's a lot of discretion built into this scheme. It comes across as three strikes and you're out, and that's it; but it's not. There's discretion in the prosecutor and discretion in the judge. Are there, in Los Angeles or in California, any guides to prosecutors in exercising their discretion, say, whether to treat a wobbler as a misdemeanor or a felony? Donald E. De Nicola: There are no statewide standards. Each elected district attorney in the various counties in California has the option of promulgating guidelines. Some of them have. And the fact of the matter is some of them... some of them differ. We think that's a rather unremarkable event in light of the fact that prosecutorial discretion is always going to lead to some sort of different approach depending on local conditions. But there is not, as far as I know, any statewide guideline, and certainly nothing that would be binding on the local prosecutors. Ruth Bader Ginsburg: The prosecutor can charge something as a misdemeanor. As far as the striking a strike is concerned, is that solely for the judge? Or, I suppose, it depends on what's charged. The prosecutor can decide not to charge two strikes. Donald E. De Nicola: Yes, the prosecutor, under the statute, is required to allege the priors, but the prosecutor may seek dismissal of the prior strikes either in the furtherance of justice, or because of problems of proof. But the judge also has authority to strike strikes, even without the consent of the prosecutor, in California. And so-- Ruth Bader Ginsburg: And similarly, to reduce a wobbler to a misdemeanor. Donald E. De Nicola: --Yes, the prosecutor, in a way, has that discretion, because he or she can charge a... an alternative felony or misdemeanor as a misdemeanor in the first place, but even under the three-strikes law, the trial judge retains the discretion to sentence a... an alternative felony misdemeanor as a misdemeanor, and that would take the case out of the three-strikes scope. John Paul Stevens: May I ask you a question about your theory of the limits of the constitutional protection here? Supposing the offense was speeding... and it can be dangerous speeding... and you had a... you said that... 15 arrests for speeding gives you this very sentence we got in this case. Would that be permissible, do you think? Speaker: Just on the theory that Justice Scalia has explained... where this guy is just too dangerous, we just don't want him on the street anymore, so we'll put him in jail for life, 25 years without possibility of parole. Donald E. De Nicola: Well, we think that might possibly be constitutional, Your Honor. I-- John Paul Stevens: Possibly be constitutional or unconstitutional? Donald E. De Nicola: --Might possibly be constitutional. I think it's more likely that it would be-- John Paul Stevens: Well, why wouldn't it clearly be constitutional if we're thinking about protecting the public from repetitive offenders? Donald E. De Nicola: --Well, because I think the limiting principle that we're seeking here, Your Honor, is one that's premised on the felony classification. If the-- John Paul Stevens: Do you think the statute would have been unconstitutional if they had said it's a misdemeanor when it's $1200... if the legislature just, say, called the three golf clubs for $1200 by a misdemeanor instead of by felony, would that change the constitutional analysis? Donald E. De Nicola: --It... I think it would make the constitutional... it might change the constitutional analysis. It might make the result different. I think, again, once you have the predicate in place of the serious or violent felonies, then I think the reason you're-- John Paul Stevens: But serious or violent... it really doesn't have to be violent; it has to serious. But you could have had $1200 thefts, four or five of them, and he would still qualify, wouldn't he? Donald E. De Nicola: --No, Your Honor. If... the prior crimes have to qualify as serious or violent under the definitions of a separate statutory scheme, so they would not-- John Paul Stevens: But are there not serious crimes that are not violent? Donald E. De Nicola: --Yes, I think that's true. There are serious crimes where no injury is inflicted, but the crimes, I think, by their nature, tend to be crimes where the prospect of violence is rather imminent. John Paul Stevens: But they're... I'm just trying to... I'm trying to understand the theory. Is violence an absolute requirement, in your view, in one of the priors? Donald E. De Nicola: No, I think... I think-- John Paul Stevens: Okay. So then we could have something equivalent... maybe instead of $1200, $2000 or something. But if you just had five... or three or four $2,000 burglaries, that... do you... would that be permissible to put him in jail on the same sentence that you have in this case? Donald E. De Nicola: --I... again, Your Honor, I... it's a... it's a much tougher call. I think it might be permissible to do it, provided that the sentence allows for a possibility of parole, after the-- John Paul Stevens: After 25 years. Donald E. De Nicola: --Yes. That would distinguish it from Solem, Your Honor. But nevertheless, here, the predicate, even though the prior crimes don't necessarily have to involve the actual infliction of violence, they are crimes that by their nature-- John Paul Stevens: But in your view, violence is really more significant than the number of prior offenses, if I understand you correctly. Donald E. De Nicola: --Well, I think it might be a sliding scale, but I think violence does play a significant role and can justify a scheme like this, even in the absence-- John Paul Stevens: Okay. Donald E. De Nicola: --of a great number of priors. John Paul Stevens: But you... but I'm not quite sure what your view would be if there were no violence, but just seven or eight high-speed offenses, say, speeding, or $1200 golf clubs. Donald E. De Nicola: Well, we think a lot would depend on whether the legislature in the jurisdiction had determined for... for... on an historical basis and for reasons independent-- John Paul Stevens: Well, speeding is dangerous. People get hurt in automobile accidents. It seems to me it's exactly the same risk to the public that you have with this kind of crime. Donald E. De Nicola: --But we think... if the legislature declares those to be a felony, then I think we become a lot... we come a lot closer to-- John Paul Stevens: It depends on what the legislature calls the offense. Donald E. De Nicola: --Yes, it does, Your Honor, in a very significant respect, because what the legislature calls the offense in connection with it being a misdemeanor or a felony does reflect, we think, a reliable longstanding consensus of the... of the community. And under the Harmelin principles of deference and reliance and objective factors, we think that's a prominent objective factor. Stephen G. Breyer: On Justice Stevens' hypo, taking it one step further, I guess we would have to say that if there were 15 prior speeding offenses, and they had been classified as felonies in California, that there was no disproportion between 25-to-life for 15... with a predicate of 15 prior speeding offenses, on the one hand, and the penalties for torture and murder, on the other hand. Because I think it's undisputed that the only standalone penalties that are this great are the penalties for torture and homicide. That would be rather a stretch, wouldn't it, regardless of whether the legislature wants to put a felony label on them or not? Donald E. De Nicola: Well, again, Your Honor-- Stephen G. Breyer: Speeding's important, but-- Donald E. De Nicola: --Yes. Stephen G. Breyer: --I mean, torture and murder? Donald E. De Nicola: I do think that it is a much tougher case for us, and I'm not at all certain that it would be constitutional if all of the crimes, the predicate through the new crime, were simply speeding. I think-- Ruth Bader Ginsburg: Might it be an abuse of the judge's discretion not to reduce such a... if it's a wobbler, in such a case, or not to strike a strike? Donald E. De Nicola: --Well, I don't... in the California context, the question would only arise... well, I don't think it would arise at all, because you wouldn't have a speeding... even as a predicate, any felony-triggering events, and the speeding wouldn't qualify as a serious or violent felony under the statute anyway. So this hypothetical is very far removed from the three-strikes scheme that California has in place. Antonin Scalia: I would have thought that your response to Justice Souter would have been that it might seem disproportionate insofar as the penal goal of punishment or retribution is concerned, but it depends on what you want your penal goals to be. California has decided that disabling the criminal is the most important thing, and in... from that point of view, it's not necessarily disproportionate. The one is disabled as the other. Donald E. De Nicola: Well-- Antonin Scalia: I mean, proportionality... you necessarily have to look upon what the principal objective of the punishment is. If the objective of... if the objective is retribution, then, sure, I guess it's disproportionate to execute somebody for killing only one person, when you do no more than execute somebody for killing 20 people. But if your purpose is disabling the criminal, I'm not sure that it... that the example that Justice Souter gave is disproportionate. Donald E. De Nicola: --Well, again, Your Honor, I don't... I don't think I would absolutely concede that it would be unconstitutional. I'm just saying that-- David H. Souter: Well, do you adopt Justice Scalia's analysis? I mean, this came up in the briefs, and this was an interesting point. Does the State, for purposes of proportionality analysis, have the option to adopt a different theory of penalty? And he's given an example. Do you... do you adopt that argument here? And do you think that is a justification that you want to rely on in this case? Donald E. De Nicola: --Yes, we do adopt the theory of incapacitation, and we do rely on incapacitation as a theory that justifies the sentence in this case. David H. Souter: All right. Here's the problem that I have with that, and this is... this is... this is what I wish you would address. If we allow, for purposes of proportionality or gross disproportionality analysis, this kind of... the consideration of varying intentions... retribution, incapacitation, deterrence, and so on... and every time the State gets to a very high offense, the State says, "Oh, we've changed the theory. " "We've gone from deterrence to retribution. " it seems to me that it makes this kind of analysis of comparables... this proportionality analysis... impossible because we no longer have two comparable entities on either side of our comparison. What we have is a low sentence on the one hand for deterrence, and a high sentence for incapacitation or retribution. We have apples and oranges instead of oranges and oranges. So my question is, If we accept the State's option to say, "We've changed the theory", don't we read comparability analysis right out of the law? Doesn't it simply become logically impossible? Donald E. De Nicola: Well, I think it becomes much more difficult, but I don't think it necessarily becomes logically impossible, because I think there is still room for judicial scrutiny, within the context of the Harmelin narrow proportionality principle, to take a hard look-- David H. Souter: But my problem is, I don't know what we're supposed to... what we can compare for comparable examples on proportionality analysis if it can be fundamentally affected by the State's change of intention from one theory in one crime, or one set of penalties, to another theory in another set of penalties. I don't see what we can compare. We no longer have comparables. Donald E. De Nicola: --Well, but I think the Court can still look at whether the phenomenon of... as in this case, of heightened recidivism based on prior violence, or serious offenses threatening violence and triggered by a new crime that, say... that's classified as a felony by the legislature and that offers a sentence of... a lengthy sentence, but that still offers a possibility of parole-- Speaker: I guess the conclusion that Justice Souter's questions would lead to is that a State cannot use any factor except retribution. Or if it uses any other factor, it does so at the risk of our simply holding it to be disproportionate. Donald E. De Nicola: --Yes, Your Honor-- Speaker: And I don't know that our... I'm sure that our cases don't support that. Donald E. De Nicola: --It... and I acknowledge it... to Justice Souter, it makes it a very difficult situation. But under Harmelin, those, I think, are penological objectives that the Judiciary ought to defer to the State. David H. Souter: But maybe... maybe, and I... we've... we haven't said this... maybe our assumption is that the State, in establishing a penal system, is going to establish it on a set of consistent and neutral principles from beginning to end. Would that be a legitimate basis for us to ground our constitutional analysis? Donald E. De Nicola: No, Your Honor. It disables the states from changing... from dealing with changing conditions. William H. Rehnquist: Thank you, Mr. De Nicola. Mr. Chertoff, we'll hear from you. Michael Chertoff: Mr. Chief Justice, and may it please the Court: I think the last series of questions which Justice Souter posed to Mr. De Nicola really framed the issue in light of this case's most recent pronouncement in Harmelin... this Court's most recent pronouncement in Harmelin. I would have read Harmelin as establishing two principles, at a minimum. One is, the analysis is not proportionality; it's gross disproportionality, an extremely rare basis to invalidate a statute. Second, we recognize that the states are entitled to adopt different penological theories, or a mix of theories. In fact, I would have thought that a state's entitled to say, for example, that certain types of crimes ought to be addressed in terms of retribution; other types of crimes posing other kinds of issues can be dealt with in terms of deterrence and incapacitation. And if the consequence of that principle is that this Court has very limited review on comparability of sentences, at least where we are dealing with sentences that allow for the possibility of parole, then I think the conclusion is that it is the extremely rare case in which a sentence gets-- Stephen G. Breyer: Well, why isn't that this case? I mean, I don't know how to approach proportionality other than to say, What sentences are given for the same crime, or what crimes are treated with the same sentence? Now, suppose, looking at that, I find this is the rare case. If it isn't, why isn't it? I mean, all the information we have, as I've said before, seems to suggest that this is higher by a factor of two or three times anything else you can find. Michael Chertoff: --Well-- Speaker: Now, if that isn't grossly disproportionate, why isn't it? Michael Chertoff: --It's not for several reasons, Your Honor. First of all, although there's nothing in the record to speak to what the pre-1977 proportions were in terms of sentencing, we do know, for example, that elsewhere in the country there have been comparable sentences. We've cited in the United States-- Stephen G. Breyer: Cited a lot of instances in which the law permits such a sentence, but that's quite different from saying there was such a sentence. Michael Chertoff: --Actually, I think in footnote 13, we've cited several cases in other states where you have very comparable punishments, where you have larcenies between 4 and $700 as the third strike-- Stephen G. Breyer: And do you have instances where people were sentenced to 25 real years in prison for having committed such an offense? Or were you citing that the law would permit such a sentence? Michael Chertoff: --We cited review and rejection of disproportionality challenges in one case in Nevada to a life sentence without parole for a grand larceny of-- Stephen G. Breyer: Good, okay, thank you. Michael Chertoff: --$476, and a similar one, I think, in South Dakota. Also, of course, as we look at the current sentencing regime, this is not, as in Solem versus Helm, where you have single judge who is apparently an outlier under the state sentencing scheme. In this case, if one takes, in fact, a petitioner's own figures, you have at least 2 to 300 individuals whose third strike, under the California scheme as it now exists, has, in fact, been a property-based crime. And I think the most compelling reason why this is not that very, very rare case where we strike down a sentence is precisely what Justice Ginsburg has been repeatedly asking about, the discretion that the courts have to tailor the particular sentence in this case to the facts of the case. If we look at the record in this case, in the joint appendix, the sentencing judge carefully considered the entirety of the file with respect to the trigger... or the predicate offenses, which involved, actually, three burglaries in the course of a single month, one of which involved pulling a knife and threatening somebody, as well as at least nine prior offenses. And interestingly, in no case since 1988 had the petitioner ever successfully completed probation or parole. He was always violating probation or parole by committing his next offense. And that's precisely what the sentencing judge looked at and explicitly referred to in rejecting the request on the part of the petitioner either to downgrade the triggering offense to a misdemeanor, or to eliminate some of the strikes. And I would have thought that is precisely what we expect and want judges to do in a rational sentencing system. David H. Souter: In effect, you're... going back to the beginning of your argument, I think you're... I think you're saying that what the judge here did in rejecting the request to downgrade or to disregard, in effect, was saying, "Yes, I am finding that this is a case in which it is appropriate to sentence on an entirely different theory, a theory of putting them away, as opposed to a theory of deterrence. " and I... that seems to be the logic of what's going on. Michael Chertoff: That's correct; an entirely different theory, though, that is embraced by the State in passing this law. David H. Souter: And may I ask you one more question on that? Because again, you started toward it in responding to me at the beginning. Like you, I came in here assuming that the State could change its theories. If that is so, then I guess what that means for proportionate or gross disproportionality analysis is this: A State can do it and can pass our Eight Amendment test if it has a reasonable basis for saying, "We are going, under certain circumstances, to say there is a change to theory of sentencing. " "The theory changes from deterrence or mere retribution to a theory or public protection, putting away the person who simply will repeat and repeat and repeat. " So, for purposes of our proportionality analysis, the question would come down, Do they have a reasonable basis for doing that under their statute, in general? And in particular, is there a reasonable basis for saying that this is a case for that? And if the answers to those two questions are yes, then it passes the test. Is that... would you adopt that analysis? Michael Chertoff: I would absolutely agree that if it satisfies those two, it passes the test. That's not to say that if it flunks those, it automatically fails the test. But certainly if you meet those conditions, I think you pass the test. And I think there's a common sense to that. One could look, for example, at certain types of violent crimes, like murders and rapes and say, irrespective of whether it was a crime of passion or something that will never happen again, "It is so heinous, our philosophy is we have to punish it. " But one can also look at comparatively small crimes, at least if they're felonies, and say, "If someone is repetitiously unable to conform their conduct to the requirements of the law, we don't have to wait until he commits the next felony or the next two felonies before we put an end to it. " And interestingly, if one goes back Blackstone, who talks a little bit about the issue of proportionality as it related back in his day, he discusses the fact that when you deal with habitual offenders, it would be cruel to the public to simply allow that person to get out again and commit their next crime. So, I don't know that it's so much that the State changes its theory, as that the State adapts its theory to the particular type of crime and particular type of offender. And that's, of course, what we want to have in sentencing. And, finally, I would say this. In a scheme like California, where the state judge has the power to tailor to the particular offender and the particular offense what the right answer is, for the federal courts to come in under gross disproportionality analysis and recalibrate that... even if, sitting as state trial judges, the justices might feel we would do it differently... would be essentially converting the courts into a constitutional sentencing commission. And if one looks at the companion case-- Speaker: Excuse me, would be essentially to-- Michael Chertoff: --Convert the court into a constitutional sentencing commission. Doing the kind of analysis that we now have, a sentencing commission-- Stephen G. Breyer: --And that would be a very bad thing. I agree. Speaker: [Laughter] Michael Chertoff: --It would be a... certainly very complicated thing, Justice Breyer. So... and if one looks at the companion case, Andrade, and the subsequent cases in the Ninth Circuit that have flowed from that case, one sees this phenomenon beginning to emerge, where every fact pattern is evaluated slightly differently. One court views burglary as being a violent offense; one court says it's not a violent offense. Speaker: Could you argue that, because discretion is consistent with the goals of the statute before the sentencing, that some discretion is also permitted to a reviewing court after the sentencing, and they can still maintain the symmetry and the purpose of the statute? Michael Chertoff: The state law could certainly provide for some kind of review as a matter of state sentencing law in terms of abuse of discretion by the sentencing judge. John Paul Stevens: But in this... in California, does the appellate court ever set aside sentences on the ground there was an abuse of discretion to invoke the three strikes law? Michael Chertoff: I know of cases where they have affirmed trial judges that have set aside strikes. I don't know of a case-- Speaker: No, I... has... has a trial judge ever been set aside for imposing the third strike? Michael Chertoff: --I'm not aware of it. Speaker: I don't think-- Michael Chertoff: I'm not aware-- Speaker: --there are any-- Michael Chertoff: --of such a case. Certainly the state law could allow that to happen. If there are no further questions, I will return the rest of my time to the Court. William H. Rehnquist: --Thank you, Mr. Chertoff. Mr. Denvir, you have one minute remaining. Quin Denvir: Your Honor, the point I... I'd like to make two points. One is, if the discretion in... under the California law is very limited. One thing would be to treat a wobbler, if it is a wobbler, and reduce it to a misdemeanor; so you would go from 25 to life, or life, to one-year maximum penalty. That's not used very often. The other one is to strike a prior conviction. But that's a... the California Supreme Court in Romero said that's a very limited discretion, that it is only when you can find that this offender is outside the "spirit of the law", whatever that is. And there's an amicus brief filed by the Los Angeles public defender in Romero that shows that that discretion has been used very little in California. So the... this limited discretion has no effect on it. The only other point I'd make, as far as the repetition... as far as the labeling, if all the legislature has to do is say, "What we're doing here is incapacitation, and, therefore, the Court can't look at that. " then it really writes the Eighth Amendment protections against grossly disproportional sentences out totally. If it's just a question of... they say, "Here's our reason", and you can't even question that, because they can always claim they want to incapacitate any criminal for any amount of time. William H. Rehnquist: Thank you, Mr. Denvir. The case is submitted.

Earl Warren: Number 645, John Davis, petitioner versus Mississippi. Mr. Zarr, you may continue with your argument. Melvyn Zarr: Mr. Chief Justice, may it please the Court. I'd like to summarize the major points I made yesterday and then say a few things about the record. The major points were these; one, that the petitioner was caught up in a police dragnet. Two, that the two detentions of petitioner yielding the two sets of fingerprints were illegal arrest because in the first place, in neither case was there was a warrant to earn any attempt to show exigent circumstances excusing a warrant. And secondly, even assuming that the warrant requirement could somehow be excused in this case, there was no attempt by the state to show probable cause to arrest. Next the fact that these arrests were for investigation only explains but cannot excuse the failure to comply with these constitutional safeguards, and last that fingerprints are not accepted from the operation of the exclusionary rule. Now, counsel opposite stressed to the Court yesterday that the December 3rd detention, the first detention was not an arrest and apparently relied upon the court’s below ruling which in role and part appears at page 59 of the record which I shall just briefly read. The court below said this, the officer said that he arrested appellant but the evidence which is in no way controverted shows that appellant was merely escorted to headquarters for interrogation as in fact for numerous others in the course of an investigation by police of an unsolved major crime. It is clear from the record that there was no intention to arrest within the accepted legal meaning of the word and of course there are two answers to this. One, it is clear from the record that that statement is wrong that the only testimony in the record about December 3rd arrest is that of officer Griffin and Thompson which they say they arrested the petitioner and there is nothing to controvert that. And the second answer of course is that this was an investigative arrest and that as we have argued is illegal. I have two evidentiary points, one, I want to stress that the petitioner had done the yard work for the woman at page 17 interrogation there that the record makes that clear. And next, I want to stress that even though Mr. Justice Stewart yesterday correctly observed that she testified that there was no doubt in my mind about it that Johnny was the one. In other places, she was not quite so positive at page 22 just previous to that she says, “I recognized it was Johnny. I thought it was but I wasn’t perfectly sure right then but then I knew nobody else have been in the house but him. I asked him to carry a table to the kitchen where he threw the light where the media was.” And on page 30 of the record, on cross-examination, she says in response to the question, “But by light of the flashlight could you see his face?” Answer, “Yes sir, true. He had that fascinator put to the head piece over it and I could see through that crochet part his face and I recognized him or who’s as far that's who it was. I was pretty sure it was.” Potter Stewart: You are going back for a moment if you will to the first three points you made in summary. Melvyn Zarr: Yes, sir. Potter Stewart: The last of which was -- the third of which was that fingerprints are not excluded from the -- are not accepted from the exclusionary rule. There's the Bynum case in the District of Columbia. Melvyn Zarr: Yes, sir. Potter Stewart: Are there any other cases on that point? Melvyn Zarr: None that we could find Your Honor that dealt explicitly with fingerprints. Potter Stewart: That's what I'm talking. Melvyn Zarr: Thank you (Voice Overlap). Potter Stewart: Thank you. Earl Warren: Very well.

Warren E. Burger: We'll hear arguments next in Heckler against Edwards. Mr. Garvey, I think you may proceed whenever you're ready. John H. Garvey: Thank you. Mr. Chief Justice and may it please the Court: Section 1252 of the Judicial Code provides that any party may appeal to this Court from a decision by a court of the United States holding unconstitutional an act of Congress. The issue in this case is whether the Government must appeal to this Court in a case where it concedes that the statute is unconstitutional and the only issue is the question of what relief should be provided. The statute in this case is Section 211(a)(5)(A) of the Social Security Act, which deals with self-employment income from a family business in community property states. What that section says is that if a family business is not run as a partnership then for purposes of old age, survivors and disability insurance all the income from the business shall be attributed to the earnings account of the husband, unless the wife is able to show that she exercised substantially all the management and control of the business. In 1980 the Attorney General determined that that presumption made in that section was unconstitutional and informed Congress that he would not defend on appeal a case called Becker against Califano, which had held that section unconstitutional. Three weeks later Respondent filed this action on behalf of a class of affected wives in community property states. The Government acknowledged in the district court that the section was unconstitutional and did not defend it. So the district court shortly entered judgment on the uncontested issue of liability and held the section unconstitutional. Thereafter and until now, the only issue in this case has been what relief should be provided for that deficiency in the statute. The Government proposed in the district court that, since the invalid provision was simply an exception to Section 211(a), the general rule applying in the 42 non-community property states, that what the district court should do was what was done throughout the rest of the country. That is to say, if the family business wasn't run as a partnership then all the income should be attributed to one spouse or the other without the use of any presumption, after a determination of which one was chiefly responsible for running the business. The district court disagreed and held, among other things, that in community property states the income should be divided between husband and wife according to the amounts of their labor in the business. The Government appealed to the Court of Appeals, which dismissed in a one-sentence order saying it didn't have jurisdiction because of Section 1252, and the Government then petitioned this Court for a writ of certiorari. Our position can be summed up briefly in two points: number one, only an appeal from the constitutional issue can bring a case to this Court: number two, the question of relief in this case is not part of the constitutional issue. Let me begin with the first of those points. Only an appeal from the holding of unconstitutionality can bring the case to this Court under Section 1252. It's important to recognize at the outset that Section 1252 is a unique jurisdictional provision. In that section what Congress did was to pick out from the whole universe of cases that customary go from the district courts to the Court of Appeals a few unique cases which, because of their great importance, were thought to warrant extraordinary treatment and immediate review in this Court. The extraordinary treatment is, first of all, tat they're within the mandatory appellate jurisdiction of this Court; but in addition, they leapfrog over the Courts of Appeals. And unlike even cases coming to this Court under Section 1253, they haven't had the benefit of review even by three district judges by getting here. The reason Congress did this, in the words of the sponsor of the bill which became Section 1252, the reason was this. The sponsor of the bill said: "It is ridiculous that the final determination as to the constitutionality of an act of Congress be held in abeyance for two or three years and nobody knows whether or not it is constitutional. " The House report said, in similar-- Speaker: Mr. Garvey, do you propose to shift at some point in your argument from the statement of the sponsors to the language of the statute? John H. Garvey: --Indeed I do. I intend to turn there briefly. Let me, if I may, just finish this thought and then I'll turn to the language of the section. The House report on the bill said that its purpose was to provide a prompt determination by the court of last resort of disputed questions of constitutionality of the acts of Congress. This is not such a case. As I will demonstrate when I get to my second point, it does not even involve a constitutional issue. At most what it involves is something like a question of statutory intent. At worst, it involves nothing more than a simple question about whether the district judge properly exercised her equitable discretion in providing a remedy for a conceded unconstitutional provision in the statute. Those are like the questions that the Courts of Appeals address every day. They are not the questions of extraordinary importance that Congress determined should come immediately to this Court. Now let me turn to the language of the statute-- Speaker: I suppose some issues, although not constitutional ones, can be as important in other ways. John H. Garvey: --That is certainly so. There are many questions of statutory construction that are more important than some of the kinds of questions that can come to this Court under Section 1252. Nevertheless, Section 1252 does not turn on the importance of the question, but on whether an act of Congress has been held unconstitutional. Now, what the statute provides... and we have reproduced it at page 2 of our brief. What the statute provides is, in the first paragraph it addresses what should be done with appeals from the holding of unconstitutionality. In the second paragraph it addresses what should be done with other issues. The first paragraph says: "Any party may appeal to the Supreme Court from a judgment, decree or order by a court of the United States holding an Act of Congress unconstitutional in any civil action to which the United States is a party. " Now, there are two ways in which that, in which the language in that first paragraph, can be read. But I would suggest that only one of them makes sense in light of what Congress had in mind in providing this extraordinary review mechanism. One way of understanding that language is that any party may appeal from any issue that is decided in a judgment or order along with the issue of the unconstitutionality of an Act of Congress. So one way of looking at the judgment or order is that it's a kind of grab bag and, provided the issue of unconstitutionality is in there, a party is entitled to take any other issue up to this Court, even if the unconstitutional question is not brought to this Court. So for example, if in this Court in the same judgment in which the district court held the statute unconstitutional it had also denied attorney's fees to the plaintiff, this grab bag interpretation of the first section would entitle the plaintiff to bring up to this Court the question of her entitlement to attorney's fees, even though the constitutional question is not presented. Or, to take another example, if in the same judgment the district court had decided a pendent question of state law and nobody was interested in appealing the holding of unconstitutionality, this grab bag way of reading the first paragraph would entitle the losing party on the question of state law to bring it directly to this Court. Speaker: By calling it a grab bag way of reading the paragraph, are you suggesting it's not a preferred or not a reasonable way of looking at the paragraph? John H. Garvey: That's exactly what I'm suggesting. Speaker: Well, certainly it doesn't seem implausible to me, given the language you just read, that you say any party may appeal to the Supreme Court from a particular kind of final judgment. What kind of final judgment? A final judgment holding any Act of Congress unconstitutional. And if the final judgment meets that definition, it may contain a number of other provisions, and if you want to appeal any of them you have to go to the Supreme Court. John H. Garvey: As I said, the language and the syntax of that paragraph will support that reading. I suggest that that reading doesn't make a lot of sense in light of what Congress had in mind in adopting that section, and that there is another reading which can be given to it, which is that the first paragraph is entitled to authorize only appeals from the holding of unconstitutionality, that that is the issue which brings the whole case to this Court and that's an essential prerequisite for getting the case up here under the first paragraph. Speaker: Mr. Garvey, did the United States take a protective appeal here? John H. Garvey: No, we did not. Speaker: Was that a conscious decision? John H. Garvey: I don't know whether it was a conscious decision or not. That interpretation of the first paragraph of Section 1252 I think is, the interpretation we propose, is supported by the language of the second paragraph, because what the second paragraph says is that once this notice of appeal, which I think is this proper Section 1252 notice of appeal, is filed, the second paragraph tells you what to do with the other issues in the case. It says if any of those issues have been taken to other courts... that is to say, to the Court of Appealss... prior to the filing of the proper Section 1252 notice of appeal to this Court, they shall be treated as taken directly to this Court... that is to say, they will be transferred from the Court of Appeals to this Court... when the holding of unconstitutionality is brought here, so that the whole case can be decided together. It also says in the first paragraph that the party who has received a notice of appeal under this section shall take any subsequent appeal or cross-appeal to the Supreme Court. Now, the reason for that direction is, in the example that I gave earlier, if the winning party is sitting around drafting her notice of appeal on the question of attorney's fees to the Court of Appeals, where it would go but for an appeal to this Court on the question of unconstitutionality, the first sentence says that she ought instead to file the notice of appeal to this Court because the appeal on the constitutional question has brought the case here. Speaker: Suppose, Mr. Garvey, that you have the whole range. You have a decision on constitutionality, which would clearly in your view bring the case directly here, but that there were also some remedial factors and some attorney's fees. Is there any statute that would prevent this Court, after it had decided the constitutional question, to remand the case for a determination, for an examination by the Court of Appeals of the other two questions that were not constitutional? Or would this Court be required to decide all the issues? I don't believe this Court would be required to decide all the issues. I think the reason why the second paragraph directs the other issues to be brought to this Court is that in the ordinary case the party bringing them up won't yet have had a chance to have them reviewed and Congress didn't want those issues being decided simultaneously with the decision on the constitutional question in this Court so that inconsistent results might be reached. But the procedure you suggest wouldn't result in possible inconsistencies in the determinations. But one way or another, the parties would be entitled to review of the district court in some way? John H. Garvey: Yes, they would. The second paragraph, by leapfrogging over the Court of Appeals, deprives those parties appealing on other issues of their usual right to have at least one appeal in the Court of Appeals. Well, that is our first point, that only an appeal from the holding of unconstitutionality can bring the case, although it brings the whole case, to this Court under Section 1252. Our second point is that the question of relief in this case is not a part of the holding of unconstitutionality. Respondent has maintained that the issue of relief here is an intrinsic aspect of the holding of unconstitutionality. But that is not so, as I think a couple of examples ought to make clear. Suppose that what the district court had done in this case after holding the statute unconstitutional was to adopt the approach the Government suggested. Suppose the district court had concluded that, because this exception to the general rule in Section 211(a) was invalid, that it ought to apply the basic rule in Section 211(a) that applies in non-community property states. If Respondent, plaintiff in the district court, had appealed that issue of relief to this Court, Respondent would not be able to contest the holding of unconstitutionality, having prevailed on it in the district court. And the Government, having conceded the unconstitutionality of Section 211(a)(5)(A), would have no interest in contesting it in this Court, and yet the appeal would be brought directly here. Or to take an even more extreme example, suppose the district court had gone a step further and actually... suppose this were an individual action. Suppose the district court had gone a step further and actually recomputed the Respondent's earnings account. Suppose that on the basis of that recomputation the district court had concluded that Respondent was entitled to collect $200 in old age benefits under the Social Security Act, and suppose that Respondent believed she was entitled to collect $205 a month. If relief is in fact an intrinsic part of the holding of unconstitutionality, Respondent would be entitled to bring to this Court her disagreement with the district court about the additional $5 a month, notwithstanding that again she couldn't contest the holding of unconstitutionality, having prevailed on that issue in the district court. Or, to take just one more example, suppose the district court had done what it did in this case and said that the income was to be divided between husband and wife, but that the district court had declined to recompute earnings accounts back to 1950 because, the court might say, some wives are going to be better off under those earnings accounts, under the earnings accounts of their husbands, than they will be under the new standard, and we don't want to disturb their reliance interests; and some husbands are going to be deprived of benefits if we recompute. So we'll just make this prospective. Once again, when the case got to this Court there would be no question about the unconstitutionality of Section 211(a)(5)(A). Now, what those examples show, I think, are two things. What they show first of all is that there is involved in this case at this point no constitutional question whatever. The choice among the three types of relief that I suggested in those examples is not determined by the Constitution. All three of them are constitutionally permissible. What's more, the type of relief that the district court chose, the one of those three that I suggested or another one, the one that it chose, the type of relief that the district court chose might in fact be, for all we know, precisely the one that Congress would prefer it to apply, given the unconstitutionality of Section 211(a)(5)(A), which everybody concedes. That means that the district court's decision on the question of relief, unlike its decision on the question of unconstitutionality, may very well be quite consistent with the wishes of Congress. Speaker: But I take it it was not consistent with the Government's arguments there as to what the intent of Congress was. John H. Garvey: Indeed not. But whether or not it is inconsistent with the wishes of Congress is something that at this point we don't know, whereas its holding on Section 211(a)(5)(A) we do know is inconsistent with what Congress wanted, because wrote that into the statute and the district court said that statute is invalid. So the question of relief may very well be consistent with what Congress wanted to do, and in that case I would suggest that there isn't the need for immediate review in this Court that exists in the case where the statute is actually held unconstitutional and that issue is still being litigated. Now, I said that those examples showed two things and one of them was that the case didn't really involve any question of unconstitutionality; in fact, it really involves a question of what Congress would want to do, or maybe what it involves is a question about equitable discretion. For example, in last example that I gave the district court took account of the reliance interests of people who were already collecting benefits under the invalid provision and said that maybe the most equitable approach is to protect their interests by making the judgment prospective. Those kinds of decisions about what Congress had in mind, about the equitable... about the reliance interests of people who are already collecting benefits, are the kinds of questions that the Court of Appeals decide every day in cases of statutory construction, in cases where... in other cases involving issues about the proper remedy. What's more, the impact of the decision on the question of relief is quite unlike the impact of the holding of unconstitutionality. The impact might only be a difference of five dollars a month, as was shown in the second example that I gave. I think-- Speaker: Mr. Garvey, can I ask you this question? You use hypothetical examples, which is understandable because this problem doesn't exactly arise every day. How often has this particular problem... has it ever arisen before where the Attorney General has conceded the unconstitutionality of a statute? John H. Garvey: --Yes. I think this is precisely the question that arose in Montana Contractors against Kreps, a case in which this Court dismissed for lack of jurisdiction. The issue in Montana Contractors was whether the plaintiff was entitled to collect damages after the district court held the minority business enterprise provision of the Public Works Employment Act unconstitutional. And I presume because the Government did not docket a separate appeal on the question of unconstitutionality, this Court dismissed plaintiff's appeal on the question of whether he was entitled to damages because of the enforcement of that provision. Speaker: You say you presume. Certainly our summary action doesn't explain it, does it? John H. Garvey: No, your summary action does not explain it, although it does note that the dismissal is for lack of jurisdiction. I would also suggest, Justice Stevens, that it may be, with the less frequent use of three-judge courts nowadays, that the question may be one of more significance in future cases than it has been in the past. We suggested in our reply brief that the question might come up in the wake of this Court's decision in INS against Chada about questions of severability, which we say are really no different from the question of relief involved in this case. So it is one which I think has not only arisen in the past, but may reoccur with some frequency. Let me make just one last point. The question in this case is not whether this Court should review the question of relief or not. The question in this case is whether this Court should immediately review the district court's decision on the issue of relief, because we presume that if an appeal were taken to the Court of Appeals and the impact of the relief really were severe and it really was fairly clear that the relief chosen was not the one that Congress would have preferred, that certiorari is always available from the Court of Appeals' decision on the question of relief under Section 1254(1). So the question is not whether this Court should review it; it's whether it should review it immediately, rather than after having the benefit of the Court of Appeals' determination. If there are no further questions, I'd like to reserve the remainder of my time for rebuttal. Warren E. Burger: Very well. Mr. Dudovitz. Neal S. Dudovitz: Thank you, Mr. Chief Justice, and may it please the Court: The issue before you today involves both determining the parameters of the appeals to this Court as well as appeals to the Court of Appeals under Section 1291. As the Government has acknowledged, the federal district court in this case did hold a federal statute, Section 211(a)(5)(A) of the Social Security Act, unconstitutional. It also went forward and awarded constitutionally adequate relief to the class members whose rights were violated. The Government filed a notice of appeal from the district court order holding the statute unconstitutional. But they filed that notice of appeal to the Ninth Circuit and not to this Court. There was, as, Justice Blackmun, you noted by your question, no protective appeal filed in this Court. Section 1291, which sets forth the jurisdictional parameters for the Court of Appeals, says that the Court of Appeals may not have jurisdiction if it's possible for there to be an appeal to this Court. The operative word in the statute is the word "may". If you may appeal to this Court, then the Court of Appeals loses its jurisdiction. And as this Court has emphasized recently in its Donovan case, what that means is is that there is only one place for you to go when you're appealing from an order holding an Act of Congress unconstitutional. The issue here then turns on whether or not this case presents a situation where the place for the Government to go if they had an appeal was this Court. We believe that the requirements of 1252 are pretty clear right on its face. They talk about, as most of the commentaries have pointed out, four basic requirements, three of which... that it be from a proper court, that it be a civil action, the Government be a party... are really not controversial and certainly are not in issue in this case, and the fourth requirement, that the order being appealed from must be from a holding that a statute is unconstitutional. Well, there's no doubt that the order of the district court from which the Government appealed was in fact such an order. And it is important to recognize in this case that their notice of appeal purports to be a notice of appeal from that entire order. It simply says, we're appealing from that final judgment where the court, the district court, held the statute unconstitutional. We contend that, on the basis of that kind of notice, which fits squarely within 1252 and particularly so in a situation as here where the issue the Government wants to contest is really the relief that the court fashioned consistent with the Constitution to remedy the violation. Speaker: Well, Mr. Dudovitz, I'm curious to know how much of your position depends on the form of the Government's notice of appeal. Supposing everything were the same here except the Government's notice of appeal said, the Government appeals from all of that order the district court entered except that portion holding such and such unconstitutional. Do you think that should have gone to the Court of Appeals? Neal S. Dudovitz: No, I don't think that should have gone to the Court of Appeals. I think the fact that the Government did that sort of highlights why this case is appropriate, but in and of itself it is not determinative. And that is because what it highlights essentially is there was a choice. And as I pointed out, under 1291 when there's a possibility that seems to point us toward 1252. In fact, the Government would concede that. The Government would concede that they in fact could have appealed the constitutional issue to this Court even though they didn't contest it in the district court, similar to what happened in the Clark case, where they didn't contest it in the Court of Claims and then appealed it to this Court. So that's something that the Government says can happen. Speaker: Suppose a concession of unconstitutionality was made and the Court of Appeals rejected it. Would there then be a decision under 1252 on the constitutionality? Neal S. Dudovitz: Yes, there would, because-- Speaker: And then what should be done? Neal S. Dudovitz: --1252 is not limited to applicability in the district court. It also applies to the Court of Appeals. Speaker: Oh, I didn't make myself clear. I mean when it came to the Court of Appeals, the district court not having passed on it but having accepted the concession, the Court of Appeals said, no, we don't accept concessions on constitutional issues and we're going to decide it. Then could they decide it? Neal S. Dudovitz: I guess your question presumes that it was proper for that case to get in the Court of Appeals in the first place. If it was, as I was trying to say, if it was and then the Court of Appeals holds the statute unconstitutional, then you're going to be under 1252 and the appeal from the Court of Appeals could come directly to this Court because, as I was saying, 1252 is not limited to the district court. Speaker: As an appeal and not as a cert.-- Neal S. Dudovitz: Not as a cert, that's correct. With regard to the relationship of the relief to the constitutional question, I would point out that the Government itself agrees, as they've noted on page 3 of their reply brief, that the district court must address the questions of relief as a consequence of holding that statute unconstitutional. That is something the court had to do. That was part of its job once it found that statute unconstitutional. And it seems to me that that puts that issue as a predicate; that the predicate to that issue therefore is the holding of unconstitutionality, which therefore binds the Government to do something. And that's the kind of problem that the court... excuse me... that Congress wanted to bring to this Court. When the Government was going to be bound, when something was going to happen to the Government as a result of holding the statute unconstitutional, Congress wanted this Court to quickly and promptly resolve that problem, to make sure that the disruption to the Government was minimum. Now, the Government's line here that they've attempted to draw we contend just plainly doesn't fit within the statute on its face. They are trying to draw, in a sense here, lines which do not exist. There is no phrase or statement in Section 1252 that suggests that the issues to be appealed must be the question of constitutionality. Speaker: --Certainly there are intimations in the second paragraph, aren't there? Neal S. Dudovitz: There are, but it's very different, Your Honor, from the kinds of language that exist in the other direct appeal statutes, that talk more about the kinds of issues, such as 1257 and 1254. And it's also very different from the earlier predecessor of 1252, which was repealed in 1925. And in that earlier language, which the Government cites in its cert petition at page 11, the statute said that in any case that involves constitutional construction on application of the Constitution or in which the Constitution or the laws of the U.S. are brought into question, that that's when you bring a case up. Now, the Congress didn't go back and bring that language back. Speaker: But now take the second sentence of the second paragraph on page 2 of the brief: "All appeals or cross appeals taken to other courts prior to such notice shall be treated as taken directly to the Supreme Court. " Now, that hypothesizes that appeals to the Court of Appeals by some party would have been proper in the case of a judgment which held an Act of Congress unconstitutional, don't you think? Neal S. Dudovitz: Well, I contend and we have argued that what that could very well be referring to is in fact other kinds of appeals, such as interlocutory appeals, which may have been appropriate in the Court of Appeals prior to the holding of the Act being unconstitutional. The real import of the entire second paragraph is to make sure that when this Court gets a case where an Act has been held unconstitutional, it gets all aspects of the case so that it has the power to determine what should be done in this situation to make a final and quick decision in order, again, to avoid disruption to the Government. Speaker: That's certainly part of what the statute is trying to do. But another part, as your opponent has suggested, is to select out a very few cases that Congress felt deserved the immediate attention of this Court, and certainly the focus of Congress was on the declaration of unconstitutionality. Neal S. Dudovitz: Well, I agree it's very few cases, and I can partly, I think, try to answer Justice Stevens' question about how many cases. There is a statute, which of course the Government has cited, which requires the Attorney General to notify Congress when they're not going to appeal from a holding of unconstitutionality. It's my understanding that in the years '81, '82 and '83, subsequent to this case, there have been two times where the Attorney General has so notified the Government. That's other than the one time before in this case. We're not... this is one of those unique cases. There aren't very many times when this happens. In fact, the Government itself points out the great difficulty it always has in conceding the unconstitutionality, that they rarely do that. So this is a unique case. I don't think it's a common case in any way. Let me add, Justice Rehnquist, to one other major reason I believe that the kind of line that the Government wants to draw here in terms of constitutionality doesn't make sense, and that is because it's really premised on the theory that in interpreting the statute this Court ought to be trying to minimize its mandatory docket. Now, whether or not we all think that that's something that ought to be done, the fact is that this Court has held very explicitly that 1252 is not to be so interpreted. In fact, the purpose of 1252, as this Court has held before, is to expand the mandatory docket and not restrict it. And therefore, the Court should not view the language here with the idea of supporting the minimizing of the mandatory docket, but rather with the idea of what Congress desired. Speaker: I don't think our cases support you. If I understand your contention, you're saying that once Congress has decided to expand the mandatory docket by passing a statute such as 1252, that statute ought to be generously construed. Now, I think that the whole history of the three-judge court situation and appeals from three-judge courts indicates that this Court recognizes when Congress wants to increase our mandatory docket, but it doesn't construe those statutes generously or beneficently, or whatever you want to use, the term. Neal S. Dudovitz: I think this Court has explicitly said, going back to the McLucas case and in the Grace Brethren Church case, that 1252 is not to be construed in the same fashion as 1253, the three-judge court. It is separate-- Speaker: No, but what it said in McLucas was that it shouldn't be construed in the same way that the three-judge court appeal statute was, where we held that in order to have the appeal the three-judge court had to have jurisdiction. We said that wasn't required here. But I don't think that really is the same thing as saying we'll treat as broadly as possible the substantive definitions of what can be appealed. Neal S. Dudovitz: --Well, I guess, Justice Rehnquist, as I read those cases the Court has really said that the basis for the 1253 cases was in fact carrying out the principle of limiting the mandatory docket of this Court, and as a result that 1253 was going to be interpreted, if interpretation was necessary, in a restrictive way. On the other hand, the cases... and they go back before these three-judge court cases. The Reid case, where the word "party" was interpreted; that the Court specifically said, we're not going to take a restrictive view of the word "party", we're going to take a more broader view of the word "party". Another... let me add a final point on what I think are some problems with the Government's line drawing, and that is I think it's very difficult to draw that line and then make it consistent with the footnote in the Regan case, where it says that an appeal by a party who succeeded in the lower court on an issue which the lower court found to be constitutional fits within the first paragraph. That is not an appeal on the issue for which the court held unconstitutional at all, and in fact, as the Government has pointed out in its reply brief in Regan, the real reason for that appeal was relief, because in order for the plaintiffs to get the relief they wanted they needed to try to succeed on a different issue. They were really appealing relief. And the Court didn't say that that issue comes up under the second paragraph as a further appeal once the Government made its appeal. Instead, it said it comes up under the first paragraph. It comes up under that more broad language. And I think that that's consistent with what we're arguing here. Speaker: Mr. Dudovitz, you have referred to the Grace Brethren Church case as supporting your view and it seems to me it does no such thing. Jurisdiction under 1252 in that case was premised on the district court's implicit but necessary holding that the federal statute was unconstitutional, and the Government challenged that holding. That's the point which you omitted. Neal S. Dudovitz: Well, I understand that the Government challenged the constitutional holding. But it seems to me... well, first of all, I don't believe there is any case that the Court has actually handled that is exactly the same as this case. Probably we wouldn't all be here if that were true. But what Grace Brethren does, I believe, is it follows a line of cases from this Court which indicates the broader interpretation of what it means to hold an Act of Congress unconstitutional. We have cases like Fleming, where-- Speaker: But Grace Brethren was wrestling with the problem of whether it was an implicit holding of unconstitutionality. Neal S. Dudovitz: --Right. Speaker: That's all. It didn't deal with this question at all. Neal S. Dudovitz: What it does, I think, is it follows from first the holding that you don't really have to hold an Act of Congress unconstitutional; it can be the Act applied, which is a much earlier line of cases from the Fleming case. And then... and I do think that it's taken at least somewhat of a step further to say, not only do you not have to hold the Act itself unconstitutional, but in fact if you held a state statute unconstitutional but it effectively tied in the federal statute and affected the operation of the statute program, the Federal Government... I think the language of Grace Brethren talks about the Federal Government being effectively bound by that decision of the lower court... then you're also under 1252. Speaker: It found, of course, that implicitly the federal statute was held unconstitutional and the Government challenged that. So it is not this case. Neal S. Dudovitz: I wouldn't disagree that it was not this case. All I'm trying to suggest is that its view of how to interpret 1252 is consistent, I believe, with our view of how you interpret 1252. Speaker: Mr. Dudovitz, while you're pausing let me just be sure I'm right about one assumption. Taking your opponent's hypothetical appeal on attorney's fees, where you wanted to appeal because the court didn't allow them, denied an allowance entirely, you would agree that should come here under your reading of the statute? Neal S. Dudovitz: I would not. I think what comes here under my reading of the statute is relief that is necessary to remedy the constitutional wrong. The attorney fees relief doesn't come from that. It really comes from a separate statutory basis. That is, if the statute wasn't there, if we didn't have the equal access to justice statute-- Speaker: Well, assume it's a single judgment. The court says, it's hereby ordered that the statute is declared unconstitutional, that's paragraph one. Paragraph two is, there will be an award of attorney's fees of $1,000. You appeal from that judgment and you say, the only relief I want is an increase. You are not contending that that appeal would be to this Court? Neal S. Dudovitz: --Let me try to clarify that. I think my view is that as the statute is set out that definitely does fit within it, and I think that's how this Court has to interpret the statute, that that's correct that-- Speaker: I'm not sure whether you're saying there would be jurisdiction here or not. Neal S. Dudovitz: --On its face I think that there would be jurisdiction. What I'm saying is that if this Court feels... and I would point out also that we're far different from that-- Speaker: I understand. Neal S. Dudovitz: --situation in this case. But if this Court feels that it has to in a sense draw some lines... I mean, I think the statute is fairly clear on its face, but if you have to draw some lines, the relief aspects I think that fit within the constitutional question are constitutionally required relief. And attorney fees is not constitutionally required relief. Speaker: So you're in effect arguing, you're challenging your opponent's second point rather than his first point. In other words, he argues: one, it has to be an appeal from the constitutional holding; and secondly, he argues this case does not involve a constitutional issue. You're response to that is: No, this case does involve a constitutional issue and that's why it's appealable. Neal S. Dudovitz: That's right. Speaker: You're not arguing that it would be appealable even if it did not present a constitutional question? Neal S. Dudovitz: Probably partly arguing both. I think that-- Speaker: You're not, then, really relying on your sort of plain language... you're not resting your whole-- Neal S. Dudovitz: --I would not rest solely on the plain language. I think even if you don't do the plain language we're still there, because effectively this is a constitutional ruling. Speaker: --Right. Neal S. Dudovitz: But under the plain language there's no doubt. I mean, it seems to me that, as the Government would concede, if the plain language were correctly undoubtedly this case should have been here under 1252. Speaker: Whether it's a constitutional ruling or not that's being appealed? Neal S. Dudovitz: Well, as long as the district court held the statute unconstitutional, that's correct. Speaker: Yes, but you're much less confident on that argument, as I understand you. You aren't taking a four-square position that the attorney fee issue by itself would be appealable. Neal S. Dudovitz: I'm saying that I think you can set that issue aside if you want to, because of the fact that the relief doesn't flow directly as a remedy for the constitutional violation. Let me finally turn to one other point which the Government has requested here to this Court which I want to address briefly, and that is they have asked that, even if this Court determines that we are correct, that the Court ought to vacate the district court's order and remand to allow the district court to enter a new judgment, from which a new notice of appeal could be filed, and therefore they could then appeal to this Court and have the relief issues brought here. We think that that is a particularly inappropriate action for this Court to take should the Court decide in our favor. I think the question of whether you do that or not is really an equitable kind of decision and you must look at what the effects of that are and what actions of the Government ought to be protected here. First, the effects of it could be very disastrous to the class members in this case, who are old and disabled women who, as the district court noted, are largely living on the social security benefits, some of which they receive as a result of this, the district court's ruling. The district court's relief has been fully put into place by now. In fact, it was required to be so by August 1983. The Government, while it sought a stay in the district court, did not pursue the stay. They did not argue that having the relief implemented while this was going on was going to be necessarily particularly harmful to them. So it seems to me that their failure to do that, the effect that this has on the class members, and finally the fact that the Government didn't take any action which you ought to really protect, which Justice Blackmun pointed out by his question, they didn't file a protective notice... and it seems to me after the Donovan case, which you remember came down three or four months before the final judgment in this case, that at worst from the Government's position there were some questions to be asked as to where an appeal ought to go. The Government didn't do anything in this situation to try to suggest that they were... to protect themselves. They could have filed two notices of appeal, something that happens all the time. They could have tried to say something in their notice of appeal. They could have done something to indicate their awareness of what they say is a difficult problem. Given those circumstances and the effect on the Plaintiffs, and finally noting that if what's left here in this case is just the relief ordered by the district court that also is relief that can be remedied somewhere else. Congress can remedy that if the Government thinks that the relief that's left by the district court is particularly inappropriate. In fact, Congress has acted on many occasions in these social security sex discrimination cases to set forth new rules and new standards. So that to leave in place relief for a statute we all agree is unconstitutional and then to have another forum available to remedy that relief it seems to me is not very onerous. In fact, it's less onerous, I think, than what happened in the Donovan case, where what was left in effect was the ruling a statute was unconstitutional when the Government thought the statute was constitutional. And so it seems to me that we are not any different than that. Just one other point before I close, and that is the Government made the comment that the Montana Contractors case was in effect on point here. And I agree first with the comment of Justice White that that summary affirmant should have little effect as a precedent even if it were. But I don't think it really is on point. My understanding of reading what happened in that case is the Government did in fact first appeal, file a notice of appeal to this Court on the constitutional question. As a result, the plaintiffs had no choice under 1252 but to file their second appeal to this Court. I think we all agree that once an appeal is here under 1252 there is no choice. The Government then decided not to perfect its appeal. The Government never filed a jurisdictional statement. It dropped its appeal and then moved to dismiss the other party's appeal. They sort of got stuck in this Court, and therefore the Court... and then the Court held lack of... no jurisdiction. It seems to me, given the extraordinary circumstances of that situation, that that's really not a case that ought to stand as precedent for this situation, which is far different. So I would again urge this Court to remember the uniqueness of this kind of situation. It doesn't happen very often. It happens very rarely and it does present, I think, a situation where Congress wanted this Court to be the determining factor of what was going to happen to this kind of federal program. Thank you. Speaker: Anything further, Mr. Garvey? John H. Garvey: I just have three brief points, if I may. If I understand correctly what Respondent's counsel has said, essentially, unless they're able to win on this unlikely point regarding the first paragraph, what this case all boils down to is whether the relief in this case is constitutionally mandated. That, as the examples that I gave showed and as all the cases cited in our reply brief at page 3 to 5 indicate, is simply not the case. The second point I want to make is a rather technical point in response to a concern by Justice Rehnquist. You pointed out that under the second paragraph of 1252 Congress at least contemplated that some kinds of appeals would be filed to the Court of Appeals prior to the filing of what I have been calling the proper Section 1252 notice of appeal. Respondent in her reply brief indicated that those prior appeals were probably appeals taken under Section 1292(b) of the Judicial Code. In fact, Section 1292(b) was not enacted until 1958, so it's unlikely that they had 1292(b) appeals in mind. There were... there was a narrow class of interlocutory appeals that could be taken before that time, although they weren't even the kinds of appeals that Rule 54(b) of the Federal Rules of Civil Procedure contemplate, because that rule didn't exist in 1937 either. There was a narrow class that Congress probably had in mind as well, simply a question of who beat in filing the notice of appeal. And the third point I want to make is that, if we should lose the proper disposition of this case should not be like the disposition of the Richland County case. In the Richland County case, in the Government's brief in this Court we conceded that we had gone to the wrong court in taking our appeal to the Court of Appeals and, as this Court said, the direction in which we should have gone was clear under this Court's precedents. In this case, by contrast, I think we had very good reason for believing in Montana Contractors against Kreps that the proper place for us to go was to the Court of Appeals and not to this Court. And so if we should be wrong about where we should have gone, at least the proper disposition would be to remand to the district court for entry of a fresh decree from which we may take a proper appeal to this Court. John Paul Stevens: May I ask you one final question? It hasn't been argued, but I'm just suggesting a rationale for requiring jurisdiction to be accepted by this Court of Congress might have been that it did not want the Attorney General to be able to concede the unconstitutionality of statutes without this Court in effect approving the concession, and that therefore they wanted the mandatory jurisdiction here, because it's certainly conceivable that the Attorney General might unwisely make a concession of that kind. And that perhaps underlies their requirement that you tell the Congress whenever you do this. John H. Garvey: That's conceivable, although I, having read the legislative history, have found no indication of that. And what's more, the Attorney General's choice to intervene or not in these cases is discretionary, so that he may let go by a holding of unconstitutionality without even getting involved. I think in light of that what you suggest is not probable. Speaker: Well, I suppose you would be taking the same position even more strongly if you had contested the constitutionality... had attempted to sustain the constitutionality of the statute in the district court and you lost, and then, rather than appeal that declaration, you appealed only the remedy. John H. Garvey: We would still be taking the same position. Speaker: You'd go to the Court of Appeals? John H. Garvey: That's correct. Speaker: And if you were right then, you should be right when you concede? John H. Garvey: A fortiori, we should be right when we concede. If there are no further questions, we would rest. Warren E. Burger: Thank you, gentlemen. The case is submitted. We'll resume at 1:00.

William H. Rehnquist: We will hear argument first this morning in Number 85-2156, Shaare Tefila Congregation versus John William Cobb. Mr. Brannan, you may proceed when you are ready. Patricia A. Brannan: Mr. Chief Justice, and may it please the Court: This case presents the issue, whether a complaint that alleges racially motivated discrimination and harassment against Jews may state a claim under Title 42 of the United States Code, Section 1982. The complaint alleged that respondents' desecration of the synagogue of Shaare Tefila Congregation was racially motivated and hence covered by the statute. The complaint further alleged that the facts that supported the allegation of racial motivation were principally the character, symbols and words that respondents themselves painted on the synagogue. The complaint alleged that they painted the words, "Dead Jew, Death to the Jew. " They painted swastikas, and on a door the words, "In, Take a Shower, Jew. " They painted the garbled German words, "Toten Kamf Verband" next to a skull and crossbones. The "Toten Kamf Verband" with the death head units of concentration camp guards in Nazi Germany, and the skull and crossbones was their symbol. These words and symbols invoked Nazi ideology, and it was one of the principal tenets of Nazi ideology, both in Nazi Germany in the 1930s and '40s and among neo-Nazi groups in this country today that Jews are racially non-white and inferior to whites. The complaint further alleged that respondents painted the words, "Ku Klux Kian", and the burning cross, the familiar symbol of the Kian. Kian groups, like the Nazis, hold as one of their central tenets that Jews are racially distinct from whites and inferior. The Fourth Circuit Court of Appeals split on the issue as to whether this conduct stated a Section 1982 claim. A majority affirmed the dismissal of the complaint, holding that because Jews are not racially distinct or non-white, this conduct does not state a 1982 claim. But in dissent, Judge Wilkinson recognized that although Jews are not racially distinct from whites, when they suffer racially motivated deprivation of rights protected by the statute, they like any other group should be covered. We, of course, agree that Jews are not racially distinct from whites. We respectfully ask this Court to reverse the Fourth Circuit and to hold, consistent with its prior cases-- John Paul Stevens: May I ask you a question about your last comment? Do you think at the time the statute was passed that the people who voted for the statute thought that Jews were racially distinct or not? Patricia A. Brannan: --I believe that they did, under the common understanding of the word "race" at that time. That issue has been briefed in greater detail, actually, in the St. Francis College case. For our purposes, we don't believe that that even would matter. That what really matters, if persons who discriminate against Jews, Arabs or other minorities now, who do that because they view them as racially distinct, that that conduct should be covered. After all-- John Paul Stevens: Maybe it should. But you don't contend that at the time the statute was passed, that the authors of the statute might well have used the term "race" in a way that would have treated the Jews as a separate race? Patricia A. Brannan: --We believe that they did use that term at that-- John Paul Stevens: But you don't rely on that fact? Patricia A. Brannan: --We don't believe that that really adds to the argument that we are making. I am reminded, in answering your question, of Justice Marshall's language in the McDonald case, that at the time of the passage of the statute in 1866, Congress probably didn't anticipate racial discrimination against whites of the sort that this Court held in McDonald to be covered. But Congress had an open-ended concept of what it was covering, that there would be new groups coming to this country; new kinds of discrimination undoubtedly would arise. And it was the discrimination itself that Congress focused on, not particular groups and whether they were covered. That is also illustrated, we believe, in the legislative history by the repeated references to Germans and Swedes and other groups as a race who really... it just isn't thought any more that those groups are racial-- William H. Rehnquist: Ms. Brannan, the word "discrimination", of course, connotes treating some people differently than others, and your idea is that the statute covers any instance in which, say, a Frenchman treats a German differently than he would another Frenchman, if they are all in this country? Patricia A. Brannan: --No, Justice Rehnquist. The principle for which we argue is more narrow. That would only be covered if it is racially motivated discrimination. William H. Rehnquist: Well, then how does one know whether a decision by someone of French extraction to treat someone of German extraction differently than he would treat other people, is racially motivated? Patricia A. Brannan: We think that that is a question for the finder of fact as it would be in any-- William H. Rehnquist: Well, what should the judge charge the jury? Patricia A. Brannan: --The judge should charge the jury that the standard is racial motivation, and that that can be evidenced by statements and admissions of the defendants, by any, for instance, expert opinion as we put in, in this case, that indeed this very conduct and these very symbols-- William H. Rehnquist: And if someone of French extraction then thought that the person of German extraction was of a different race, that would be sufficient? Patricia A. Brannan: --Yes, it would, if it can be established... and the plaintiff, of course, has the burden of proof. William H. Rehnquist: But only that this person-thought that, not that it is a fact? Patricia A. Brannan: That's exactly right. And the reason-- Antonin Scalia: But If you had discrimination of the same sort by a Frenchman against a German, just because he doesn't like Germans, they have been engaged in too many wars and that other Frenchman acknowledges that they are not different races, then it wouldn't be actionable? Patricia A. Brannan: --Unless the plaintiff could prove, of course, that that statement was false or that acknowledgment was false. And the reason we think that that is a principled and fair distinction, in fact supported by this Court's cases, is the Court has held that these statutes address discrimination that is racial in character. There is something especially invidious, in the eyes of the 1866 Congress, about racial discrimination, that if the discrimination were just for some other reason, it isn't-- Antonin Scalia: Why isn't it enough that he is discriminating against Germans, and Germans are a race under the statute? Patricia A. Brannan: --Well-- Antonin Scalia: He is discriminating against Germans as Germans, not because he thinks Germans are a different race but because he thinks Germans are Germans, and under the statute as it was enacted at the time, it was agreed that Germans were a distinct race. Patricia A. Brannan: --That is-- Antonin Scalia: Why wouldn't that come within the statute? Patricia A. Brannan: --That is another way of approaching the issue that we think is very fair in light of the legislative history, and indeed, would lead to a reversal at this case and an affirmance in the St. Francis College case as well. Antonin Scalia: It would make a lot more sense... given two instances of discrimination against the German, you would want us to find one actionable and the other one not actionable simply because of the two people is foolish enough to think that Germans are a separate race and the other one isn't? Patricia A. Brannan: The only difficulty, as we have argued in our briefs, is that at all costs we would want the courts to avoid is the issue of defining race in order to determine coverage. We believe that was one of the key errors of the Fourth Circuit majority, that they had a notion, a correct notion that Jews are not racially distinct from white, and they let their correct idea get in the way of dealing with this discrimination on the terms of the discriminators themselves, and that certainly we wouldn't want the lower federal courts to be analyzing, are Jews racially distinct, are Germans or Arabs or any other group racially distinct. William H. Rehnquist: Well, unless that's what Congress intended to be determined in a case like this. Patricia A. Brannan: And we believe, Justice Rehnquist, that the legislative history demonstrates it's not at all what they intended, and that in fact this Court's analysis of that history in the McDonald case makes that very clear. William H. Rehnquist: What if I take a dislike to people with brown eyes, and I say that I'm just not going to deal with people with brown eyes the same way I'm going to deal with people with blue eyes. Now, if I deny someone a right on that basis, is that actionable under the statute? Patricia A. Brannan: Well, the answer is, of course, unless it's racially motivated in our society. William H. Rehnquist: Well, could that be racially motivated? Patricia A. Brannan: It could be if there were facts to show that historically, or in our society, and in the eyes of the discriminators, was a racial distinction, and the hypothetical-- William H. Rehnquist: How is the judge going to charge the jury? What should they ask themselves, to decide whether someone with blue eyes who treats differently people with brown eyes is "discriminating"? Patricia A. Brannan: --The charge should be whether it is conduct that we understand as racial, as based on that person and their heritage and background and what they are in unchangeable ways, unlike, for instance religion, and that that should be backed up in the evidence and the plaintiff has the burden to show that it ties in historically or culturally with an understanding that is racial. In the hypothetical you posed, that probably would be an unlikely result, that a plaintiff could prevail in a case like that. William H. Rehnquist: But it has to have a historical background. In other words, the discrimination would have to be going on for a while before it would be actionable under the statute? Patricia A. Brannan: Not necessarily. If there developed now, for instance, a notion that French Canadians are racially distinct and there were Kian-like groups who were out to do the sorts of things that happened at Shaare Tefila to French-Canadians, I don't think we would have to wait for some period of time but we would need to show that they view their conduct as racially motivated against those groups. Sandra Day O'Connor: Ms. Brannan, are you asking us, in effect, to equate race with national origin discrimination? Is that what it approaches? Patricia A. Brannan: We are not. We are looking to the facts of this case and saying that, given the historic and contemporary link in the eyes of people who lash out at Jews, that they are a racial group; that we really needn't broach that question in this case at all. But to go back up-- Antonin Scalia: So long as they are intelligent enough to know that they are not a distinct racial group, it would be okay; they could paint the same things on the synagogue so long as they know that the Jews are not a separate race? Patricia A. Brannan: --In this case, Justice Scalia-- Speaker: That is the position you are urging us to take, though, isn't it? Patricia A. Brannan: --No. I don't think it turns only on admissions. In this case, if the Respondents denied up and down that they had a racial belief about Jews, I think-- Speaker: They in fact didn't. I'm not saying they just admit... they in fact didn't. They in fact know that Jews are not a separate race. But they still set out to defame and cause injury to Jews. Do you think that that would not be covered, so long as the individual is not doing it because he thinks Jews are a separate race? Patricia A. Brannan: --Well, I have some difficulty, I suppose, with the notion of, you know, "they don't think", because given the content of the message that they put up on the walls of Shaare Tefila, it really evokes a racist history. Speaker: Don't change my hypothetical. I am giving you a hypothetical in which the individual knows Jews are not a separate race and paints the same things as were painted here on the synagogue. Now, under your theory if I understand it correctly, that would not be actionable? Patricia A. Brannan: Under my theory, I guess I can't reconcile them knowing that Jews are racially distinct and still invoking the Holocaust. Speaker: Make believe, all right? Patricia A. Brannan: All rights. Speaker: Accept my hypothetical. Under your theory it would not be actionable; isn't that right? Patricia A. Brannan: If we could know completely what was in their minds, it would not be actionable. But perhaps to work a variation on your hypothetical-- Speaker: Well, what in the legislative history supports that very unusual approach to the statute, and perhaps unworkable approach? Patricia A. Brannan: --Well, we think in fact that the approach is directly in line with this Court's cases, particularly the McDonald and General Building-- Speaker: I asked about the legislative history. Patricia A. Brannan: --And what is supportive in the legislative history was the repeated references-- Speaker: Well, there may be some support in the legislative history for treating Jews as a separate race or treating Germans as a separate race. But I don't see anything in the legislative history that would make it turn on the relative sophistication of the person doing the discriminating, which you are urging. The view of the discriminator... I mean, that's what gets you into a very peculiar approach here. And is there anything in the legislative history to support that? Patricia A. Brannan: --Well, Justice O'Connor, we think it isn't so much the sophistication as the intent of the discriminator, and that is an issue that this Court addressed in terms of the legislative history in General Building Contractors, and held that intent is the touchstone of coverage, that a plaintiff now has to show racially discriminatory intent. Speaker: But why isn't it enough if the intent is to discriminate against a race, as race was understood when the statute was enacted? You are not just insisting that the intent be to discriminate against a race, but you are insisting that the intent be to discriminate against a race because it is a race, not because we have been at war with Germans for 200 years, but because Germans are a separate race. Now, why do you have to add in that qualification under the statute? Isn't enough that you are discriminating against a race? Isn't that all the statutory language would require? Patricia A. Brannan: Yes, but the difference, I think, between the last part of what you said and what we are arguing, Justice Scalia, is the motivation of the actor must be racially discriminatory. That is the thing that we are emphasizing. Speaker: Why? Where is that in the statute? Patricia A. Brannan: Well, basically because this Court so held in General Building Contractors and McDonald, but that has been the thing that the Court has looked to, not who the group is, who is the victim, but what the intent is as demonstrated by the acts and by statements and by the usual evidence that fact finders look at to measure intent. Speaker: Do you think McDonald would have come out differently if a person just didn't like the color of the white race's skin, or of the black race's skin and was discriminating on that ground, although still discriminating against a race? Patricia A. Brannan: Well, in our society skin color is very wrapped up, of course, with issues of race and I am not sure that those two things are separable in a case such as McDonald. Speaker: That's what I was wondering about. What would you say if they painted swastikas on the synagogue on Lenox Avenue in the middle of Harlem? There is a synagogue there. Patricia A. Brannan: Yes, Justice Marshall. Speaker: And there is not a white person within ten blocks. Patricia A. Brannan: And we believe that the result would be the same, that those congregants should be covered, as we believe Shaare Tefila would be covered. Speaker: Well, you couldn't do it an race, could you? Patricia A. Brannan: Well, again swastikas on a synagogue again invoke that ideology of racial distinctness of Jews, and we think if that is part of-- Speaker: But there are no Jews in that synagogue. There are no white Jews, I would say. Patricia A. Brannan: --Well, we think it makes no difference whether the Jews are black or white if the racial animus is there to support the cause of action. As in McDonald versus Jones, the Court hasn't weighed the color of the skin or the race of the victim but has looked to the intent of the discriminator and that the result there should be the same even if the victims are black. Speaker: If these people had just vandalized the synagogue without painting anything, swastikas or anything like that, they had just trashed the place, would you be here? Patricia A. Brannan: It would be a much more difficult case. Speaker: You would then have to have some other evidence that they did it on a racial basis? Patricia A. Brannan: Exactly. Speaker: But if it turned out that they... as Justice Scalia suggested, if it turned out that as a matter of fact they knew that Jews were not a different race, they claimed that they just didn't like Jews, you wouldn't be here then? Patricia A. Brannan: Exactly, if there weren't some evidence. Here the character of what was painted is the strongest evidence. Speaker: And you would... in that case you wouldn't even be here if you determined or you wouldn't even be here, even arguably under the statute, claiming that at the time the statute was passed, that Jews were considered to be enough different to be covered by the statute? Patricia A. Brannan: We might, although I think we would be advocating, as are the respondents in the St. Francis College case-- Speaker: You don't want to urge in this Court, I take it, that Jews are a different race? Patricia A. Brannan: --No, not at all, Justice White. We want to urge that where the discrimination against them is racial, even though-- Speaker: And you don't want to... you are not urging that Congress thought Jews were a different race at the time they passed the statute? Patricia A. Brannan: --There is some evidence of that, but we really don't think that is critical one way or the other to the holding, that what Congress was after and was concerned about was racial discrimination against anyone. Speaker: Well do you think it would be error if we read the legislative history to say, Congress thought that Jews were a different race and therefore the statute covers it? Would we be in error? Patricia A. Brannan: No, I don't, although we would certainly urge the Court to make clear that of course Jews or any other group now bringing a claim would not have to prove some racial distinctness. That was really what was suggested by the Fourth Circuit majority, that there is an extra burden beyond racial motivation on the plaintiff to show that they are non-white or racially distinct, although it is unclear, racially distinct from whom. That, we believe, was the crux of the error and that particular aspect of that opinion, we believe should be reversed and made clear by the Court, whether or not the Court accepts the racial motivation theory that we have put forward or the respondents' approach that is more closely tied to the meaning of race in 1866. Speaker: And could, under your theory, these respondents have been prosecuted criminally under the criminal counterpart of these statutes? Patricia A. Brannan: We believe that they could. In fact, they were prosecuted under state law only under the malicious destruction of property types of statutes that don't in any way address the racial motivation or the real... the civil rights violation that was the most hurtful part of the conduct. It wasn't really getting the wall messed up that is offensive to the congregation. Speaker: Ms. Brannan, you have a lot of trouble with this Screws case which says, you must have an intent to deprive somebody of a right, a specific right. Remember that case? Patricia A. Brannan: Yes, I do, and we-- Speaker: Well, in this you'd have it awful hard to prove that criminally, beyond a reasonable doubt. Patricia A. Brannan: --I think as a question of proof, there will be more, or less easy cases. We think that the intent here is very clear, and that the right that was violated is the right in Section 1982 to hold property, one of the specifically enumerated rights. Speaker: It doesn't say that the result... the man was killed. Screws says it was what was in the man's mind. You have to prove that he intended not only to kill but to kill in order to deny him a constitutional right. Well, that would be a lot of problem in this case. Patricia A. Brannan: Yes, it would certainly be a question of fact. But we believe at the threshold a colorable prosecution could be brought. Speaker: If your interpretation is correct, do you think that it will eliminate or sweep out of the way some specific exceptions that were enacted in Title VIII, the Housing Act where Congress specifically exempted some, forms of possible discrimination? I guess those would just be swept away by the potential for suit under this section? Patricia A. Brannan: Well, as in the Court's prior cases, considering the relationship of 1981 in Title VII and 1982 in Title VIII, they are separate and independent causes of action and the Court already has held that in Title VII and Title VIII, Congress did not intend to-- Speaker: Well, certainly, your interpretation would make useless the reservations expressed in Title VIII for certain types of discriminatory conduct. Patricia A. Brannan: --Well, our view is that Title VIII has its restrictions and its areas of coverage, and that 1982 has its, and that they stand independently. It may well be that there are cases covered under Section 1982 that would not be covered under Title VIII. In fact, this is such a case. We do not have a Title VIII claim because the congregation building is not a dwelling. So, the two, we believe, can be on parallel tracks but each have their independent areas of coverage and exemption. Speaker: Well, but it would open up for suit, if you are correct, various things that were reserved in Title VIII, for example the duplex housing when the owner lives in part of the duplex, and that sort of thing. Patricia A. Brannan: We think that is true now, Justice O'Connor, under 1982. For example, if a black family is now denied housing, rental housing in a duplex, there is no reason why they cannot bring a Section 1982 case if they can prove that discrimination, you know, was against them on racial grounds. It's really... we're not going any farther in that area than already the Court has established, that there are areas of coverage under Section 1982 that might be exempted. Speaker: Well, except that you would extend it to every other possible source of national origin? Patricia A. Brannan: Well, we view it really not as an exemption, but as reversing the Fourth Circuit's attempt to restrict by defining groups the courts think are not racially distinct from the coverage of the statute, whereas under this Court's cases, particularly General Building Contractors, the rule has been where there is racially discriminatory intent to breach one of the protected rights under the statute, there is coverage. Speaker: Yes, but Justice O'Connor's point, I think, is that Title VIII has some meaning. If you assume that what Title VIII was doing was extending to persons other than just blacks the guarantees of 1982. But now, under your theory, Title VIII doesn't do anything that 1982 doesn't already do. Patricia A. Brannan: Well, Title VIII, as I recall, also covers religious discrimination. It also covers, I believe, gender based discrimination which our theory certainly would not reach. Racial motivation, we believe, will cover victims of racial motivation but in a straightforward religious discrimination case, for example, our theory would not cover plaintiffs, whereas Title VIII very well right. So they do have, we believe, their independent areas of coverage and exemption, even under the approach we urge. Speaker: Could I just explore again what you mean by racial motivation? Suppose a landlord doesn't want a particular racial group, just because the landlord thinks that that racial group is sloppy, just has made the judgment that the group as a whole is sloppy. Now, would that be the racial motivation? Patricia A. Brannan: Yes, Justice Scalia, we think it would be, and in fact it's those kinds of stereotyped generalizations about racial groups that have created the disabilities that Congress was trying to break in the 1866 Act. Speaker: But the landlord has to believe that it's... if the landlord just believed that, let's say, all Frenchmen are sloppy, but knew that Frenchmen were not a separate racial group, that would be okay? Patricia A. Brannan: I don't-- Speaker: Or let's say, all Puerto Ricans or all Italians or whatever? So long as the landlord knows that is not a racial group, that's perfectly okay? Patricia A. Brannan: --If it isn't a racially based distinction, we think that case would not be covered. Speaker: Very strange. Patricia A. Brannan: Again, harking back to the legislative history a bit, what was at the heart of the Reconstruction, Congress's concern of course in the first instance was creating situations in which the newly freed slaves could function in our society. But they didn't limit that protection, of course, just to blacks as the Court held in McDonald. It was really a deep concern with racial motivation as being something distinct and particularly odious in our society that was at the heart of their concern. Speaker: It seems to me you are only getting at the ill-educated discriminator, right? Patricia A. Brannan: Well, perhaps, Justice Scalia, it's a question of ignorance, not education. I think that there are perhaps those in much more sophisticated places with a string of degrees who may be surprised to hear a congregation arguing before the Supreme Court that Jews are not a race. We believe that the error of the Fourth Circuit simply was in not applying this Court's precedents in McDonald and General Building Contractors, but adding on that extra burden an extra test for the plaintiffs. One of the additional difficulties with that test is that it simply is not practicable and sensible for the district courts to be trying to figure out who is racially distinct or non-white, which are the words the Fourth Circuit used. It is unclear, first of all, what the Court even meant by "racially distinct". Racially distinct from whom? In Sullivan and Tillman, this Court held that even whites who are the victims of racial discrimination by other whites, because those white plaintiffs have advocated the rights of blacks, have a cause of action under Sections 1981 and 1982. And we believe, again, the principle that underlies that case is if the motivation is racial, it's racial because those white plaintiffs were advocating the rights of blacks, that once again there should be a cause of action even if the plaintiffs and defendants are of the same race, indisputably. In terms, of course, of its language about the Jewish plaintiffs in Shaare Tefila being non-white, we think perhaps it goes without saying that it would be completely inappropriate exercise for the district courts to undertake trying to figure out who is white and non-white in some objective, anthropological or scientific test, that that simply would not be an appropriate approach for the courts to take. For all of these reasons we respectfully ask this Court to reverse and to hold that all victims of racially motivated deprivations of the rights enumerated in the Civil Rights Acts of 1866 may state a cause of action under Sections 1981 and 1982. William H. Rehnquist: Thank you, Ms. Brannan. We will hear now from you, Mrs. Garren. Deborah T. Garren: Mr. Chief Justice, and say it please the Court: You have heard the petitioners argue that the desecration of a synagogue, what is a place of worship is covered by Section 1982, what everyone agrees is a race discrimination statute, because these defendants allegedly acted out of a completely erroneous and irrational belief that Jewish people are racially distinct. I would argue that inclusion of such a religious discrimination claim within the scope of this race discrimination statute is entirely out of keeping with the purpose of the statute as originally enacted and its specific language as interpreted by this Court. Likewise, and particularly importantly, determination of the coverage of Section 1982 wholly by reference to the illogical and erroneous misperceptions of discriminators is a far cry from the purpose and the language of Section 1982 as it has been interpreted by this Court. Sandra Day O'Connor: Ms. Garren, there is some evidence in the legislative history, of course, that Congress had in mind treating race to cover such things as Gypsies and Chinese and Germans and so forth, is there not? Deborah T. Garren: There are some general references by some of the legislators and the-- Sandra Day O'Connor: President Johnson vetoed the statute because he thought it was unwise to sweep in Chinese and Gypsies, didn't he? Deborah T. Garren: --Yes, ma'am. Sandra Day O'Connor: So, there is some legislative history to support the approach that Congress, at least, in enacting Section 1982, may have intended to cover discrimination on the basis of a different version of what constitutes race than we would have today? Deborah T. Garren: I think there is no evidence in the legislative history that Congress intended to define the coverage of the statute wholly by reference to intent. In other words, there is no evidence in the legislative history that the coverage of the statute is determined by whether or not a defendant arguably acted out of an erroneous and illogical racial perception. Sandra Day O'Connor: That may be true, but how about the argument that apparently is going to be made in the companion case, rather than here, that indeed the statute does cover discrimination against Jews because they are Jews? Deborah T. Garren: I would say, Justice O'Connor, that in this case the petitioners have always very carefully not argued that Jewish people have any sort of racial identity or even are commonly identified by society as racially distinct. They haven't made that argument in this case. There may have been some general references in the legislative history to Jewish people as members of a different race. I think it would be inappropriate to look to an individual legislator's comment regarding that as determinative of the coverage of the statute. There is certainly no indication that the majority-- Sandra Day O'Connor: Well, it would be appropriate, though, to look to the legislative history to determine what it is that Congress had in mind in passing this statute? Deborah T. Garren: --Yes, ma'am, and that is what you all have done in determining that the statute is limited to rights which are racial in character and addresses an effort to achieve racial equality, with reference to people who are members of specific groups, I think. And whether or not there was a general recognition in society at the time of the 39th Congress that Jews are racially distinct, it is something that has never been argued by petitioners in this case, and I think something that is not evidenced in the legislative history either. And will be difficult to discern, if one attempted to go back and develop racial definitions at that time. I would argue that a more appropriate approach would be to try to bring the statute into the 20th Century, and at most, in an effort to define what groups are covered, to look at whether a group... an individual as a member of a group that is commonly identified as non-white or is commonly identified as white, that is reflective, I think, of the specific language of the statute and also-- Sandra Day O'Connor: This Court has brought whites within the protection of the Act in McDonald. Deborah T. Garren: --Yes, ma'am. I understand that. Sandra Day O'Connor: It is unlawful to discriminate against white people. So, how can you now exclude Jews? Deborah T. Garren: Jewish people would have a cause of action based on discrimination because they are white, if that was their contention, but that is not their contention in this case. They also do not contend that they are racially distinct from whites in any way. So, I would argue that they do not fall within a group that is protected by the statute. There is no evidence that they fall within such a group. Lewis F. Powell, Jr.: Mrs. Garren, the problem we have in the United States... when I say a problem, it's perhaps a great asset of our country... is that we have so many different races that over a period of many years that there have been a great many intermarriages. We have a heterogeneous society. How would your theory fit, for example, if a white had married an Asian and their progeny, children, grandchildren, would... would they be a member of the white race or an Oriental race? Deborah T. Garren: I understand. Lewis F. Powell, Jr.: You can cite any number of examples like that. We see them every day. We have friends like that. What do we do about that? Deborah T. Garren: Your Honor, I am not attempting to suggest that the Court define scientific categories of race, as has been suggested by the petitioners. I think what you would do with those sorts of cases is, first of all, there are certain groups in our society that are commonly identified as non-white. Those groups would be entitled to protection, and if an individual is subjected to discrimination because he is perceived to be a member of such a group, then he would be covered. Lewis F. Powell, Jr.: That is matter of perception? Deborah T. Garren: It is a perception only of an individual's membership in a group that is commonly identified as non-white. And that is something that the jury could determine, in other words, whether or not that individual was acted against because he was non-white. Lewis F. Powell, Jr.: Does that bring you close to the position of your opposition here today? Deborah T. Garren: No, I think it does not, because the petitioner argues that the perceptions of the discriminator, without reference to groups, are determinative. In other words, under the petitioner's argument, to take an extreme example, if a group of anti-gay people decided that homosexuals were racially different than others and discriminated against them on that basis, I think carrying the petitioners' argument to its logical conclusion, that claim would be covered by the statute. The same might be true for handicapped individuals. Suppose some deviant organization in our society decided that handicapped people were different racially and acted against them on that basis, I believe that claim also would be covered under the petitioners' theory for coverage of this statute. So, it is something different. It's an effort to bring the statute into the 20th Century and to recognize racial groups in a way with reference to society's perceptions. Thurgood Marshall: Where do you want to go to find this, it read it, if you are part Scandinavian, part Indian, part South African, part Japanese? What are you? What book do you find-- Deborah T. Garren: Again, Your Honor, I am not saying that anyone has to make that determination. I am saying that there only has to be a decision by a jury whether you are discriminated against because you are identified as non-white. Thurgood Marshall: --White or non-white? Deborah T. Garren: Pardon me. Thurgood Marshall: You said you have to find out whether you are white or non-white? Deborah T. Garren: No, sir, I did not say that. Thurgood Marshall: What did you say? Deborah T. Garren: I said that an individual could obtain the coverage of the statute if he was discriminated against because he is identified as non-white, or as a member of a group that is commonly identified as non-white. Thurgood Marshall: How did he become identified as a non-white person? Deborah T. Garren: Well, I think one obvious way in which he would be identified as a non-white person would be by reference to immutable physical characteristics such as skin color, which we traditionally understand-- Thurgood Marshall: I would like to have seen you identify my father. He was white with blond hair and blue eyes. Deborah T. Garren: --In that case, sir, I don't think he would have a cause of action for race discrimination. Thurgood Marshall: Oh, but he did. He was a Negro. I am trying to find where you... what do you do with Sammy Davis? [Laughter] Deborah T. Garren: Sammy Davis might certainly have a cause of action for race discrimination. He would not have a cause of action based on his religion. Thurgood Marshall: The people that committed this act knew exactly what they were doing and they knew exactly who they were aiming at, didn't they? Deborah T. Garren: Your Honor, I understand that this was an egregious wrong. Thurgood Marshall: And should be punished. Deborah T. Garren: It's one that cries out for a remedy. That is correct. And there was a remedy here available to these petitioners. Thurgood Marshall: What? Deborah T. Garren: Mr. Rehmer was convicted of malicious destruction of property and was sentenced to three years, the maximum sentence for that offense. Criminal restitution was available to the petitioners under Maryland law. In addition, they had many common-law actions that they could have brought in the state courts. Instead, they asserted them as pendent claims in the federal court, and never really, seriously wanted to pursue those state claims because they wanted to send a message to these individuals under federal civil rights law. My point simply is that you can only send that message if Congress has accorded federal jurisdiction to do it, and that there is no indication that Congress intended the statute's coverage to be determined by reference to individual discriminators' illogical and irrational perceptions of race. There has to be something more. Harry A. Blackmun: Ms. Garren, there is such a thing as an Ethiopian Jew, isn't there? Deborah T. Garren: Yes, sir. Harry A. Blackmun: Suppose this synagogue had been one for Ethiopian Jews? Deborah T. Garren: That might be a different case, Your Honor. I can imagine a circumstance where there could be allegations that the synagogue was defaced because its members were predominantly black, in which case clearly they would be able to assert a claim under Section 1982. Harry A. Blackmun: Black, not Jewish, then? Deborah T. Garren: That's correct. That's correct, because they have agreed that Jewish people are not racially distinct. Thurgood Marshall: Well, if they are black and Jewish? Deborah T. Garren: I think they have a cause of action because they are black. Thurgood Marshall: But not because they are Jewish? Deborah T. Garren: As indicated-- Thurgood Marshall: If they painted swastikas they wouldn't have a cause of action because they are Jewish? Deborah T. Garren: --That's correct, Your Honor. Thurgood Marshall: You have to take that position. Deborah T. Garren: In order to take that position, you would have to. Yes, sir, I do. [Laughter] You would have to define the scope of the coverage of this statute, something clearly that Congress and now the courts must do, by reference to those deviant organizations' decisions about Jewish racial identity. The petitioners herein do not claim a Jewish racial identity, and have never claimed a Jewish racial identity, nor did they contend that they are commonly identified as racial or non-white in any sense. It's simply a matter of what the statute was intended to address. It was not, I would argue, a statute to root out all forms of invidious discrimination or bigotry in our society. This Court has held that it does not address sex discrimination, religious discrimination, national origin discriminations standing alone, and all of those categories would be pulled in, arguably, under the petitioners' theory. Harry A. Blackmun: Are you taking the position, however, that the statute is applicable only to blacks? Deborah T. Garren: No, sir, I am not. Harry A. Blackmun: So, if it were the yellow... they were Chinese you would say the statute is applicable? Deborah T. Garren: That is correct. That group would be-- Harry A. Blackmun: And yet, when the statute was enacted, the concern was with the freed men, was it not? Deborah T. Garren: --Well, if one looks to the actual concern of the legislators in passing this statute, I think one would have to realize that it was passed in an effort to protect and extend the rights of the newly freed slaves. And this Court has indicated, therefore, that blacks are protected, and has subsequently indicated that whites as well are protected. The additional step that you must take, not in my case, I would argue, because in this case Jewish petitioners have indicated that they do not have a racial identity but in the case that follows mine, there is a need to make an effort to define race. I would argue that the petitioners just throw that out the window and say, we don't need to define it; we don't need to determine what groups are protected by this statute; we'll determine the statute's coverage by reference to each individual's deviant ideas, without any reference to protected groups in our society. John Paul Stevens: May I ask, Ms. Garren, over the... years ago, and of course it's still prevalent in some areas, there was prejudice against Jews. That was known in our society. There was a lot of anti-Semitism. How would you characterize that prejudice? Deborah T. Garren: Your Honor, I would-- John Paul Stevens: You wouldn't call it racial prejudice? Deborah T. Garren: --Prejudice that is based on their religion. John Paul Stevens: Do you think it was based entirely on their religion? Deborah T. Garren: That is the characteristic that defines them. There is no racial characteristic that in fact defines people of the Jewish faith. It is a religion. John Paul Stevens: Do you think that would be the proper characterization in Germany when it was so virulent? Deborah T. Garren: No, sir, but again that was the deviant perception of a couple of organizations in the society that had run rampant. It wasn't a common perception in the society. They weren't commonly identified. John Paul Stevens: Do you think the origin of the prejudice in this country was entirely religious? Deborah T. Garren: Of the prejudice against Jewish people? John Paul Stevens: Yes. Deborah T. Garren: I think I am not qualified to comment on that, but I have every reason to believe that religion in part motivated that prejudice because that is what in fact defines the group. Antonin Scalia: It didn't extend to Jews who were atheists, nonbelievers? Do you really think that was the case? Deborah T. Garren: I'm not sure I understand your question, Justice Scalia. Antonin Scalia: I mean, do you think that the prejudice that existed against Jews in this country was only against believing Jews, and so long as the Jew said, I really no longer believe in the religious tenets of Judaism, the prejudice no longer existed and that person would have been able to get into all sort of country clubs and what not? Deborah T. Garren: No, sir, but I do think that the discriminators identify the group by their religious beliefs. They may not know in each individual instance whether that Jewish person follows his faith or not. Antonin Scalia: Why... you want us to use modern concepts of taxonomy in order to apply this statute? Deborah T. Garren: No, I don't think I do, Your Honor. Antonin Scalia: Why? Deborah T. Garren: I don't think I do. I am not suggesting that you attempt to define racial categories in a taxonomical fashion, or any kind of scientific way, because I do think there are incredible difficulties with doing that. I am saying that-- Antonin Scalia: Modern perceptions is what you want us to use? Deborah T. Garren: --Common identification of a group as non-white in our society, and that's an approach that the lower courts have taken without fail in attempting to grapple with these cases. And none of those lower courts have included Jewish people within the rubric of-- Antonin Scalia: Why just non-white? I mean, wasn't non-white... do you contest that non-white was used in the statute to mean non-Anglo-Saxon? I mean, isn't there a lot in the legislative history that would suggest that Germans would have been considered non-white for purposes of this statute? Deborah T. Garren: --There may be statements by individual legislators with reference to a German race. Now, whether that individual legislator considered Germans to be non-white, I don't know. I have no reason to think that the Legislature intended to address the rights of Germans when it passed the race discrimination statute. Antonin Scalia: Wasn't there a lot in the legislative history that showed that the statute was a reaction, not just to slavery but also to the know-nothingism that had grown up in this country, and that it was intended to protect Irish and Germans in particular? Deborah T. Garren: The respondents in the case that follows us have discussed some of those references. I do not think there is a lot in the legislative history to that effect, nor do I think that that would represent the majority opinion of the legislators. I think the primary emphasis was on protecting the rights of newly freed slaves and blacks in the South when that statute was passed. It was a Reconstruction era statute. And the courts have now extended it... you all have now extended it to encompass whites. The question is, how one defines additional categories that it would cover, and I think it is with reference to those two categories that one defines the definition. Thurgood Marshall: Ms. Garren, do you want us to amend McDonald and say, when we said "white people" we didn't mean Jews? Deborah T. Garren: No, sir. I think, again, that Jewish people have a cause of action based on their whiteness. If they are discriminated against because they are white they can sue. If a Jewish person is discriminated against because he is black, he can sue. Jewish people don't have a racial identity, as the petitioners have recognized, as the lower courts have recognized, as we recognize. They have a cause of action if-- Thurgood Marshall: Just because certain Jews are white in complexion doesn't take away the rights of them as Jews. Deborah T. Garren: --Those are rights against religious discrimination. There's no-- Thurgood Marshall: Well, isn't it religious-- Deborah T. Garren: --[inaudible] Jewish people are racially distinct. Thurgood Marshall: --Well, this is not religious discrimination, then. Deborah T. Garren: I would say this is religious discrimination, and is not encompassed within this race discrimination statute. Thurgood Marshall: That's the only thing the swastika means. Deborah T. Garren: A synagogue was desecrated. Thurgood Marshall: "Death to the Jews". That's what the swastika means. Deborah T. Garren: I appreciate what Nazis believed and I also think that that is not a belief that is common to society. Thurgood Marshall: I didn't say Nazis. I said anybody that uses the swastika means, "Death to the Jews". German, American, or whoever he is, you don't use the swastika. Deborah T. Garren: Well, I think even the petitioners in this case would agree that a claim would not be covered if the swastika wasn't used to indicate that Jews are racially inferior. That's what results from their standard. Thurgood Marshall: It means that you should die. Deborah T. Garren: Pardon? Thurgood Marshall: It means that you should die. Deborah T. Garren: These are horrible views. The question is whether or not we should determine that-- Thurgood Marshall: The word is Holocaust. That's what the swastika means. Deborah T. Garren: --I understand that Jewish people have been subjected to historical discrimination, that it's an awful circumstance. But whereas here these petitioners were not without a remedy to make them whole, there isn't any need to extend a federal statute to cover any situation where a defendant acted out of a misperception. Thurgood Marshall: How could they protest the swastika being placed on their building? Deborah T. Garren: Well, I think first of all that they could have pursued these fellows in state courts. Thurgood Marshall: Well, if they say that, if you just painted a stroke you're desecrating the building. Deborah T. Garren: That's true, Your Honor. Thurgood Marshall: Well, this was more than that. This was a swastika. Deborah T. Garren: I understand that, Your Honor, and I think that the state courts likewise would have addressed that circumstance. Thurgood Marshall: Well, what statute does a state have saying you shall not use swastikas? Deborah T. Garren: The state doesn't have such a statute, Your Honor. However, I think the egregious nature of the conduct in this case would have been addressed by reference to punitive damages, for instance, in common-law actions; by reference to criminal restitution, by reference to sentencing. And I think it was. With respect to criminal sentencing, at least with respect to the individual whom I represent, he received the maximum sentence and that is an uncommon thing for malicious destruction of property in the State of Maryland. That reflects an effort by the State to address the seriousness of the act. Your Honor, I don't know the circumstances surrounding the others. It's not part of the record and I have no way of knowing whether there's even sufficient proof to tie them in with this incident. Antonin Scalia: Ms. Garren, you rely on the fact that it was a synagogue to show that it was racial... religious rather than racial. But actually, they just went across the street to the synagogue after they had initially spray painted a Drug Fair, which is not notably religious. [Laughter] Deborah T. Garren: That's correct. Antonin Scalia: And they sprayed the Drug Fair with the words, "White Power" and "Aryan Brotherhood". And then after that they happened to see a synagogue and they go over and do what they did to the synagogue. Deborah T. Garren: That's correct. Antonin Scalia: That doesn't strike me as predominantly religious, the whole episode. Deborah T. Garren: No one has denied, at least for purposes of this appeal, that these defendants acted out of a belief that Jews are racially inferior and that the symbols they painted suggested that. Antonin Scalia: Well, then I don't understand why the... why you raise the fact that it was a synagogue and saying that that proves something about the case. I don't see that it does. Deborah T. Garren: What happens when... if the Court applies this misperception standard, to use a shortened term, then in essence all religious discrimination claims, national origin discrimination claims, even some sex discrimination claims might come within this race discrimination statute. That is the point I am trying to make when I say, this is really religious discrimination and it's an effort to use a standard that will result in an unmanageable approach to this statute, I think, in the lower courts and one that is not consonant with the purpose of the statute as originally enacted, and with its language. The problem is with the standard that the petitioners urge and the results that could accrue if that standard is applied, and I don't think in this case... it really isn't necessary that you engage in this racial definition that we have been hassling with because the petitioners indicate that they are not racially distinct, and Jewish people are not racially distinct. Recognizing that, they have attempted to argue that the perceptions of the individual defendants, erroneous and irrational perceptions are what determine the coverage of a federal civil rights statute. That just can't be right. There is no evidence that that is what determines the coverage of this statute in the legislative history. Antonin Scalia: What if I just disagree with them as to whether they are racially distinct within the meaning that the framers of the statute had, framers who thought the Gypsies were a race, framers who thought the Germans were a race, who meant by "race" a stock? Deborah T. Garren: I understand. It would be my position that the petitioners have essentially stipulated that away here. They have never contended that Jews are racially distinct or commonly identified as such, nor do they want that characterization. Antonin Scalia: Do you think it wouldn't be within our power, given the status of the case, to decide it on that basis? Deborah T. Garren: Clearly it would be within your power. I think that it would be-- Antonin Scalia: Well, I mean-- [Laughter] Deborah T. Garren: --Inappropriate. I think that it would be an inappropriate interpretation of the statute. It would result in you having to reach back to the 1860's and determine what groups society then regarded as racially distinct, and I don't think that is a practical approach to interpreting the statute. A more appropriate approach, I think, is to look to our society now and determine what groups are commonly identified as non-white, with reference to what we all recognize as racial characteristics. Antonin Scalia: Why not non-white? What groups are identified as races? What if we concluded that the theory of these people was scientifically foolish but not necessarily socially foolish? There are a lot of people who might use the term "Jewish" to refer to what they think is a racial group, a stock. Deborah T. Garren: I think that the petitioners would disagree that there is any kind of common perception. I understand, Your Honor-- Antonin Scalia: Has that been conceded away too, that there's no common perception? I don't recall any... I do recall their forcefully arguing that they are not scientifically... Jews are not scientifically a race, but I don't recall their arguing that there is no general social perception that to be a Jew is only a religious thing. Deborah T. Garren: --I think that they have never indicated that there is a common perception in our society today that Jews are racially distinct either. John Paul Stevens: May I ask, is it critical to your case that there be some well-defined categories of races? I imagine at one time, perhaps scientists might have thought there were five or six races, or ten or twenty. Now, they seem to say there are three, is it, three races. What if 20 years from now they really study this thing and determine there is only one race, that really, the differences among the races are not scientifically significant? Deborah T. Garren: Yes, sir. John Paul Stevens: Then, I suppose the statute would just have... no longer have any significance. Deborah T. Garren: That is why I would take the position that it isn't appropriate to define races by reference to any kind of scientific terminology. In fact, an appropriate approach is-- John Paul Stevens: Well, how do you define race, then? If you don't do it by reference to scientific standards, what are the standards for defining whether two people are in different races or not? Deborah T. Garren: --The approach that, in fact, anthropologists take in many instances is by reference to culture and by reference to common perceptions in society. John Paul Stevens: Well, if you look at culture, I suppose a pretty strong argument could be made that the Jewish have a very special culture of their own. Deborah T. Garren: I do not believe a strong argument could be made that the Jewish people are commonly identified as racially different. That's what I am referring to when I say that cultural-- John Paul Stevens: What I am trying to get at is, how does one decide whether two people are in the same or different races? Deborah T. Garren: --One evaluates whether those individuals... you look at the individual, first of all, and you evaluate whether that individual is identified as white or is identified as non-white in our society, in some sense. John Paul Stevens: So, now we've got two races, white and non-white? We're down to two, is that it? Deborah T. Garren: There are various groups that would fall in the non-white category. This isn't an effort to get at defining what race means. Sandra Day O'Connor: In your view, would Hispanics... how about Hispanics and Arabs. Would they fit in your category? Deborah T. Garren: I think it's quite conceivable that Hispanics would be a group that is commonly identified as non-white in our society. Several of the lower circuit courts have held that and have approached the statute in precisely the way that I am suggesting that you approach it. Sandra Day O'Connor: And how about Moslems or Arabs? Deborah T. Garren: "Moslems" is a religious term, I believe. Again, it would require the courts to evaluate whether there is a common identification of that group as racially distinct, or non-white in our society. For my individual reaction-- Sandra Day O'Connor: Yes. Deborah T. Garren: --I think that those groups would be included within the categories that are protected because in many instances individuals that are in those groups have dark skin, for example. And there can be no doubt that if an individual is discriminated against because he is black and has dark skin, or a large number of members of that group are black and have dark skin, they would have a cause of action under this statute. In conclusion, I would like to say that where, as here, there are adequate state remedies available to the petitioners, it is not necessary to stretch Section 1982 to cover every defendant's... every defendant who is motivated by an irrational and erroneous racial perception, and therefore I would ask the lower courts to uphold... this Court to uphold the lower courts' dismissal of this claim for the desecration of a synagogue under Section 1982. If there are no further questions, thank you. William H. Rehnquist: Thank you, Ms. Garren. Ms. Brannan, you have one minute remaining. Patricia A. Brannan: May it please the Court, if I could just briefly address the issue that arose during Mrs. Garren's argument about commonness of the perception of Jews and whether this is a deviant belief, first of all, as Judge Wilkinson pointed out in dissent below, there was no record on the commonness of the belief because we were cut off on a Motion to Dismiss in which the district court didn't even consider the extra pleading material that we put in the record. But secondly, that I think that some Gallup poll or test of the prevalence of the view really doesn't solve the problem. The facts of this case show that this kind of conduct occurs. It is not unique to Shaare Tefila, and where it occurs, regardless of the prevalence or whether we characterize it as deviant, which I hope we all would, that the harm is the same. It is a harm based on racially motivated conduct and it should be redressed under Section 1982. William H. Rehnquist: Thank you, Ms. Brannan. The case is submitted.

Earl Warren: Number 815, Elmer Davis, Jr., Petitioner, versus North Carolina. Mr. Bell. Charles V. Bell: Mr. Chief Justice and may it please the Court. In this case Elmer Davis, the petitioner, contends that his petition for writ of the habeas corpus should be granted. This case has been in the litigation for nearly seven years and Elmer Davis, a 35, now 35, I believe he was about 29 when this case started, is in the state present at Riley on death row. We say we are -- I believe the state would even admit this that this case stands or falls with this confession. What I mean by that? That the only evidence that could possibly could link Davis with this murder is the confession, that's the only thing in this case. Now if you have notice on the record page 110, that he was arrested by the Charlotte police on September the 21, 1959. They went over there and arrested him. They brought him back to Charlotte and in his presence they made out that arrest sheet. Don't let him use the telephone, don't let him call anybody, and hold for Hucks and Fesperman RE - Foy Bell Cooper, that's the remedy. So he was arrested right there in Belmont in the police station. Potter Stewart: He was a -- he had escaped from the prison, didn't he? Charles V. Bell: Yes, he had -- he escaped from Haywood County prison camp. Potter Stewart: And he -- where he was under a sentence and where he still had some 15 years to serve. Charles V. Bell: Yes, Your Honor. Potter Stewart: So there's no question about that – no question for propriety of the locking him -- locking him up, keeping him locked up for the (Voice Overlap) Charles V. Bell: Well they say that -- Potter Stewart: Continue -- and deserve that present sentence where -- from which he'd escape. Charles V. Bell: Well what we contend in this case that the Charlotte Police Department went to Belmont and the record where arrest sheet solely indicates it and arrested him in Belmont, North Carolina which is another county and brought him back into Gaston for the crime or killing and murdering the white lady, Mrs. Foy Bell Cooper. Then -- and we say that this -- the arrest sheet and be -- our points in this case that he was denied, one, he was denied counsel and number two that all of the facts and circumstances point unerringly that this is of course confession that it wasn't voluntarily given by Davis. And if you -- the careful perusal of the fact presented by this record in this case would indicate that it was coerced that they used force and that would -- it was involuntarily obtained. It's admitted Davis is an illiterate man who couldn't read and write. When they brought him back to Charlotte and still no place I mean placing him in the county jail, they put him in the police lockup. He was held in solitary confinement and held incommunicado for 16 days. Potter Stewart: Well, that could happen to anybody who has escaped from prison, isn't it? Charles V. Bell: No sir. Potter Stewart: He was under -- he was under a long prison sentence, what? Charles V. Bell: By -- Potter Stewart: -- 15 to 20 years and when he was recaptured I suppose it's – would he be surprised at least which is rather the normal thing you -- he's returned to prison and maybe in solitary confinement. That could ha -- that happens everyday to people who were apprehended after they have escaped from prison, doesn't it? Charles V. Bell: No sir. Potter Stewart: That's not -- Charles V. Bell: Does not -- Potter Stewart: Well what does -- Charles V. Bell: Well he -- Potter Stewart: What's the difference? Charles V. Bell: What's the difference -- the difference is Your Honor, when a man escapes from prison he violates the law there. He violates the law in the county in which the prison is located. Byron R. White: And when he's apprehended he is returned for confinement. Charles V. Bell: Then he is returned to prison. Byron R. White: To confinement. Charles V. Bell: That's right. But instead of that -- that it be done -- be in this case, the Charlotte Police Department went into another county and arrested him for this murder which the pol -- the ‘arrest sheet' indicates and held him in an overnight jail for 16 days. We say and contend that the Charlotte overnight jail isn't an extension of the prison system of North Carolina that he was held as a primary suspect arrested and held incommunicado in an overnight jail for 16 days. And it's admitted -- William J. Brennan, Jr.: Well, Mr. Bell he escaped from a prison camp, was that it? Charles V. Bell: Yes sir. William J. Brennan, Jr.: And ordinarily on -- being recaptured where would they return him, to the prison camp? Charles V. Bell: We would return -- William J. Brennan, Jr.: Yes, in the prison camp? Charles V. Bell: Yes sir. William J. Brennan, Jr.: Oh, I see. Charles V. Bell: They -- we return him to the prison camp. William J. Brennan, Jr.: And your point is instead of doing that they took him to a police station or police county jail, was that in Charlotte? Charles V. Bell: Yes – police -- William J. Brennan, Jr.: That's where they kept him -- you say interrogated for 16 days? Charles V. Bell: Yes sir. William J. Brennan, Jr.: But not in connection with his escape but only in connection with his alleged murders, is that it? Charles V. Bell: Yes sir. Byron R. White: They said -- did they communicate with the prison authorities? Charles V. Bell: Sir? Byron R. White: Did they communicate with the -- Charles V. Bell: Yes and I understand it's in the record that Captain McCall after having gone over there and having gotten in and have them arrested him and largely and in this lockup did get permission from the Director of Prisons to investigate this crime. Byron R. White: Well to -- to hold them in their custody for a while, isn't it? Charles V. Bell: Yes. Byron R. White: Where is this overnight lockup -- Charles V. Bell: The overnight -- Byron R. White: In relation -- in relation to the county jail that you spoke of just a moment ago (Voice Overlap) this prisoners are kept except for overnight. Charles V. Bell: The county jail is right across the street. It's within -- one street separates it and we have it in the records here that -- it's in the record that one officer testifying that he had never known and he's about to retire any place where it could be held under these circumstances for such a protracted period of time. Earl Warren: In that lockup? Charles V. Bell: In this lockup. And he also testified that he locked him in, held for such a protracted period of time that they put him in the county jail that whenever they want to use him or interrogate him or for some other purpose they transfer him back to the overnight jail. William J. Brennan, Jr.: What's the lockup? Just to keep him in the cell within a police station is that it? Charles V. Bell: Yes sir. It's a pretty large place because it has to accommodate all of the prisoners awaiting trial in the city courts. Speaker: Is it in the police station Mr. Bell? Charles V. Bell: Sir? Speaker: Is it in the police station? Charles V. Bell: Yes sir, it's in the police station. It's a police overnight lockup jail. Speaker: Yes. People who were arrested are taken there and then they appear in court the next morning, is that it? Charles V. Bell: Yes sir. Speaker: The -- and where is the county jail? Charles V. Bell: The county jail is right across the street. Speaker: In a building all by itself or in a – Charles V. Bell: Yes sir. Speaker: in a county courthouse or -- Charles V. Bell: It's in the county courthouse and I believe it's on the fourth floor. So when Elmer Davis was brought back to the jail, he was held for 16 days and he was interrogated by three shifts of policemen. Captain McCall testified that he put his entire force of 29 men to investigate this case. However, the record only the clo -- discloses it that about seven men interrogated him. Earl Warren: Can you tell us something about they extent of the interrogation. Charles V. Bell: Davis contends that this dispute of -- Mr. Chief Justice that he contends that he was interrogated around the clock. But they -- they don't -- they dispute that. They say they only talked to him maybe seven or eight times. And they contend that they didn't talk to him about his crimes that they were trying to breakdown some alibis and that in itself trying to breakdown some alibis, that in itself would show to the Court that they were continuously questioning him about this crime. They took him to Canton in North Carolina and it's in the record. Captain McCall testified that he agreed with the other police to take him to a Canton in North Carolina breaking down the alibis and made and forced, took him out of the jail with leg cuffs and handcuffs. And after they've got to Canton, he was handcuffed with that -- to another officer walked 19 miles down the railroad right away for 19 -- that's what their -- Mr. Fesperman said. That is 19 miles from Canton to Asheville, but from one of the outskirts to the other Canton and Asheville would only take up about 14 miles. But I think this Court could have judicial notice that that's punishment, that's cruel and barbarous punishment. Earl Warren: What was the reason for walking him down the road in fact for that --? Charles V. Bell: Well, they claimed that they were trying to breakdown some alibis that he had told them. That he had -- what had happened to him after he escaped from the Haywood County Serving Jail and they wanted to check this advocacy if it was true or untrue. Earl Warren: And when was that with relation to the time he was -- Charles V. Bell: That was during the time that he had -- he had consistently denied that he have anything and to do with this murder and that was therefore they got the confession. Earl Warren: Was that -- was that in the last two or three days or was it before that? Charles V. Bell: I think it was about four or five days before the confession was obtained. Earl Warren: Was that -- was that before the time they said that they had first asked him about the murder? Charles V. Bell: I think it was Your Honor. Earl Warren: Direct -- substantially that would? Charles V. Bell: Yes sir. Potter Stewart: Well he had stolen some things, hadn't he and just walked down the railroad track to check his stories, the the route he had taken after he had escaped from prison and the circumstances under which he had stolen these things off the close lines? Charles V. Bell: Well that's what -- that's what the validity -- Potter Stewart: Well isn't that true? Isn't that -- Charles V. Bell: No sir, I've -- Potter Stewart: – comparing the side. Charles V. Bell: What happened happens. Here's what I actually think happened in this case. I mean what your interpret Mr. Justice. They -- when they brought Elmer they -- goes back from Gaston County into Mecklenburg. Captain McCall had already divulged the plaintiff by which he would make this man confess. He knew that he couldn't get a bill of indictment that he would have to be released and so he -- this was a planned thing. This was a means of punishing Davis breaking down his spirit and cause him to confess. Then this was a -- this was a device of punishment to pull a confession out of Davis. Abe Fortas: Well McCall -- Mr. McCall satisfied that he didn't mention the murder case to him until Friday afternoon, the 3rd. The arrest was September 26, or September 21. Captain McCall testified that the murder was not mentioned to Mr. Davis until October 3rd, and the confession was signed October 6. Is there anything contradictory to that in the record? Charles V. Bell: Well, Mr. Justice Fortas, I could -- I would have to reject that because I think -- Abe Fortas: I'm asking whether there's anything in the record that -- Charles V. Bell: I think the record on page 110; the ‘arrest sheet' would contradict that because the ‘arrest sheet' was made out in his presence. Abe Fortas: I see. Charles V. Bell: And he's got a notation, the RE-Foy Belle Cooper. Earl Warren: What was that, I didn't understand that? Charles V. Bell: Only if you look Mr. Justice, if you -- Earl Warren: No, just -- just repeat your last sentence, I just -- Charles V. Bell: It goes -- it said the problem of that arrest sheet RE-Foy Belle Cooper. Abe Fortas: RE, what is it? RE -- the record. Earl Warren: I still don't -- I still don't get it. It said RE, what? Charles V. Bell: RE-Foy Bell Cooper who was the murdered lady. Earl Warren: Oh, when he was arrested? Charles V. Bell: Yes sir. Earl Warren: Oh, yes. Abe Fortas: Is there any evidence as to when that entry was made -- Charles V. Bell: That interim was -- Abe Fortas: -- was made for Mrs. Cooper? Charles V. Bell: Yes sir. Abe Fortas: There is evidence on that. Charles V. Bell: Yes, it was made -- as soon as -- it immediately upon his being brought in the police department. Abe Fortas: I see. Charles V. Bell: The same day and unusual thing about this record on cross-examination, each -- there were three officers who had brought him in from Gaston County and all three of them denied that they knew anything about the contents of the ‘arrest sheet' and during the trial of the case, after all three officers denied anything about any knowledge of the contents of the ‘arrest sheet' then Captain McCall on prompt cross-examination himself admitted. And I think that's on the record at page -- Your Honors if you will notice, if it please the Court if you will notice record page 8 and 9. Now this was the testimony that was elicited from Captain McCall and cross-examination. He is the man who is in-charged of this whole investigation and here's what he says. “I don't know if it's impossible that I could have ordered this boy to be held without privilege of communicating with his parents.” Now, he's the man in-charge. He's the man who directs his officers what to do. His friends and relatives are held without privilege of using the telephone or without privilege of talking to anybody. And may it please the Court I think the word “anybody” to mean lawyers, relatives, friends, or anybody who -- or everybody he might possibly contact to give him some type of assistance. I don't know whether I told the jury or not that I did not do this. Yes, I care. No, I did not want him to talk to anybody. That's the captain of the [Inaudible] William J. Brennan, Jr.: He gave any reason, did he? He followed with the -- Charles V. Bell: Yes, he has followed with reason that he -- yes, Mr. Bell I know that a prisoner in the State Penal Division can see his own people. Let me see. William O. Douglas: It seemed to be correct. Charles V. Bell: Yes, and he said he was grade prisoner and he wasn't entitled to see anybody and that before he would be allowed to see anybody he would want to get a permission from the Director of Prisons. William J. Brennan, Jr.: I suppose your point is that that might be alright and at least that's not what it is because they returned him from the prison from which he escaped. Charles V. Bell: Yes sir. William J. Brennan, Jr.: But that when they brought him in solely to interrogate him that they couldn't do that. Charles V. Bell: Yes sir. That be -- that was a critical stage in this investigation and that he shouldn't have been denied counsel and it was part of the devise to ring coerced confession from him by holding him in -- holding him in solitary confinement for 16 days. Potter Stewart: Mr. Bell, going back to this document which is reproduced on page 110 of the record, I don't quite understand the top one -- the top one shows that he was arrested 11:00 PM on September 21st, 1959. The arresting officers were Homberg, Guilon and Porter, describes them and it's there that says “Hold for Hucks & Fesperman RE - Mrs. Cooper. Escapee from Haywood County still has 15 years to parole. Do not allow anyone to see Davis or allow him to use telephone and then going down right below the middle of the page, there seems to be a duplication of the same document, but with other -- I mean the same form with other information in it. There it says facts of the arrest did kill and slay one Foy Belle Cooper on September 20th in Elmwood Cemetery, was that all made out at the same time or these were two different documents -- Charles V. Bell: Now, the bottom part -- the first -- the top portion of this ‘arrest sheet' -- Potter Stewart: Yes. Charles V. Bell: -- was completed the day he was brought to Charlotte. Potter Stewart: Yes. Charles V. Bell: And the bottom part of it was completed after the preliminary hearing. Potter Stewart: Well, there seem to be the same form, you shall see -- Charles V. Bell: The only thing something was added there as to the disposition made in the preliminary hearing. Then there that he was charged with murder rape of Foy Bell Cooper. Abe Fortas: So that the bottom half is October 7th, is that it? Potter Stewart: No, it's dated September 21st same way. Charles V. Bell: The bottom half and -- Potter Stewart: Yes, right down at the bottom to the right. Mr. Justice Fortas points out; it's stated October 7th, 1959. Charles V. Bell: Yes, October 7th, 1959. Potter Stewart: And that was filled in this -- and this -- and this bottom half was filled in after a preliminary hearing, is that it? Charles V. Bell: Possibly the same day or the next day. Potter Stewart: That he has a different age for the man. He's age 29 at the top of the page, he's age 32 on the second half of the page. Charles V. Bell: And that could have been typographical error. Potter Stewart: The age is three years and two weeks. Charles V. Bell: Well, that we -- they -- I mean the circumstances under which he was held, I'm surprise that on the basis there could possibly be living to be. He has been on death row seven years, approximately seven years and in connection with this preliminary hearing that he had no -- he had no council even then. No lawyer represented him at the preliminary hearing that they made arrangements themselves on the waver without counsel. Potter Stewart: He plead not guilty, did he? Charles V. Bell: Yes sir. Earl Warren: Is there anything in the record to indicate that the officers told him of his rights during his three weeks. Charles V. Bell: It's undisputed Mr. Chief Justice that when they obtained the purported overall confession that they did not tell him in any event. They didn't advise him of his Right to Counsel, any privilege that the Constitution would be -- make available to him. Earl Warren: Is there any -- Charles V. Bell: But -- Earl Warren: Oh, go on. Charles V. Bell: But in order to legalize this thing when they wrote it down which Davis couldn't read, he didn't know what they were writing, when they wrote it down then they're ready to transcribe it. Then they advised him of his constitution rights. He had no advice when he made the oral statement. Earl Warren: There's no -- there's nothing in the record to indicate that during these three weeks that he was in there that he was advised of his rights, nothing in it. Charles V. Bell: Yes sir. Earl Warren: Not until -- not until the written statement? Charles V. Bell: Not -- not until the written statement. Potter Stewart: What do you mean by his rights? That -- that's something that hasn't been -- Charles V. Bell: Right to remain silent, right to have counsel -- Potter Stewart: Right to have counsel? Where -- what do you mean in the jail at all times? Charles V. Bell: I go right to talk to somebody or you're allowed here if you wanted to. Potter Stewart: Did he actually object? Charles V. Bell: It's not -- they say he didn't Your Honor. But after in this case Your Honor and the circumstances of under which this man was being held that it was in cumber that he -- I mean that he had reached the point, that legal guidance was an absolute necessity. I believe too -- that he couldn't forfeit his rights due to his ignorance and not knowing what he had avail. Well, I -- I don't think he -- I think that he should have had a lawyer instead. Speaker: Is there other evidence against this man prior to judgment (Voice Overlap) Charles V. Bell: The only thing that they offered, they -- they put on testimony that he -- some distance away from the cemetery where this murder was committed that he had been in that vicinity and possibly had stolen a pair of shoes from someone. Speaker: Would you mind repeating that -- Charles V. Bell: They did offer testimony that he had been in that vicinity sometime when – in close proximity when to which -- to when -- when the murder was committed and has stolen a pair of shoes from somebody who was asleep. But he -- he testified that this man that he took the shoes from was some distance away from the cemetery. May it please the Court, I think that all the circumstances in this case were careful perusal of the facts would show that this man had volunteered until the minute that -- that this was a conceived plan to ring confession out of this man. Potter Stewart: It occurred immediately after the policemen gave prayer, isn't it? Charles V. Bell: Yes. They claimed that one man testified and that's the disad -- that's the great disadvantage about confessions. And the police, all of the police testified against one man and one day they had this preacher there and he testified that he talked to him and that he said he had been treated alright. And it would elicited on cross examination from this minister that he is what -- he had testified in many cases of this kind. He's always at hand there when the police needs him and there's a funny thing, he never showed up until he signed the confession and he testifies in many cases of this kind and that was elicited from him on cross examination. He is what you call as handy Uncle Tom. Potter Stewart: Handy Uncle Tom? Charles V. Bell: Yes. Earl Warren: How did he -- how did he happen to come to see the defendant? Charles V. Bell: Well, he never would say that. He just claims he just happened to be there. He's always -- Mr. Chief Justice, happens to be when he has given the police department assistance. He happens to always be there when they need him. And they never -- they didn't need him in this case until they had a written confession from Elmer Davis. It seems to me that if the police department wanted to do right about it, they would have headed there before he signs that paper and had him talk to him and he could have told exactly what happened. Earl Warren: What -- what do you have to say about the prayer that the -- that the deputy sheriff made for him. What was that incident? Charles V. Bell: Well, the Deputy Sheriff said that I think he testified that he talked to Elmer and that he had made a prayer -- said a prayer -- say to ask him had it been for him. He solely stated he saw a bible in his hand and then Elmer told him he didn't know how to pray and so -- then he made a prayer for him. Earl Warren: How they happened to get the bible? Charles V. Bell: That never came out in the evidence. Earl Warren: Did -- Charles V. Bell: And I think it's a customary thing around the jail, they give people bibles. Earl Warren: I see. Speaker: Are you familiar with this case of -- Charles V. Bell: Yes sir. Speaker: [Inaudible] it came up here on direct review phrase in our certiorari. Is that it? Charles V. Bell: Your Honor this case I think it had as much action as any case I've ever known. We -- we tried the case in [Inaudible] called Mecklenburg County. We lost it, the death sentence was imposed. We had it reviewed by the Supreme Court of North Carolina and they affirmed it. Then we filed a petition for cert to this Court and it was denied. Then we went into the Eastern District Court of North Carolina with a petition for writ of habeas corpus and it was denied in which in the petition we requested a hearing. Then it went to the Fourth Circuit. Potter Stewart: And there was a hearing? Charles V. Bell: It was not. Potter Stewart: You're not. It's the first time actually. It's not -- Charles V. Bell: Then it went to Fourth Circuit and it was argued before the three-judge court then they requested reargument en banc and they reversed it and sent it back to the United States District Court for our hearing. Then that the whole case was tried over again before the United States District Judge and he denied the petition. Then it went back on appeal to the Fourth Circuit and argued before a three-judge court again. And before any decision was passed, was imposed or rendered, they wrote to Attorney General's office and Mr. Levin's and me and asked “Would we consent for the record to be reviewed en banc for a disposition and they disposed of it on a three-judge, 3-2 decision. Then since you asked that question, may I state this. That that was to my -- to my mind I've been thinking about and I think I don't' understand it. The original three judges who heard the case, two of them dissented, Judge Sobeloff and Judge Bell. And the thing I can't understand is why they couldn't vote for -- vote to grant this petition instead of requesting that it be decided en banc on the record because they would -- the dissenting judges it -- Potter Stewart: Your argument was only to those three judges? Charles V. Bell: That's right. Potter Stewart: There was no argument to the Court en banc? Charles V. Bell: No sir. Potter Stewart: The Court en banc is to review the record but only -- Charles V. Bell: View the record -- Potter Stewart: And of the three judges who heard the case, the United States Court of Appeals, two of them votes on your favor? Charles V. Bell: Yes sir. Speaker: Well, at some [Inaudible] closed case or want to en banc it. Earl Warren: Mr. Bullock. James F. Bullock: Mr. Chief Justice, Associate Justices. Mr. Bell was been with this case all the way through and I got in on the very end of it, several members of our office having handled it previously. The question before this Court is not a new question. However the ascertainment of the answer by placing all the facts of this case within the applicable law was enunciated by this Court, it's difficult as always, we realized that. If I may add a personal note, the case is difficult for me there are two reasons. First, I do not approve of capital punishment. Second, it's the first case I have ever appeared in which the death sentence had been imposed and I was on this side of defense that I -- I've always been a defense counsel previously. Now, the State of North Carolina and the Attorney General's Office is not vindictive, not blood thirsty. It has been our practice as Mr. Bell well knows during the years that I have been there that we concede error very frequently in criminal cases in both the State and the federal courts when there's been violation of due process or error of law. Yet, I have a duty to the public of North Carolina and I have a profound respect for the law and we feel that when all of the circumstances of this case have been considered, that the decisions of the lower courts will be affirmed finding that there had not -- had not been a violation of due process. Mr. Bell in response to your question, we did some of the history of this case. It has been a long case. It's been in litigation ever since 1959. The voluntariness of the confession was considered by the trial judge in the Superior Court and resolved against the defendant. The North Carolina Supreme Court resolved a question against the defendant. This Court denied certiorari. It was Judge Butler the first time in the District Court in that circumstance, I was not within, found the facts against the defendant. It went to the Fourth Circuit and they felt that a plenary hearing should be held and a plenary was held in the United States District Court of the eastern district which was a trial de novo. In fact, every witness involved so far as this confession is concerned in material was heard by the District Court plus additional three witnesses who were not heard in the Superior Court. And I might say that the State allowed Mr. Bell to lead his client and his witnesses anyway they wanted to go because we had no hesitation in letting the full facts come out in that court. Now, we had not planned to argue the facts of this case in detail because we think that the findings of the District Court, the findings of the Fourth Circuit sufficiently deal with the facts and then prior to law thereto and it would be somewhat of a wasted time for us to review them again here. I would like to respond to what Mr. Bell said he felt had happened that this was a planned thing from the beginning when the police first took Davis into custody. It must be remembered that he was taken into custody in Belmont the night or the day after the murder and I see no way that the police could have planned anything against Davis because they didn't know who had committed the murder. Now, on Davis' person when he was arrested was a pocketbook, identification cards from Bishel Hayes whom he had robbed the day of the murder within a few yards of the cemetery where the murder occurred. Now that is why the Charlotte police went to Belmont and brought him back. The Belmont police contacted the Charlotte police as they always do when they pick up an escaped convict and let them know he has been apprehended. In addition to that he had on this person various other articles which he had stolen. He had broken into homes and stolen ladies pants. He had stolen these items off on clotheslines on his trip down from the mountains coming in to Charlotte. He would -- William J. Brennan, Jr.: When did he escape? James F. Bullock: Sir? William J. Brennan, Jr.: When did he escape? James F. Bullock: I have not been able to pinpoint from the record the exact time of the escape this case, but it's indicated it was some days prior to his apprehension and -- William J. Brennan, Jr.: [Inaudible] James F. Bullock: I think so, yes sir. I don't believe he ever said the exact day. It shows that he – it indicates that it was several days prior to his apprehension and the murder in Charlotte because he had come down by train and he said by bus and other means from up in the mountains. And this route from Campton to Ashville is where he told the police very freely, he admitted this in the Superior Court, admitted it in the District Court that he had broken into these homes. That he had committed this robbery although he said it was on Saturday instead of Sunday the day of murder. He pretty admitted all of these. He said he had always freely omitted his crimes. The statement is in the record which he had committed, but the Charlotte police had ample reason to investigate this suspect, this escaped convict of all these other crimes and a crime which was committed in Charlotte, a robbery of a -- from the person there. Earl Warren: He ad -- he admitted those -- James F. Bullock: He admitted though, yes sir. Earl Warren: Freely? James F. Bullock: Freely, he admitted that under oath in the Superior Court, he admitted that under oath in the District Court. Earl Warren: I was speaking about when he was arrested, did he admit then or -- James F. Bullock: Oh, yes sir. Yes sir, he admitted on -- during this period of time, the 16 days. I don't know exactly what day he first admitted thought but that was what they were interrogating him about during this time. The Cooper murder was not mentioned to him until October the 3rd I believe. He was first brought to Charlotte on September the 21st, the night. Speaker: Was there anything found on his person connecting him directly with [Inaudible] James F. Bullock: No sir, there was not, nothing on his person that connected him with it because the items of her personal property had been left in the cemetery and Davis later showed where he had hidden those articles in the bushes, pocketbook, glasses, things of those. William J. Brennan, Jr.: And yet by the time they got him to Charlotte according to his arrest record, he was being held only in connection with the murder, wasn't it? James F. Bullock: This notation which is on here indicates that sometime he was held in connection with this case for questioning there. William J. Brennan, Jr.: But I mean there's no reference here that was being held on Charlotte for any of these evidences. James F. Bullock: No sir. There's no charges remained at that time because there's no actual formal charge made in this case against Davis until after his confession and then a warrant was issued and he was -- had a preliminary hearing a way of the preliminary hearing. Potter Stewart: Well it's certainly a reference to the fact that he was an escaped prisoner. James F. Bullock: Yes sir. Potter Stewart: With 15 years more to serve. James F. Bullock: es sir that -- that's right there and they did clear this with the prison officials in order to hold him while they were investigating all of these other crimes; the articles which he had on this person -- Abe Fortas: And had the -- James F. Bullock: -- and the Cooper case in the event if there is any connection there. Abe Fortas: Is that the -- your explanation of this exhibit on page 110, the arrest record where it does say hold for Hucks & Fesperman RE - Mrs. Cooper. James F. Bullock: Yes, Your Honor not on my explanation, but the record does not indicate when that notation was put on there that you will note from the reading of the record that the arresting officers or the least the ones who went to Belmont and brought him back, said they said they did not put that on there. They had never had any knowledge on this until the time of the trial. The two officers who were assigned to the Cooper case to investigate the Cooper case said they never put it on there because they were not the arresting officers of course. They had no occasion to -- they had no knowledge of this notation until the time of the trial in the Superior Court. Now, Captain McCall testified that he may have had it put on there sometime, but apparently it was sometime after he was put in jail and not the day of this -- original ‘arrest sheet' was made out. Abe Fortas: Well, it does follow that alleging that I've just read, it's followed by alleging escapee from Haywood County still that's 15 years full. James F. Bullock: Yes sir. Abe Fortas: Do you know whether it's customary to fill out the form on the facts of the arrest when a person is arrested? James F. Bullock: I didn't know what that -- do not know what the procedure is in the arrest -- and the police department shall -- Earl Warren: Well, the form would indicate that that is the purpose of it wouldn't it? James F. Bullock: Yes sir. Earl Warren: The form says facts of the arrest and right under it “Hold for Hucks & Fesperman RE - Mrs. Cooper.” James F. Bullock: Yes sir. The -- the notation -- we can't deny the fact that the notation raises serious questions. However, all of the evidence that the Superior Court and the District Court indicates that this notation was completely disregarded by all of the police officers, in fact, they had no knowledge of it other than Captain McCall who said he may have had to put on there -- it would be explanation concerning to being a C grade prisoner. Now, the reason -- the evidence shows that it was disregarded immediately after David was put into jail, I believe the next day the record indicates, he requested the jailer, I believe, to contact his sister by telephone. They looked in the directory and could not find her address. It must be remembered that his sister had not seen Davis for 10 to 15 years, she testified. So apparently, he did not know exactly who she was so they were having some difficulty in locating in the directory. But Mr. Hucks -- Earl Warren: Does she live in the city? James F. Bullock: She lives in Charlotte yes sir, near the cemetery where this murder occurred. In fact Davis' home was near the cemetery where this murder occurred and I believe it was in evidence that one of his parents has killed the other parent while Davis was a youngster. And the police knew him and his background for that reason for more investigation with that and his other crimes. But Mr. Hucks, a detective, when Davis says time after time, he treated him very nice that he was assigned to the case never mistreated him in any form of fashion. Mr. Hucks went out and made a search and found the sister and told him that Davis wanted to see her. And she said, I think she had seven or ten kids, something like, who were sick. She said she couldn't come then because of the children. Earl Warren: Mr. -- when the fact that he did that? James F. Bullock: That was a day or two after Davis had been arrested. Earl Warren: After the arrest. James F. Bullock: Yes sir and after he was brought back to Belmont. And then a few days later Mr. Porter asked Davis whether there was any one he wanted to contact and he mentioned that his sister had not come and he wanted to see her. He started to located the sister and found that Mr. Hucks had already had and did not proceed any further. But Mr. Hucks and Mr. Garner who lived next door to the Davis home -- old Davis home out there went over and talked to the sister a second time and she still did not come. Now, all the officers say that she'd never once came to the City Jail to see Davis. She said that she did go over to the County Jail to see him at one time, but it's significant that she didn't even bother to go to his trial. It is further significant that neither Mr. Bell nor Mr. Avins or her attorneys nor the sister nor Davis considered this testimony germane enough to have at the trial or at any time until four years later at the plenary hearing in the District Court. And we just think that the police testimony on all of these circumstances as the District Court believed and the Circuit Court believed, was more worthy than I believe than the sister's. Speaker: Is there -- is there a conflict in her testimony at one stage -- in another stage with respect to having or having made an effort to see Davis in light of her testimony? James F. Bullock: It seemed to -- but she only testified and that was in the District Court. There were some conflict as to when she was trying to see him there. It was not entirely clear on that. Earl Warren: What -- what -- James F. Bullock: Excuse me -- Earl Warren: What is your explanation of the -- of the statement on the arrest warrant, do not allow anyone to see Davis or allow him to use telephone? James F. Bullock: The only explanation we have as what Captain McCall himself testified to there that he was doing that in order to -- or get -- that was the instruction he had received from the prison department. When they -- he called about having him and asked permission to keep him up there. And that -- that was a preference. But apparently none of the police officers had been instructed by Captain McCall to argue anything about this notation. Now, we say that all the evidence clearly indicates that we -- we can't deny it was there and the fact if it had been carried out and the purpose of it was to hold him this way, the police would have been silly to kept this ‘arrest sheet' there for the attorneys to see. They could easily destroyed it and fix that one. But they say there never was any denial that Davis seen anyone he wants -- he only requested to see one person and that was his sister. They made two attempts, three counting the telephone trying to find -- to find her and she would not come. William J. Brennan, Jr.: Did the police testify that they have advised him that he might see someone, that he might see a lawyer or that he might make a telephone call that he didn't have to talk and if they did what did they advise him and when? James F. Bullock: The record indicates that at least two or three of the police officers did advise of him of those general rights. William J. Brennan, Jr.: When? James F. Bullock: Previously, one of them previously to the confession and then at the time of the confession they specifically advised him at that time they -- William J. Brennan, Jr.: In that brief, that he testified there's a written confession -- James F. Bullock: The oral confession. William J. Brennan, Jr.: The oral confession. James F. Bullock: That's oral confession and then again at the time of the written confession Captain McCall told him that -- advised him of his rights that if he wrote it and signed it, it could be used against him so forth and so on. William J. Brennan, Jr.: And what -- in relation to the date of arrest which I gather September 21st, what date was that? James F. Bullock: This would have been on October the 6th, I believe. William J. Brennan, Jr.: That's after about 15 days. James F. Bullock: Yes sir. Potter Stewart: The written confession Mr. Bullock appears at page 360, through the middle of the page on 362 of the record Davis is illiterate, is he? James F. Bullock: Sir? Potter Stewart: Is Davis illiterate? Can he read or write? James F. Bullock: He can read Your Honor. The District Court found that he had completed a third of fourth grade. There was evidence that he had a testament which he had been reading in the jail which was given to him by people who visited the jail regularly to distribute these testaments and there is evidence in the record that he read this bible all during his trial in the Superior Court. Potter Stewart: And what does the evidence show as to this written confession which as I say appears on page 360 to 362 of the record. Internally here it says tantamount, Captain McCall has dictated the statement in the presence of Detective Hucks and Fesperman and Gardner, Davis and detective Lieutenant Sykes and I wondered, so it was dictated apparently by Captain McCall? James F. Bullock: Yes, I understand that it was -- Potter Stewart: Was it read by Davis or was it read to Davis? James F. Bullock: It was read to Davis as I understand it. Potter Stewart: He says that here -- I've not been promised any reward or hope of reward. I have not been mistreated by any of the detectives or any other person who was talking with me. I've been told that I do not have to make a statement. And if I do make a statement or answer any questions pertaining to this murder it can be used against me or for me in the Court of Law. And at the end he says “I've made the statement freely and voluntarily. I'm glad it is over because I have been going through a big strain a little earlier. In closing, I want to say this. I've known in my own mind that you people -- I suppose it means what you people were holding before that all of the time I've been lying in jail. It has been worrying me and I knew that sooner or later I would have to tell you about it. Now it's -- I -- to me it's of some importance how much of this Davis himself knew or subscribed to or was it just written by somebody else. James F. Bullock: The statement as I understand it Your Honor was dictated by Captain McCall and was taken down by a police reporter and with -- in the presence of several other police officers, I believe three or four often that time who witness Davis signature -- witnessed, in fact it was read to him and his signature to it. Speaker: What was the other thing? James F. Bullock: Yes sir. It was read to him. Earl Warren: Mr. Bullock, would you just tell us something abut this 19-mile walk that they took when he – it was alleged that he was handcuffed to an officer? James F. Bullock: Yes sir I will. This was I believe about two weeks perhaps after he had -- his arrest. Detective Hucks who was assigned, chief detective assigned to this took Davis to his home that morning for breakfast and fed him a hot breakfast and then they went out to Canton by an automobile. Now, they kept leg chains on him in the car, but they took the leg chains off of him for the walk and the officer handcuffed Davis to his wrist. And they walked side by side for the 14 miles he testified from outskirts to outskirts approximately 14 miles along this way trying to identify the homes into which Davis had broken to secure these items which he had in his possession at the time of his arrest. He wanted -- he was willing to go, the record indicates that. Now he wanted to clear up this aspect of it and he was willing to go. Now, we -- we don't think that Davis suffered on that trip. If you -- Earl Warren: Did they find the homes? James F. Bullock: No sir, he was unable to point out anything to him whatsoever. He had told him about these various places and described them but they were never able to find any home or any place that he would identify as a middle of the tracks. Earl Warren: Was this walk along that -- was along the highway? James F. Bullock: No sir, it was on the railroad line. He -- he had traveled the railroad coming down. Earl Warren: Is there -- is there a highway along the railroad? James F. Bullock: I'm not familiar with it. Apparently, not because the other officer went by car on that to meet him at the other end where they would come into by rail where they were walking. Earl Warren: Pretty hard walking on the railroads -- railroad right of way for 14 and 19 miles, isn't it? James F. Bullock: It is not a casual stroll, I agree Your Honor but if you would -- if you knew the officer involved who was short and rather portly built compared to Davis, the officer must have suffered a great deal more. In fact he testified that he did. That it was quite a chore for him to get -- to survive as he would say. Hugo L. Black: Did Davis admit that that was the walk he had taken by himself? James F. Bullock: Yes sir. He admitted this. Hugo L. Black: You've followed the same course that he walked – James F. Bullock: Yes sir, he admitted that he had come this way himself. Hugo L. Black: But he'd walked to full distance. James F. Bullock: Yes sir. So he had been this way before walking and breaking into homes and stealing and it didn't bother then so I don't think this later won't bother him at all. Speaker: [Inaudible] he was taken back to the original place with his compliance for [Inaudible] James F. Bullock: No sir, he was apprehended in Belmont which is some miles out from Charlotte. Speaker: Do you know what county? James F. Bullock: He's in adjoining counties few miles from Charlotte and then when the Charlotte police learned that the Belmont police had him in custody they went over to get him to Charlotte to investigate these crimes which had happened in Charlotte. One, which had been reported to the robbery of Hayes; Hayes came up and reported, he had reported he had been robbed and they had the person's billfold and the identification cards and all on this person when he was arrested. So there's no doubt about that. They were investigating this and had Davis placed on Sunday at the day of the rape murder within a very few feet of the grave cemetery in which it occurred. In fact that he had robbed Hayes there. Earl Warren: Well that led him -- led him to -- James F. Bullock: -- suspect -- Earl Warren: -- a suspicion at least that he had killed the lady. James F. Bullock: Yes sir, there was the -- Earl Warren: Now would you -- James F. Bullock: -- suspicion at -- Earl Warren: Would you please tell us why they didn't mention the murder to him for over two weeks after he was in custody while they were interrogating him all the time? James F. Bullock: The officers testified that they were investigating his backgrounds and these other crimes which he had told them about. He had told them of several crimes which he had committed since his escape. Earl Warren: They were more interested in that than they were to murder do you mean? James F. Bullock: Well, I -- what I understood from their testimony was the fact that if in investigating these they could place Davis away from Charlotte. He would be exonerated of the crime in Charlotte. If as he later testified he was some place else breaking into homes, committing another crime, and certainly it was to his interest that the Charlotte police investigate these matters and attempt to find out what had occurred and that was the explanation. In fact, they were still investigating the Cooper murder and beside that they had not been able to tie in with Davis in any respect until they asked him about it and on October the 3rd, again on the 5th, and then on the 6th when a confession occurred. Hugo L. Black: When did he later say he later say -- he -- what was his alibi? You said alibi? Why did he later the claim he was at the time the murder occurred? James F. Bullock: He claimed that he was in Belmont at his auntie's home. But the auntie didn't appear at the trial and testified that he was up there. I'd like to say one word about Nathaniel Cross. Earl Warren: About what? James F. Bullock: Mr. Dr. Nathaniel Cross, a colored pastor who testified at a District Court. They called him Uncle Tom. I have never seen a more dignified gentleman in my life than Dr. Cross. He's a -- has a doctor's degree in religion. He's editor of the newspaper, radio commentator, highly educated, very rounded person and has fought, for many years, for the rights of the underprivileged people particularly their constitutional rights as the record would show in Charlotte and surrounding areas. He testified to this fact. Now, why did he come to see Davis? Because Davis was standing and Davis himself was former member of his church in Belmont, he knew him and when he finally made the connection by reading the newspapers that this was the Davis that had been in his church or his family, he went down to visit him and went in and had an hours of conference with him at which time Davis admitted to him that he'd been well treated, no mistreatment by the police officers that he signed a confession voluntarily. It's all in the record. Now, we don't like to talk about people whose character is known but Davis here, I have a summary that I think this points it out, 29 years old, low average intelligence according to the District Court, frankly he made an outstanding appearance in the District Court on the witness stand. He was very calm and he's not half as nervous as I am here today, but -- and gave very intelligent answers. Now -- Potter Stewart: This Davis? James F. Bullock: This is Davis. Potter Stewart: In the federal district court. James F. Bullock: In the federal district court. It's the only time I had ever seen him -- Potter Stewart: Yes. James F. Bullock: Made a very favorable impression on me as a witness. This is the first time I was connected with the case. I went back then and got the record in the Superior Court which this Court had the written -- that same record that appeared certiorari, not once in 41 pages of testimony in the Superior Court did Davis say anything about any mistreatment, not once. But when you get into the District Court four years later, that's his theme song, police beating and brutality relay after relay of questioning late in to night, all night long. He is a phenomenon. He has total recall of details four years later. He has every component that this Court has said was a violation of the constitutional rights four years later, but they don't have at the original trial, they don't mention them. He's a liar by his own omission in the District Court by identifying an officer whom he claimed, said he was going framed -- framed, something to that effect. In the District Court he identified three different persons and then finally ended up by saying that he had lied about Detective Sykes in the Superior Court and you will find inconsistency after inconsistency between the two records, his testimony which to me is nothing more than his testimony in the District Court as complete publication, a good story dreamed up, fixed up, to get a reversal, to save himself from this penalty which has been imposed upon him. Earl Warren: Of course we do find some discrepancies in the prosecution's case too, don't we? James F. Bullock: Yes, I -- Earl Warren: Which is the records here and the handwriting of the Captain of police which says do not allow this man to see anyone, do not allow him to telephone and that is -- he explained the way has been of no consequence. James F. Bullock: We do not deny the fact that it was there but we -- we do say that all of the evidence -- a great deal of evidence indicates that that was completely disregarded so far as this prisoner was concerned. Earl Warren: Yes, I know. I say that they -- they have to contradict their -- James F. Bullock: Yes, yes it would. Earl Warren: -- their own handwriting in their own record in order to say that, do they not? James F. Bullock: Yes, they do. Earl Warren: Would you mind telling us how they denied -- that the -- the officers admit interrogating him? James F. Bullock: I don't believe there's any omission that they ever interrogated him at night. At that time the detectives only worked until 11 o'clock at night. Earl Warren: Well, I thought there was something in the record to the effect that they never -- they never interrogated him after 11 o'clock.' James F. Bullock: I -- I check back on it. I thought I had -- I believe I mentioned that in my brief that they had not interrogate him after 11 o'clock in any event but I went back to the record later and I never could find any testimony that he was interrogated at night by the police officers. The latest that I could find was late in the afternoon four, or five, six, seven o'clock, something to that nature. What time is it? Potter Stewart: What's the word fram mean in the North Carolina fram? James F. Bullock: I assume that he was talking about the beating among friend, he beat you, I think that's what he's having reference to. I couldn't what word is that whether he was framed or fram or what but -- Potter Stewart: I wonder. James F. Bullock: But after we use the time until I think the connotation is it -- the [Inaudible] in that respect-- Earl Warren: If -- if you had another statement to make in this brief you may make it Mr. Bullock. James F. Bullock: I don't believe that we have any other points to make at this time unless the Court has some questions. Earl Warren: Very well, we'll adjourn.

Warren E. Burger: We will hear arguments next in 72-606, Oklahoma against Mason. Mr. Solicitor General, you may proceed whenever you are ready. Erwin N. Griswold: May it please the Court. In the present fluid state of our law, court spend a good deal of time going over all ground, that is the situation in this case. The case is here on certiorari to review a judgment of the Court of Claim. The suit there was begun by the administrators of the estate of Rose Mason, who was a restricted Osage Indian, acting pursuant to this Court’s decision in West against the Oklahoma Tax Commission in 334 U.S. The Osage agency of the Department of the Interior filed an Oklahoma estate tax return on her estate and paid the tax due. The claim in the suit in the court below is that this payment though in conformity with a decision of this Court conceded to be squarely in point and not overruled, was in fact a breach of trust, because the United States should have known that the West case would be overruled by this Court. The Court of Claim so held and held the United States liable to the estate for the amount of the tax paid. Warren E. Burger: Couldn't it be something less than that Mr. Solicitor General that there was enough of the question about the West case that some precautions might have been taken. Erwin N. Griswold: Yes Mr. Chief Justice, I think that's true, but I suppose that's almost always true with respect to a trustee. If there is a decision 20 years old, maybe there are various things which might have happened, and he ought to present it to a court again. I think that the question of the duty of a subordinate agency of the United States to question decision of this Court ought not to arise to the dignity of a breach of trust. At any rate, that's the issue in this case. Harry A. Blackmun: Mr. Solicitor General does the record show the approximate size of the decedent’s estate. I take if the tax, the state tax was $8,000, but which would indicate a very substantial estate as I recall the estate inherent -- Erwin N. Griswold: I believe that the items are indicated on Page 6 of the Appendix and they would appear on a quick addition to come to about a $125,000 for the estate, Osage headrights 48,000, security of sales and trust 19,000, surplus trust funds 48,000 and two other items. On the quick adding I get something like a $120,000-125,000, on which the tax paid was $7,700. The United Stated brought Oklahoma into the case there as a third-party defendant and the court below also held that Oklahoma was liable to the United States in the amount of the tax. Both Oklahoma and the United have sought review of this decision, and I shall appear for a 20 minutes and Mr. Duncan representing Oklahoma will use the other 10 minutes. In order to determine whether the United States committed a breach of trust it will be necessary to review some decisions. Now, there are three decisions of this Court which are particularly relative. The first of these decided 30 years ago, Oklahoma Tax Commission against the United States, an opinion by Justice Black dealt with restricted Osage property, and although the United Stated appeared there and vigorously contended as it shown by the brief file, that the restricted Osage property was not subject to Oklahoma inheritance tax. This Court reviewed the situation, concluded that there was nothing in the Osage Allotment Act which a established a tax exemption and directly held that the restricted property was subject to Oklahoma inheritance tax. Justice Murphy dissented in was one of the dissenters in that case, but just five years later there came up the case of West against the Oklahoma Tax Commission in 334 U.S. where Justice Murphy wrote the opinion. That case involved property held in trust for an Osage Indian. Identical types of property to that which is involved here, item by item, the same types of property, trust property and the Court again, revealing the situation, held that the Oklahoma inheritance tax was applicable to property held in trust by the United States for an Osage Indian. It was less than eight years later that third of these cases came to the court. Now that is Squire against Capoeman in 351 U.S, an opinion by Chief Justice Warren. That case involved Quinaielt Indians in the Sate of Washington under a different statued, the General Allotment Act. It was an income tax case not an inheritance tax case; it was a federal income tax case, where the guardian was seeking to take a tax from the words property and it was a tax on capital gain derived from the sale of timber on the Indians land when the timber constituted the only substantial value of those lands. And the court and Squire and Capoeman held that that federal income tax was not due. I think it can surely be said though that the Squire court did not understand that it was overruling the West case nor was its decision so understood by others at that time. It can be said that the approach of the Court in the West case -- in the Squire case was not wholly consistent with that of the Court in the West case. But the cases were distinguishable as I have said, west was an inheritance tax case or Squire was an income tax case. West involved a state tax or Squire involved a federal tax. Harry A. Blackmun: You just mentioned -- does everyone conceive that there is no difference between the Osage Allotment Act and the General Allotment Act or purposes of this case. Erwin N. Griswold: No Mr. Justice, I think there are clear distinctions between the Osage Allotment Act and the General Allotment Act including the two items that were specifically relied on by the Court in the West case. The obligation to return the property, I forgot the exact word I was about to say undiminished, but I am not sure that is -- Harry A. Blackmun: It’s the Squire case? Erwin N. Griswold: Sorry Mr. Justice? Harry A. Blackmun: It’s the Squire case, it relied on the Squire case? Erwin N. Griswold: In the Squire case, the General -- Harry A. Blackmun: The obligation to return the property. Erwin N. Griswold: The obligation to return the property and a provision that the property should be subject to taxation after a certain date which carried an implication that it was not subject to taxation beforehand. The Court of Claims relied on certain subsequent developments, a decision in the Court of Claims in Big Eagle against the United States in 300 Federal Section 19 -- F. 2nd 1962. That was a federal income tax case and the Court of Claims held that the Squire case meant that the federal income tax could not be collected from trust property, such as is involved here. And there is a later case in 1968 called Beartrack against the United States, where the United States settled by payment in full. I don't want to suggest that there was a compromise, because of doubt about liability, settled by payment in full. A federal estate tax case involving Osage property, and finally after the text was paid here, and incidentally the Beartrack case was after most of the tax was paid here. In Revenue Ruling 69-164 in 1969, the Treasury issued a ruling that Osage trust property is not subject to the federal estate tax. Whether these actions were right or wrong, they did not deal directly with the question of the liability of the estate of an Osage Indian or estate inheritance taxes. Moreover they were actions taken by the Treasury and the Justice Departments. Now, the government is necessarily large in complex with many subdivisions of responsibilities and it is asking a lot through a subordinate office of the Interior Department in Oklahoma to keep abreast of these developments in other departments on a matter not directly in point. Now this Court had decided the West case. This was known to the appropriate officers of the Interior Department. They acted accordingly. They ought to be able to rely on a decision of this Court, which has not been overruled nor even remotely questioned here. In this connection I would like to call attention to the decisions of this Court just three weeks ago yesterday in McClanahan against the Arizona State Tax Commission and the Mescalero Apache Tribe against Jones. Not only do these cases show the extreme complexity and uncertainty of the field of state taxation of Indians, but in the Mescalero case, this Court, on Page 11, cited Oklahoma Tax Commission against the United States and Squire against Capoeman in the same paragraph indeed back-to-back it might be said. Now Oklahoma Tax Commission was the case on which the West decision is based and it hardly seems likely that this Court three weeks ago contemplated that Squired had overruled Oklahoma Tax Commission. Squire is a case to be dealt with, of course, but it's a federal income tax case involving a very special kind of income tax, a capital gains tax, imposed on the realization of most of the value of the Indians’ property by the sale of the timber which gave it its value. Oklahoma Tax Commission and West involve a estate inheritance tax often treated differently from an income tax as in the case, for example, of the federal estate tax as applied to the transfer of state municipal bonds where the income is not taxable, but the Court, over a period of 75 years, has held that a transfer tax on death can properly be collected, or so a responsible officer in the Osage agency in Oklahoma might have understood and felt and acted accordingly. By appropriate standards of the law of trust this was not a breach of trust, we contend, and the United States should not have been held liable for complying with a decision of this Court. The liability imposed here is so novel that we have not been able to find trust decisions directly in point, but we have cited Professors Scott’s strides and we believe it supports our position that the Court of Claims went too far in finding liability here. Of course if the United States is liable, we support the decision below in holding that Oklahoma is liable to indemnify the United States as a third-party defendant. The ultimate question here, of course, is whether West should be overruled. On that question I find myself in a dilemma where the United States is trustee for the Indians and I am obligated to represent the Indians as I did here last Monday. And the United States is been held liable and has tax revenues taken the general situation, and I am obligated to represent the United States in the capacity too. In private practice when such a conflict of interest develops, a lawyer must withdraw from one of the representations. Now that is not so easy in public office. We have only limited authority to retain outside counsel and even if such counsel were retained they would still be subject to the overall authority of the Attorney General and the conflict would remain. It is inherent in the situation. The President has asked Congress to establish an Indian Trust Council Authority, which would resolve this particular problem, but this is not been done. It has been suggested that the Solicitor General might ask various interested agencies of the government to file briefs or to incorporate the view of the different agencies in a single brief. It is not clear though that this would always meet the responsibility of the Solicitor General to this Court. For one of the functions of this Solicitor General, I suppose, is to reconcile and ajust diversion views of government officers, and so far as possible to present a single view to this Court. Now this area can be one of great difficulty, where there are often widely diversion views with respect to Indian problems depending on whether one looks at it solely from the point of view of the Indians or whether he seeks to deal with and to reconcile as far as possible many competing governmental interests, such as the taxing power or the law of governmental instrumentalities or the responsibility for the enforcement of criminal law. In many cases it has been possible to work these things out and to present a unified view. That was done, for example, McClanahan and Mescalero. In another cases the difficulties have been acute as in the Agua Caliente case where the Court asked the Solicitor General to state his views and he did so, although endeavoring to make it plain that his view was not shared by some other officers of the government. In this case we have filed a brief in which we have endeavored the state both sides as fairly and evenly as possible without taking an official position. Consequently on this final question I ask the Court to consider the materials in our brief. If the time has come when West should be overruled, this Court is the place where that action should be taken. If the West Case can still stand, it would be helpful if this Court would state that effect and in terms which would indicate whether the decision is applicable to federal income and the state taxes as well. William J. Brennan, Jr.: Mr. Solicitor General and even if that world rule I take it your position would be nevertheless the liability was erroneously -- Erwin N. Griswold: Yes Mr. Justice. Our position would be that it was not a breach of trust to comply with an outstanding unqualified decision of this Court as to which this Court and never indicated, in any way, the slightest doubt, and as to which only three weeks ago it seemed to regard. William J. Brennan, Jr.: So you would press for reversal here even if we were to overrule. Erwin N. Griswold: We would press for reversal even if you were to overrule it. It is not -- Byron R. White: Would West take with it Oklahoma Tax Commission in 319 U.S.? Erwin N. Griswold: Would -- Byron R. White: Would overruling West take with it Oklahoma Tax Commission? Erwin N. Griswold: I would thank so Mr. Justice. I have never been able to see any distinction between the restricted property in this case and trust property, and I think the Court in the West case regarded Oklahoma Tax Commission as the clear and controlling authority. Byron R. White: But a state privilege to tax wouldn’t mean the federal (Inaudible) and as a matter of federal tax policy or as federal -- the federal government wouldn’t need to impose its taxes. Erwin N. Griswold: Not necessarily, although it is quite clear that the actions which have been taken by federal executive representatives have been taken based on a view that the approach in Squire weakens the West. Byron R. White: But I would suppose that Congress expressly said in so many words that federal estate taxes to apply in Indian property. That would be the end of the matter. Erwin N. Griswold: Congress could say so, there isn't a slightest doubt. Congress hasn't said so the -- Byron R. White: It's just a -- it’s a matter of administrative application of the existing estate tax. Erwin N. Griswold: Influence, Mr. Justice, by impressions created as to whether this Court in Squire so impaired the West case that yet ought not to be followed. There is no view from Congress as to whether the tax -- there has been no action by Congress in this field from the beginning and certainly not since the Oklahoma Tax Commission and West were decided. Byron R. White: Well, certainly there has never been any indication that Congress disagree to either West or Oklahoma? Erwin N. Griswold: No, nor agreed or disagreed. Potter Stewart: Or Squire. Erwin N. Griswold: Or Squire, that's right. In either event, the Court should reverse the decision below insofar as it held the United States liable a breach of trust. For the officers of the United States should not rightly be held in default for failing to attack a decision of this Court, which has never been qualified or doubted here. Warren E. Burger: Thank you Mr. Solicitor General. Mr. Duncan. Paul C. Duncan: Mr. Chief Justice, may it please the Court. As the Solicitor General has pointed out, this is a very difficult situation which both the United States Government and State of Oklahoma find to serve in today. State of Oklahoma is in particularly difficult position, because as the Solicitor General indicates, under the Court of Claims decision, if the United States is found to be liable for a breach of fiduciary relationship then the ultimate responsibility for the payment of this breach rests with State of Oklahoma. Now since 1947, State of Oklahoma has gone about collecting the tax in question conformity with this Court's decision in West. Harry A. Blackmun: They must tax on the barrel head, at issue here for Oklahoma. Paul C. Duncan: Yes, sir I have -- would not, of course, in this particular case I suggest this is -- Harry A. Blackmun: Overall. Paul C. Duncan: Yes, sir. They have -- respondents have filed a class action lawsuit with regard to all the other Osage Indian estates so similarly situated, and although we have not been able to arrive with a figure we anticipated, it's actually several million dollars, depending, of course, upon what timeframe that might be ultimately applied. The Court of Claims in deciding the case, did say that as of 1967-1968 when the Rose Mason case came about that the Federal Government breached it fiduciary relationship at that time. He did not apparently foreclosed the possibilities and under different circumstances they might go back even to an earlier period of time, some time I guess would have to be necessitated by the advent of the Capoeman case in 1954. It couldn't go back prior to that time, but the State of Oklahoma recognized that this places a possible severe tax brief on consequence if the Court of Claim's decision is to allowed to stand. Harry A. Blackmun: Mr. Duncan, suppose the United States in this case, they had taken the position that it wouldn't pay the inheritance tax. What would Oklahoma have done? Paul C. Duncan: Well, we would have -- I think that we would have had to taken the United States to court -- Byron R. White: In Court of Claims. Paul C. Duncan: -- in reliance upon the -- I reliance upon the West decision, yes Your Honor. Harry A. Blackmun: So you do feel that the West is correctly decided? Paul C. Duncan: Well, I think that the practicality of the situation required the State to have taken the government to court with regard to West, whether or not West is still should be considered with law, should this Court decide otherwise, would not place a severe burden upon State of Oklahoma, if we are talking about perspective actions only. Harry A. Blackmun: The reason I asked this last question is because I think I didn't find in your brief any statement to the effect that you felt that West was a correct decision. Paul C. Duncan: Well -- Byron R. White: Well, a lot of trust properties have inspired it? Paul C. Duncan: Yes, sir. Byron R. White: I mean -- and so the client (Inaudible) significant. I mean it isn't going to go on forever? Paul C. Duncan: No, that's correct. I believe there are approximate there -- it’s in neighbor to 500-550 present restricted Osage Indians estates at the present time or Osage accounts at the present time that might become involve and -- Lewis F. Powell, Jr.: And the idea what they aggregate is -- Paul C. Duncan: In the future, in the past. Lewis F. Powell, Jr.: The existing ones. Paul C. Duncan: No, sir, I do not. In with regard to the past, we do not have any information, because the tax has been paid through the Bureau of Indian Affairs, through the Department of the Interior, through the Oklahoma Tax Commission, as with any other estate tax we paid and the Oklahoma Tax Commission is not seen fit in the past to segregate this money or even pave your ways specific accountancy. Accounting of the money is collected from the Osage estate. If some rule is set down for Oklahoma would be liable for all these in the past even to 1967-68, we would have to go back and rely on the records of the Department of the Interior. William H. Rehnquist: Mr. Duncan, a following up on Justice Blackmun's question, I can certainly see why the Solicitor General of the United States feels itself in a difficult position here, since it's both a fiduciary for the Indians and representative of the United States. I too was surprised to see that the State of Oklahoma didn’t take the position that West is rightly decided. You are not a trustee for the Indians; the Indians presumably have very capable council. You have a decision and favor of your state that says you are entitled to tax. Paul C. Duncan: Mr. Justice, I am sorry, we gave that impression. We feel feel that the West decision is good law at the present time. The only point the State was trying to make in its brief was if the Court wishes to change that ruling or feels that way should no longer be the state of the law. It should not impose the burden upon State of Oklahoma for the past actions of the Federal Government in collecting the tax for the breach of duty of their own. Now we feel that, of course, until this Court says otherwise that the West decision unless be considered good law, we do not feel the Capoeman case although, the rational perhaps is different in the Capoeman case. We do not feel it had a direct overruling effect on the West decision and the West would still be the correct interpretation of the law, and certainly had not this come about, we would still be making every attempt to collect the tax. Potter Stewart: Now we don't at least in theory in this case, we don't need to decide anything more than what you have just argued, do we, in order to decide in your favor that until or in last the West case is overruled, it's to be considered law. Without expressing any view on whether or not to -- without either over overruling or affirming it, isn't that correct? That's really all it represents, that's what your argument is. Not that the West case is -- should be overruled or should not be overruled. That's simply that until it’s overruled, it's the law that has to be followed, and the Court of Claims was wrong in doing so. Paul C. Duncan: Yes sir just -- that's, of course, what we argued at the time the Court of Claim -- Potter Stewart: At least, in theory, we wouldn’t -- don’t need to say anything more in order to decide in your favor, in this case. We wouldn't have to say whether or not the West case should be overruled or is going to be overruled, and certainly we wouldn't have to over -- wer wouldn't have to reaffirm it, in order to decide in your favor. Paul C. Duncan: Well, I believe that's correct. The only question that I think might be is whether or not you have overruled, and of course, I think the resondents take the position, the Court of Claims takes the position that this Court has overruled the case insofar as to -- Potter Stewart: Now you erode it and undermined that whatever, but nobody claims that it's been expressively overruled. Paul C. Duncan: No, that's correct. And that -- of course, we have relied on and we argued this before the Court of Claims but they did not accept this argument. It's interesting to note that with regard to this undermining our eroding of the West decision, the Court of Claims also relied upon a number of cases, as Solicitor General has referred to including the Internal Revenue Ruling, which Oklahoma was not a part to had no part in, in which the State of Oklahoma takes position at these rulings, by an inferior court, cannot in any way, although they are expressions of the interpretation by that court or that agency with regard to the these ancillary tax questions, they in and of themselves cannot possibly overrule the decision of this Court. Now -- Thurgood Marshall: All you need to say is that as of the time this case was heard in the Court of Claim, it was a good law, West was a good law, that's all you have to do. Paul C. Duncan: Yes sir, that’s exactly -- Warren E. Burger: You don’t even need the adjective, do you? It was the law of this Court? Paul C. Duncan: That’s right, it was law -- Thurgood Marshall: It was the law. Paul C. Duncan: It was the law, that’s -- Thurgood Marshall: But you don’t need anymore than that, do you? Paul C. Duncan: No. Byron R. White: Do I understand that you position is on the refund of inheritance taxes? Paul C. Duncan: Yes, Your Honor, 68 O.S, Section 227, provides for the general timing in which a refund can be claimed. It’s one year of statue limitations when it’s a mistake of law or a question of law or on three years on question of fact. However, there is a provision, subtitle 2. It provides the estate tax must be questioned at the time of payment, and this would fall under that category. So at the time they would have had to have contested under the Oklahoma statute at the time that this payment was made. Byron R. White: Now what -- the Oklahoma Tax Commission against the Texas Company 336, that’s also involved here. Paul C. Duncan: Well, of course, the Court, you referred to it in your opinion in Mescalero and although it has not -- it was not a part of my brief at the time it -- we were relied -- Byron R. White: Well, let’s assume West -- Let’s assume West is -- that Oklahoma Tax Commission (Inaudible)? What about (Inaudible) Paul C. Duncan: Well, I would like for the Texas Company case to stay however if the West decision goes, it’s the court who returns the West decision, which is the case, on all four squarely in point, it’s hard to imagine that we are going to have some other case that’s going to put us in a better situation. Byron R. White: Well I know -- I just want to make clear that you would -- you conclude that the Texas Company case was (Inaudible) than West? Paul C. Duncan: Well, I would assume that it would be trouble also. William J. Brennan, Jr.: Sort of a a dominant theory. Paul C. Duncan: Yes sir. Warren E. Burger: Thank you Mr. Duncan. Mr. Hobbs. Charles A. Hobbs: Mr. Chief Justice and may it please the Court. One point brought up by the Solicitor General, I would like to reply to immediately and that is, he referred to conflict of interest in the government when it comes to representing questions of Indian rights as are raised in this case. He said that some times it’s possible to solve the problem by reaching an accommodation between divergent views of agencies of the government. That is a perfectly correct, tenable way to handle divergences among the various agencies, which are not trusties of the Indians but ones you see the government were in the half of the trustee, of the Indians, there is no substitute for a separate voice speaking for the Indians. This could be done by hiring special counsel or it could be done as the Solicitor General referred as presenting two different views in one brief and that was done in Steven’s case in the Ninth Circuit. Last year, one of the most recent cases construing Capoeman in a way inconsistent with West. Warren E. Burger: Does that really solve, in a technical sense, the conflict problem, because the special counsel would still be speaking for the United States, the same United States that his trustee is, is that not so? Charles A. Hobbs: The same problem occurs in the public defender area where the government employs both sides of the fence there, but I think we are used the accepting the loyalty, diverging loyalty of the both sides of the counsel there, and I think that could grow up with respect to Indian rights. Our basic theme is that the West case was good law -- well never was good law, but was entitled to be followed until 1956 when Capoeman overruled it. You don’t need an expressed overruling of a case in order to render it bad law or invalid law. Capoeman did so by implication and so we say that when Capoeman made its ruling, it related back to West and declared West in the case it in turn defended on Oklahoma Tax Commission. Thurgood Marshall: Mr. Hobbs, it has never been overruled, right? Charles A. Hobbs: West, to this day, has never been expressly overruled. Thurgood Marshall: As -- it wasn’t my question, has it ever been overruled? Charles A. Hobbs: West? Thurgood Marshall: Yes. Charles A. Hobbs: Yes, your honor. It was overruled in 1956 by this Court. Thurgood Marshall: And what language said? Charles A. Hobbs: It was, by implication, and -- Thurgood Marshall: Ah, overruled by implications. What does a lawyer do when he is advising his client; he tells him that this is overruled by implication? Charles A. Hobbs: The trustee should have advice the word or rather should have taken action to hire an attorney and have this question resolved in 1956. Thurgood Marshall: Do you mean he could have gotten a better timing than the Solicitor General’s office? Charles A. Hobbs: No, it’s the Solicitor General’s -- Thurgood Marshall: It’s no where -- Charles A. Hobbs: -- Office who should have been one to do it. Thurgood Marshall: Well who -- well, what other lawyer could have given better advice than that? Charles A. Hobbs: I am not sure I follow the question, but the United States -- Thurgood Marshall: The question is where you have got the case that is on all forth with your case. How can you get better advice than to say that is still the law? Charles A. Hobbs: Eight lower courts have disagreed with you Your Honor and have held that the -- Thurgood Marshall: We are not considering any lower court; we are considering a decision of this Court. Charles A. Hobbs: Of course but there is a -- Thurgood Marshall: Now what court of competent jurisdiction has overruled this Court? Charles A. Hobbs: No lower court can overrule this Court. Only this court can do so and did so in 1956. Thurgood Marshall: Well, even if this Court now says that West should be overruled, do you win? Charles A. Hobbs: Well, we then reach the question of fiduciary liability but ultimately we would win, yes. Thurgood Marshall: (Inaudible) Charles A. Hobbs: I think it’s a necessary conclusion. It has been suggested during the argument of Mr. Duncan that that perhaps all these Court needs to decide is that West has never been overruled. This would throw us back to another court, I assume to try another way to get a ruling of this Court that West has been overruled. I suppose if we arrange our jurisdictional amounts properly, we can go in the Federal District Court. We could go through the Oklahoma State Authorities, of course, and come back up here that way, but that’s inevitable. The day that this Court overrules West as we feel it will unless it puts a dam across entire tied of the law since 1956, it must do that to keep West alive. If West is overruled, it then becomes the duty of the United States to get that money back for the Indians that it is wrongfully paid over to the State of Oklahoma. Thurgood Marshall: Why it was wrongfully paid over? Charles A. Hobbs: If West is as I said -- Thurgood Marshall: When I call back to time West was decided? Charles A. Hobbs: West was decided 1948. Thurgood Marshall: What does it go by there from? Charles A. Hobbs: Yes, the United State is not subject to the statue of limitations at least until 1977. Thurgood Marshall: So it will go back forever? Charles A. Hobbs: Well, that could go back to 1947. Thurgood Marshall: Why not forever? Charles A. Hobbs: Pardon? Thurgood Marshall: Why not forever? Charles A. Hobbs: Well, Oklahoma didn’t collect the tax earlier than that. Thurgood Marshall: Oh, I see. Charles A. Hobbs: We are just dealing with 24 years of taxation. Our theory is that whether we hold that the fiduciary duty here was clearly breached, you had Capoeman in 1956. It was the talk of the Bar whether this now caused a reevaluation of West Oklahoma Tax Commission, Choteau v. Burnet, a recent dicta in that, and our law firm began litigation the following year of which this case today is in combination to test this premise. The Capoeman case was also our case. Byron R. White: Well the court -- I thought you are telling the court was relevant enough to be retained its client -- and do you think West Oklahoma relevant enough to be cited in there because that was -- if they were cited, they were litigated within? Charles A. Hobbs: Well, one must draw its own conclusion as to why they weren’t cited. My by conclusion is that they could not handle, could not reconcile Capoeman with West and that it was therefore, wiser for the sake of -- Byron R. White: Was there a law of enactment involved? Charles A. Hobbs: Yes but there is so parallel, it’s almost impossible to reach different conclusions under them. Byron R. White: Well that’s your argument? Charles A. Hobbs: Yes, of course. Thurgood Marshall: And the Capoeman case did you ask this Court to overruled West? Charles A. Hobbs: No. We did not. Thurgood Marshall: Why? Charles A. Hobbs: I don’t know. Thurgood Marshall: You said it was so horrible? Charles A. Hobbs: I wasn’t with the firm at that time, I can’t personally answer here. Thurgood Marshall: Well, you looked into the brief, didn’t you? Charles A. Hobbs: Yes. Thurgood Marshall: But in the brief -- Byron R. White: I am looking at it right now. Thurgood Marshall: Did the brief asked that it be overruled? Charles A. Hobbs: I don’t know Your Honor. It’s my recollection from a reading sometime ago over the brief that we did not ask that it be overruled. It wasn’t necessary to get into that. It was -- it would have been easy to leave that for a later day, today, but to conclude my point, we say that government has reached to his fiduciary duty by not taking action after 1956 to test the validity of West and see if it's still was good law. Certainly there were good minds of thought that it had undermined the West case and if the duty didn’t accrue then its certainly accrued at some point over the years up to the time where it actually paid the tax in this case. There were seven cases decided by the lower courts in an unbroken row deciding that the Capoeman case reverses the spirit of those cases in the 1930s and 1940s which include West and Oklahoma Tax Commission that they didn't hold so outlawed, but you by comparing the language it is perfectly plain that the parallelism was inconsistent. They were parallel case but inconsistent. William H. Rehnquist: I suppose you would be possible to decide that the government perhaps did have an obligation to begin testing through litigation after 1956 even though this Court were to decide and West was still good law. There you have a breach of duty, but no damage resulting from? Charles A. Hobbs: Correct and we would take that position. The duty of the government became more and more pronounced as the years went on and in these lower cases kept ticking off entire West decisions and finally in the -- when it pay the tax – it paid the tax in two bytes. The first byte was September 1967 then two things, well and the Beartrack case which was another case we had brought involving Federal death taxes which cannot be distinguished from West we say neither can an income tax cases we say. At any rate the Beartrack case, the government gave up and agreed to a refund, paid the refund and the Internal Revenue Service subsequently held that the -- it wouldn't collect Federal death taxes anymore. After that the government still pays Oklahoma the Debt tax in this case. We say by that time all the bells were ringing in the watchman should have awakened and done his duty and did not, but should you find that there was no liability for failure to bring suit and nevertheless reach the West case and in this case and a squarely brought before you rethink, should you just agree it will be before you in a couple of years later, when you decide there was, there is no longer good law of you do at that moment the government has a duty to file suit for refund. It can do so. It's not subject to the Oklahoma Statue of Limitations, that's settled law and therefore it could go back and collect all of the refunds that were erroneously paid, especially erroneously paid at Capoeman case. There was a question as to how much money is involved here. We happen to know something about that. Oklahoma has a budget. The Oklahoma State Authorities send us a budget and for fiscal year ending 1963 the budget would be $1.1 billion of the revenues to cover that. $700 million will be raised by Oklahoma from it's own sources and $400 million will be given to it by the Federal government. Of the $700 million raised by Oklahoma from it's own sources, largely taxes $15 million comes from death taxes in Oklahoma. Of the $15 million there is no breakdown to show how much was Osage property, but the Osage Agency has a advised that over a six-and-half year period the payments to Oklahoma averaged $21000 a -- $26000 a year. Oklahoma has been collecting taxes for 24 years and so if you assume that the $26000 a year is an average, it come to $624,000. That would be a5 total refund of all estate taxes ever paid. It's a -- William H. Rehnquist: Would there be other tribes in the Osage involved? Charles A. Hobbs: Osage is extremely unique. They are the only tribe in Oklahoma that still has a reservation. They, it to me it would be not necessarily true that other tribes would have a change in their tax situation. I am not sure, I haven't studied it, but Osage is the only one with a reservation in Oklahoma. I would like to give some of the historical background because I think the Court should have this when it considers whether the West case is still good law. The -- to me the critical fact to keep in mind when you are considering the West case and the Oklahoma Tax Commission case is this. When this court made that decision involving state taxes, it was assumed by everyone that this Indian property was subject to Federal Estate and Income taxation. This Court had held and superintendent in five tribe's case in 1935 in a broad general statement, not subject to qualification that Indians pay income taxes on their trust property unless there is an express exemption. This was taken to mean and later held to mean that Indians pay taxes like everyone else unless there is an express exemption. By 1943 when Oklahoma tax Commission case came up, it was generally assumed and not doubted and the Internal Revenue Service was collecting on this assumption that Federal taxes were correct. Now this Court or any other tribunal would have a very hard time finding the state taxes should not lie if Federal taxes would lie and the Court at that time was assuming a federal taxes did lie. It has said as much with respect to income taxes. The Internal Revenue Service was collecting the death taxes. Now the court in West and Oklahoma Tax Commission really made a ruling of law which should not be overruled. It still a good law. It said after reviewing the situation and finding that these properties were taxable it's said, however, should any of these properties not be subject to direct taxes than there would be no death tax. That is a rule of law. We say still good. The only thing wrong with those cases is that they mistakenly assumed because of some language which has been overruled, now I will show in while in a minute, that the Osage property and the Creek property in the other was subject to Federal Taxation. Had this Court realized that Federal taxes wouldn't lie and it later held that in Capoeman, well then it's a fortiori that it would not have held the tax taxes lie. It's an error to a law of state taxes if federal Taxes don't lie. The state taxes are not fortiori case. Now as this taxes of history that explains how the court get all the track on that -- Potter Stewart: It's not a fortiori case in which direction? You said earlier that it would be very difficult and extremely anomalous to hold that state taxes didn't apply if Federal taxes did? Charles A. Hobbs: That's right. Potter Stewart: But does it work the same way in the opposite direction? Charles A. Hobbs: Well No, if Federal taxes then a fortiori state taxes. Potter Stewart: Yes. Charles A. Hobbs: If state taxes -- Potter Stewart: It's nit a fortiori tax -- Charles A. Hobbs: Not a fortiori but very compelling, very difficult not to find the other. Potter Stewart: But it's certainly not a fortiori? Charles A. Hobbs: No, no, the a fortiori runs in the direction I said. Potter Stewart: Some can be a fortiori in both directions by definition? Charles A. Hobbs: No, no of course not. Byron R. White: Isn't the whole question a statutory question? Charles A. Hobbs: Yes it is, interpretation of statues. Byron R. White: Strictly statue and the Congress easily could I suppose they exempt Indian property from it's own estate tax and still permit states to tax? Charles A. Hobbs: Certainly it could. Byron R. White: And you must and you are saying that -- you are relying on implied exemption from state, from states estate taxes. There is no express exemption in the statute? Charles A. Hobbs: No, of course not. Byron R. White: And there is no expressed exemption in the regulations or anything else? Charles A. Hobbs: Right nor in the Capoeman case. Byron R. White: No, no. Charles A. Hobbs: We say that the construction -- Byron R. White: Except with the court read the particular allotment statue there to imply an exemption. Charles A. Hobbs: Yes, and here is what the court saw in the Capoeman case. It saw a governmental undertaking when this tribal property had been broken up and distributed to the members of the tribe, it saw a governmental undertaking to hold this property in trust. This is vital to our case. This is the heart of our case to hold this property interest until the Indian was competent to compete in society by himself. During this interval he would be trained by the United States to talk to manage his own affairs and presumably hopefully soon he would at the melting pot and he is confident as anybody else. In the mean time this property was beheld in trust, undiminished by any claims, a simple Indian is at the mercy of loan sharks and speculators who want to buy his land. Congress knew this and so have made the land an alienable. No charges or incumbencies were to be placed on this land on this land. From this, well -- Harry A. Blackmun: But this Indian has died? Charles A. Hobbs: Well, there is no Mr Justice Blackmun. There should because no question that the death is not significant in the impact of this tax exemption. Exemption carries forward, it bridges the death and goes until the heir becomes competent. This is clear from the language of the General Allotment Act which says that the United State shall hold this land in trust for the Indian or in case he dies, his heir until becomes competent. And it's also expressly so in the Osage Allotment Act. In our brief, in footnote on page 11, we cite four of the many references to the concern that Congress cottage had for the heirs. Furthermore the West and Oklahoma Tax Commission cases when they say, if this property is exempt from direct tax, then it is exempt from death tax, sort of forecloses that question we feel. We feel that the Capoeman has proved that these properties are exempt from direct taxes and that therefore under West and Oklahoma Tax Commission, there aren't any overruling at all, they are still good law when they say that therefore no death tax. So we don't think that the death is relevant here. But back to the General Allotment Act, the trust relationship, determination of the trust when the Indian became competent, the freedom from the charge of incumbency, this Court held in Capoeman, may will be sufficient to support the tax exemption. Now there was more in the Capoeman case. Now the General Allotment Act was passed in 1887. The Osages weren't allotted and incidentally the Osages were left out of the General Allotment Act by a fluke. The General Allotment Act was supposed to fly to all Indians in the country with a few exceptions. And those exceptions were the Indians who held their lands in fee and the Osages were believed to own their lands in fee, but because they were in Oklahoma, but unlike any other tribe in Oklahoma they didn't, their lands were in trust. Therefore the Osages were not under the General Allotment Act. In 1903 this Court held that when the General Allotment Act exempts land from levy, attachment or the charge of incumbency, that means tax exemption, that was the Rickert case 1903. Now, the next thing that happens is in 1906. Congress amends the General Allotment Act and it says that, for the first time adds the idea that the trust period can end sooner that the 25 years extended, if the Indian becomes competent sooner than that time. And it says, “after he reaches the point of competency, the trust will end and he gets his land and all restrictions as to alienation and taxation are lifted. Now, this implies that Congress thought that the land was free of tax after that point and well so. Only three years ago this Supreme Court in 1903 had held restriction on alienation added up to a tax exemption. So Congress assumed on very good authority in 1906 that the restriction on alienation was equivalent of a tax exemption. Now when we come to the Osage Allotment Act also in 1906, we have Congress very much aware of all this at the time. Congress says that the Osage property, the tribal land will be alloted to the individual Osages. They will pick 160 acres of land and that's going to be tax exempt. The rest of their land which would be several hundred acres, Congress said will be taxable. Congress expressly said that this land would be taxable. Now the implication is that when Congress doesn't say the Osage property is taxable then it isn't. When it came to the minerals, it wasn't was to just divide up the minerals along with the surface rights, so what they did was they took they whole mineral estate as if it were a single body or reservation, held in trust for the Osage tribe and alloted the minerals by allotting head rights to the individual Osages. Now each head right just like the General Allotment Act was to be inalienable until the Indian became competent. The parallelism is compelling. The Congress also permitted still another tax. In 1919, this Court had held that --- because Congress had not authorized an Oklahoma Gross Production Tax, no such tax could lie and that's an important case. It's holding that silence in this context means no taxes. So Oklahoma then went to Congress and persuaded Congress to pass statutes expressly authorizing the Oklahoma Gross Production Tax and Congress did so in 1921. From that day to this, Congress or Oklahoma has collected and no one has challenged it, the gross production tax on all this head right minerals. Incidentally there is so much, I am not going to be able to cover, but one thing I wanted you to know that these head rights have diminished in value and annual income. They are now paying about $3,300 a year. In the 1910s and the 1920s, they were paying enormous amounts of money and I am sure you are familiar with some of the stories that arose from that time. Lewis F. Powell, Jr.: Suppose if fiduciary had not been to government, I realize you have an Indian involved here, but let's assume you had a private fiduciary, a lawyer in Oklahoma representing a private estate in which all of the other facts and circumstances in this case existed substantially. The Supreme Court decision not overruled except of some lawyers who did think it was overruled by implication. Would you feel that that fiduciary was subject to be surcharged to same extent and in the same manner as the government, as fiduciary in this case? Charles A. Hobbs: Well as in this case, certainly. I would say the fiduciary liability doesn't start out full blown in 1956. There is more to the story. A case was decided in 57, in 58, 62, 63, 66, 67, two in 68. By 68, when this tax was finally paid any fiduciary, in my opinion any fiduciary would have been surcharged for failure bring a suit to get the question cleared up. I think to review those lower Court cases will compel the same conclusion. They don't say West is overruled. They don't dare tackle it, but it's clear from what they say, that they are just regarding it less, that they are regarding it as overruled. And a lawyer has to look at these things in order to properly advise his client or a trustee to take care of his beneficiary's property, he has to look at the tide of the law that flows along. Thurgood Marshall: What about the Solicitor General's suggestion that just three weeks ago, we didn't think it was overruled? Charles A. Hobbs: Well, you say that in Capoeman in my opinion showing that you -- there are many ideas in that case that you still have full-blown agreement with. The citing of Oklahoma Tax Commission in the way you cited it in those cases sheds, in my opinion shed --- it does not put anyone on warning that you still think West is a good case. West is a complicating case and it goes with, excuse me, Oklahoma Tax Commission. We don't ask it be overruled. We ask it to be modified. The part of the land exempt from direct taxes is also exempt from death taxes is a good ruling. We don't suggest that that be overruled. So the parts of West -- Byron R. White: And you aren't suggesting, you know, a return to federal-instrumentality law? Charles A. Hobbs: Excuse me Your Honor? Byron R. White: And you aren't requesting any return to federal-instrumentality which Oklahoma Tax Commission is heavily involved in? Charles A. Hobbs: Well the case is perfectly valid and accepted by the Bar, the Indian Bar with that respect, federal-instrumentality rule. That was what Tax Commission was all about. That was in the midst of the tumbling of this federal-instrumentality rule which Courts had relied on for Indian Tax Exemption and it wasn't discovered until Capoeman that there is another basis for finding tax exemption and that is really a sounder basis where you examine statutes carefully, the suite of statutes for each tribe and reach an individual conclusion for each tribe. Byron R. White: In West the Court said expressly that we don't find any exemption here. There must be an express exemption. We are saying there isn't one and there isn't going to be one until Congress comes along and itself gives one under this General Allotment? Charles A. Hobbs: I am not sure I follow. Isn't it -- Byron R. White: Isn't that said -- that is what the Court said in West? Charles A. Hobbs: Yes I was following an idea, first born in the Choctaw (ph) case 1931, carried along in Superintendent of Five Tribes -- Byron R. White: But that's what it's conclusion was. It said that Congress in effect if you want us --- if there has to be an exemption, provide one? Charles A. Hobbs: But Capoeman said it wasn't necessary to do that and that's why they are inconsistent. They both can't stand together. Potter Stewart: Wasn't part of the – at least part of the rationale of Capoeman be proposition that it could hardly be presumed that the guardian would tax the ward and that there was emphasis in part's of the opinion upon that relationship and that relationship simply doesn't exist in this case? Charles A. Hobbs: It does Your Honor. It most assuredly does. Potter Stewart: Nor in West, no -- the Oklahoma is not the guardian of these Indians? Charles A. Hobbs: Oh! I am sorry. No the United States is. Potter Stewart: Exactly and that was United states tax in Capoeman? Charles A. Hobbs: Well, I was troubled by that language in Capoeman because that language harks back to 1924 Attorney General's ruling which followed a line of cases that said just that. Now that line of cases was overruled in the 30s and 40s. I confess I can't remember the case or cases that did it, but there weak read when Capoeman came along. The strength of Capoeman is in examining the General Allotment Act and -- Potter Stewart: Well and that is your view, that is the way you read it, but concededly there was language in Capoeman opinion along the lines I have indicated, was there not, that it is hardly to be presumed that the guardian would tax the ward for the guardian's benefit. And also there is a language in the Capoeman opinion, as I remember that said that the, guardian as guardian United States as the guardian was the one who determined when then how the timber would be cut and therefore was in a conflict of interest as a tax collector? Charles A. Hobbs: Well the United States -- Potter Stewart: TO maximize or the income or whatever? Charles A. Hobbs: The United States has a great deal to say when this oil is pulled out of the ground. Potter Stewart: Yes but this is an Oklahoma Tax Return? Charles A. Hobbs: But if the guardian is not going to tax his own ward that it is always been regarded at least by myself that if the Federal Tax does not lie, estate tax a fortiori does not lie. William H. Rehnquist: But maybe a fortiori is in the other direction? Potter Stewart: That is what I was -- William H. Rehnquist: The language of Justice Stewart quotes from Capoeman is the dominant force in that case? Charles A. Hobbs: No I have been -- I have learned through many cases in many text books, I reached that conclusion through that and that is the way I see it, that the Federal Tax is the hardest tax defined that lies. No, I am sorry the estate tax is the hardest defined that it lies. The -- I have met confusion. Byron R. White: Because it was -- the Court was trying to accommodate two federal statutes there. Potter Stewart: Right. Byron R. White: Federal tax statutes and a Federal allotment statute? Charles A. Hobbs: Perhaps what I meant to say is based on this. The State in order to tax must number one find Jurisdiction and number two must find congressional intent to permit. Whereas in the case of Federal tax you need only find congressional intent to permit. You do not have the jurisdiction problem. Byron R. White: The Court in West said you have to find an express exemption? Charles A. Hobbs: Capoeman said you did not have find an express exemption. Byron R. White: For a federal tax? Charles A. Hobbs: True. An argument I have not made here, but have made in the brief, is that the Osage reservation still a reservation and if the Mescalero case applies to Osage then Oklahoma has no Jurisdiction to impose any tax whatsoever except those taxes that Congress has specifically authorized which would be a tax on the non-homestead land and the gross production tax. So we rely on Mescalero. Potter Stewart: So this property here is not timber, it is a mineral property permit, is it not? Not oil and gas and you say that each had now has about an income of something over $3000 a year? Charles A. Hobbs: Correct. Potter Stewart: It used to be astronomically high, did it not? Charles A. Hobbs: Yes. Potter Stewart: Up in the -- Charles A. Hobbs: It is petering out. The figure four or five hundred -- Potter Stewart: Are the reason of depletion -- Charles A. Hobbs: Yes it is gone. Potter Stewart: Was it oil or gas or both? Charles A. Hobbs: Oil, some gas, mostly oil. They are on secondary recovery methods now and that is going to peter out. I would like to make one final quote from the Mescalero case which also supports our position. Mescalero said that, “in the special area of state taxation, absent session of jurisdiction or other Federal statutes permitting it, there has been those satisfactory authority for taxing Indian reservation lands or Indian income from activities carried on, within the boundaries of the reservation.” Now as we argue more fully in the brief, we question where Oklahoma gets to the jurisdiction to impose this tax. They have the same constitution that Arizona does, it disclaims jurisdiction. Congress has to permit two taxes and we can see that those lie, but where is the jurisdiction. Under the McClanahan or following his quotation from the Mescalero case where is the jurisdiction to impose the tax in this case. Osage is the only reservation left in Oklahoma, but is a reservation, shown as such in the BIA maps. Potter Stewart: Yeah, and this – the decedent was lived on reservation, where the reservation Indian -- Charles A. Hobbs: Yes. The Solicitor General suggested that is not alleged in the record, but it is a fact. Potter Stewart: But it is not in the record, you can hardly – anyway if it is not the racket it means that you have not relied on it up till now? Charles A. Hobbs: That is right, we have not relied on that. Warren E. Burger: Thanks you, Mr Hobbs. Charles A. Hobbs: Thank you, Your Honor. Warren E. Burger: Thank you Mr. Solicitor General. The case is submitted.

Warren E. Burger: We will hear arguments next in 75-817, Nebraska Press Association and others against Stuart. Mr. Prettyman, you may proceed whenever you are ready. E. Barrett Prettyman, Jr.: Thank you. Mr. Chief Justice and may it please the Court. I am Barrett Prettyman, Jr. and I represent a group of newspapers, Press and Broadcasting Associations; UP, AP, Sigma Delta Tau Chapter and several individual journalists. Mr. Floyd Abrams is with me representing certain amici will also argue for a reversal in this case. The basic question before the Court is whether it is permissible under the First Amendment for a Court to issue a direct prior restraint against the Press, prohibiting in advance a publication or reporting of information revealed in Public Court proceedings, Public Court records and from other sources about pendent judicial proceedings. The case arose out of multiple murders. William H. Rehnquist: You are going to define that prior restraint somewhere in your argument, Mr. Prettyman? E. Barrett Prettyman, Jr.: I certainly think that under any definition Your Honor, it applies here and that is, it is in this case at least, it is an order not to print certain information in advance of that information being printed. This case as I said arose out multiple murders in Lincoln County in Nebraska back in October, 1975. The suspect, a man named Simants was arrested the following morning which was a Sunday and on Monday and Tuesday as would be normally expected, there are a number of stories, factual in nature appeared in the local media. They told about his arrest. They mentioned that the Lincoln County Attorney have said that Mr. Simants had made a statement. The Lincoln County Attorney had said that he had a theory about the motive which would be brought out when the autopsy was completed and it was also reported that one person had said that Simants father had told him that Simants had told the father the he had committed the killings. Potter Stewart: What are the local media in the Lincoln County? E. Barrett Prettyman, Jr.: Actually, there is no newspaper in Sutherland, the small town of 800 where it occurred. The North Platte Telegraph is the nearest newspaper. There are a number of other newspapers from Omaha and Denver and so forth which permeate -- which come into the state. There are a number of radio stations and there are also several television stations. I think we can assume for present purposes that all the media were in the state. Potter Stewart: There is no local media right in this town? E. Barrett Prettyman, Jr.: Not in Sutherland. In North Platte there is a newspaper. Potter Stewart: Is North Platte is the county seat? E. Barrett Prettyman, Jr.: Yes. It is not very far away. Potter Stewart: And there is a -- E. Barrett Prettyman, Jr.: North Platte Telegraph. Potter Stewart: -- a newspaper and what, two or three radio stations? E. Barrett Prettyman, Jr.: That is my understanding, yes sir. On the Tuesday evening, the prosecutor, in advance of a preliminary hearing that was expected the next day, moved for a prior restraint in the County Court. No evidence was admitted to back it up. The County Court entered an order the following day in which he said that because of the reasonable likelihood of prejudicial news that would make it difficult, if not impossible to impanel an impartial jury, he was entering the order. It was a very broad order. It prohibited not only any evidence that would come forward at the preliminary hearing, but any evidence apart from the preliminary hearing except as would be allowed in certain voluntary Press-Bar Guidelines that were then in effect in Nebraska. That order would have remained in effect even after trial. As a result of that order which the Press chose to obey, the Press could not report the following day what happened at the preliminary hearing, even though it was an open preliminary hearing. The public was there, the Press was there, anybody who wanted to be, could be there and could leave and go out and tell anybody he wanted to what had happened, but the Press was prohibited from reporting what had occurred. Warren E. Burger: Mr. Prettyman, could that have been in a closed hearing with the consent of the defendant? E. Barrett Prettyman, Jr.: We are in a strange situation in regard to closed hearings there because you have a statute that says that it had to be open, but the Nebraska Supreme Court in this case seems to be interpreting in a way that seems to allow to have been closed. Certainly the judge at the time thought that that hearing had to be open. I would argue with you in a different case that it had to be open constitutionally, but that is not this case. There is nothing before you in regard to the closed hearing problem. Since the Simants case was actually -- Warren E. Burger: Do you agree Mr. Prettyman that to entertain the arguments you advance, we must explore all of the alternatives to what you characterize as prior restraint? E. Barrett Prettyman, Jr.: I think you must say that there are certainly -- I would certainly argue that there are many alternatives available. I would certainly hope that you would bank on the Sheppard type alternatives and not on closed hearings. I think a closed hearing is the hand-made until the prior restraint and certainly when they used either alternatively or even worse, hand in glove with each other, then you have really effectively stopped the complete flow of news. Warren E. Burger: Would you take the same view of an order directed at prosecutor and the defense counsel, that they would be held in contempt if they discussed the case publicly? E. Barrett Prettyman, Jr.: Again, Your Honor, that is not this case. I want to stress it because there is no such order in effect here. It is an alternative that was suggested in Sheppard. In a different case, I might be before you arguing that that is impermissible, but again, it is not this case. I certainly agree that it was an alternative suggested in Sheppard. John Paul Stevens: Would it be a prior restraint, if you order the prosecutor not to discuss the case? E. Barrett Prettyman, Jr.: Well, it would be a prior restraint on the prosecutor. John Paul Stevens: It would be that the same constitutional principles apply or not? E. Barrett Prettyman, Jr.: Absolutely not, Your Honor. I certainly think not -- John Paul Stevens: That it is a prior restraint is not controlling? E. Barrett Prettyman, Jr.: In the prior restraint on the prosecutor, you have a free speech problem for the prosecutor, but you do not have the direct prior restraint on the Press that you have here. John Paul Stevens: How important is the label prior restraint? E. Barrett Prettyman, Jr.: Well, I think insofar as this case is important, I do not know that the label means very much, but what actually occurred is of extreme importance, that is you have directly prohibited the Press from publishing a certain information. Now, whether you want that label or some other, that is the issue here whether you can do that under the First Amendment? Byron R. White: (Inaudible) E. Barrett Prettyman, Jr.: Absolutely. Byron R. White: And (Inaudible) prior restraint (Inaudible) E. Barrett Prettyman, Jr.: That may well be -- that is correct and in the next case you may have to decide that, but certainly, if you are going to have prior restraints, the one that is worst, the one that affects the public the most, the most onerous one is the one that is the direct prior restraint on the Press as this Court has recognized in New York Times and University of Minnesota and in a lot of other cases. Warren E. Burger: Those extreme examples that to a degree the rules of evidence and the rules of procedure are a restraint on the lawyers who are appearing in the courtroom? E. Barrett Prettyman, Jr.: Sure. Warren E. Burger: And so -- E. Barrett Prettyman, Jr.: Just as you can restrict the Press in a courtroom too, from not sitting inside the bar and from doing a number of -- taking pictures and from doing a number of things. Warren E. Burger: What about sound equipment? E. Barrett Prettyman, Jr.: Absolutely, there is no question, but that you can impose some restrictions on the Press. The Court has always distinguished between those incidental restrictions and the direct prior restraint, forbidding a newspaper not to publish. William H. Rehnquist: Do you say that the prior -- the cases say that prior restraint comes here with a heavy presumption against it, are at least at their core, limited the case is involving the Press rather than the individuals? E. Barrett Prettyman, Jr.: Yes sir. I would say that Your Honor. I do not think that you have directly have applied the same standards here before. Byron R. White: Interpreted broadly. Interpreted broadly, is that correct? E. Barrett Prettyman, Jr.: Yes, that is correct. I want to emphasize that the order that I have just described was not the order before you. I am going through the four orders and to give you a feeling of the difficulty of this area because four orders have been entered in this case and they are all different. Because of that County Court, because of the trial was going to be in the District Court, the petitioners here went to the District Court and asked for him to strike the County Court order and the District Court entered its own order and its grounds was because of the nature of the crimes charged. He said that there was a clear and present danger that the pretrial publicity could impinge on defendant’s right to a fair trial. He also included those guidelines as part of his order, but he changed a number of items and said for example that we could not report the identity of persons sexually assaulted in connection with these murders. That order would have remained in effect until after the jury was sworn. After a number of procedural problems with which the Court is fully familiar and it does not bother us now so I would not go through them. Mr. Justice Blackmun entered an order granting in part and staying in part the District Court's order. He eliminated the guidelines as being too broad and vague and he did allow certain information to be published, but he also prohibited the publication of other items, including facts strongly implicated with the accused or facts highly prejudicial to the accused. That order was then succeeded by the Fourth Order which is the one that is before you and that order is the one of the Nebraska Supreme Court entered on December 1, 1975. It too, eliminated the guidelines, but it prohibited the publication of the existence or content of confessions or admissions against interest, made by the accused to law enforcement officers or the third parties except to the Press. And it also prohibited, “other information strongly implicative of the accused as the perpetrator of the slain,” whatever that means and we are not sure. That applied interestingly only to petitioners and not to all the other media and it was effective only as to events which had occurred prior to the entry of the order. As a result of all four of these orders, the Press was prohibited from publishing information, most of it coming from public records and public hearings for over eleven weeks. The trial followed and Mr. Simants was found guilty. Now, insofar as this Nebraska Supreme Court Order prohibited the publication of news, developed in an open-Court hearing or from open Court records, I just do not think there can be any question and I submit to you, it is very clear that is blatantly unconstitutional under Craig versus Harney and Estes versus Texas and Cox Broadcast. Speaker: Can anyone just take question of information, Mr. Simants has been convicted, has he not? E. Barrett Prettyman, Jr.: Yes sir. Speaker: Has he been sentenced to death? E. Barrett Prettyman, Jr.: Yes sir. Speaker: Is there an appeal in that case in Nebraska Supreme Court? Has it been heard? E. Barrett Prettyman, Jr.: No, it is my understanding that has not. Speaker: So that there is a possibility that there might -- that could be heard. He might want a reversal and revoke the trial. E. Barrett Prettyman, Jr.: Correct, Your Honor, correct. In which case I assume the same order would be entered again if this Court allowed it to do so. Potter Stewart: In the first trial, once the jury was impaneled and sworn it was sequestered? E. Barrett Prettyman, Jr.: It was. Potter Stewart: The first trial, I suppose was fully reported by the news media, was it not? E. Barrett Prettyman, Jr.: That is correct. Potter Stewart: So, if there is a new trial, the community has been apprised, there are things that came out in open Court? E. Barrett Prettyman, Jr.: As a matter of fact in this small community, that community was apprised of everything about this event, with or without the media. The gossip and rumors are clearly indicated in the newspapers and in the record. Byron R. White: Why is this a live case Mr. Prettyman, that the order has expired, has it? E. Barrett Prettyman, Jr.: The order has expired. I would assume that you would have already made the decision that this is not a moot case because if you recall, we moved the Court prior to the expiration of the order for an expedited hearing. We offered to have briefs to you in the typewritten form the next day to have immediate -- Byron R. White: I am accepting your offer now. E. Barrett Prettyman, Jr.: Sir, that issue I assume you have already passed on because you put -- Byron R. White: (Inaudible) is still a live case? E. Barrett Prettyman, Jr.: I think it is a live case because not only for the reason mentioned by Mr. Blackmun that this order could be entered again in regard to this very person, but that orders are coming down from all over the country. We have had eleven of them in the last six months and this a problem which is typically under your decisions of such short duration that unless you are going to take these and face these and rule on them now, they are just going to continue into an effect and expire before you can take one that is alive. I think it is not only capable of repetition, but it is being repeated everyday. We just had one entered the other day in Nebraska. William H. Rehnquist: In Sosna and Weinstein against Bradford which was a per curiam that came down a couple of months ago. we made it rather clear that they are capable of repetition, but evading review standard applied to these particular litigants not just to the issue in general? E. Barrett Prettyman, Jr.: Well, I think you have done that Your Honor and in response that, I would simply say that in Carroll, that case was moot in Java on the Third Circuit, that case was moot and the Court nevertheless took it and decided it and I would assume it did so on two grounds. And Judge Cassel incidentally also did it in a District Court after the firing of Mr. Catz and it did it on two grounds. One was that it could actually apply to the parties in the same sense that Mr. Justice Blackmun just pointed out, but also that issue was of such moment and was occurring again in other situations and was otherwise so incapable of being decided quickly, that it was necessary for the Court to hear it. William H. Rehnquist: Just an exception to Article 3? E. Barrett Prettyman, Jr.: It is a kind of exception, yes sir. Warren E. Burger: Hypothetically, I emphasize hypothetically possible that the case might come here and we reversed with the Sheppard Case treatment? E. Barrett Prettyman, Jr.: Yes. Warren E. Burger: Even after we have decided this case. E. Barrett Prettyman, Jr.: I am sorry. I did not get that purport. Warren E. Burger: Even after we have decided this case, suppose we decided in your favor? E. Barrett Prettyman, Jr.: Yes, you decide that prior restraint is impermissible. Warren E. Burger: And then his case comes up here, hypothetically and theoretically, we could reverse on the ground that there were excessive publicity. E. Barrett Prettyman, Jr.: You certainly could. You might -- I would be very surprised because I do not see how the publicity in this case could conceivably be called excessive. It was very factual and it was limited, but it is perfectly possible that you could take the case and reverse it on that ground, yes sir. Thurgood Marshall: The bottom line is that, if we hold it, he might be retried, that is not keep it alive? You do not have to push the other point, do you? E. Barrett Prettyman, Jr.: That is right, sure. I emphasize that insofar as the order prohibited what occurred in open Court, it seems to be you have already ruled on it and you have said that is impermissible. But this order went further as I have said and would keep us from talking to people and finding out things about this judicial proceeding, and therefore, I have to go further. And I think in order to make the point, let me give you a hypothetical, because it seems to me that the fact that the fact that this is the Press somehow is giving the courts a strange impression that you could enter these orders that they would not do under other circumstances. Let us just suppose for a moment, that very minister, priest and rabbi in Lincoln County had gotten to -- everyone of them had gotten together a couple of weeks before this gentleman’s trial and they had decided that Mr. Simants was the embodiment of the devil and that they are going to have to do something about it. They will going to make him a symbol and that they were going to get together on the next Sunday or Saturday in their pulpits and they will going to reveal his confession. They are going to reveal the sexual nature of his crimes. They were going to condemn him as guilty and the they are going to ask the death penalty. And in order for me to make my point if you will assume with me that all of the overwhelming majority of the people in Lincoln County went to their churches and synagogues that is next Sunday. Is there any question, but that this Court would sanction a prior restraint on the giving of those sermons. I do not think that any judge would say that you could enjoin those people from getting up in their pulpits and talking about his confession. And yet somehow, it somehow does not seems so bad to the courts, at least that what is going on around the country, when they do it in regard to the Press and the others, you pointed Mr. Justice Stewart in your Yale speech, the Press is the one private organization that is carved out and mentioned specifically as entitled to protection under the First Amendment. William H. Rehnquist: What if the Lincoln County Bar Association had done what your hypothetical calls for the priests, rabbis and pastors doing at a meeting at the Lincoln Country Bar Association? E. Barrett Prettyman, Jr.: I think that then they might possibly have been held in contempt after the -- that certainly would have been called up on the under canons of ethics, but that no prior restraint possibly have been entered. John Paul Stevens: Mr. Prettyman what if your ministers had also agreed that they would advocate lynching the man, could a prior restraint be permitted then? E. Barrett Prettyman, Jr.: I do not believe so. No, sir. William H. Rehnquist: How is the President of the Lincoln County Bar Association any better off, if he is called up on a contempt and fined $500, then if he is preliminary enjoined, cited for contempt when he makes the speech and fined $500 per civil contempt? E. Barrett Prettyman, Jr.: Well, Your Honor, the difference between prior restraint and a contempt after the event has just been made so clear through all of your opinions. In the prior restraint, in the first place people tend to obey them, and therefore, it directly prohibits them doing of the event and in the second place, if he is going to be held for a contempt, he can contest the order itself. He can even get a jury trial. He can contest the contempt order, but in a prior restraint, you cannot do it. If their prior restraint is entered, you then must obey it under the laws it now stands until it is reversed on appeal and if you go in and try to attack the order, the only defense is that you did not violate it, but you cannot attack the order itself. So there is a great difference between the two situations, certainly in terms of impact. We say that the assumption that someone who hears about a case, even an alleged confession, the fact that he cannot be impartial or if he is partial, but he cannot be weeded out during the voir dire is simply unsupported. In fact, it is directly refuted by statutes in Nebraska and elsewhere which we have cited in our reply brief which allow jurors to sit, even if they have formed opinions of guilt from reading newspapers so long as the judge is satisfied that the juror is impartial. The courts have made it clear from United States versus Burr in 1807, all down through Irvin v. Dowd and Reynolds and Murphy versus Florida, that juror can give an impartial verdict even if he has some preconceived notion as to guilt. And if we need any examples of that, we certainly have them recently with Cali, Chapen, Mitchell, Connelly, Lily, all of whom stand as it seems to me irrefutable proof that even all pervasive publicity does not necessarily result in an unfair trial. We trust our juries in so many ways. We sit there and tell them, look, do not listen to the confession given by your co-defendant. It does not apply for you and we give them these instructions and we trust them and we expect them to do their job and yet Nebraska is not willing to concede that with proper voir dire and proper constructions that you cannot find 12 people who were going to give this man an impartial and fair verdict. There are ample ways, short of prior restraint to deal with adverse publicity. Sheppard, I counted, 12 of them in Sheppard and I do not need to go through them because you are certainly aware of them, but certainly two of them, change of venue and continuance, neither which were given here would obviously be what -- Potter Stewart: Voir dire of the question for a change of venue that was denied? E. Barrett Prettyman, Jr.: This is not in the record, but the fact is that -- Potter Stewart: That is what I read in the briefs? E. Barrett Prettyman, Jr.: Yes. That there was a request for a change of venue which was denied, there was not a request for a continuance and the judge did not grant one sui sponte. Potter Stewart: And under the Nebraska Law, the change of venue could be only to an adjacent county, is that correct? E. Barrett Prettyman, Jr.: Yes, that is correct and our response to that is two-fold. First of all, even if you put the surrounding counties together, you have got over 80,000 people, so you certainly could be able to find 12 jurors, but secondly, under the Groppi Case and Irvin v. Dowd, I think that that provision would be unconstitutional if it in effect prevented him from getting 12 impartial jurors. Warren E. Burger: The trial judge handed an order, a protective order along the lines you intimated as an alternative, namely, a written directive or directive on the record to the prosecutor that he is not to talk to anyone, specifically including media, to the defense counsel, the same, to the witnesses, would the media representatives be in violation if they importune these people who violate the order? E. Barrett Prettyman, Jr.: No I do not believe so, Your Honor. Warren E. Burger: Could an order appropriately be entered that they should importuned not to violate the order? E. Barrett Prettyman, Jr.: That would be an order prohibiting access. It would be an order in effect stopping them from seeking that news and I think it would have many of the same constitutional infirmities that this one had. It would not be as direct, but I think it would be close to it. Warren E. Burger: It is alright to put the order on the attorneys? E. Barrett Prettyman, Jr.: I have said, I do not conceive the constitutionality of that. I simply said that is not involved here and that I recognize that Sheppard cited it as one alternative. Warren E. Burger: Would you suggest whether the alternatives that you think would survive constitutional scrutiny? E. Barrett Prettyman, Jr.: Well, I think certainly, that a continuance would. I think certainly a change of venue would. I think when you get to trial certainly sequestration would. I think that you can even bring in a foreign jury if necessary if it came down to that bad a case. But I want to emphasize to you that somehow the assumption is, that simply because you have a danger that a jury might hear some bad things, that you are not going to have a trial. Suppose Jack Ruby had shot Oswald on television and every single person in the United States saw it, you would not say that Ruby would not be tried, that he could go free. You would get him a trial as best as you could. You would give him a continuance and maybe for a long time, you would have the most extensive voir dire you could possibly have, you would have strong jury and instructions, but you would not say go free. Warren E. Burger: Was that the issue really in that Mr. Prettyman or is the issue that a defendant has a constitutional right, if you protect it from the influences that will impair a fair trial? E. Barrett Prettyman, Jr.: But that is what Sheppard is all about, that what is Sheppard gives him. It gives him a number of ways that he can protect himself short of prior restraint. It is very instructive that in Sheppard, despite that all of these ways that were listed, the Court three times made clear that it was not talking about a prior restraint on the Press, and therefore, you do not have this conflict that everyone seems to assume you have. We have ways of protecting Jurors, and that is the point that I want to make most strongly that you can protect them and that you have a constitutional jury, as I say, even if you have people who have read the newspaper and who come to the jury room first with some kind of preconceived notion. As I say, they even have a statute in Nebraska which makes certain, that a juror is not stricken just because he has read a newspaper and had heard some bad publicity. The judges have the right to determine for themselves whether that man is impartial. I want to save a little bit of time for rebuttal so can I just simply say that it seems to me that to -- at this point in time, after 200 years, when we have let our Press print what it is able to get, to subject them now to a prior restraint after all of this time is to take away one of the great liberties that we have had. I do not think we have to look very far on the world. I do not think we have to look very far outside of this country to understand the extraordinary importance of allowing the Press, the only really free Press probably left in the world to publish what it has gotten hold off so that the public can be contemporaneously informed of all of that. If one of those Watergate people had broken in and had immediately confessed that he had broken into Democratic Headquarters at the directions of the White House, can we restrain for six months from trial time the fact that that it happened. That is what you are get into. You are going to get into decisions as to well some of these confessions maybe or ought to be in the public interest would get them out and some of we should not. Do not put the courts into that position. They are not equipped to handle it and values are too great. Thank you. Speaker: Mr. Prettyman, let me inter check the moment of lightness in all the seriousness. You represent the Omaha World-Herald? E. Barrett Prettyman, Jr.: Yes sir. Speaker: A judge of the Eight Circuit sent me this very brief clipping from the Omaha World-Herald, your client. I read it in its entirety. As illustrative of “a responsible press,” three justices of the Nebraska Supreme Court and Judge Donnelly of the Eight Circuit Court of Appeals in St. Louis will take part next week in a seminar on appellate practice in Nebraska. Anyone having information that leads to the arrest and conviction of the person or persons responsible are asked to contact Joe Smith.[Laughter] E. Barrett Prettyman, Jr.: I think Jefferson would have enjoyed that particularly.[Laughter] Speaker: I indicated it was a moment of lightness, I am not (Inaudible) Warren E. Burger: Mr. Abrams. Floyd Abrams: Mr. Chief Justice and may it please the Court. Mr. Prettyman represents as he has advised you, a large elements of the Nebraska Press. I appear today on behalf of a variety of publishers, broadcasters and journalists from around the country to join with that Press and to urge upon you today a ruling which would be unthinkable in any nation in the world, except ours and unlikely in the rest. That it is in our view entirely consistent with American history makes it no less remarkable, but simply points to the remarkable nature of that history. For what we would asked of you is nothing less than a renunciation of power, a conclusion by this Court that the judiciary should not, indeed and may not, tell the Press in advance what news it may print, save only in that rare national security situation and that rare national security case adverted to by this Court in Near Versus Minnesota in the Pentagon papers case. And what we urge upon you is that renunciation occurred over 200 years ago, that has been reaffirmed by this Court since its formation and that you should reaffirm it today. Mr. Justice Stevens asked earlier whether the label prior restraint was important here and what the relevance of it is and I would like to devote the bulk of my remarks to that question. I would like to start historically because I think it is important to note that until very recently it was accepted by one and all that whatever else could be done to the Press with respect to pretrial publicity, the one thing that could not be done was any kind of prior restraint. 20 years ago this month, if can be personal for a moment, I was on college debating team we used to talk about this subject and debate this subject full-time for a year and of all the remedies that people proposed to control what was then thought sometimes to be an irresponsible Press, no one even suggested in the scholarly works or in our debates the idea of prior restraints. So understood was it that while there could be some areas perhaps for contempt of Court after trials are over, that there could be no prior restraints in the area and we were not alone. The cases supported us as they existed then, our briefs submitted on behalf of the amici curiae that I represent indicate that in our effort to survey all the cases in this area in American history, we come upon only five prior to the Sheppard Case in which there is any reports at all of any attempt to obtain a prior restraint against the Press and that each of those cases, it was easily and summarily reversed, they have of course in many cases since Sheppard. And while it is true that almost all of them had been reversed, all but one, two or three at the most, it is also true that prior restraints on the Press around the country are becoming a common place. Within the last year, New York has had its first. New Jersey has had its first and its second and Nebraska has had its first and second and third. But I think it is a fair question to ask what is new or what has changed to lead to the start of a process by which prior restraints are now being issued in almost common place fashion. What I would urge on you, it is not that the Press has been more irresponsible by anyone’s judgment within the last few years than the years preceding it. The days of the front page are over if they ever existed and even if Harry Hurst trial bore no resemblance to that of Sam Sheppard or Bruno Hauptmann. It is not the guilty defendants are walking free on the streets because of the Press and because there is sometimes perhaps excessive pretrial publicity and it is not the innocent man, so far as we can tell, are in jail because of irresponsible Press coverage of trials. And it is not, I would urged on you, that we now have reason to think that juries are less trustworthy than we ever thought they were and as Mr. Prettyman indicated, I can hardly think of a time in our history when juries have proved their metal in a more strong basis than they have it in the last few years nor is it the studies of scholars, of judges, of lawyers and a journalists have concluded within the last few years that anything had changed and that we should retreat from our abhorrence of prior restraint in this area. Warren E. Burger: Mr. Abrams neither you so far nor Mr. Prettyman have refereed to the trial judge's post-trial inquiry of the jury. I hope that some point before you sit down, you will leave us your comments on that? Floyd Abrams: Sure, Your Honor. I will turn on that right now after just observing that there are five separate studies in these area by Bar Association Groups and the like and each of those conclude the prior restraints are constitutionally impermissible or unwise or the both of them. With respect to the post trial study, I would have a few comments to make. First, it is really devoid, the record of this case. Mr. Prettyman in his brief urged upon you that if you care to take account of that post trial study that that petitioners before you should be permitted to put in a post-trial study of their own which is a poll taken by the North Platte newspaper of the jurors as to what they meant when the judge asked them those questions after the trial. I suspect you will not be interested in that poll, but I think it is first to rather unreliable study. I think the phraseology of the study is to say the least, slanted, and I am struck by the fact as Mr. Prettyman’s brief argues to you that one would believe jurors at the post trial moment when they are asked that question and not believe them when they are asked if they can give a fair trial in voir dire time prior to a trial beginning. It seems to me that a good part of what is involved in this in this case involves just that question of whether we can trust jurors or not. As I have urged upon you, we think there is no time in our history when jurors have better indicated their ability to decide cases and to decide them without reliance on outside factors which might have been indicated and which others might have thought might have affected them. Now, we have urged on you the Sheppard Case. We have urged it again and again and I just for you to decide whether our interpretation of Sheppard and our reading of Sheppard is correct. It is supported, we urge on you by Higher Courts in New York and California and by the Court of Appeals for the Fifth Circuit. And I can think one other reason apart from what I believe to be a misinterpretation by many Lower Courts of the Sheppard decision, for the amount of gag orders or restrictive orders that had been issuing in recent years. I detect for what it maybe worth to you, a profound and growing sense of judicial concern that what is sometimes is viewed to be your responsibility on the part of the Press and its coverage of Courts and of other matters. I have been confronted when I have argued before other Courts than this with a number of questions relating to just those matters, relating essentially to matters of responsibility and I could do no more with respect to that and to urge on you the language in the CBS case of the Chief Justice for the majority of the Court that the risks of abuse of the First Amendment are well known to the framers who accepted the reality that risks of those of abuse or evils of which there was no acceptable remedy other than the spirit of moderation and a sense of responsibility and civility on the part of those who exercise the guaranteed freedoms of expression. I wish to be clear. We maybe back someday, I suspect, some of us will, representing clients or some of our brethren representing clients will be back urging on you the proposition that a power to hold the Press in contempt is very narrow, that the power to punish the Press for what it prints is narrower still. But historically, the power to ban the Press in advance, from deciding what to print, is narrowest still and that is this case. Potter Stewart: Mr. Abrams, before you proceed, I think perhaps I miss something. You were telling us of the demonstrable sea change in traditional latitude in recent years -- Floyd Abrams: Yes. Potter Stewart: -- and then you told us, why was not it attributable to this and not attributable to that and not attributable to the other thing. What I missed I think was your Henry ending [Laughter] what was it attributable too? Floyd Abrams: Justice Stewart, what I meant to convey in Nebraska, I have lost in conveying, but that I think it is attributable to two separate things. One is in this reading as we view it of the Sheppard case by Lower Courts around the country and the second is what I described as what I view at least or what I see at least, as the continuing sense of judicial concern of the nature of the reporting which occurs with respect to the judicial process. Those are the two things that I think it is. It is also I think, and we have urged upon you in our amici brief on this reading of those cases of this Court which deal with the heavy burden on prior restraints. I did not understand the concept of heavy burden on prior restraints to be an invitation to enter prior restraints when on some basis or another it was thought useful to do so. We believe that the nature of the prior restraint idea is set forth in the Southeastern Productions Case of Justice Blackmun and that you must take into account in deciding whether they can be prior restraints at all, whether historically, there has been a category established here of prior restraints which are acceptable in this area and an exception to what the Court in Southeastern Production refer to as the prohibition against prior restraints. John Paul Stevens: Mr. Abrams, let me just ask you a specific question. What do you do about the problem of the inadmissible confession? Say, for some reason a confession is very dramatic, but yet it would be rather clear that it would not be admissible to trial. Is that just something we have to live with?There is no way of curtailing the publication of that kind of information? Floyd Abrams: I think you have to live with it, Mr. Justice Stevens and one of the ways that you live with it is by giving jury instructions by appropriate voir dire, by all the Sheppard methods, but to take your questions at its narrowest, yes it is our view that there are such things as we do have to live with if it had finally comes to that, be it confessions or something else. I would close with this observation. We well appreciate that there are cases which this Court must sit as a drawer of very hard to draw lines on an ad hoc basis on a case-to-case basis and there are of course areas in which it may properly be set as Justice Holmes did, “that the power to tax is not the power to destroy while this Court sits.” We believe the power to lay prior restraints on news reporting is the power to destroy and we urge this Court not to permit the birth or growth of such a rule of law. Warren E. Burger: Thank you Mr. Abrams. Mr. Mosher. Harold Mosher: Mr. Chief Justice, may it please the Court. I am Harold Mosher, Assistant Attorney General, State of Nebraska. I am representing the Honorable Hugh Stuart, Judge of the Lincoln County. Mr. Milton Larson, a Lincoln County Attorney is also with me here today and we will argue a certain aspects of the case. Let me, if I may, take this case from the top. 8:00 p.m., October 18th 1975, KNOP, the only television station in North Platte began transmitting the NBC Saturday night movie, The Deadly Tower, a dramatization of the 1966 massacre of 16 persons and the wounding of 31 others by a sniper atop the tower, the University of Texas in Austin. By an uncanny coincidence, the movie provided the electric background for another broadcast mass murder. About 18 minutes into the movie, a KNOP newsman answered a telephone call from the sheriffs’ office which requested the television station to put a warning on the area that there had been killing at nearby Sutherland, Nebraska and that everyone should lock their doors and windows. The case at bar was born. It is, therefore, proper that certain events be reviewed and placed in the proper perspective. The town of Sutherland is located in Western Nebraska between the North and South Platte Rivers. It is a cattle country, cattle Country at its very best. The town of Sutherland had a 1970 population of approximately 800 persons. The population today is somewhat larger due to a number of transient workers who are employed in the construction of a huge electrical generating facility nearby. Following the television announcement, law enforcement officers in the Sutherland area continued their investigation of the crime and early the next morning, on a tip by a reliable informer, they arrested the respondent Erwin Charles Simants near the scene of the crime. Warren E. Burger: Mr. Mosher, suppose that after the restrictive order, challenged as prior restraint had gone into effect, did the local television station decided to re-run the dramatization of the Texas Sniper killings and both the defense and the prosecution came to the court and said this is going to stir up all kinds of passion and prejudice and impede a fair trial and we want a restraining order to restrain the showing of the dramatization of the Texas City Affair. Do you think that would be an appropriate matter for the -- Harold Mosher: I doubt it very much Your Honor, I doubt it very much. Warren E. Burger: We have a tendency to provoke passions and prejudices? Harold Mosher: I doubt it. I really do. That of course is not at issue in this case, but I really doubt it very much. When it is all said and done and I will get to it with your permission in a few moments, the so called restraining order here by the Supreme Court of Nebraska is truly a very narrow one and the Court simply was not called upon to go any further and it certainly did not, but just because of a particular aspect like this, I doubt it. I doubt it because there is so many other variables in the world in which we live. Movies nearby maybe showing certain types of film which in and off themselves, one might argue would lead to this kind of thing, but I seriously doubt that one could perhaps, in a given case when one make a showing. I am at loss, however, it suggest what that showing might be. John Paul Stevens: A quick question, your characterization of the order is a narrow one. It does include as I understand, the way it has been narrow down the prohibition against publishing any information strongly implicative of the accused as the perpetrator of the slain, do you regard that as a narrow prohibition? Harold Mosher: Certainly. May I get to it in a moment? John Paul Stevens: Yes. Certainly, I do not want take your (Inaudible) Harold Mosher: Certainly, let me continue though with some facts if I may because I think they are important. Following his arrest, in fact the same day, October the 19th, Erwin Charles Simants was charged with six counts of murder in the first degree by a complaint filed by the County Attorney and thereafter that same day, Simants was arraigned and the preliminary hearing was scheduled for October 27, 1975. The statement on page five of the brief of the petitioners is that “On October 20, a Lincoln County Attorney told the Press that Simants have given authorities a statement,” exemplifies the need, in case such as this, for the trial courts to be able to restrict the media in certain cases. Specifically the quote on page five of the petitioner’s brief refers to read at page 88 of the joint appendix and there sure enough, there is a copy of a newspaper and a quote “Lincoln County Attorney Milton Larson, said Monday, that Simants has given authorities his statement.” Putting aside for a moment how the reputation of a quotation such as that could influence a community where a jury will ultimately be chosen, is the naked fact that the statement is false. Indeed the writer who is the Bureau Chief of one of one the nation's largest wire services has now admitted that hearsay of an eminent's driver's husband was falsely attributed to the County Attorney. That is the petitioners themselves have demonstrated in this Court, at this time, the need for restrictive orders in cases such as this. It is, therefore, not -- Warren E. Burger: Just an order restricting them from making false statements or making any statements? Harold Mosher: I think it means Your Honor is that, first of all, before they are going to get to a question like this, before they would ever to it again, is whether or not this Court is going to allow the Supreme Court of Nebraska to implement Section 3.1 of the Guidelines of the American Bar Association's fair trial free Press. If you allow the Supreme Court of Nebraska to implement that particular section, the section provides that defense counsel may move, timely move at anytime prior to trial, to close the hearing, to close the hearing and thereby insure that matters of this will not be made public prior to the actual trial. As you know today, defense counsel has a mere amount of tools at his disposal to discover the Government’s case against the individual. And any defense counsel who is worthy his salt can certainly learn whether or not there is a confession. He can also, at that time, make a adequate presentation to the Court that not only should preliminary hearing because of the prosecution in and off itself is not to make public statements about the nature of a confession. By doing this in this manner, this type of an error simply will not repeat itself. The same day that this quote appeared in the morning newspaper, the County attorney filed a Motion for Restrictive Order which requested the County Court to restrict publication of testimony to be presented at the preliminary hearing. Hearing was held on that motion the same evening. Attorney representing the state, the defendant, and the news media were present. The defendant’s attorney advised the Court that Simants joined the state's motion to restrict the publication of testimony from a preliminary hearing. He even went a step further and asked that the restrictive order be brought until close of the preliminary hearing. The motion of the defense counsel was overruled. The motion of the state was sustained. The next day -- Potter Stewart: Mr. Mosher, you have I gather two hearings in Nebraska prior to the trial at least two, one is in arraignment and the other is the preliminary hearing? Harold Mosher: That is correct. Potter Stewart: And which comes first? Harold Mosher: The arraignment is the first -- Potter Stewart: And what is the function and purpose of an arraignment? Harold Mosher: Primarily, the only function of that is to set a time for preliminary hearing and it serves a second function to determine whether or not the accused has sufficient funds to secure the services of an attorney, that is all is so called arraignment does. Potter Stewart: There is no evidence -- Harold Mosher: None whatsoever, none whatsoever. The Court just simply at that stage of the game merely makes an inquiry if the defendant desires an attorney, and if he has, to secure one and if not, an application at that time is made, the counsel is appointed, and the date for the preliminary hearing is set. Potter Stewart: There is no pleading? Harold Mosher: None whatsoever, absolutely not. Thurgood Marshall: (Inaudible) Harold Mosher: Yes, it can be waived. Speaker: (Inaudible) Harold Mosher: I doubt it, I doubt it. It probably could at that time if the defendant was represented by counsel. But for the defendant in and off himself to waive it at that time, I do not know if the Court would allow it. We have never had a precise question that I know of in the history of the state. Speaker: At the preliminary hearing, does he plead at that time? Harold Mosher: At the preliminary hearing? Very rarely, very rarely. Speaker: Generally the purpose of preliminary hearing is to determine whether or not just a prima facie case and whether not to bind him over? Harold Mosher: That is correct. The purpose of the preliminary hearing does two things. It puts the burden on the Government to prove to the examining magistrate, one that crime had been committed and two that there is probable cause, not proof beyond a reasonable doubt, but probable cause to believe that the accused committed the crime charged. If there is, the bind over goes to the District Court where the trial is held on the merits. Potter Stewart: Where does he plead? Harold Mosher: At the District Court level. Potter Stewart: Not until then? Harold Mosher: That is correct. Potter Stewart: He does not do it in the arraignment? He does not do it in the preliminary hearing? Harold Mosher: No, absolutely not. Potter Stewart: And generally the defendant does not introduce any evidence at the preliminary hearing, does he? Harold Mosher: Well, he may in a given case. In a given case, the counsel may be very well appeal that the evidence produced by the Government is so weak that it could be exploited at that level. The witnesses can be shown through testimony. I have seen cases in which that is exactly where this case. In which case even though one might argue that on its face the Government presented a prima facie case. The fact remains that the trial judge who holds that a magistrate, if he will, has the credibility as the trier of the fact, it is upon him, to make the determination of what witnesses are to him are to be believed and whether or not to bind over should call. Lewis F. Powell, Jr.: Preliminary hearing is normally open to the public? Harold Mosher: Normally it is open to the public, yes Your Honor. Lewis F. Powell, Jr.: The statute that was construed by the Supreme Court of Nebraska is the one that requires a public hearing, but only at the trial itself as the Court has construed it? Harold Mosher: I do not understand your question, give it to me again. Lewis F. Powell, Jr.: Does a Nebraska Statute had presently construed, required that the preliminary hearing be open to the public? Harold Mosher: Certainly. Lewis F. Powell, Jr.: It does? Harold Mosher: The statute in and off itself says that you cannot close it except for certain reasons. Now, the Supreme Court of Nebraska in its December 1 opinion in this case has said, and by implementing section 3.1, The American Bar Association Standards, that preliminary hearing can be closed under certain circumstances and those circumstances are the one which are enumerated in Section 3.1. The next day, preliminary hearing was held on amended complaint that charged murder in the first degree and further charged that one or more the murderers was committed in the perpetration of one or more sexual assault. After testimonies of several witnesses and the introduction of other evidence, Simants was with bound over to the District Court for trial. The very next day, October 23rd, attorneys representing the media in (Inaudible) criminal case filed a motion requesting the right to be heard on a challenge to the constitutionality of this restrictive order. The District Court granted the motion to intervene and four days later on October the 27th, the District Court terminated the County Court's Order and imposed one of its own. Late in the afternoon of Friday, October the 31st, 1975, the petitioner sought relief in Supreme Court of Nebraska on two procedural routes. They filed an appeal on the District Court's order and at the same time they filed a petition in the Supreme Court of Nebraska for a leave to file an original action on the nature of a writ of mandamus. Obviously the Supreme Court of Nebraska could not have been expected to award to the parties to write briefs and drive over two hundred miles to Lincoln and to give oral argument on these two cases the same day on which they were docketed late Friday afternoon on October the 31st, 1975. Nor did the Supreme Court of Nebraska be expected to hear the cases the following week and that had previously called more than 50 cases for oral argument that week. It is hard to hear argument on that many cases as the Supreme Court of Nebraska divided itself in two divisions and it brought in several District Judges to help with the case load. That is the statement on page 21 of the reply brief of the petitioners and I quote that “the Nebraska Supreme Court refused to act expeditiously in this case” is simply unfair and contrary to fact. To compound the problem the Supreme Court of Nebraska learned while the two cases were pending in its Court, the petitioners have previously contacted Mr. Justice Blackmun of this Court, as Justice assigned to the Eight Circuit and asked him to stay the order entered by the District Court of Nebraska. The Supreme Court of Nebraska immediately issued a memorandum opinion in which it noted that the petitioners were seeking concurrent relief in both this Court and the Supreme Court of Nebraska and caused for me to find and take action so long as the position of the exercising a parallel jurisdiction of the Supreme Court of the United States could not be determined. They, however, continue the action until this Court may have known whether or not it would accept jurisdiction. On November 13th, Mr. Justice Blackmun in his capacity, Circuit Judge issued a chamber’s opinion in which he noted the desire to re-frame punishment or denying a stay until the Nebraska Supreme Court had an opportunity to act. The very next day, November 14th, the Supreme Court of Nebraska sent the original action for mandamus as well as the appeal on oral argument on November 25th. It notified counsel to file typewritten briefs to expedite theory and thus I again submit to you that its safe that any statement attributed to the Supreme Court of Nebraska that it failed to act expeditiously in this matter simply is contrary to fact. On November the 20th, Mr. Justice Blackmun -- Harry A. Blackmun: Mr. Mosher, is not 11 days a pretty long time under the circumstances? Harold Mosher: Not really Your Honor. Harry A. Blackmun: The excuse given as I remember was that they had some kind of seminar to attend? Harold Mosher: I do not know, I am not privy to that information, so that I cannot answer. I can tell you though that the Court in that period of time and when it was it first docketed which was a Friday on October 31st, the following week, through Monday and Tuesday of the second week heard 50 some cases, I believe as a matter of fact, it was 53 and that is a terrible case load for any Court to carry and deliberate. Thurgood Marshall: It does not help us in this case, does it? Harold Mosher: It does not help you in this case at all. All it really does though it set a background is to how this case came here and under what circumstances, because I do not want to leave you with the impression, nor do I want anyone else to leave you as impression, but somehow none of the Courts in Nebraska were derelict in this matter. They simply were not. John Paul Stevens: Mr. Attorney General, do not we have to decide whether it was a routine case or an exceptional case, which is your position? Harold Mosher: Well, I think this was an exceptional case. John Paul Stevens: Then should not the Supreme Court of Nebraska expedite it? Harold Mosher: They did. John Paul Stevens: Then what is the relevance of these 27 or 30 other cases on the docket? Harold Mosher: Well, Your Honor, when you call 50 cases for oral argument, there is just no way to stop it. John Paul Stevens: In other words it is fairly exceptional, but not extremely exceptional. Harold Mosher: But there is now way to stop it. Well, you have got 53 cases coming in for arguments the next day and these attorneys are coming in from all over of the state at minimum, that is 106 lawyers.[Laughter] There is no way to stop it. Each of these lawyers believes he too has exceptional case. John Paul Stevens: I would suggest maybe they just had to replace one case on the docket and heard this one first. Harold Mosher: Perhaps that could have been done, but perhaps also Your Honor there was need for time to breach the matter. Thurgood Marshall: Let me put it in other way. If there were 500 cases it would make any difference? Harold Mosher: 500 cases? It would make a tremendous difference. Thurgood Marshall: What the numbers had to do with the point we have got before us? Harold Mosher: Only to the point as I have said Your Honor, is to try to impress upon you that the fact that the Supreme Court of Nebraska was not derelict, but let us turn to the first issue. John Paul Stevens: Let me just interrupt once more. Are you not demonstrating that one of the vices in these orders is that inevitably they will remain in effect for some period of time until the judicial process can face up to the question on whether to remove them, but that is an inevitable part of the procedure, if you once enter the order? Harold Mosher: Well, there is always a certain time line Your Honor. There has to be. That is just part of the system, but to say that 10-11 days in unreasonable I do not consider to be. Someone else can very well argue that it is unreasonable. I just know what the Court was up against. I just know that they heard arguments for nine days and before then, they say again that they took 11 days before this was set down and at the same time giving the attorneys the appropriate time to reach the matter, I do not consider to be unreasonable. Your Honor, there are though of several issues and I would like to address myself to them. First, is the first very basic issue and that is whether or not the Courts had a power and under in what circumstances to enter a valid protective order. The answer seems to me unequivocal. The Courts do have the power. A few basic consideration seems to me make this conclusion absolutely necessary. One, fair administration of justice is one of the most essential functions of Government. Every other with other right including the right of a free Press may well depend upon ability to get a judicial hearing that is dispassionate and as an impartial as a weakness inherent men will permit. Two, the media has the power, whether lawful or not, to destroy the right to a fair trail. Not only does it have this power, but it has been exercised as demonstrated in the case of Sheppard v. Maxwell. Three, no Government can long endure if it can permit private persons or persons to prevent the discharge of one of its essential functions. The Press has taken a position that the Courts have no power, save national security, to issue restrictive orders. That position I submit to you finds no support whatever in the constitution in the United States nor does it find any support in the teachings of this Court. Two dangerous impressions moreover are alleged in the position that the petitioners have taken in this case. One, is it that the press is above the law, and the other is that the people in the Government are antagonistic, that the press must somehow protect the people from the Government. I submit to you that these impressions are based upon some misconceptions. A fundamental principle of American law and from Anglo-American law for at least 700 years is that no one is above the law and certainly, neither the constitution nor the people are conferred upon private corporations, whether engaged in a publishing or the broadcasting business or any other business, a status that not even of the President of the United States can claim. All are under the law and none has the right in its sole discretion to prevent the judicial branch or any other branch of the Government in carrying out its assigned functions. Secondly, America’s greatest claim to freedom, to its place and history is its Government other people, by the people and for the people. Is that the Government who is at the control of the people, the people want and they need the news media to assist them in this process, but only under the law and not above it. Freedom of the Press simply is not absolute and absolute discretion is granted to no one under the constitution. Ours is the Government of laws. It is not a Government of men. Thus it cannot seriously be doubted that the Courts have the power to render valid protective orders. That critical issue is under what circumstances can a restrictive order be entered and what should be its scope. The issue here is delicate. It is a delicate balancing of interest between the First and Sixth Amendment. This is where the Courts and media must give careful consideration to the important functions that media performs. Perhaps a good place to start is the preliminary hearing. This is a likely source of most Restrictive Orders. As I have previously alluded to you under Nebraska Law, one who believes he had been unjustly charged with a criminal offense has a right for a prompt preliminary hearing before a magistrate. In that particular hearing, the Government does have the burden proving one, whether or not a crime has been committed and two whether or not a person charged committed the crime. The dissemination of public information at that stage of the trial can in appropriate case create habit in providing a defendant with a fair trial because frequently at such hearings there is testimony relating to confessions, and I call your attention to several empirical studies, empirical studies which are cited on pages 10 and 11 of the brief for the respondent Stuart, which demonstrate how, the publication of a confession or the fact that one has been given can in a particular case deny that criminal defendant a fair trial. In the case of Estes versus Texas this Court itself had that the pretrial can create a major problem for the defendant in criminal case. Indeed, the Court went on to state a pretrial publicity may be more harmful than publicity during the trial for it may well set the community opinion as to guilt or innocence. William H. Rehnquist: Mr. Mosher, a minute ago you said that frequently a pretrial hearing, there would be an offer of a confession? Harold Mosher: That is correct. William H. Rehnquist: Is that typical in Nebraska felony pretrial that more often than not if there has been a confession the state will seek to offer? Harold Mosher: I do not know if I can give you a yes or no answer Your Honor. It will depend on an awful lot on the facts in a particular case. In this particular case that you have before you, no eyewitnesses survived and so the case, the Government was going to make much of the case, certainly a confession was certainly a way of doing it. There were simply no eyewitnesses to this heinous crime. William H. Rehnquist: And was a confession in fact offered at the pretrial? Harold Mosher: It was, pardon me, it was. The culprits of possible prejudice in the case at bar, the Supreme Court of Nebraska restricted the petitions for publishing confessions and admissions. The Supreme Court of Nebraska did not restrict the petitioners from publishing that six persons had been culled, or that six persons that had been slain in their homes. It did not restrict the news media from investigating any portion of the crime. It did not restrict the newspaper and the news media from publishing the names of the victims, their age, or their sex, or that Erwin Charles Simants has been arrested. Thurgood Marshall: What was the purpose of the newspapers investigating that they cannot publish? Harold Mosher: All they could -- probably they publish immediately, of course Your Honor, under the terms of this particular restricting order just as soon the jury was impaneled. Thurgood Marshall: So they would investigate and wait around until that time? Harold Mosher: Certainly. Thurgood Marshall: What is the difference between everybody else going out and talking about what happened in the preliminary hearing except the Press? Harold Mosher: I think it is probably one of the gray. I think it is one of the gray. The newspapers in this nation really do enjoy the tremendous sense of credibility. Thurgood Marshall: But then it was a public hearing, was it? Harold Mosher: What is that? What was in the public hearing? Thurgood Marshall: The preliminary hearing. It could not be public if it could not be published? Harold Mosher: But there is no requirement under the Constitution that a preliminary hearing be a public hearing. The Sixth Amendment only goes to a public trial. Thurgood Marshall: I thought you said it was the law of Nebraska? Harold Mosher: The Law of Nebraska (Voice Overlap) Thurgood Marshall: Well, at any rate it was a public hearing here, was it or not? That is public except for the Press. Harold Mosher: Well, even the Press that the way case was developed was entitled to attend. Speaker: (Inaudible) Harold Mosher: Certainly, that is correct. Speaker: (Inaudible) Harold Mosher: But Your Honor, it was not a total restriction. It was a merely restriction until the jury was impaneled and placed in a box. At that stage of the game the Press was freed and let it all hang out. There was nothing to restrict to matter, the jury was in the box. It was simply an attempt, a very sincere attempt of balance the First Amendment and the Sixth Amendment. John Paul Stevens: Mr. Mosher, your theory of why this is a narrow order then goes to the fact that it was limited period of time rather than the scope of the prohibition? Harold Mosher: That is one and the other thing I think why it was very narrow is they restricted the publication on. John Paul Stevens: What about that third clause that I asked you about before, are they broad? Harold Mosher: I do not believe so at all. I think all the Court was really saying is here is that one, you cannot publish before this, before this matter goes to the -- before the jury is impaneled. One, any admissions against interest or confessions, and two you cannot publish the fact that the man had had a prayer of general conduct. This is all the -- John Paul Stevens: Are there any information tending to prove guilt? Is that not that part of the order and is not that the thing the newspaper people would probably most like to publish if they had their own reporters out digging around for facts? Harold Mosher: I do not think so Your Honor, because the second one for example, let the media publish anything that is -- John Paul Stevens: This order would have been appropriate in the Watergate, the background? Would it have been a narrow order? Harold Mosher: I do not know the scope of your question because Watergate involved a lot -- John Paul Stevens: In tending to prove guilt of any other crimes under the statute? Harold Mosher: Well, of course, Watergate involved a tremendous amount of investigation by the media before Government acted, but probably Watergate is the media’s finest hour. Certainly it is one of its finest hours, because here are some investigations that went on by the media before the Government acted to set the criminal process in action. This was not the case here. The Government had set an action. The Government had arrested a person that they believe -- John Paul Stevens: Really, I am just directing my attention -- directing your attention to the scope of the order, the prohibition of information tending to prove guilt. Do you think that is a narrow order? Harold Mosher: That is a narrow order. William H. Rehnquist: Are the terms of the ordered tending to prove guilt of the accused or just tending to prove guilt? Harold Mosher: The terms of the order prohibit the media in publishing before the jury is impaneled, from publishing a fact that this man had confessed. It also prohibited the media from publishing such other matters except in those statements that they might get from the accused. Now, if the accused was willing to talk to the media they were perfectly free to publish it. William H. Rehnquist: What if an investigative reporter, after this order was entered, but before Simants trial came upon some leads that led him to think that X rather than Simants was guilty, would he have been free to publish that? Harold Mosher: Oh! I think he probably could, certainly. Harry A. Blackmun: Did not the order contained word such as ‘Seriously Implicative’? Harold Mosher: It did, which of course, would go to the prior criminal conduct of the accused. Harry A. Blackmun: That to me sounds a little more narrower than Mr. Justice Stevens’ description of tending to prove guilt? Harold Mosher: I think so. John Paul Stevens: Yes, and it is also limited to the accused that Mr. Justice Rehnquist pointed to. Information strongly implicative of the accused that the perpetrator of the slain so (a) it has to be strong, and (b) it has to relate to the particular accused and that is what narrow is about. Warren E. Burger: Mr. Larson. Milton R. Larson: Mr. Chief Justice, Your Honors and may it please the Court. My name is Milton Larson. I am the prosecutor in this action and I am here representing the State of Nebraska. I believe that, insofar as the factual background, Mr. Mosher has done a very good job in laying forth the situation. The one thing that he did not mention in terms of whether the state may have overreacted to some publicity. I was called to Sutherland on the evening of October 18th, assisted in the criminal investigation. The bodies were in the house from approximately 10 o’clock when I got there until 4:30 the next morning. Everything left just as it was for the purpose of getting the criminal investigation underway and completed and before the bodies were removed, there was an NBC helicopter from Denver that had arrived. There were news, media representatives from the Wire Services, AP, UPI, Omaha World-Herald, all of the local radio stations, television. It was very apparent, very early that I was going to be faced with a good deal of publicity. In this regard, I would like to narrow the issues here a little bit. I think that we need to say that we are talking here only about the very exceptional case in the criminal arena, unfortunately the sensational case, the highly publicized case. However, we are also talking therefore about the major cases. The ones that the public presumably the going to be the most interested in. Certainly this case, involving the mass murder of six people, involving sexual assaults on children and an elderly woman both before and after death must fall within the realm of an exceptional case. You have to couple that, unlike the Watergate situations that happened in a metropolitan area where everyone is not terribly concerned about it. Here we have a situation in a town of 800 where virtually everyone knows everyone. The people in the community knew both the accused and all of the victims. They were very vitally interested in it. They were going to learn all that they could and rightfully so. They would want to learn all that they could, but that adds to the prosecutions’ burden of protecting the individual’s right to a fair trial. I do not mean to sound as a defense attorney, but as an officer of the Court, I felt that it was the burden of the prosecution as well and I think that is clearly indicated in Sheppard to take reasonable steps as I felt were necessary to protect the individual’s right to a fair trial. I do also wish to reemphasize the fact that I did not, at any time state that the defendant had made a statement and I am very happy to report that because it would have been highly embarrassing had I done that. I was misquoted on that. Then with regard to the pervasiveness of the County Court's Order, he simply said, you shall not report what happened at the preliminary hearing, except as in compliance to the Bar Press Guidelines. You have to take that into account in terms of the circumstances there. Nebraska has a statute requiring that if a man is held without bond that he shall be entitled to a preliminary hearing within four days. That is not very much time. By the time we got even organized, I have a four-man staff, by the time I even got organized to consider the procedural problems of Due Process and fair trial and the Sixth Amendment, it was Monday. I had to have the preliminary hearing Tuesday, and so I asked, I simply put a motion on and said, Your Honor, I just request that the order -- that the Court enter whatever order it deems necessary to protect this individual’s right to a fair trial. And the judge looked at it and he said, my gosh, I see the problem. In the meantime, I have received calls from the Chicago Tribune, LA Sun-Times, The London Sunday-Times, NBC, ABC, everyone and I was very much appalled that what was going to transpire. So the judge said, obviously, this needs to be considered. Obviously, I have not much time, call of the media that are here and that are represented, asked them to come to the Court this evening and we are going to talk this over and he came in, he ultimately decided that he was not going to be able to make any extensive study of the law in the area and he said, you are going to be able to get a review from the District Court and I am just going to shut it down and you can get your review there. The following morning, we had our preliminary hearing. The following evening, we had a hearing as to the -- we had a review of the County Court's Order and the District Judge also said, this order is over broad, but I do not know how over broad it is because I am not right up-to-date on everything with regard to free-Press and fair trial. So I want to postpone this matter until October 27th, that was four days, request that counsel give me some guidelines, give me their thoughts as to what ought to go into the order and if they ought not to be in order, what those -- the basis for that is and on October 27th, he modified the order which was five days after the original order had been entered and I think under the circumstances he got it on Wednesday, gave Thursday and Friday for the people to get -- the people involved to get their information together as to what they want to put before the judge. Then on October 27th, at which he entered his order and the heard arguments as to its validity and what ought to be in it, and what ought not to be in it and decided to go with the Bar-Press Guidelines. And Justice Blackmun, I think correctly stated, that they are over broad because they are not specific enough in all areas. If you are going to be charged with contempt you certainly ought to know what you are being charged with and I could not agree more. I think that is absolutely correct. So, it was limited to confessions, confessions made to law enforcement people, confessions made to others, and to those facts strongly implicative of this defendant. Now, Justice Stevens question is that would on its face appear to be rather pervasive, but I would submit that it is not when applied to the facts to the case itself. Basically, at the time of the preliminary hearing all we have was the confession of the defendant. All of the physical evidence that was to later corroborate the confession, the fibers that were found from his coat, that were found on the bodies of the defendants and etcetera, this was all being packaged and being sent to the FBI Laboratory in Washington D.C. We had nothing at the time of the preliminary hearing to secure a probable cause for the bind over of this defendant, except, nothing exculpatory except his confession which is sufficient for establishing probable cause, to bind him over. But with regard to the questions that are involved here, I think what comes into conflict are the two rules of law. One that that which transpires in the open courtroom is maybe published with impunity and two, that where there is a reasonable likelihood of prejudicial news coverage that the judge shall take those steps as are required to protect the right to a fair trial. Clearly, none of the cases have indicated that there is any indication toward prior restraint that that it is all desirable. That I submit in exceptional cases where locale and circumstance combine such that pervasive publicity, extensive publicity and prejudicial publicity would or create a clear and present danger to the impaneling of a fair and impartial jury that that must necessarily that the judge must necessarily have the authority to enter any appropriate order. Thurgood Marshall: Does that not cut in other way in the place of 800 people, would they talk, would 800 people talk about anything else but the -- Milton R. Larson: No Your Honor, I presume what is your getting to now is the rumor in innuendo that goes in the absence of a court, and is that correct? Thurgood Marshall: You cannot stop that? Milton R. Larson: No, and my answer to that and it is only a feeling, but I think it is correct that that which Mrs. Jones tells me, I am going to be more easily convinced to put aside than if I have read in the papers in the headlines, evidence established at preliminary hearing shows that a confession was made. I think that once it has given the sanction of the judicial proceeding when it has given the sanction of the written word in the paper recorded under judicial proceedings that it is much more devastating to the rights of criminal defendant to a fair trial. Thurgood Marshall: In the small town of 800? Milton R. Larson: Yes, Your Honor. First of all, with regard to that as a practical matter, anyone who was from Sutherland was removed for cause without opposition by the prosecution because of that very reason. Thurgood Marshall: (Inaudible) Milton R. Larson: Yes, Your Honor. Thurgood Marshall: (Inaudible) Milton R. Larson: You cannot stop it Your Honor, but I do think that it is not going to be as prejudicial as what comes out in the paper that judicial proceedings have indicated that a confession was made. In regard to the confession itself, I would submit to the Court that a confession, in an exceptional case, such as we have before us uniquely lends itself to a restriction in the pretrial proceeding. I think it is also important to remember that we are talking about pretrial here. I cannot conceive of any basis during the trial of precluding publicity because obviously the jury can be sequestered at that time, they do not need to have access to that information. But we are talking about pretrial and we do not know who the perspective jurors are going to be and we do know though what type of information they are going to have at their disposal. I would submit, Your Honors that in light of the four-day requirement, in light of the fact of necessity had to introduce the confession at the preliminary hearing in order to get a bind over, that it can be hardly said as petitioners would have believe that we volunteered that information for dissemination to the public. As a matter of prosecution, as a matter of getting my job done, there was no -- I had no alternative, but to introduce confession. So, when you -- John Paul Stevens: Before a confession is introduced in a preliminary hearing, is there any test of its voluntariness? Milton R. Larson: No, Your Honor, that was the next point that I was going to make, Due Process before the admission of a confession, into the trial portion, requires a due process hearing outside the presence of the jury with relationship to voluntariness, that was held. But I would submit to you that that would be a very little moment if the confession had already been published and the jurors already have knowledge of it, because I would submit that what would go up to the mind of the juror, if they went to the trial and no confession was introduced, was not that there must not have been a confession, but rather that, well, that prosecutor did not introduce said confession, but I know it was made and I think that type of prejudice simply cannot be over come. And I think that the issue, the basic issue here is that in the exceptional case who shall govern, who shall have ultimate authority to protect the due process requirements with relationship to a fair trial. Shall it be, the Courts, shall it be the judiciary or shall it be the editor? I would submit that before public dissemination of information relative to the existence of a confession can be or should be disseminated that the question of voluntariness should first be determined, in the first instance by the judiciary, not by editorial comment. And that again, I am talking about exceptional cases, highly publicized issues, I am talking about this case gentleman, where in a small rural community we had a mass murder of a scope that was unprecedented in Nebraska since the Starkweather case in 1957. It would seem to me that if ever there was a situation where there could be a limited prior restraint, and again we must say limited, I feel that as I think it clearly the law, it can be no more pervasive and it is absolutely necessary to insure the judicial process and the orderly administration of justice and that is really what we are talking about. Is the ultimate power of the Courts to control their own processes to insure that due process of the law is met. I think that we should talk about the Estes case, the Rideau case, the Sheppard case which indicate that due process, that actual prejudice need not be shown where a due process demands a reversal because of prejudicial publicity. Warren E. Burger: Thank you Mr. Larson. Mr. Prettyman, you have I think, eight minutes left. E. Barrett Prettyman, Jr.: I do not think that I will take it all, Your Honor. I just want to say that I would be making my argument even if prior restraints worked. They do not work at least in the sense of guaranteeing a fair trial or benefiting the public. They result, as you have just pointed out Mr. Justice Marshall in rumor and gossip and speculation that is often far more dangerous to a defendant than factual reporting in a newspaper. They result in the cover-up of occasional corruption and abuse of power and the pressures that elected judges sometimes are put under -- Warren E. Burger: (Inaudible) If the Press are permitted to be present and have access to the entire record, they have a rather hard time covering it up. It could be delayed reporting, but could not cover it up? E. Barrett Prettyman, Jr.: Well, the problem of course is that is what is actually going on and that is that you are having a combination of closed hearings and prior restraints and what we are having more and more now and what is developing at an accelerating rate as the fact that the Press is being cutoff entirely. Now, you sort of assume that the publication of a confession must be a bad thing, it is going to harm the defendant. In fact, people confess the things all the time that they did not do and the publication of confessions can result in freeing the people. There was an incident the other day in Britain where a young man was charged with a crime and he got on television and said, I did not do it and the youngster who had been at the scene saw it and said that man was not there and he told his father they got the police the follow that off. Now, the same thing would have happened if he had actually confessed on television. If he said, I did do it, and that young boy said, I was there, he did not do it all, that could have gotten that man off. You cannot just assume that the publication -- Potter Stewart: (Inaudible) our decision in The Rideau case was erroneous? E. Barrett Prettyman, Jr.: No.[Laughter] I would point out that Your Honor that in that case you are talking about the effect at trial and that you reversed, you did not enter a prior restraint and I think Rideau is a very good example because you did not order that man to go free. You sent him back for a new trial and you assumed that despite those 50,000 people or however many it was who saw that television program, that somehow with the Sheppard help, you have got a man who was going to get a fair trial the next time around. Potter Stewart: Now, the issue there was whether or not he was unconstitutionally entitled to a change of venue -- E. Barrett Prettyman, Jr.: That is true. Harry A. Blackmun: Mr. Prettyman, I suppose your position, if you prevail here will be to increase the number of closed hearings. Now, you said a while ago that that is another case, it would argument against this -- E. Barrett Prettyman, Jr.: Yes sir. Harry A. Blackmun: -- but is this a privilege for the Press to assert or for the defense to assert? E. Barrett Prettyman, Jr.: Well, of course, we would contend and the Nebraska Supreme Court does not agree with us that the Press is entitled to intervene here, that it represents not only its own rights, but the public's right. One very strange aspect to this case is that the Nebraska Supreme Court said, we never should have been allowed to intervene in the first place, and that therefore, we could have disobeyed the County Court order with impunity even though it was entered against us. Now, you got a strange situation. Do we have rights or do we not? Is the public going to be represented or is it not? I think what is going to happen, if you allow these things is this. Defendants as a matter of course are going to ask for a prior restraint, both to prevent themselves from being charged of in effective assistance to the counsel and also because it is obviously in their client's interest not to have any publicity about this. So that is going to become the normal thing. That prosecutors, what is their attitude going to be, sure, give it to them. Let us do not take a chance on reversal later, disagree to it and suddenly you are sitting there with a judge, with both of parties agreeing on something, pushing it toward it, you do not have the Press present in Nebraska, because they do not have a right to intervene, and so the judge naturally who also does not want to be reversed is going to grant it. I assure you no matter how narrow an order you attempt to fashion, you are going to see a flood of litigation if this happens -- William H. Rehnquist: Your grand jury is certainly closed -- E. Barrett Prettyman, Jr.: I am sorry I did not hear you. William H. Rehnquist: In the federal system, your grand jury is certainly closed. You are not suggesting that the Press can open up the grand jury? E. Barrett Prettyman, Jr.: No, absolutely not. We are not talking here about our right to get information. We are not saying that courts cannot keep some unknown information secret or that everything has to be made public. We are not talking about an access -- William H. Rehnquist: But I thought you were saying that the State of Nebraska is constitutionally obligated to open up its preliminary hearing? E. Barrett Prettyman, Jr.: No, I was not arguing at that now. I said I might argue in the next case that it was, but that is not this case. In this case they chose to have a public hearing and they nevertheless refused to give us the information that was at the Public Hearing. I think that he mentioned a few moments ago that well, it is just for a short duration it is just between the preliminary hearing and trial, it was two-and-a-half months. You prevented this information and that for two-and-a-half months from coming out and I just do not think that no matter what kind of an order you try to fashion, you are going to see the beginning of something that is not only a great departure from our constitutional system as we have known it, but you are going to see a flood of litigation that is going to result in more and more orders and I simply implore the Court not to start down that path. Warren E. Burger: Mr. Prettyman, your argument on the matter why is it essential that it be published tomorrow morning as distinguished from a later point? E. Barrett Prettyman, Jr.: Yes, Your Honor -- Warren E. Burger: Assuming that there is no barrier whatever to the subsequent publication? E. Barrett Prettyman, Jr.: Yes. Your Honor, I think that if the Court is really going to attempt to decide in each case whether a little bit of time is too much or too little, you are really in the trouble. Let us say for example that on the morning of an election, a Congressman is indicted and confesses and an unconstitutional order, constitutional or not is entered immediately against the Press, but it stays into effect only until 7 o’clock that night. That man is re-elected, is seven hours too little or too late? Are you going to put the courts into the position of saying, well, in that case, that seven hours was too long, but in some other case, maybe a week is alright or a month is alright. Speaker: (Inaudible) E. Barrett Prettyman, Jr.: Well, I can only say this, that this Court has said on several occasions that it is the contemporaneous, In re Oliver was one, and I think that there have been several others, have emphasized that it is the contemporaneous publishing of news. The public's right immediately to news, because you cannot judge the impact that news is going to have. In the Joan Little case for example, the fact that the women’s rights were immediately able, right immediately able to generalize, get support for her, was extremely important and in the Schulingkamp case, the immediate putting out of the news resulted in the whole juvenile system being redone and all of that could have been lost if there had been a delay. There was a momentum to these things. There was a momentum to news and I think Watergate of course is the great example. The fact that news coming out now of something is a vital importance to this public and as soon as you start saying, no, let us just keep it under cover for a little while you put yourself in a very serious trouble. Thank you. Warren E. Burger: Thank you gentlemen. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 97-569, Burlington Industries v. Kimberly Ellerth. Mr. Casey. James J. Casey: Mr. Chief Justice, and may it please the Court: Is an employer strictly or automatically liable for job-related threats made in conjunction with sexual advances when the employee has suffered no tangible job detriment for the rejection of those advances... in other words, the unfulfilled threat? We submit that the answer to that question is no. Strict or automatic liability should not be applied in a situation of unfulfilled threats, but rather should be analyzed-- Sandra Day O'Connor: Mr. Casey. James J. Casey: --Yes. Sandra Day O'Connor: It sounds to me like you're asking question 2 of the questions presented on petition for certiorari, which is whether strict liability is the proper standard. Now, I thought the Court didn't grant certiorari on question 2. I thought we granted certiorari on question 1. James J. Casey: That is correct. Sandra Day O'Connor: Most of your brief addresses question 2. I mean, are we going to talk about question 1, on which cert was granted? James J. Casey: Justice, the... the... the question... question 1 is the un... is whether or not the strict liability standard ought to apply in the unfulfilled threat situation, where... where there is no adverse job consequence. Sandra Day O'Connor: Well, it doesn't address strict liability actually. It says whether a claim of quid pro quo sexual harassment may be stated under Title VII, when the plaintiff has neither submitted to the sexual advances nor suffered any tangible effects. That's the question. James J. Casey: Yes, Justice. Under-- Sandra Day O'Connor: It... it doesn't refer to strict liability. James J. Casey: --Under... under the assumption, Justice, that in... that most courts, who have addressed the issue, have addressed quid pro quo as a strict liability issue. And that's why I referred to the strict liability for the unfulfilled threat. And... and that's why I believe it is... it is cognizable under question 1, which is the question that the Court did accept. You are quite correct about that. But almost all of the courts who have addressed quid pro quo sexual harassment have addressed it under the theory of strict liability for the employer, where there has been a adverse job action, such as a termination of employment, a demotion, a transfer to a less fulfilling job, a loss of benefits. These are all tangible job detriments, where the company has acted, through... through a supervisor. Antonin Scalia: Well, there... there's really no other reason to have the quid pro quo category, is there? James J. Casey: Absolutely not, Your Honor. Antonin Scalia: Except to establish a different standard of liability. James J. Casey: That's correct, Your Honor. And... and-- Antonin Scalia: The statute doesn't... doesn't establish different kinds of sexual harassment... quid pro quo and... and environmental harassment. James J. Casey: --No, it does not. It-- Antonin Scalia: That's not in the statute, is it? James J. Casey: --It does not, Your Honor. But the courts who have addressed the other violations of Title VII, for example, in race cases, have attached strict liability to the employer when the... the supervisor has taken an adverse job action, such as a termination of someone because of their race, a refusal to hire someone because of their race, a termination of someone because of their national... their national origins, because of their religion. Courts have viewed that as employer strict liability. On the other hand, when... when in a race case, for example, a... a person is living in... in a hostile racial work environment, or a hostile environment to one's religion, or a hostile environment because one happens to be Korean or Indian or... or English, that has been viewed as whether or not the company has been negligent in permitting that hostile work environment to exist. Ruth Bader Ginsburg: When you say VII, you are just asserting that there is a different standard for the employer? James J. Casey: Oh, absolutely, Your Honor. Ruth Bader Ginsburg: So everybody agrees that this kind of claim is stated under Title VII? James J. Casey: This is a... this is a claim for discrimination by reason of one's gender. Ruth Bader Ginsburg: And then how did we come to this distinction, then? Because the statute doesn't say a word about quid pro quo and it doesn't say a word about hostile environment. It says: same terms and conditions of employment, period. James J. Casey: It... it does, indeed. This Court, in Meritor, acknowledged at least a distinction between the hostile work environment and quid pro quo. This Court, in the Harris Forklift opinion, by noting that the Harris case was not a quid pro quo case, implicitly recognized the distinction. I think the same distinction, Your Honor, has been made in the other... in the other type violations of Title VII, in terms of... of race and national origin, where there has been an act. Ruth Bader Ginsburg: Do we have a race or national origin case where there's a negligence, as opposed to vicarious liability? James J. Casey: Not from this Court. There have been... there are many circuits who have... who have recognized that... that the hostile environment... the racially hostile environment is... is a negligence issue. And... and the standard the company or the employer is held to is whether the... whether the employer knew or should have known of the... of the racially hostile environment. And... and the same distinction is... is what we are urging the Court to adopt in the sexual harassment case. Anthony M. Kennedy: So suppose this supervisor... let's use race as an example... suppose a supervisor says, I'm not going to promote you because you're Asian, Hispanic, whatever, and a week later does promote the person. And the person is no longer even working for that supervisor... promoted out of the department. Is there a violation there? James J. Casey: In that one instance, I would say there is not. Anthony M. Kennedy: There is? James J. Casey: There is not a violation. Anthony M. Kennedy: There is not. James J. Casey: If... if there was repeated... repeated and... and repeatedly hostile comments made by the supervisor to the employee because of his national... I think there then would be a violation. But here-- Anthony M. Kennedy: And do you analogize what happened here to the hypothetical that I... I gave you? James J. Casey: --I do. I do exactly. Here there was an implicit threat: I could make your job easier or harder for you. That was... that's the kind of threat we talked about. And it was at... at a job promotion instance. And in this case-- Anthony M. Kennedy: Well, suppose in the case that I... that I put the promotion... the case where I put it was... that she was promoted the next week. James J. Casey: --Yes. Anthony M. Kennedy: Suppose in the race hypothetical the promotion isn't going to come up for a year, but the supervisor has said that. Could the employee bring a cause of action injunction? Or is there just no... it's just kind of a violation in the air, with no damage? James J. Casey: I think... I think there is no harm. I think there is no harm. Although-- Anthony M. Kennedy: Despite... despite the insult and the personal hurt, et cetera, et cetera? James J. Casey: --Well, I don't think, Your Honor, that one insult is sufficiently severe to rise to... to a hostile environment, as... as bad as it may-- Sandra Day O'Connor: Well, what if... what if you have a situation of a supervisor for a large corporate employer who routinely orders a female employee under his supervision to go to a certain isolated place, where the supervisor can be alone with this employee and repeatedly then tries to use that opportunity for sexual gratification... repeatedly? No... no change in promotion status or discharge. Is... is there vicarious liability there for the employer or only if the employer is, as you put it, negligent? James J. Casey: --Your Honor, in... in the example you just gave, I believe that there... there is very likely a quid pro quo. She has been ordered off-- Sandra Day O'Connor: No. I... I left that out of the assumption. James J. Casey: --All right. The assumption is that... that she's ordered to an isolated-- Sandra Day O'Connor: That the supervisor uses his supervisor... supervisory authority to place the employee in... in this situation, where he can then take advantage of her. James J. Casey: --Okay. Sandra Day O'Connor: And does so repeatedly. James J. Casey: Okay. He has acted. He has... he has used the authority vested in him by... by his employer. He has then acted on behalf of the employer, and I believe there may well then be-- Sandra Day O'Connor: But the employer is not negligent, the employer tells all their supervisors to be careful, don't do this. James J. Casey: --By... by issuing orders to isolate an employee, I believe he is using the authority vested in... in... in... vested in him by the... by the employer. David H. Souter: All right. Then why not, in... in one instance alone... let... let's take Justice O'Connor's example, but change it in this respect. Let's assume the supervisor orders the... the employee into his office. And instead of being subtle about it or comparatively so, he is very explicit about it. He said: You are going nowhere with this company. You are not going to get your promotion 12 months hence unless in the meantime you grant sexual favors to me. Isn't that sufficient to create at least the hostile environment? James J. Casey: No, Your Honor. David H. Souter: Why not? James J. Casey: Because it-- David H. Souter: What could be more hostile than that? James J. Casey: --Because he... he... he has one... well, in terms of the hostile environment, Your Honor, the... the courts have routinely... the circuit courts of appeal have routinely held that a single incident-- David H. Souter: Oh, quite. But... but the... the point of the single incident cases, as I understand them, is that there's a certain amount of... of necessary rough give and take in life. And the fact that there may be one or two employees in a company who occasionally make a remark... the one-incident case to be literal about it... does not suffice to modify the entire environment to the point where a discrimination can be inferred. But when one is talking about a supervisor, with the undoubted authority, in effect, to... to change the entire future of a given employee in that company, and that supervisor is explicit about it, nothing is left to chance, it seems to me that the... that the... the very power of the employer, the explicitness of what he does in... in this hypothetical should... should be enough, whereas one remark from a fellow employee wouldn't be enough. James J. Casey: --For liability... Your Honor, for liability, for an employer to attach in an hostile work environment, there has to be some... some indication to the employer that he knew... the employer knew or should have known. David H. Souter: But why... why not? Why, if... if in a series of cases the employer is going to be liable because the supervisor has been authorized, has been given a particular power and repeatedly abuses it, so that the abuse is clear, why shouldn't the employer, by a parity of reasoning, be liable when the abuse is equally clear when it is made very explicitly clear in... in one instance? James J. Casey: Because, Your Honor, in... in the... in the example... or the hypothetical that Your Honor posits, the supervisor has done nothing but speak words. He has not exer-- David H. Souter: Well, but he has done nothing in Justice O'Connor's hypo except speak words, except that he has done so somewhat less explicitly than he does in my case. So it may take a while to make it very clear that he means what he says. But in... in my case, the... the same inference can be drawn after the first instance. James J. Casey: --On the contrary, Your Honor, in Justice O'Connor's hypothetical, as I understood it, the... the supervisor repeatedly ordered the employee off to a isolated place where... where he could then take advantage of the employee. And... and it's the acting-- Ruth Bader Ginsburg: But she resisted. She resisted every time. It was awful for her, but she resisted. What... where do you put that case? I assume that if she succumbs in order to get the promotion, then you would say we don't have to prove negligence; is that correct? James J. Casey: --Your Honor, in a... in a submission case, I would... I would argue that, in a submission case, that if the employee reasonably believed that submission was a term and condition of employment, I believe then there would be strict liability... if she reasonably believed-- Ruth Bader Ginsburg: Okay. Now she reasonably... she reasonably believes that it's going to be very hard to put up resistance, but she's going to do it. She reasonably believes that she's got to resist this. And she does. And in those two cases, as far as the employer is concerned, there's no more likelihood that the employer will know about one situation than the other, is there? But you told me that if she succumbs, then there's liability. And if she doesn't, then what? James J. Casey: --In... if I can modify my... not modify my answer, but if I can clarify my answer on... on the submission. I do not believe in a case such as we have here, where there is a clear policy against sexual harassment, where there are avenues of redress which... which... in which you can avoid the complaint... complaining through the offending supervisor, as is this case here, where... that no employee then could reasonably believe what-- Ruth Bader Ginsburg: Well, that's... that would all be for a trial if there were a trial. But this... that's... this was decided only on summary judgment. James J. Casey: --On summary judgment. That's correct. Ruth Bader Ginsburg: So we don't know anything about what employees... we know that there was a policy. We don't know anything about how effective it was, how other employees reacted to it. So all we know at this stage in the game is that there was a policy. James J. Casey: We... we know... we know something in addition to that, Your Honor. We know, one, there was a policy. We know, two, in... in... in following this Court's guidance in Meritor, that there were avenues of redress in which one could avoid the... the... the offending supervisor. And, three, we know that... that the Respondent in this case was aware of the policy, understood the policy, and intentionally... intentionally did not follow the policy. And in fact stated the reason she didn't tell her-- Ruth Bader Ginsburg: We... we know... we know two things: That there was a policy and she didn't use it. We don't know any... anything about why. It may be that she thought it would... was a totally ineffective policy. But we really can't go beyond the summary judgment record. And we don't know any of these things, other than the fact that there was a policy and the fact that she didn't use it. James J. Casey: --Your... Your Honor, and... and I'm not going beyond the summary judgment record. What she... what she testified to... and it... and it is part of the summary judgment record... what she testified to is that she intentionally did not report it to her supervisor because, and I quote, it would be his duty to report it. And we do know that. And we do-- Ruth Bader Ginsburg: Where is that? What are you referring to? What testimony? James J. Casey: --That's in the record, Your Honor, at... I will find it, Your Honor. But it is... it is clearly in the record, and it's quoted directly in our brief. Ruth Bader Ginsburg: What... what is the relationship between your reasonably believe standard and the standard either of employer negligence or, for that matter, employer strict liability? James J. Casey: I... I don't understand. Ruth Bader Ginsburg: Well, I understood you to say a moment ago, in response to Justice Ginsburg's variant on the question, that if the employee reasonably believed that he could carry out... that the employer could carry out threats, even though those threats had not at that point been carried out, that there would be a hostile environment. And I... I was going to say, what is the relationship between that standard and the standard of employer negligence? James J. Casey: Your Honor, I... I... perhaps I misspoke. What I said was if... what I meant was... if an employee reasonably believed that... that submission was a term and condition of employment and she did submit, and the relief was reasonable, then I believe there is... there would be a... an adverse tangible job consequence. Ruth Bader Ginsburg: But... but if she reasonably believed it and did not submit, even on a claim of hostile work environment, there would be no liability, period? There could be no liability; is that your position? James J. Casey: In the hostile work environment, unless there... there is some evidence that the employer knew or should have known. John Paul Stevens: May I ask a question on that point? Supposing in the Chicago office you had conditions that clearly amounted to a hostile work environment, much... much worse facts than you have here. Everybody is being very, very rude to the female employees. And the only person outside of that office who knows about it is the vice president in charge of sales in New York... this particular individual. Would that be notice to the company of the hostile work environment? James J. Casey: Your Honor, I think in this... in the... in the situation you describe-- John Paul Stevens: Yes. James J. Casey: --there would be... there would be the standard of the company should have known. If it is as open and notorious as Your Honor describes. John Paul Stevens: Well, but it's open only in Chicago. And the only higher executive who knows about it is this particular individual, Mr. Slowik. Would that be sufficient notice to the company? James J. Casey: And he was responsible for this office? John Paul Stevens: Well, he had exactly the duties he has in this case. He's the vice president in charge of the sales in a large part of the country. Is that-- James J. Casey: I believe... I believe, Your Honor, if he was aware of open-- John Paul Stevens: --Yes, he's aware of it. That's my-- James J. Casey: --and... open and notorious conduct, of... of a hostile environment for female employees, it would be notice to the company. I think so. Just-- John Paul Stevens: --Well, then why isn't it notice to the company when he does it himself? James J. Casey: --Because, Your Honor, he did not fulfill the threat. He... he simply implied a threat, never carried it out. She in fact got promoted. John Paul Stevens: What if he told the president about... about the case, the president of the company. Would she then have... have a case? He told the president everything that she's put in the record here. James J. Casey: I'm missing the-- John Paul Stevens: The question... part of the question is, A, is there a violation? And, B, if so, is the company responsible for it? And I'm trying to assume that... that what he said would be a violation. Maybe that's where we... we part company. I don't know. But if the things that happened here were not only known by Mr. Slowik, but by the board of directors of the company, would there be liability? James J. Casey: --I do not believe so. I do not believe this is a hos... I do not be-- John Paul Stevens: So... so it isn't a question of whether we hold the company responsible. The question, in your view, is whether there was a violation at all? James J. Casey: --Well, if there's no liability, there's no... there's no violation. John Paul Stevens: Right. I thought you said earlier that... that, in your view, the acts were not repeated enough to constitute a hostile work environment. Was I wrong about that? James J. Casey: No, that's correct. John Paul Stevens: Yes. James J. Casey: And... and... and I don't-- Antonin Scalia: So that's the reason, if there were notice to the company-- James J. Casey: --and I don't think it rises to a hostile work environment. Antonin Scalia: --Can... can I ask you something about Justice O'Connor's hypothetical? James J. Casey: Yes, certainly. Antonin Scalia: You said that where... where the company officer takes the woman aside to an isolated place where he can make his sexual advances, that that would... that would be automatic liability on the part of the employer? James J. Casey: Your Honor-- Antonin Scalia: That would be a quid pro quo case? Is that why... why... because he's using his power as an officer to take her aside to the-- James J. Casey: --To order her to isolated parts of the... of the factory. Antonin Scalia: --What would you call that? Would you call that quid pro quo? James J. Casey: I would... in... in that circumstance, Your Honor, I would say that is quid pro quo, because... because he is exercising the... precisely the authority-- Antonin Scalia: Well, what if he tells her to come over to the water cooler? I mean, boy, you've expanded quid pro quo an enormous amount if you accept that. What if he tells her, you know, Come on over to the water cooler, I want to tell you something, and she goes over to the water cooler? James J. Casey: --I don't... I'm making the distinction, Your Honor. I interpreted Justice O'Connor's question-- Antonin Scalia: I had thought the quid pro quo was just those... those company actions which, in themselves, amount to an alteration of the terms and conditions of employment, like firing, promotion and so forth. James J. Casey: --I think-- Antonin Scalia: But you're willing to say quid pro quo is... is what, any... any action that... that an officer of the company has authority to tell somebody to do? James J. Casey: --No. I think, Your... I think, Your Honor, that isolation and constant isolation on orders of a supervisor is... is an adverse tangible job consequence. Antonin Scalia: Well, it isn't constant isolation, as I understood her hypothetical. He just took her aside to an isolated place to make his proposition. I mean if he assigned her to a... you know, to Timbuktu or something, yes, then-- James J. Casey: Justice-- Antonin Scalia: --then I could see a quid pro quo. James J. Casey: --Justice-- Antonin Scalia: But he just pulled her aside to make his proposition. James J. Casey: --Justice O'Connor's question was repeatedly... repeatedly ordered her to an isolated part of the factory so he could do that. Antonin Scalia: Oh, I see. So she's working... you... you understood her question to mean that she's working in an isolated part of the factory? James J. Casey: That's correct. Antonin Scalia: All by herself there? James J. Casey: That's correct. That's how... exactly how I interpreted it. Sandra Day O'Connor: Mr. Casey-- --Well, that wasn't the question. [Laughter] But you're altering it to suit your needs now. Mr. Casey, would you explain this to me? In the... I take it it's common ground here with you and everybody else that in a hostile environment claim there does not have to be any change in conditions beyond those conditions which are constituted by the hostility of the environment? James J. Casey: That is correct. David H. Souter: Okay. Now-- James J. Casey: Environmental hostility, correct. David H. Souter: --Right. If the environmental hostility is created by threats of personnel action, threats of a quid pro quo nature in other words, which are not carried out, why isn't the hostility of the environment just as clear, even though there are no other changes in condition, as... as may be the case in a non-unfulfilled quid pro quo hostile environment case? James J. Casey: It... Justice Souter, it may well be a hostile environment. And if it is a hostile environment, then... then we look at it as a... as a standard of negligence. Did the employer know or should the employer have known? David H. Souter: Well, but I'm leaving aside the... and maybe... maybe I'm isolating the question too much for... for... for your tastes... but I'm... I'm suggesting for a minute let's leave aside the standard for imputing liability to the employer. Let's just look at whether there's been a violation. And... and forget whether it's negligence or whether it's strict liability for the moment. And I take it your answer is yes, there can be a hostile environment by unfulfilled quid pro quo kinds of threats? James J. Casey: That's correct. David H. Souter: And your... your only point of difference then, I guess, with your opponents on that isolated point is that you say there's got to be more than one threat, just as there has got to be more than one hostile remark, if you will, in order to create the environment? James J. Casey: Correct. David H. Souter: One... one instance-- James J. Casey: One instance does not create a hostile environment. David H. Souter: --And you're saying that the fact that the hostile environment and the unfulfilled quid pro quo situation is created by a supervisor, with more authority than let's say just a fellow employee, that doesn't make any difference in the calculus of how many instances there have got to be before we can conclude that the environment has in fact become hostile; you're saying that really is not relevant? James J. Casey: I... I don't... I do not believe that to be relevant. William H. Rehnquist: Okay. Mr. Casey, you... you formulated this question, a claim of quid pro quo sexual harassment. Now, what... what is your understanding of the term "quid pro quo sexual harassment"? James J. Casey: My understanding, Your Honor, is... is this for that. You give me something, and I will do something either negatively or positively to you. There's a quid and a quo. And... and I believe-- Antonin Scalia: Simply where it's proposed or where it happens? James J. Casey: --Where it happens. Antonin Scalia: Where it happens? James J. Casey: Correct. William H. Rehnquist: You mean-- --Where it happens? James J. Casey: --where... where... where something is proposed by... by the... by the supervisor, but not necessarily acquiesced in by the employee, I take it? Sleep with me or I won't promote you, I mean, is the classic example that we all use. William H. Rehnquist: Yes. But... and-- James J. Casey: And I don't promote you. Antonin Scalia: --Yes. But it's curious, because you say that where... where the woman says, Okay, I will sleep with you, and he does promote her, so that there is a quid and there is quo for the quid, that is not quid pro quo. But where she refuses, she does not give the quid, and therefore does not get the quo, that is quid pro quo? [Laughter] James J. Casey: Your Honor, if... if he gets-- Antonin Scalia: It's an interesting theory. James J. Casey: --No... no, it's... but that's... but that's not precisely the theory. The theory is if... if she gets the promotion for having slept with him, she... she got something she's not otherwise entitled to. And I think that is... that is discrimination. And I think that is a violation if she actually didn't get the promotion. Stephen G. Breyer: And in the case where it is... in the case where it is the violation, he makes the proposition, it's refused, and she is not promoted, and the person who did it is the vice president of the company, why doesn't the company know about it? He knows about it. He's the vice president. He is the company. So why isn't the company the actor? Why does he-- James J. Casey: Because he... he... excuse me, I didn't mean to interrupt you... because he didn't act with the authority given him by the employer. Stephen G. Breyer: --All right. So then you're just using the same arguments that were in this other case. There's nothing new here? I guess it puzzles me that-- --Is that right? --if she does acquiesce, the law gives her a remedy. If she doesn't, it doesn't give her a remedy. So the law favors submission, as I understand it. James J. Casey: No, I don't... I don't think that's actually the case, Your Honor. I don't think it's safer for submission in... in any event. I don't think there's a-- John Paul Stevens: But if we're talking-- --I'm assuming he's bluffing in both cases. In both cases he's bluffing. James J. Casey: --If he's bluffing in both cases and she had no reasonable belief, I think there's no violation. Stephen G. Breyer: But in your view, there... in your view... this is what I was trying to get at... there is nothing in this case in respect to authority, apparent authority, agency... all the things that we discussed in previous cases that were recently argue... in that area, there is nothing different here; the only thing that is different in this case is whether or not the quid pro quo is in fact substantively irrespective, is that right? James J. Casey: In the face... in the face of a clear policy in the company, she could not reasonably believe that he had the authority to do... there is no apparent authority-- Stephen G. Breyer: I mean, but I know that you... I'm trying to figure out, is there anything in the question that we are being asked to decide that is different from the question in the two cases that were recently argued here? James J. Casey: --Absolutely. Stephen G. Breyer: And there is one thing that seemed different. We're asked... which is what I thought the question meant... whether there is a substantive violation of the statute, nothing to do with vicarious liability. James J. Casey: The-- Stephen G. Breyer: And now, other than that, is there anything different? James J. Casey: --Yes, Your Honor, the difference-- Stephen G. Breyer: And what is that? James J. Casey: --The difference in this case is the standard of liability to be applied. Is it strict liability or is it a negligence issue? Stephen G. Breyer: So if I believe it's strict liability, there's nothing different? If I-- James J. Casey: Other than standard liability, that's correct. William H. Rehnquist: --But that... that's what we didn't grant certiorari on. That's the second question. James J. Casey: Your Honor, I'm... I'm tying the strict liability to the quid pro quo. If it is a quid pro quo case, this for that, I believe the... the cases are... are quite uniform that there is strict liability. And in-- Ruth Bader Ginsburg: Mr. Casey, how did all this come up? It really is mystifying, with a statute that doesn't use any of these terms. It just says no... thou shall not discriminate in hiring, firing or terms and conditions of employment. James J. Casey: --Justice, it came up in the context, really, of the other violations of Title VII, in the race cases. For example, the company is automatically liable if... if the person is fired or demoted or not promoted because of his race. And-- Anthony M. Kennedy: Why... why should that be? Why should there be a distinction between quid pro quo and hostile work environment? What is the law trying to achieve by adopting that category... by adopting that dichotomy? James J. Casey: --Well, this Court has... has instructed us, in Meritor, that we should look to agency principles. And... and when one is acting on behalf of the employer and using his authority, that is in effect the employer acting. When... when there is simply a hostile environment, there... the standard for agency should be "known" or "should have known". William H. Rehnquist: Thank you, Mr. Casey. Mr. Rossiello, we'll hear from you. Ernest T. Rossiello: Mr. Chief Justice, and may it please the Court: The express language of Title VII of the Civil Rights Act of 1964 specifies that three elements, and three elements only, must be demonstrated to establish a violation of that statute. There must first be employer action; secondly, posited upon a discriminatory basis; and, third, the discriminatory conduct must alter the terms and conditions of employment. The only issue for this Court to decide is whether or not Mr. Slowik's conduct in this case was employer action within the meaning of 42 U.S.C. 2000e-2 (a)(1). Sandra Day O'Connor: Mr. Rossiello-- --Well, why does quid... I'm sorry, go ahead. I'd like to ask you, in... in a situation like this, where we take it that the supervisor doesn't follow through on any threat, actual or implied, of failure to promote or something, some employment action, where the employer does not follow through on that, the harm to the employee seems to be very much the same as that under hostile environment claims. Ernest T. Rossiello: That's correct. Sandra Day O'Connor: I mean, I... I don't see a lot of difference here than there would be to simply a hostile environment situation, where... where the threat is... is not carried out. Ernest T. Rossiello: Well, the harm could or might be the same. For purposes of damage... for purposes of damages or the harm inflicted, it could be the same for hostile work environment. Sandra Day O'Connor: Well, I... I just don't see much difference now. And in that regard, what role does the existence of an employer policy and method for handling complaints of this type play? Does it go to the reasonableness of the employee's belief or does it go to the amount of damages if there's liability? What role does that play? Ernest T. Rossiello: It goes to the amount of damages. The existence of a policy has little or no effect on the liability issue. In this particular case, the policy we're talking about is a single, flimsy sentence, buried amid two very brief paragraphs-- Sandra Day O'Connor: Well, let's suppose it's a fabulous policy and very effective. Ernest T. Rossiello: --If we can find-- Sandra Day O'Connor: Now, what role does it play? Ernest T. Rossiello: --Excuse me? Sandra Day O'Connor: What role should it play, if it's a perfect policy? Ernest T. Rossiello: Little to none on the liability issue. Because the express language of Title VII does not require that the plaintiff follow a policy or complain to the employer before it goes to the EEOC-- Sandra Day O'Connor: Well, but might it go to the reasonableness of the employee's understanding when some comment is made? I mean if she knows perfectly well, look, this company has a... a good policy, and if I say something higher up the ladder, it's going to be taken care of. Then is it reasonable to... for her to believe that there is some serious threat out there? Ernest T. Rossiello: --The short answer to that is yes. The existence of a policy does affect the reasonableness of the plaintiff's conduct. Most often that would be in a hostile work environment-type case. In a quid pro quo-type case-- Sandra Day O'Connor: Well, but we've already explored the possibility that this is very much like hostile environment if the threat isn't carried out. You're... you're back to hostile environment. Well, it's sort of a hybrid. If-- --Well, Mr. Rossiello, a hybrid of what? Ernest T. Rossiello: --Well, some case... if you look at Judge Wood's opinion, the first one, that was vacated in the Seventh Circuit, she seems to believe that quid pro quo sexual harassment also is a hostile work environment. William H. Rehnquist: Well, what's wrong with that belief? Ernest T. Rossiello: Nothing. I think it's... not... nothing at all. Antonin Scalia: Could I follow up on that? Ernest T. Rossiello: Sure. Antonin Scalia: You... you agree that where... where either she complies and... and the job action... threatened job action isn't taken or she doesn't comply and the job action still isn't taken, it's like hostile work environment. Isn't it also true that where she doesn't comply and the job action is taken... she's not given the promotion or she's fired... is anything added to the Title VII analysis by saying it was quid pro quo? That is to say, suppose the... the officer of the company, without making a quid pro quo proposition, you know, didn't say, you know, Unless you sleep with me, you won't get the promotion, but simply asked the woman to sleep with him, she didn't, and he fired her for that reason. Without having made any quid pro quo proposal, would... would the case come out any differently if that could be established than it would if he had made the proposal? In other words, isn't the... isn't the proposal simply evidence of the fact that the reason she was fired or the reason she didn't get the promotion was sexual discrimination? Ernest T. Rossiello: Yes. Antonin Scalia: Okay. Ernest T. Rossiello: Because... right. The... if the threat is discriminatory in nature and if it affects-- Antonin Scalia: You don't even need a threat. I mean if... if-- Ernest T. Rossiello: --You don't need much necessarily. Antonin Scalia: --if he just makes a sexual advancement, she doesn't comply, she is fired thereafter, and if you can show that the reason for the firing was that she was not compliant, you... you've established a case, haven't you? Ernest T. Rossiello: Yes, you have. Antonin Scalia: Whether there's been the threat or not. The threat only serves as evidence of the reason for the job action. Ernest T. Rossiello: Yes. David H. Souter: Okay. But in a... in a situation in... in which the threat is not carried out, then I take it quid pro quo... the quid pro quo distinction makes a difference in this sense... and tell me whether you think I'm right. As I understand the way we've been using the term, a quid pro quo threat is, by definition, a threat that only a supervisor can make, because only the supervisor has got the power to do whatever is threatened. Ernest T. Rossiello: Right. David H. Souter: I suppose that a supervisor's threat, simply because it is that of a supervisor, may have more force, may be more powerful in creating a hostile work environment, even if it's only made once, than would one off-color remark or one proposition by a fellow employee without such power. Do you agree that in the unfulfilled quid pro quo situation there might be that difference? Ernest T. Rossiello: Well-- David H. Souter: Which is essentially an evidentiary difference. Ernest T. Rossiello: --There is. It's a question of proof. Right. David H. Souter: Okay. Ernest T. Rossiello: We're only on summary judgment here. The District Court has-- Ruth Bader Ginsburg: With respect to that, if you've got a supervisor who just loves to... never makes kind of a thing, "If you don't, then I will. " but just likes to make the atmosphere fun for the guys and dreadful for the... for the women, doesn't ask for any favors, there's just all of these remarks, light touching, just makes it... do you remember way back in the beginning of the world, there was a case called Bundy, and there were secretaries who said, We don't want a promotion, and nobody is threatening to fire us, but this is awful to live under these conditions. So, Court, don't give us money, just tell them to stop. Now, where does that kind of case fit in this picture? Ernest T. Rossiello: --Well, that is discriminatory conduct within the meaning of Title VII. As both... both cases, Harris and Meritor, stated when the work environment is permeated with intimidation-- Ruth Bader Ginsburg: But nobody ever suggested in those days that there was something different between quid pro quo and a hostile environment and... and vicarious liability on the one hand versus knew or should have known on the other. It seemed to be all one... it was under Title VII and there was one standard. Ernest T. Rossiello: --Well, we believe there should be one standard. I mean, with all due respect, I think Meritor is a wonderful opinion, but I don't think the Court or the author of the opinion intended to wreak the havoc that it did when it used those words, "quid pro quo", and "hostile work environment", in that opinion. The circuit courts of appeals and the district courts have had a field day with those two expressions. Anthony M. Kennedy: Well, let me ask you this. Suppose it were a given... suppose we would hold that in a hostile work environment case there is liability only if the employer is negligent. Suppose that were our holding. Would the quid pro quo distinction then be important to you? [Laughter] Ernest T. Rossiello: Yes, it would be. [Laughter] Anthony M. Kennedy: And in fact, I noticed that in answering Justice O'Connor's question you said, but in a quid pro quo case. And now, see, you attack this distinction and yet you use it. Ernest T. Rossiello: Well, it's so hard to-- Anthony M. Kennedy: Or at least you want to hold it in reserve. Ernest T. Rossiello: --You see, it's so hard to avoid it. There is just such a large body of case law throwing these two terms around. Antonin Scalia: And we didn't start it, Mr. Rossiello, lest... lest silence indicate consent. [Laughter] When we used the... the expression in... in Meritor, we were referring to by... what was by then a well-established body of... of court of appeals law. I mean don't... don't put it on us. We were just-- Ernest T. Rossiello: All right. I promise not to. Stephen G. Breyer: I don't see why it's a problem. Why is it a problem, but for the circumstance that you have here, where there is a proposition that is refused and no punishment? In any other situation, isn't it perfectly useful, or is it? Ernest T. Rossiello: Well, it is... it is instructive. Stephen G. Breyer: Instructive. But I mean more, doesn't it happen, propositions, every day of the week? Ernest T. Rossiello: Yes. Stephen G. Breyer: And they're sometimes are followed by punishment. And they're also sometimes accepted and followed by the lack thereof. Ernest T. Rossiello: In many cases, yes. Stephen G. Breyer: So there is actually... but if there is... if... to go back to our case, where... where there's a proposition turned down and no punishment, if it were true in that subset, in that subset of quid pro quo, that it is not a violation unless it is a hostile work environment, which depends upon circumstance and a lot more than just the bare facts I stated, how can you win? Because what I'm interested in your answering is, in the opinions below, I have some kind of impression that you either waive that or they said that that isn't in the case or... what... can you explain to me what I'm... what... it may be a hostile work environment, but it requires further factual exploration, and there is a Seventh Circuit opinion that suggests this whole matter was waived or something. Ernest T. Rossiello: Right. Stephen G. Breyer: Could you respond to my... what I'm worried about? Ernest T. Rossiello: Yes... yes, I can. And that inquiry of Your Honor is treated at great length in our cross-petition for certiorari. By the time the Seventh Circuit got through its 203-page decision below, I think that hostile work environment claim got lost in the shuffle. We think there's enough in the record that we... it hasn't been waived. And if the Court-- Stephen G. Breyer: What are we supposed to do if... if... or what am I supposed to do if I thought that might still be there, in light of what the Seventh Circuit did hold, not what they should have hold... held? And... and in light of the fact that your cross-petition, I take it, is not before us? Ernest T. Rossiello: --No. Stephen G. Breyer: All right. So what are... what would I do in this case if I... on the assumption... I'm not saying I really think that... but on the assumptions that I gave you? Ernest T. Rossiello: Well, I would remand this case for reconsideration of the whole claim. [Laughter] Antonin Scalia: He should regret that we did not accept your cross-petition, I suppose. Ernest T. Rossiello: Well-- Antonin Scalia: We didn't accept it. I mean that's the fact. Ernest T. Rossiello: --Well, it's still pending. We have our foot in the door. Ruth Bader Ginsburg: Mr. Rossiello, as I understood what... what happened, was that you didn't surrender a hostile environment case, but you did surrender a simple negligence. So, in other words, what you said is hostile environment, quid pro... whatever you want to call it, there's vicarious liability here. So I think what the majority of the Seventh Circuit judges said you gave up was hostile environment, simple negligence, not that you gave up hostile environment and the standard is vicarious liability. Is that correct? Ernest T. Rossiello: Yes, I believe that's an accurate characterization. David H. Souter: So that in the next round of this... let's assume you win this round... in the next round, if it is determined that in fact when a supervisor is involved and the action involves a threat of using the authority that the supervisor has been given by the company, negligence is not required. A stricter standard of vicarious liability applies. Then you're home free? Ernest T. Rossiello: Yes. Just as Justice Breyer said a few minutes ago, you know, when this... this type of conduct is engaged in by a vice president, he is the company and the company is him. David H. Souter: Right. But the... the point that I was making is the only thing that you have conceded out is company liability on a negligence theory? Ernest T. Rossiello: For sure. David H. Souter: Yes, okay. Ernest T. Rossiello: If there are no more questions-- Antonin Scalia: Well, I don't... I just don't understand your response about his using authority that the company has given him. The company hasn't given him authority to... to make a sexual proposition to any of the employees, has it? Ernest T. Rossiello: --That's true, the company has not. Antonin Scalia: And I assume the company also hasn't given him authority to fire a woman for her failure to comply with his sexual proposition. Ernest T. Rossiello: No, absolutely not. That's why the cases in our brief, which are other types of Title VII cases, where-- Antonin Scalia: I mean-- Ernest T. Rossiello: --where a firing or discharge or a demotion or a pay... a pay differential is-- Antonin Scalia: --where it occurs, you can say the employer has acted. I don't care whether this officer was involved or not, the employer has acted, where the firing has occurred. But where the firing hasn't occurred, where there's been no employer action, I... I find it... I find it much more difficult to leap to employer responsibility on a theory that the supervisor was using authority employment... the employer gave him. The employer didn't give him any authority to fire somebody for failure to comply with his sexual advances. Ernest T. Rossiello: --Well, there's where you... we get into the hair splitting. That's very true. The employer did not give the authority to sexual harass. No employer does that as far as I know. In fact, in the face of an explicit policy against sexual harassment, this type of conduct still occurs. But where a supervisor, like in this case, Mr. Slowik... should I just finish? William H. Rehnquist: You can finish your answer briefly to Justice Scalia's question. Ernest T. Rossiello: All right. But where a supervisor uses the authority delegated in him in general to accomplish the sexual harassment, Title VII has been violated. Thank you very much. William H. Rehnquist: Thank you, Mr. Rossiello. Ms. Underwood, we'll hear from you. Barbara D. Underwood: Mr. Chief Justice, and may it please the Court: When a supervisor tells an employee she has to provide sexual favors in order to get a promotion, he is, at that moment, imposing a term or condition on her employment because of her sex, in violation of Title VII. That's true whether she complies or refuses. And if she refuses, whether she's punished immediately or has to suffer anxiety about the result. No matter how she responds, this supervisor has used the power of the employer-- Antonin Scalia: Even when the employer's policy, which the woman knew about, specifically prohibits this, how... how could you possibly say that the employer was... was changing her terms and conditions of employment? The... the supervisor was violating an employer policy that she knew about. Barbara D. Underwood: --Just as when a supervisor fires someone or demotes someone-- Anthony M. Kennedy: Yes, but in... but in... but in that instance, the... the company is acting... the company has acted. So it is within the scope of employment. But if it's just a threat, there's no action within the scope of employment for agency principles. Barbara D. Underwood: --Justice Kennedy, there is. The power to-- Anthony M. Kennedy: And we'll... we'll leave aside hostile environment and repeated acts and pervasive discrimination and so forth. Barbara D. Underwood: --The power to fire or to hire, to promote or demote, includes the power to state what the conditions are for doing that, to hold out threats and promises. In fact, that's the way that power is most commonly and effectively and predictably used in the management of a company. Antonin Scalia: Well, you could say that, but it's not true. In fact, that power does not reside in that officer. It has explicitly been taken away from him by the company. What more can the company do than to... you know, than to make that the company policy? Barbara D. Underwood: No, the company has given him the power to hire and fire, but not to do it for wrongful reasons. And just so, the company has given him the power to hold out the prospect of hiring and firing, promoting and demoting-- Anthony M. Kennedy: Well, but that's... that's-- Barbara D. Underwood: --but not to do it-- Anthony M. Kennedy: --But that's the difference. Suppose you have a model employer, with... with policies, with grievance procedures and so forth. Then you have a threat that is not carried out. Under agency principles, there's... the scope of employment doesn't come into play, because nothing has happened other than an environment, which we can take care of under a different analysis. Barbara D. Underwood: --Well, a great deal has happened. The employee has now been told that her work assignment and the conditions of her work are different and the terms on which she can get a promotion are different. Just-- William H. Rehnquist: But... but that's never... that's never... never carried out. And she knows that's not true. Yes. Barbara D. Underwood: --Well, she doesn't know it's not true. She knows that the company has stated that it's against company policy. That's not quite-- William H. Rehnquist: Well, then she also learns that it's not carried out because she doesn't acquiesce and nothing happens. Barbara D. Underwood: --If there are no damages, then that would be a matter for damages. In this case-- William H. Rehnquist: Well, but there... there... my sense of the thing, if... if that is true, is that there simply isn't any liability. Barbara D. Underwood: --Well, suppose the company fires somebody and she complains and she immediately is reinstated. There will still be a violation. William H. Rehnquist: Sure. Barbara D. Underwood: There will be minor damages. Stephen G. Breyer: And suppose they don't discharge the person. He says, I'll discharge you; are you discharged? Barbara D. Underwood: No. Stephen G. Breyer: He's wanting you to go collect unemployment insurance. I don't think they'll give it to you. Barbara D. Underwood: No, you're not discharged. Stephen G. Breyer: All right. And this doesn't penalize an attempt to discharge. Barbara D. Underwood: No, it doesn't. Stephen G. Breyer: All right. So it... it... if it's say you can't discharge, you can't hire, you can't discriminate on terms of employment. So why, if in fact you don't discharge the person but say you're going to but you don't, if that doesn't violate the statute, why would it violate it to say, I'm not going to give you a promotion, and then you do? Barbara D. Underwood: Well, this... this isn't just, I'm not going to give you a promotion. If it were just, I'm not going to give you a promotion-- Stephen G. Breyer: But suppose it is, I'm going to make you work in Timbuktu, or, I'm going to make you do some other thing terrible, but you don't. Barbara D. Underwood: --No, what... what distinguishes this is the... the coercive effect it has right now. I'm not going to give you a promotion because you're a woman, I would say, is... is not a... is not now changing the condition-- Stephen G. Breyer: But if it has... if it has... if it has the bad effect, if they do something bad, she's hurt. Barbara D. Underwood: --Right. Stephen G. Breyer: But you're saying the simple statement of saying it... so if you say something that never happens, because the person is a woman and it doesn't create a hostile environment, it still is actionable? Barbara D. Underwood: No, not if they say because she's a woman, because that isn't attempting to coerce her to do anything. There's nothing really she can do to stop being a woman. It's when the statement is, I won't promote you unless you do something. William H. Rehnquist: Ms. Underwood, supposing this supervisor had two employees, one a man and one a woman. And he says to the man, I can make your life a lot easier here if you let me... you let me use your beach place every weekend, and he says to the woman what was said here. Now, is a case of discrimination on the basis of sex made out there? Barbara D. Underwood: Well, if it's on the basis of using your beach place, then it's not on the basis of sex. William H. Rehnquist: Well, but he's... he's asking favors from both males and females. Barbara D. Underwood: Oh, I see. Well, I think that if he's asking female... favors from females on the basis of sex, then he is discriminating on the basis of sex against them. And he may also be engaging in other improper conduct with respect to other people. But I think the... the point-- Antonin Scalia: I see. So... so your answer might be different if he hadn't asked the male employee to lend him his beach place, but rather made a sexual overture to the male employee. Then he would have been making sexual overtures indiscriminately, and there would have been no sexual discrimination towards either party; is that your-- Barbara D. Underwood: --Well, that... that's the hardest case for the sex discrimination proposition. But-- Antonin Scalia: --Yes, it is. It's an impossible case, isn't it? Barbara D. Underwood: --Yes. [Laughter] David H. Souter: Ms. Underwood-- Barbara D. Underwood: But... but... yes. David H. Souter: --No, finish... I thought you were finished. Go ahead. Barbara D. Underwood: No, I want... I wanted, in response to some of those questions, to suggest that, for instance, if an employer said to the women employees or to the black employees that you have to work twice as hard as the men do in order to keep your job or to get a promotion or you have to do twice as much work or you have to work twice as fast or you have to do the... the... you have to, in addition to doing all the other aspects of your job-- Anthony M. Kennedy: And... and then the next... and the next day, a new supervisor comes in and says, We're sorry about that; that's wrong. Was there a violation? They worked for 1 hour under the... under the employee who behaved wrongfully. Barbara D. Underwood: --There's a violation with de minimus consequences. You can always produce a trivial version of a violation. There was a violation. There have been cases in the lower courts where there was a remand to the district court for a factual inquiry to determine whether what happened was so trivial, so de minimus as not to-- Stephen G. Breyer: Is there any case in any area of the law... I'll focus on the word "discharge", because it clarifies it conceptually. I want to take out of your thought the problem of the bad environment. So we're not talking about a bad environment at all. Is there any case in labor law, law of contract? You know, there... there is lots and lots of law where it's unlawful civilly to discharge someone. And is there any instance where a person could recover where he wasn't discharged? It's somebody who said, I will discharge you, but he didn't. I... I can't-- Barbara D. Underwood: --Not... not if the only-- Stephen G. Breyer: --All right. Then-- Barbara D. Underwood: --there is not the case that to... that a discharge is equivalent to a promise to discharge. But Title VII prohibits more than discharges. Stephen G. Breyer: --Is there any case, then, under Title VII... well, but it's... you see, it's in... it's lined up certain things: hiring, discharge and discriminating in terms of conditions of employment. So the question would be the same for each. That is, where there was no discharge, where there was no hiring, where there was no discrimination in terms or conditions of employment, but simply a threat to make... to do those things that was not carried out. Now, is there any precedent that would make the threat in any of those areas equivalent to the reality? Barbara D. Underwood: Well, I would describe the threat... if... if you describe the threat as altering her job responsibilities, altering what she has been told she must do to get a promotion, then the answer is yes. But-- Ruth Bader Ginsburg: And can we tell from just the first threat... and this is the problem, Ms. Underwood, that I had understanding the government's position... there could be a threat and the company could have a very strong policy. So you really, looking at it as an observer, you can't tell whether it would be reasonable for the worker to believe that the threat is anything more than a... a slight of the kind that is... we... we all have to accept. So I can understand a series of threats as making for a hostile environment. But I don't understand just a single threat. And you seem to say that a single threat, whether carried out or not, it... it qualifies for liability. Barbara D. Underwood: --A genuine, credible threat, which could be communicated, depending on the circumstances of the particular case, by one, serious, credible statement by somebody who is known, for instance, to have carried out such threats in the past, notwithstanding the wonderful policy-- Ruth Bader Ginsburg: But suppose all you have is this... you have this vice president, who is a pest. And you have a strong policy. And you have only those two things. How do you... how do you know, when he makes his first threat? Barbara D. Underwood: --Well, I think you have an issue of fact about whether a genuine, credible threat, sufficient to support liability, has been made. I think that on this record, more was alleged than one statement. And sum... enough was alleged to resist summary judgment. What we have in this case, after all, is the initial statement, I can make life difficult for you; then, I'm reluctant to promote you; then, after she's promoted, I won't give you permission to do the... the job that you need to do for your customer unless you comply with my sexual demands. In each case, a coercive statement is made. Antonin Scalia: Why does the threat... why does the threat make a difference? In the example you gave earlier, about racial... racial discrimination in employment, why... why is it any worse... why does it affect the working conditions any more if the... if the officer of the company says, Because you're black, I'm going to make your work... unless you work twice as hard, unless you black employees work twice as hard, you're going to be fired... why is that any worse than... than the officer who says, Because you're black employees, I'm going to give you twice as much work? Now, there... there's-- Barbara D. Underwood: I... I... I-- Antonin Scalia: --there is no quid pro quo in the latter case. Barbara D. Underwood: --No, I think they're the same. Antonin Scalia: They're not saying, Unless you do this, I'll do that. They're saying-- Barbara D. Underwood: They are, in each case, imposing a new term or condition on employment by reason of race, in... in the hypotheticals that you've posed. Antonin Scalia: --Right. But the problem-- --So the threat makes no difference? Barbara D. Underwood: No, the threat... the threat can be the mechanism by which the new condition is imposed. And in this case, and in other sexual harassment cases, it sometimes is. But no, it's not the only way a new term or condition can be imposed on someone's employment. John Paul Stevens: What you're saying is-- --But you're saying it's a term or condition even if the person is bluffing all the way through? You're saying it's still a term or condition? Barbara D. Underwood: I'm saying it's a term or condition if it is-- John Paul Stevens: Even... even... even if the... if the supervisor says, You're going to have to work twice as hard because you're a woman, and she doesn't work twice as hard and nothing happens, he was bluffing all along, that's still a violation as soon as he said it? Barbara D. Underwood: --Well, if he says it in a... in a sufficiently credible manner, so that she now... and everyone... and other people in the work place to whom it's said... anybody to whom it's said understands that to be a new term of employment under which-- Ruth Bader Ginsburg: But how do you judge that just on the basis of the threat alone? I mean, we... and let me ask you how you factor in the existence of a policy that this kind of thing shouldn't happen and this is how you complain when it does? Barbara D. Underwood: --Well, in general, it seems to me a good complaint procedure will serve many functions. One is that it will prevent some violations. Another is that prompt reporting will tend to corroborate the plaintiff, and failure to use it will tend to raise questions about her credibility. Anthony M. Kennedy: But... but strict liability, which is what you're arguing for, will not encourage that. Strict liability for a hostile work environment, say, or for a quid pro quo, say, if we were going to make a distinction, does... does not encourage use of grievance procedures. It encourages laying back and filing a lawsuit. Barbara D. Underwood: Well, I don't... it's not so clear that that's so. Because one consequence of laying back and filing a lawsuit is to minimize, to reduce the credibility of the plaintiff who says that something happened but never complained to anybody about it. David H. Souter: It certainly will go to damages, won't it? Barbara D. Underwood: It would go absolutely to-- David H. Souter: All right. Let me... let me... let me ask you this question, which... which I think is behind some of the things that are bothering us. Take an easy case in which there's a company policy, but there have been 25 threats from the... from the particular supervisor. And he had done everything that... that he could reasonably do to make it clear that he's going to follow through on the threat, but the moment for doing so has not yet occurred. The... the next job evaluation has not come up yet. The reason, if I understand your argument, that those threats... repeatedly, et cetera... changed the terms and conditions of employment is the same reason that we say other actions, perhaps even of co-employees, create hostile environments. It does create a hostile environment, and the hostility is in fact a change of condition. Is that your argument? Barbara D. Underwood: --Well, it is similar to the hostile environment created by coworkers in the way that you suggest. The difference is that when hostile environment is created by coworkers, there is an issue about whether the company is properly responsible, because-- David H. Souter: Okay. But leave... leave aside the question of what the standard of imputed liability is going to be. Just go the question of violation. And I take it on the question of violation, the two... the two instances are identical in your analysis? There are evidentiary differences, but conceptually they're identical; is that correct? Barbara D. Underwood: --The harm... yes, the harm that's caused is caused in the same way. I see the light. William H. Rehnquist: Thank you, Mr. Underwood. The case... the case is submitted.

Earl Warren: This case is number 574, United States versus the Estate of Joseph P. Grace, deceased, et al. Mr. Solicitor General. Erwin N. Griswold: Mr. Chief Justice and may it please Court. This is an estate tax case which comes here from the Court of Claims. Now, before starting to discuss the merits of the case, I would point out that the respondent has raised a question of jurisdiction of the Court. It is discussed in the reply memorandum which we filed in connection with our petition for certiorari and I want to discuss it now very briefly only to make a claim that I do not think that there is appropriately a jurisdictional question here. It starts out I think -- the way it starts out can best be seen by looking first at page 123 of the record where the Court of Claims on April 19, -- April 18 said upon the foregoing findings of facts which are made a part of the judgment herein, the Court concludes as a matter of law that the plaintiffs are entitled to recover and judgment is entered to that effect. The amount of recovery, will be determined pursuant to Rule 47 (c) and I would also point out that there is on page 2 of the record a pasted in correction of the record because the respondents felt that the record is it had been submitted was not accurate and that shows April 19 judgment for plaintiff with the amount of recovery to be determined by further proceedings. And then there was a stipulation and the final order of the Court appears at page 125 of the record. It is therefore ordered that judgment be and the same is entered for the plaintiffs in the sum of $419,221.05 together with interest thereon from July 14, 1954 as provided by law and that was entered on June 28th. The Government's position for certiorari was filed on September 26th which was within the 90 days. We believe that this question has been several times passed upon by this Court and perhaps most clearly and effectively in connection with the case of United States against Bianchi and Company where there is nothing in the opinion but were substantially the same question was raised in opposition to the Government's petition. The Government responded on the jurisdictional ground. The Court granted the petition and decided the case on the merits. Now, with respect to the merits of this case, it is a question of the taxability of one of two reciprocal trust created by a husband and wife within 15 days of each other at the close of 1931. The question involving reciprocal trust was one which people regarded as subtle and nearly 30 years ago, by an opinion of the Second Circuit Court of Appeals in Lehman against the Commissioner, an opinion by Judge Patterson which was concurred in by Judge Learned Hand and Judge Chase a petition for certiorari was filed and this Court denied certiorari and stated the thing as followed after that case is I think exemplified by the title of an article which is cited in our brief and was published in 1948, Colgan and Molloy, “Converse Trusts – The Rise and Fall of a Tax Avoidance Device.” I think it was Lord McNaughton who said that it's one thing to put Shelly's case in a nutshell and another thing to keep it there and this case illustrates the fact that it's one thing to get in the state tax point decided and another thing to keep it decided. Now, what then are the facts of this case? The case as I have said comes from the Court of Claims and the findings of fact if the Court of Claims begins at page 87 of the record. They show in substance in effect that Joseph P. Grace and Janet Grace were husband and wife that they lived happily together, that the husband was quite wealthy and frequently made gifts to his wife from time to time after he returned property which he had given to her which she always did and on page 88 of the record, we have finding five the decedent exercised supervision and control over and he made the decisions that were involved in the management of the business affairs of the family. And then the last sentence in that paragraph, when the decedent decided that some formal action by Janet Grace was required in connection with the management or disposition of a piece of property or a financial interest that was in her ownership, the decedent customarily would have the appropriate instrument for his wife's signature and with then ever execute such instrument. In the latter part of 1931, Mr. Grace became concerned of some indication that there were suggestions to him of ways to minimize taxes at least gift taxes which he thought would become effective and in 1932 as they did in fact become effective and on December 15, 1931, Mr. Grace created a trust, the essential terms of which are set forth on pages 92 to 94 of the record in the Court's findings. They provided that certain property was transferred to trustees upon trust for his wife for life with remainder as she might by will of point with power in the trustees to convey the principle to her and with gifts in default of appointment to his heirs. And then the finding show on page 98 to 100 that 15 days later on December 30, 1931 Mrs. Grace executed a trust instrument which was essentially identical except reciprocal, that is it was a trust by which she transferred certain property including the family residence to trustees upon trust for her husband for life with power in the trustees to convey the principle to him with remainder subject to his appointment and give in default of appointment to her heirs. Mrs. Grace died in the 1930s and Mr. Grace lived until 1951. When Mr. Grace died, the Government contended pursuant to the Lehman case that the trust which she had created was one which should be included in his gross estate as a trust in which he had reserved a life estate. The trust was of course formally created by her. It provided for a life estate in him. The estate paid the tax pursuant to the demand of the Government. Claims for refund were filed when they were not acted on within the six months that this suit was brought in the Court of Claims. The difficulty arises I think largely from the fact that in the Lehman case, the four trusts were created by two brothers, two each for the other as the result of an agreement between them. There is as a consequence some talk in the Lehman opinion to the effect that one trust was created in consideration of the other that there is a more talk as there is in page 27 of the respondent's brief where there is an extensive quotation from the Lehman opinion where there is more talk of how the decedent by transfer of his share to his brother caused the brother to make a transfer of property in trust and could there be a clearer case than this one that the decedent caused his wife Janet to make this transfer. He drew up the instruments. He made the plan. The Court of Claims has found the final finding on page 122 and 123 of the record. The Joseph Grace trust and the Janet Grace trust were created by or at the instigation of Joseph P. Grace as parts of what was essentially a single transaction. Speaker: Would the property, Mr. Solicitor General, be subject of her trust, her own property or having other source? Erwin N. Griswold: It was at that time, her own property. It -- it had come I think in large part or entirely originally from him. Speaker: Does anything turn on that? Erwin N. Griswold: I do not believe so Mr. Justice. Perhaps something could have been made to turn on at an earlier stage of the case but no intention has been made that this was anything other than her property which she transferred in trust for him in connection with or almost contemporaneously with a transfer of property which she made in trust for her. Now, the court below seized on this concept of consideration as some of the other courts have following the Lehman case and the respondent basis his whole argument on it. If I am caught by the consideration argument, my path may be somewhat difficult though I do not think that even then it is hopeless for consideration must be interpreted in the later the actual facts of the case. Well, I don't think the question in this case ought to be made to turn on any questions of whether there is a consideration in the contract sense of course there was no bargaining here. There was nothing of what the Fifth Circuit Court of Appeals in a recent decision involving a somewhat related question has referred to as treating (Inaudible). This was a question of mutual gifts not of bargain at arm's length. These spouses did not operate on that basis as most spouses do not sort of a divorce settlement and here there was never a divorce and no property settlement of that kind. As the Court of Claims has found these two trusts were created as part of a single plan which was devised and actuated by Mr. Grace. In the Court of Claims, there is a dissenting opinion by Judge Davis who deals extensively with this problem. He uses a good many other words page 75 of the record interconnected, page 76 mutuality further down on the page related connected and interdependent, page 78 he refers to –- well it's on page 80, he refers to cross trusts are seen as interdependent. Page 84 he refers to the true reciprocity and interdependence and says if the cross trust arrangement was mutual and interdependent, there is such a transfer and on page 85 he refers to the crossing was not haphazard but part of a single interdependent transaction. Reciprocal trusts are in fact outside the direct language of the statute but the Court in the Lehman case and in many other cases have uncrossed the trust relying on the fundamental rule repeatedly reaffirmed by this Court. Now, the tax consequences flow from the economic substance and effect of a transaction and not its form. This is rather like a converse of the Gregory situation. There the transaction came within the literal language of the statute but this Court held that what was done was a mere device and not within the substance or the purpose of the statute. This recalls other expression of this Court at this period in Barnette and Wells, the Court through Mr. Justice Cardozo referred to the record of the Government's endeavor to keep pace with the fertility of invention whereby taxpayers had contrived to keep the larger benefits of ownership and be relieved from the attended burdens and shortly thereafter in Griffith against Commissioner, the Court referred to a lawyer's ingenuity devised a technically elegant arrangement whereby an intricate outward appearance was given in that case to make the thing look to be sale rather than the payment of a dividend. Our submission is that the existence of consideration, the existence of a bargain for quid pro quo is not the touchstone of the Lehman case but it is simply a question of whether there are mutual gifts, whether the consequence of the transaction as it was carried out is essentially the same as it would be if Mr. Grace had created a trust for himself and Mrs. Grace had created a trust for herself and this construction of the reciprocal trust situation has been confirmed by Congress. This was in the Technical Changes Act of 1949 following this Court's decision in the Church and Spiegel cases. Congress then provided for tax free release of powers reserved in reciprocal trusts, of powers reserved on reciprocal trusts, effective until December 31, 1950, that was a little over a year after the statute was passed. This did not provide for tax free release of retained life estates or reciprocal trust estates unless the trusts had been irrevocably established before March 3, 1931 and that would not apply in this case because the trusts were established in December 1931. In connection with this 1949 statute, the committee reports are explicit. The Senate Report which is essentially the same as the House Report is set out in page 23 of our brief. Prior to 1940, the Senate Report says certain reciprocal trusts were established with the apparent intent of minimizing estate taxes by what were then considered effective means and going to the end of that paragraph, by this reciprocal device it was thought that two persons could transfer property to their heirs without diminishing effective control during life but still paying the gift tax rather than the estate tax. And then the last paragraph on that page, however, in 1940, in Lehman against Commissioner, the Circuit Court of Appeals for the Second Circuit held that where trusts were found to have been created each in consideration of the other, the nominal grantors are to be interchanged for tax purposes and the Court -- the Congress went on to provide that there should be a limited period when persons who in the sense had been caught by that could release powers but made no provision for releasing life estate or transferring life estates in reciprocal trusts unless the life estate has been created before March 3, 1931 which was the date of the statute which Congress passed explicitly making taxable the reservation of a life estate. Now, there is no reference to consideration in these committee reports or to a bargain for or arm's length transaction. There is the simple factual statement an individual might establish a trust at the same time or a short time after the husband set up the trust, his wife would also establish a trust and that is of course precisely what we have involved here. A good deal was made in the opinion of the Court of Claims out of the fact that it was perfectly obvious that Mrs. Grace had no motivation here except to be a good wife to her husband and since it appeared that Mrs. Grace was not trying to save taxes had no conscious motivation of an effort to save taxes the Court of Claims felt that the trust could not come with the reciprocal trust rule but we submit that the subjective facts that motivated Mrs. Grace or Mr. Grace have no pertinence. They were not bargaining, they were not purchasing, it's obvious that Mrs. Grace's only motivation was to do what her husband wanted her to do which she did promptly and cheerfully without harm to herself as was always the case. All of the motivation, all of the decision came from Mr. Grace. These were not bargain for transfers but they were planned transfers, mutual gifts, artfully contrived part of a single transaction, obviously with some tax motivation to get in ahead of the gift tax which was successfully accomplished. Byron R. White: But which Mr. Solicitor General, which trust is included in the decedent's estate, the one he created or the one that's created for him? Erwin N. Griswold: No, Mr. Justice White, the one Mrs. Grace created is the one which is included in his estate. Byron R. White: So he is treated as the settlor of her trust. Erwin N. Griswold: He is treated as the settlor of the trust which she signed which transferred property upon trust for him for life. Byron R. White: And it's the value of that property. Erwin N. Griswold: It's the value of that property which is included here. These trusts were planned by Mr. Grace together. They were executed within a span of 15 days. They were virtually identical in terms. They were executed in accordance with the plan of the decedent and were parts of what was essentially a single transaction. On this record, it is plain that these trusts were imminently connected in their inception and that is enough to invoke the rule of the Lehman case as Congress has confirmed. We submit that the judgment of the Court of Claim should be reversed. Earl Warren: Mr. Downard. William S. Downard: Mr. Chief Justice and may it please Court. Section 811 (c) (1) (b) of the 1939 Internal Revenue Code under which the Government seeks to impose a tax in this case authorizes inclusion in the taxable estate of a decedent of property and I believe that the language of the statute is important in imposing a tax when it described the transaction to which the tax applies. It says to the property to the extent of any interest therein of which the decedent has made a transfer under which he has retained a life estate. Now, this law clearly permits and has always been held to permit any husband to place property in trust for his wife for life with remainder to their children and that trust would not be subject to estate tax on the death of the wife because she only had a life estate in it and it was not a retained life estate. The same is true of any wife. There is certainly no discrimination on account of sex on this statute. Any wife may create a trust for the benefit of her husband for life with remainder to their children and that trust is not taxable on the death of the life tenant. Now, here the Government is trying to tax a trust on the death of the life tenant to the life tenant's estate. It tries to justify that position by reliance on the Lehman case and the many other cases following and yet in the Lehman case which involved a clear case of this economic equivalence of the two trusts where two brothers that each had a half interest in certain securities, each transferred their half interest reportedly in trust for the other brother and his children and there was no way to tell which half interest went into each trust except that papers said so. Now, -- Speaker: What extent was there in amount in equivalence here, (Inaudible)? William S. Downard: I think that is the -- the critical thing in this case, Your Honor. There was none. Now, let us go into the actual facts of this case and how they will not tally with the Government's argument that substance must prevail over form. That's what we're asking the Court to do is to let substance prevail over form and the substance of these trusts was quite different. Now, the property that the wife transferred to the trust that the Government now seeks to include in the decedent's estate consisted of the family homestead which was a large 167-acre estate on Long Island that had a big expensive 65-room mansion on it. That property had originally been given to the wife back in 1911 and she had owned it for 20 years before she created this trust with it. In that trust with the homestead property she placed 40 shares of stock in a personal holding company which were calculated to be the amount of stock necessary to produce enough dividends to pay the local ad valorem taxes on the homestead property just as support for the homestead. So essentially, the nature of the trust that the wife created and that the Government now seeks to tax to the decedent's estate was purely noncommercial interest in a homestead and by virtue of a creation of that trust, the Court of Claims found that there was no change whatever in the possession, use or enjoyment of the property so that there was and that none was intended and in fact as noted in the Government's brief in the footnote, the decedent did immediately after the creation of this wife's trust exercise a power of appointment that he had to appoint it back to her for her life and specifically provided that she would then have the successive life estate in case he predeceased her. And so the net economic effect of this non-economic trust was really certainly nothing equivalent to the trust that the decedent created. Now, in the decedent's trust that he created 15 days earlier he transferred a variety of commercial investment properties held for a long term appreciation in value. There was a thousand acre track of land down in a remote section of Long Island and there was a stock of two real estate development corporations, and there was a one-fourth interest in a real estate development joint venture and there were sure a lot of pieces of real estate. Most of these properties have been inherited by the decedent but he transferred to that estate commercial investment properties that had a financial significance and certainly in as a result of the creation by his wife of this trust placing the homestead in trust as a device for preserving it and maintaining it for the family and their children, the decedent didn't get any sort of economic equivalence. In reality, nothing was taken away from Janet Grace and nothing was given to the decedent. He had always -- he had lived in that home for 20 years at the severance of his wife who owned it. He was going to live there the rest of his life no matter whether it was put in trust or not. And as far as any real substance and effect is concerned, the Janet Grace trust accomplished nothing that could not have been accomplished had she provided a testamentary life estate in her will for husband for life and then to the children. Had she done so, this decedent's estate would not be taxable on the expiration of his life estate, the statute doesn't so provide. It could have been done in perhaps a dozen different ways. It so happened that this decedent because he was a very trust-minded man, because he had created 26 trusts for his children in the 10 years before this, and he was convinced that trusts were a good way to do things, he happened to select this way of doing it, this trust instrument and it just happened that because he was creating this other financial trust for the security of his wife and children. At the same time, he used the same format trust instrument but the similarity informs of the trust instrument is purely a superficial matter of form and it seems to me paradoxical that the Solicitor General argues that substance must prevail over form and that we must give recognition to the economic substance without ever facing up to the fact of what the economic substance of these trusts really are. And in any real sense of economic substance, there simply was no equivalence between the two trusts that were created. No equivalence of even the same character of estates or economic significance of these estates that were created by these trusts. Speaker: And the problem of this kind, there isn't at the time of her death? William S. Downard: Your Honor, she died in 1937. The Lehman case was decided in 1940. In -- when her estate was under examination in about 1943, must I stop now? Earl Warren: You finish your sentence. William S. Downard: When -- when her estate was under examination in 1943, there was a contention that the trust should be taxed as reciprocal manner. Here is where the revenue service -- if we really thought these were reciprocal trusts could have taxed Joseph Grace's trust to Janet Grace's estate. It didn't do that. They compromised -- they entered into a compromised agreement whereby 55% of the Janet Grace trust was included in Janet's estate and in this case they are trying to include it again in Joseph's estate and impose two estate taxes on the same trust and no case has ever held that the reciprocal trust doctrine should result in double taxation. Earl Warren: We'll recess. Mr. Downard, you may continue with your argument. William S. Downard: Thank you, Mr. Chief Justice. May it please the Court, I want to digress a moment before continuing my argument on the merits of the case to take out the point mentioned by the Solicitor General on the serious question of jurisdiction. We strongly believe that this petition was out obtained. It was filed on the 160th day after this decision was printed and announced by the Court of Claims formally a 55 page document which contains as the Solicitor General read to you a statement that the findings of fact which are made as part of the judgment herein. The basic Court's conclusion that the plaintiffs are entitled to recover and state's judgment is entered to that effect and a docket entry was made that judgment was entered on that day. The findings of fact which are incorporated expressly in the judgment state the amounts and date from which interest runs, everything necessary to determine the amount. There had never been any question as to the amount and it was routinely stipulated and a subsequent one-page typewritten order entered that merely confirmed the amount as shown in the original findings of fact that were made back on April 19, 1968 and that should be the time from which the time runs for filing a petition according to all of the standards set forth in this Court's case as such as Minneapolis-Honeywell and the Schaefer Brewing case and the last case I believe which the Court has addressed itself specifically to a Court of Claims case of this sort was the Adams case cited in the Government's brief in response and that case clearly indicated that a second judgment unless it were inextricably leaned with the issue dealt within the first judgment that sought to be reviewed is not the measuring time from which the time for filing a petition begins. Well, after that digression let me get back to the merits of the case. The Solicitor General has presented the Court with the paradox that while he concedes that consideration must be interpreted in the light of the actual facts of the case, he has not come to grips with the actual facts of the case as found by the Court of Claims, instead referring only to certain language out of the dissenting opinion. The dissenting judge simply did not agree with the facts as found by the Court and the Court did find the facts and the facts as found by the Court should be accepted as the facts of this case. Those facts pertinent to the question of whether these trusts were created in consideration of each other which has always been the tests are as follows and they are not purely subjective facts. There are objective facts set forth in detail in the record detailing a long history of gifts by this decedent of large and valuable properties not inconsequential gifts. They were properties worth considerable sums of money that he had given to his wife. He had made one or more such gifts either to his wife or in trust for his children in every year over 25 year period from 1917 to 1942 with the exception of the year 1921 and except that for the few years immediately after the creation of these trusts in December 1931 he didn't create any trust. The obvious reason being that in this December 1931 trust, as shown by the evidence and found by the Court, he was anticipating the enactment of a gift tax law in 1932. There was no gift tax at that time and the gift tax law was indeed enacted in 1932 and the only stated reason for the decedent's acting at this particular time was the fact that he heard the gift tax law was going to be enacted and he said anything further I am going to do in my program of giving -- I should do before the gift tax comes in because if I postpone it I have to pay for a gift tax. If I go ahead and do it now, I won't have to and that is not an evil tax avoidance motive. It's just as a man of common sense saying I've been giving away probably all my life and this is my means of expressing my affection to my dependent loved ones and if I postpone it I will have to pay additional taxes so why wait. So he was anxious to go ahead and do it and this is the full explanation of the reason that these two trusts happened to have been created at the same time because he was anxious to get things done before this gift tax came in. Certainly, if these two transactions have been done with different forms as easily they could have been or if they had been done at different times if the decedent had carried out his program of giving in his usual manner and given away one of these properties in 1931 and another one in 1932 and another one in 1933 and another in 1934 and so forth. And if Janet Grace at any other time had placed her homestead in trust to preserve and maintain it for her family and children nobody would say that these trusts are reciprocal. It's purely the superficial appearance created by the time that gives the Government any argument that these trusts have any appearance similar to those that have been held reciprocal in any cases. And that factor of timing is fully explained by the decedent's anticipation of the gift tax law. Certainly, that fact that this is concerned about gift tax law was his prime worry at the time merely serves to emphasize that these trusts really were donative in nature and he certainly considered that he was making a gift or he wouldn't have been worried about the gift tax if he thought that he was making some exchange for considerations with his wife. But the Court has expressly tried this case through a long trial in a very comprehensive record in analysis of the facts and the trier of facts has determined that these word gratuitous gifts that were made. The Solicitor General has indicated that consideration should not be the test in this case and yet his argument is based on cases such as the Lehman case that is expressly based on consideration. The Lehman case was certainly was one in which the court could have completely admitted to consideration test and just said well, the economic substance of these transactions is the same as if each the brother had created a trust for himself but it didn't stop there. The Lehman case went on to say and to point out that this was not the significant point and said that the decisive point in this case is that by transferring his own property to his brother, he caused his brother to make his brother to make the other trust for his benefit and then it went on to talk about consideration and quid pro quo. Now, the Solicitor General has picked up only one phrase out of that sentence he said. In the Lehman case, one brother caused the other brother to make the trust. But it wanted the fact that he caused him to make the trust by asking him to, requesting him to, suggesting that he do it or advising that he do it, or planning the trust instruments, the case specifically said that by transferring his own property he caused it and then in the Hanauer case in the Second Circuit which followed on the Lehman case, the Second Circuit explained and reiterated that it was furnishing of a consideration or a quid pro quo whereby transferring his own property the decedent had caused the other transfer to be made and so the consideration test is a causation test but it's a causation test based on whether one transfer of property causes another transfer of property. It is not a question of whether one person such as a husband causes a donor to make a gift to him by requesting it. A donor is nonetheless a donor and a donee is nonetheless a donee simply because the donee requests, suggests, advises, recommends, wheedles, or cajoles. If a son asks his father to give him a piece of property because he wants it, if the father gives it to him it's still a gift. If a husband asks his wife or plans and arranges for his wife to give him a piece of property and puts a deed in front of her, she owns the property and it's only she that has the right to say no I won't give it or yes I will and all she has to do to make a transfer in terms of the estate tax and the gift tax is to sign that deed and that's what Janet Grace did. You may draw an analogy to the community property situation where a husband is a sole manager of a community with the right to dispose of it even without his wife's knowledge or consent and if he does give it away, and she owned a half interest in it and that half interest passes to somebody else even without her knowledge and consent it's held that she made a taxable gift for gift tax purposes, for estate tax purposes, it may be a gift in contemplation of debt, and yet she has nothing to say about it and so the Government's argument that the wife because the wife was merely compliant or acquiescent to her husband's wishes, somehow means that she didn't make a transfer of her property to this trust seems aside from the point and contrary to the whole established concepts of stating gift taxes. Speaker: How do they do that this case was been in the courts so long? William S. Downard: Your Honor, this case was originally filed in 1959. I tried the case I was employed in 1962. It had been through various stages of pretrial. The pretrial proceedings in the Court of Claims were extremely elaborate and very detailed. I was employed in 1962 and the latter part of 1962. I tried the case in the summer of 1963 after a more elaborate pretrial proceedings, the case then went up to the -- it takes a long time because you have to -- the trial commissioner sets like a district judge and he makes a decision which is then automatically reviewed by the judges of the Court much like an appeal so you have to submit briefs to the commissioner. He then has to take time to make his decision and recommendation and that goes up to the court and after this case went up to the Court of Claims, I believe in 1965, they remanded it for a further trial because the Government argued that the whole essence of the case was that the decedent created these trusts for tax avoidance motives and the Court was interested in that and said, "Well, now if these were a tax avoidance device that may affect our disposition of the case" so they remanded it for a further trial on the issue of whether the decedent was motivated to avoid or lessen estate taxes with reference to the creation of these trusts. And another full trial was held and the conclusion of fact was reached that there was no motive gift taxes in this -- there was no motive to avoid estate taxes in this case which and that there was no showing of any motive of tax avoidance of any kind and the evidence clearly supported that for the decedent created this trust in a routine and cavalier fashion run down very hurriedly in December of 1931 not considered for a long time and he never consulted any tax attorney, any tax adviser of any kind with reference to the tax consequences of these large trust that he created which is almost inconceivable that a man would create trust of this size without consulting a tax adviser but he did because he wasn't concerned about taxes, he was concerned about providing for his dependent loved ones as he had been doing all his life, and the Court of Claims found as a fact that these trusts were merely part of this long pattern and history of gifts that these parties have been making. Now, on the question of what the law is in this case, the Solicitor General read to the Court excerpts from the committee reports including the following, however, in 1914 in Lehman against Commissioner, the Circuit Court of Appeals for the Second Circuit held that where trusts are found to have been created each in consideration of the other, the nominal grantor should be interchanged and then he said right after that there is no reference to consideration in the committee reports, and I ask you to again read the language that he read to the Court which specifically does mention where the trusts are found to have been created in consideration of each other so Congress was confronted, was fully apprised of and recognized the existence of the consideration requirement as set forth in Lehman and the case is following it. It shows not to legislate any different rule and therefore accepted that rule and certainly the Lehman rule that the Court that the Congress expressly approved of in the 1949 committee reports, when it shows not to do anything but grant some relief legislation was the very test that the Court of Claims used in the decision below and that is as stated by the Eighth Circuit in the Moreno case, perhaps one of the most recent cases on the subject that whether this doctrine applies is simply a question of fact whether one trust was created in consideration for the other trust and where trust have been found not to have been created in consideration of each other factually, the courts have held in case after case that the trusts are not taxable reciprocal in the absence of consideration. In case after case which had held trust taxable reciprocally, the courts have clearly set forth the rule and discussed the matter as a factual test of whether these trusts were created in consideration of each other. Now, that is what all of the previous cases have held. But even needing the Solicitor General on his own battleground and saying there is no consideration test despite what all the cases have said, despite what Congress said, let's assume there's no consideration test and that we confront this matter merely as a question of whether the economic substance and effect is the same whether that the consequence is or the same as the Solicitor General said as if Mr. and Mrs. Grace had each created a trust for himself and when you confront the realities and the facts of this case, you find that those economic consequences were not the same and could not be the same because of the non-equivalence in the whole nature of the two different trusts. Now, let me call attention to one further thing in even approaching the form of these transactions as the Solicitor General does that in form even these trust were not reciprocal and non-reciprocating in their taxable incidents for in each trust, the settlor named himself as trustee and retained a taxable power to terminate the trust by distributing it to the life tenant at any time. These parties did not carry out the reciprocal trusts arrangement of giving taxable powers to each other rather each one kept the clearly taxable for himself and under this Court's decision in Lober and Holmes cases cited in our briefs, those trusts would be taxable each to the settlor that created it and Janet Grace's trust should have been taxed to Janet's estate. We admit that it was taxed to her estate. Now, the Government is trying to tax it again. The Joseph Grace trust would have been taxed to his estate except that that trust terminated and passed irrevocably and outright to his children. In 1937 when his wife died and the only reason he's not taxable on the property that went into that trust is that it vested in the children passed irrevocably from him in 1937, 13 years before he died and should not be taxed to his estate nor should anything be taxed in lieu of it. Earl Warren: Mr. Solicitor General. Erwin N. Griswold: May it please the Court. There is one point which I would like to clarify and that is the suggestion that the Janet Grace trust is being taxed twice. I think it also bears on the argument of consideration and rather shows that when you are dealing with mutual gifts, the question of the meaning of consideration can be clarified by thinking of it in terms of value. It is the treasury's practice in the case of mutual gifts to say that they are reciprocal or crossed to the extent of mutual value and if one of the trusts is bigger than the other, then the excess is treated as a gift, independent of the other. Now, what happened here was that when Mrs. Grace died, the question was should be included in her estate? And I think that what was included in her estate was the Joseph Grace trust, but to the extent of the mutual value. As the Janet Grace trust was the smaller trust the mutual value was determined by finding the value of the Janet Grace trust and thus it was that part of the Joseph Grace trust which is measured in value by the Janet Grace trust which was included in the -- in Mrs. Grace's estate. As a matter of fact, it was controversial. There were questions as to value. It was finally settled by including 55% of the value but the significant thing I think is that it is mutual value. It is analogous to consideration in the case like the Lehman case. It is appropriate to talk about consideration. It is of course quite true that the committee report which I read uses the word consideration but there still remains the question of construing or interpreting what that means. I do not think that it means a bargain for item something over which the parties haggled. I think it is fully applicable to a case of mutual gifts which was involved here.

John G. Roberts, Jr.: We'll hear argument next in Case 16-6219, Davila v. Davis. Mr. Kretzer. Seth Kretzer: Mr. Chief Justice, and may it please the Court: The nature and logic of Martinez naturally applies to claims of ineffective assistance of appellate counsel, just as it does to claims of ineffective assistance of trial counsel. Erick Davila faces execution despite having been convicted pursuant to erroneous jury instructions that vitiated his only viable defense. On direct appeal, Davila's counsel recognized the centrality of the intent issue, but challenged only sufficiency of the evidence -- Sonia Sotomayor: But I have -- Seth Kretzer: -- not the jury instructions. Sonia Sotomayor: May I ask you, when do you believe that counsel below objected? And your brief seems to assume he did, but as I read the transcript, I can't find where he objected clearly. Assuming he didn't object clearly, can you say under any circumstance that appellate counsel was ineffective for choosing the route he did? Seth Kretzer: Yes, Your -- Sonia Sotomayor: Given plain error review, if there was no objection, wasn't the sufficiency of the evidence the best way to approach a forfeited error? Seth Kretzer: Well, as an initial matter, it must be remembered that plain error is not the standard in Texas. Even if a jury instructional objection is not made, all that happens under Almanza is the standard of review turns to -- from harm to egregious harm, which is less incisive for Petitioners than plain error standard, which prevails in Federal court. But, more importantly, the trial counsel did object, particularly at page 52 of the Joint Appendix -- Sonia Sotomayor: He objected to the sequence of what the judge was saying. He didn't argue any transferred intent in the way that the Court later found in Roberts. I think it's Roberts, if I'm -- Seth Kretzer: Yes. Sonia Sotomayor: -- if my memory is correct. Seth Kretzer: Yes. Sonia Sotomayor: He didn't -- I don't see any discussion of the Roberts transferred intent. All he argued was, give the original instruction over again, and then give this new one. Seth Kretzer: Oh, no, he did not say, then please do give the new one. There's no doubt the objection could have been better calibrated. And yet the closing, a discrete, complete sentence said, we object to giving of the supplemental instruction. And immediately thereafter, the State trial judge said, overruled. Neil Gorsuch: But, counsel -- Seth Kretzer: And it must be remembered -- oh -- Neil Gorsuch: Sorry, counsel. Just to follow up on Justice Sotomayor's point, I think you argued at page 228 of the Joint Appendix that trial counsel's objection was not sufficient to cover the charging error, and I think that the Federal district court on habeas found the same thing on page 366. And so that raises, to my mind, a question whether Martinez applies here. Couldn't -- couldn't your client have brought a Martinez claim? And isn't the Martinez rule premised on the idea you get one clear shot at bringing the issue? And -- and maybe the absence of one clear shot here would bring you within the rule of Martinez, and that would take care of this case. What am I missing there? Seth Kretzer: Yes, absolutely. The reason this could not have been couched as a Martinez ineffective assistance of trial claim in Federal habeas is, even if the objection had not been proper to preserve the issue in the Texas State court, and then in the court of criminal appeals, there's still no way that the direct appellate attorney argued the issue either way. In other words, what should have happened, the conforming, constitutionally sufficient direct appellate brief should have argued jury instructional error. And then first in the situation that the objection had been preserved by the objection has harm under Almanza, or alternatively, that the objection of the trial court was not sufficient to preserve the objection, and then would move to egregious harm under Almanza. But in no case, in no situation was there no underlying error for the State direct appellate attorney to argue against. John G. Roberts, Jr.: One -- one thing a good appellate lawyer will do is pare down the issues that are presented on appeal, even if they think that some of those issues have merit. I mean, if you have six issues that you think you can argue credibly before the -- before the appellate court, you may decide it would be much better to focus that court on the two or three strongest issues, that adding the others will, in fact, dilute from the value of that. So when you have these -- I'm not talking about this particular case. But in general, when you have the claim of ineffective assistance of appellate counsel, it's sometimes easy in retrospect to say, well, here's an issue that, you know, maybe -- the appellate counsel, in the exercise of discretion, thought it was like number 6 in the order of -- of strength. And you look back and in hindsight you say, well, he should have made more of that, and it's not even mentioned at all in the appellate brief. I mean, I know there's also issues of trial strategy, but it seems it's more typical in an appellate case that you have -- you know, you leave things off the table. Is -- is that going to present a problem, in your view, in evaluating the effectiveness of appellate counsel? Seth Kretzer: No, it will not. There's no doubt that appellate attorneys retain substantial discretion to not raise certain claims that are regarded to be necessarily weaker. In fact, in a trial, presumably almost all appellate lawyers have to necessarily not raise some claims. That's why the backstop of our argument is substantiality. In other words, it's not one thing to raise an appellate claim that might have, you know, theoretically gotten you somewhere, and yet not likely to have gotten a reversal in the reviewing State court of appeals. It is very difficult to raise a substantial claim, by which we mean, in this context, one that -- and this is sort of a distinction that Federal district judges make all the time in habeas -- but the question here would be whether or not it was likely that that claim would have resulted in a different outcome in the reviewing court of appeals. And the case -- Ruth Bader Ginsburg: But in this actual case, didn't the district court hold that the ineffective assistance of appellate counsel argument, on the merits, it was insubstantial? And if -- if it was insubstantial, then we didn't -- we don't even have to get to the question you would like to present to us. Wasn't it an alternative holding that, in any case, this objection to the instruction was insubstantial? Seth Kretzer: Yes. The Federal district court did make an alternative holding on the merits. However, that was not addressed in the Fifth Circuit's opinion, and was, hence, not a part of the judgment that was appealed to this Court. So at the minimum, we would ask for relief as the same which this Court afforded in Martinez, which is a remand to the reviewing court of appeals -- in that case, the Ninth Circuit -- for a determination as to that prejudice -- prejudice prong. And, in fact, Mr. Martinez was ultimately unsuccessful in Federal district court in Arizona on the prejudice prong. Ruth Bader Ginsburg: You're not in Missouri -- Anthony M. Kennedy: Well, on the -- on the issue of whether or not Martinez should be extended to alleged inadequate assistance of counsel on appeal, what is the test that I'm supposed to apply? The -- the practicality of this? The consequences? The private interests of the prisoners and the public interest in finality -- is that what I'm supposed -- is there some test you want me to apply? Seth Kretzer: Oh -- Anthony M. Kennedy: And when this test is applied, I -- I have -- have to say, it was somewhat stunning to me to read at page 15 of your brief that one study indicates that although 81 percent of habeas petitions in capital cases raise a claim of ineffective assistance of counsel, only 31 percent alleged ineffective assistance of appellate counsel, that's a third of the cases. This is a tremendous burden. Seth Kretzer: Well, to answer your question, no, the test that we -- the standard we would ask you to apply is the same that was in Martinez. Basically, first, was there a substantial claim? Did -- was that claim defaulted in the initial review collateral proceeding? And when we say "substantial," we mean one that was likely to result in a different outcome. That's why the claims will be very rare of -- substantial claims of ineffective appellate counsel. And yet when they do exist, they will likely be incredibly meritorious claims -- Anthony M. Kennedy: No, but my question was, was the systemic one, is -- is what are the systemic standards I look to, to see whether or not we should extend Martinez to this kind of case? Seth Kretzer: Oh, yes. Anthony M. Kennedy: And then what guidance do I have? It looked like Mathews v. Eldridge. I'm the one that -- or this Court's the one that balances? Seth Kretzer: Well, yes, in Martinez, this Court particularly created an equitable rule in the exercise of this Court's discretion saying that there would be an exception as it were to cause and the cause and prejudice inquiry, because otherwise you would have petitioners who would never have any forum in which this ineffective assistance claim could be litigated. The door has been opened in Martinez now for over 5 years. There has not been an inundation of new petitions in Federal court. And -- John G. Roberts, Jr.: One -- one significant distinction, of course, is that these claims of appellate assistance -- ineffective appellate assistance of counsel, under the logic can be raised in every State. Martinez, Trevino, it's only where the State has funneled the decisions to collateral review. Appellate claims like this, you know, obviously can't be brought on appeal in every State, and so this would arise, in terms of evaluating the statistics, it would be many, many times the numbers of Martinez claims that you see, and we see -- and -- and there are now an awful lot of Martinez claims anyway. Seth Kretzer: In Martinez, what Arizona had done was said as a statutory matter, you cannot raise an ineffective assistance contention in the direct appeal. Instead it was deliberately channeled over to habeas. There's a reason that in a claim like Mr. Davila's that the initial review collateral opportunity to challenge the claim of ineffective contention is State habeas, and that is because it is impossible, physically impossible -- John G. Roberts, Jr.: I -- I've got -- I've got to -- do -- for them to raise the appellate -- Seth Kretzer: Yes, themselves -- John G. Roberts, Jr.: I'm sorry to cut you off, but I -- I understand that, but that's going to be true in every State, right? It's going to be -- you're going to have the same difficulty of raising ineffectiveness of appellate counsel on direct review in every -- every State. Seth Kretzer: Yes, that would be a uniform impossible -- John G. Roberts, Jr.: Yeah. Martinez, one of the important considerations at least for some in Martinez is that it is narrow. It's only where the State has funneled the ineffective assistance at trial claims to collateral review. Seth Kretzer: I would ask the Court to look at the vantage point. In Martinez, there was not a mechanism by which the States were punished for removing the claim from what -- direct appeal to habeas. It was an equitable exception in favor of the petitioner, because if the equitable exception were not there, then petitioners would suffer the reality, there would be no court ever -- Sonia Sotomayor: Counsel, you're not dealing with the question asked. Seth Kretzer: Okay. Sonia Sotomayor: All right? The question asked has to do with the burden on the courts. Both Justice Kennedy and Justice Roberts are saying, if we recognize this right, the courts are going to be inundated with these kinds of claims because in every State, ineffective assistance of appellate counsel isn't -- can't be, by definition, raised in direct review. It all has to be channelled to collateral review. So in every State, every defendant will be able to raise this claim and it will inundate the -- the system. Seth Kretzer: We don't think so. The -- Sonia Sotomayor: And you haven't articulated the reasons you don't think so. Seth Kretzer: Yes. I would -- Sonia Sotomayor: I could start with how many post-conviction ineffective assistance of appellate counsel cases, the 31 percent that Justice Kennedy was pointing to, in how many of those is relief granted? Seth Kretzer: If any, a very minute number, because it is so -- Sonia Sotomayor: Infinitesimally small. Seth Kretzer: Yes. John G. Roberts, Jr.: Are there hearings in those cases -- Seth Kretzer: For -- John G. Roberts, Jr.: -- cranting the necessity for the court to evaluate the claims before they decide not to grant the -- the allegation -- Seth Kretzer: No, very rarely are there actually Strickland hearings on 2254 in Federal district court, for the reason that it's very hard to, one, show a substantial claim, and then, two, to reach through the -- John G. Roberts, Jr.: The court presumably has to read the -- the filings in the case to decide that the claim is not substantial, correct? Seth Kretzer: Yes, it would be necessary for the court -- John G. Roberts, Jr.: So -- so the number that are granted really isn't the consideration we're looking to, is it? It's the number that are going to force the courts to review them. Seth Kretzer: Well, I think if one accepts that for now, 4 or 5 years Martinez has been the law and -- and a number of these claims have been made, at most there might be, in a small subset of those, a very small number of additional ineffective assistance of appellate counsel claims made because it is so hard for a petitioner to formulate such a claim. For a Petitioner such as Mr. Davila, to have raised a claim like this on his own, of course, Martinez talked a lot about the importance of having an effective assistance of counsel to vindicate an underlying ineffectiveness contention, Mr. Davila would have had to have been familiar with the jury charge, he would have had have been -- with the Texas law -- John G. Roberts, Jr.: Well, I mean, are you saying it would have been hard to formulate? Are you suggesting that someone facing this sentence that Mr. Davila is facing would say, well, let's not do that, let's not raise an ineffective assistance of appellate counsel or somewhere and said, because it's just too hard to formulate that claim? These are situations where the defendant is facing capital punishment where they are going to raise every possible claim they can, and I don't know why it would be terribly different for defendants facing life in prison or further sentences. Seth Kretzer: Well, the -- as I said, there's a very difference between raising every possible claim that they could versus a lawyer's obligation to raise meritorious, not raise frivolous claims. And there may be at the margin some additional claim that perhaps when it's sifted through is found not to ultimately be successful. We would argue a substantial claim is one that necessarily, when it does exist, is going to be one that which -- about which there does need to be a hearing about the underlying ineffectiveness. Samuel A. Alito, Jr.: What concerns me about your position is that it seems to blast an enormous hole in the doctrine of procedural default. Unlike Martinez and unlike Trevino, which were cabined, it -- it seems to me, and you'll correct me if I'm wrong, that if we agree with your position, then anything that -- that an attorney in Federal habeas can examine the trial record, and if that attorney finds anything that seems to be an error, it can be raised in Federal habeas, even if there was no objection at the time of trial, it wasn't raised on direct appeal, it wasn't raised in a State collateral proceeding. That's where this is going. And if it's an -- if the underlying error is ineffective assistance of counsel, well, whatever it is, all of that will be evaluated by the Federal habeas court outside of AEDPA. That's where this is going. So this is an enormous hole. Am I not -- isn't that where this -- isn't that what this means? Because the -- the argument in Federal habeas would be there was cause because counsel was ineffective at the collateral -- State collateral proceeding, and this counsel was ineffective at the State collateral proceeding because there was ineffective assistance on direct appeal. And then counsel on direct appeal was ineffective because there was an error at trial. So the Federal habeas court has to make all of those determinations, and if the court -- the -- which means the court is going to have to look at whether or not there was an error at trial and, in doing that, it is not going to be asking whether a -- whether a State court reasonably rejected the claim because it was never presented to the State court. So it's going to be de novo review. Seth Kretzer: It would be very difficult -- the situation is not simply -- the task for the Federal habeas petitioner is not to simply aggregate every objected to or unobjected to evidentiary error or any downline error and simply present all of those in the Federal habeas petition. What they would then have to do is also find some authority from the State court of appeals saying that this type of error or constellation of errors would constitute a reversible error. Samuel A. Alito, Jr.: Well, they'd have to find something that they can argue in the Federal habeas was an error, but procedural default would be out the window. Seth Kretzer: Well, yes, but, again, it's not enough to simply say these were the trial errors. One would have to say that these were trial errors and here's some reason why the reviewing court of appeals would have held differently. That's very different from -- Samuel A. Alito, Jr.: Right. And the Federal habeas court is going to have to analyze that, which means the Federal habeas court is going to have to analyze all of these alleged trial errors that were never previously raised in the State court. Seth Kretzer: Our argument would simply be it's one thing to make a -- state this error or that error happened at the trial. Of course, every trial has some error that occurred in it. But one would have to do to create a substantial claim, in other words, not one that would be very easily discarded by the Federal district court would be then to say, here's a reason why this would create a different outcome. That would not be easy to do for downline claims, but when one gets to claims as important or as vital as jury instructional errors, those are a type of substantial claim that -- Stephen G. Breyer: Say, so what -- you started to say this, but I guess Martinez itself, one of the concerns was that any mistake that the trial -- that the trial attorney makes -- and normally, by the way, you -- you don't make ineffective assistance counsel claims on direct appeal, I don't think. It's usually the same lawyer. You have to make it in State habeas. Okay. What would happen would be that the defendant with a new lawyer in Federal habeas would go through every mistake that the trial court made, that the -- that the trial lawyer made, and say it was ineffective assistance of counsel. And so the judge would have to do just what Justice Alito said, though perhaps a few fewer States. So, you started to say this. What's the answer? It's five years. To what extent has the Martinez claim proved a burden on Federal court? Is there any empirical information? Seth Kretzer: We don't think there had been -- there may have been additional -- Martinez and now Martinez-Trevino claims that had been made in Federal petitions, but not an increase in the number or appreciable increase in the number of Federal petition -- Stephen G. Breyer: What I -- I asked you really, is there any empirical information? Because, of course, I think you probably think no. But the other side may think yes. And so that's what I would like to know, is there any -- anyplace I could look to find out whether it has proved to be a burden or not, where there have been a lot of claims or not? Seth Kretzer: Yes. We do have some studies cited, and certainly I will get them to have ready to present in the -- in the rebuttal. But our point would be that, again, if the rule of Martinez is still the rule, and if it is not also applied to ineffective-assistance-of-appellate-counsel claims, then Petitioners, like Mr. Davila, are actually worse off if their trial lawyer did object than if they did not. If they did object, they -- they had not objected down at trial court, they would already be covered by the Martinez -- this is a very modest application of Martinez that we don't think will create appreciable -- Samuel A. Alito, Jr.: But Martinez concerned ineffective assistance of counsel in a limited number of States, and Trevino arguably extended it to a few additional States. But if we accept your argument, it applies everywhere, and it's not limited to ineffective assistance of counsel. It is -- it applies to every single -- every single type of error that could occur at trial. Seth Kretzer: No. We would disagree. Certainly, the only issue -- Martinez and Trevino, of course, were limited. It talked about ineffective assistance of trial claims. Those were the claims that were presented in those cases. That was different. We don't think that this Court necessarily, if you rule in our favor in this case, that has application anywhere beyond ineffective-assistance-of-appellate-counsel claims. Samuel A. Alito, Jr.: Yeah. But the ineffective assistance of appellate counsel would be based on any type of error that occurred at trial. So here you have a jury instruction error. But if we agree with you, it would apply to the erroneous introduction of evidence, to the -- to improper statements made in closing, to any type of trial error, any type of constitutional trial error you can dream of. So whatever the statistics are on Martinez, this goes way, way, way beyond Martinez. And Trevino. Seth Kretzer: I would say that, again, the only -- if Martinez is the rule and those -- Martinez claims were about ineffective assistance of trial counsel now, have been made for at least five years. There is not, as Justice Breyer said, a large number of claims made contending ineffective assistance of appellate counsel. And that's why it's so important that the Martinez doctrine do apply. Stephen G. Breyer: I don't think that's -- I think, as I'm gathering Justice Alito's point -- and I think it's an -- you know, it's an interesting point and important, what is ineffective assistance of appellate counsel? I mean, I understand somewhat ineffective assistance of trial counsel, but it can't just be an ordinary mistake. It has to be something rather special. Seth Kretzer: Yes. Stephen G. Breyer: Now, is ineffective assistance of appellate counsel the same, or is an appellate counsel ineffective whenever the appellate counsel fails to present a claim that the trial judge made a mistake in the trial? Seth Kretzer: The Strickland standard for ineffective assistance is the same for contentions of ineffective assistance of trial counsel and ineffective assistance of appellate counsel. Stephen G. Breyer: So it's very hard to see when it would be ineffective assistance when there wasn't also ineffective assistance of trial counsel. What is such a case? I mean, I'm just probably missing it, but what -- what is a case where -- where there's ineffective assistance of appellate counsel, but not ineffective assistance of trial counsel? What is that case? Seth Kretzer: Yes. Certainly evidence is seen in Mr. Davila's case, because there is, in Texas, jury instructional error is not forfeitable. In other words, there is not some -- unless the trial lawyer objects, there's necessarily -- Stephen G. Breyer: So then why didn't the trial counsel -- this -- I can see that this was a very important matter for this particular defendant, but then why wasn't the trial counsel ineffective? Seth Kretzer: Well, again, the trial counsel did formulate -- maybe not the best calibrated -- but did formulate an objection. The -- I think the way in which this arose in this case is very unusual in that neither the -- the State never requested a transferred-intent instruction. After the jury, which had been out for over four hours at this point with those confessions, sent out that jury note No. 2 asking directly about the theory of Mr. -- Stephen G. Breyer: Well, what about saying this: Suppose we said, yes, there is -- it's the same situation, you know, you have ineffective assistance -- you have ineffective appellate counsel. Well, obviously, you can't raise it because he was ineffective. So you never had a shot at it. It's catch-22. Same with the trial counsel. But those things, it's very unlikely that you're going to have ineffective assistant of appellate counsel where there wasn't also the ineffective assistance of trial counsel. It's very hard to think of such an instance. And just the bringing of an ordinary mistake is failure to bring an ordinary mistake will unlikely to be qualified. Suppose we wrote that into the opinion or the equivalent. What would you think of that? Seth Kretzer: I think the problem is that the question here is not a Strickland determination as to the direct appellate attorney in this case. There may have been a strategic reason not to raise the claim. I would rather be skeptical, considering the direct appellate brief specifically did not request oral argument. There were no page limitations they were up against or anything like that, but that would be something that would be sorted out at a Strickland hearing where this -- the first prong, the tactical reason for doing or not doing something, would be pressed out in detail. Neil Gorsuch: Counsel, we spent a lot of time talking about Martinez, but one case we haven't discussed is Coleman. Seth Kretzer: Yes. Neil Gorsuch: And Coleman sets out the general rule that ineffective assistance by counsel in collateral review does not suffice to establish cause for purposes of Federal habeas. That's the general rule. And Martinez carves out a small exception for when there wouldn't be any chance to raise an issue in State court at all. And that doesn't apply here because trial court counsel could have raised this issue. We all admit that. So when we -- when we overrule a precedent, or part of a precedent, as I think you're effectively asking us to do with Coleman, we normally don't just ask about the merits. We also ask about the reliance interest, the workability, whether the question is statutory rather than constitutional. And I didn't see you address any of those factors in your brief. And I'm wondering what I'm supposed to make of that. Help me out. Seth Kretzer: Yes. The Coleman rule bars all other attorney mistakes that would be imputed to a client. Martinez is very clear that there was not a stare decisis problem because, in Coleman, the ineffectiveness was missing the deadline for the appeal from the hearing on the habeas petition in Federal -- in State court in Virginia, not an ineffectiveness in the initial collateral proceeding itself, called first-tier review opportunities at that point in time. Nothing about the relief Mr. Davila is seeking will have any effect on deficient performance by Federal habeas counsel. There will be no effect that the State petitioner missed their limitations period to file in Federal district court. There would be no effect if that State habeas petitioner had gotten leave to file a successor writ, or then re-file for State habeas, or if they declined the State-appointed attorney, the attorney the State offered to appoint. All of those situations would still be barred by the rule in Coleman, so Coleman is very much good law. Martinez simply looked at -- at peace that was arguing dicta in Coleman, whether or not the ineffectiveness was in that initial review collateral proceeding itself, and that's the situation we have here. Ruth Bader Ginsburg: If I may ask one question about your -- your bottom line. I think you said that if counsel had taken up -- challenged the instruction on direct appeal, it would have led to a new trial. Seth Kretzer: Yes. Ruth Bader Ginsburg: Why a new trial? Why isn't the consequence of ineffective assistance of appellate counsel not a new trial of the case, but just a new State court appeal? Seth Kretzer: Oh, yes. Well, the remedy -- the Federal remedy that we're seeking would be leave to file a additional supplemental direct appeal in State court, at which the argument would first be made that the jury instructional challenge was the harm standard of Almanza, or alternatively, under the egregious harm standard of Almanza. But with the -- ultimate new trial would, of course, have to be upon prevailing on a new direct appeal in the Texas Court of Criminal Appeals. So I will save the balance of my time for rebuttal. John G. Roberts, Jr.: Thank you, counsel. Mr. Keller. Scott A. Keller: Thank you, Mr. Chief Justice, and may it please the Court: Extending Martinez to appellate-IAC claims will have a huge systemic cost by opening up the entire trial and everything that happened at trial to Federal habeas review. And the countervailing concern, as Justice Sotomayor noted, is there's an infinitesimally small number of meritorious appellate IAC claims. So you're going to have huge costs -- Sonia Sotomayor: Ah, but does that -- does that mean that we don't remedy that? Assuming -- because, I agree -- Justice Breyer pointed out, and others have, the number of cases are going to be tiny. And as with all cases, there's an initial uptick of claims until people settle down and realize that it's a small number that are viable, and that happens pretty quickly. Do we ignore that simply because there might be that small uptick at the beginning? Scott A. Keller: Well, this is why Coleman is still the rule. Martinez expressly reaffirmed Coleman. Outside of that narrow context at trial -- Sonia Sotomayor: You mean the substantial claim of IAC? This is -- no one is going to be looking at an ineffective-assistance-of-appellate-counsel claim, assuming one is viable, unless there's a substantial claim, and no one will otherwise look at it. Scott A. Keller: Well, and here, the question is -- the relevant appellate IAC claims to look at here are those where the claim was raised in trial court, and the trial court did, in fact, adjudicate, decide the issue. It made a record, and then both appellate and habeas counsel have chosen not to raise it. Anthony M. Kennedy: Yes. And just -- just to fortify your point, I take it there are any number of defense counsel objections that are overruled. So defense counsel has been adequate, but then if -- but then the appellate counsel may very well overlook some of those. And that -- and so -- so the idea that there's not going to be IAC at the appellate level if there was not IAC at the trial level, it seems to me, not -- not sound. Scott A. Keller: Justice Kennedy, and when -- here, there -- there's no dispute that trial counsel was effective. They have not raised a trial IAC claim about the supplemental jury instruction. And so while appellate IAC claims are difficult to prevail, there -- it's going to be even more difficult in this situation, because the trial IAC gateway that Martinez already provides would give a petitioner everything they needed if trial counsel was ineffective. So if trial counsel does raise the claim, if trial counsel does preserve it, and the trial court does decide the issue, then both appellate and habeas counsel choose not to raise it, it's going to be an exponentially lower chance that those claims are going to be meritorious. Anthony M. Kennedy: Could you address my question to the Petitioner's counsel? What is the standard of -- we're supposed to follow in deciding this case? Our view of the systemic consequences? And -- and what is -- what -- what is the case authority that gives us instruction in that regard? Scott A. Keller: Martinez itself recognized that what it was doing creating the narrow exception from Coleman was that was an equitable judgment. And in fashioning the rule, the Court looked at -- it was trying to maintain a baseline where no court had ever adjudicated the underlying claim of trial error, and the Court recognized the bedrock foundation unique right to trial counsel. And putting together those two factors, plus the channelling concern, those were the three pillars of Martinez, and none of those three pillars are present here. Sonia Sotomayor: So let's go through the three pillars here. No one is reviewing whether appellate counsel has been adequate. Do you -- although you're not entitled constitutionally to appellate counsel on direct appeal, I don't know that we haven't, repeatedly, and so has every other court recognized the importance of counsel at the appellate level. I think virtually every State, if not every State, gives you a lawyer. So that prong is, in my mind, equal. The second prong is the -- Elena Kagan: Could you respond to that first? Is that okay, Justice Sotomayor? Sonia Sotomayor: Yes. Elena Kagan: Because -- because there is -- there's no right -- there's no need to have an appellate process, but once the State has given an appellate process, there is a right to have effective assistance of counsel on appeal. So that seems an important right. Scott A. Keller: Every appellate IAC claim is necessarily going to, though, be based on an underlying issue of an alleged trial error. In other words, this is going to be a -- to use the words of prisoner's counsel in Martinez v. Ryan, appellate IAC claims are a second order claim. They are going to be based on what happened at trial. And the trial court will have already adjudicated that claim of underlying trial error in the relevant set of cases that any extension of Martinez could apply to. Because, again, if the court -- Sonia Sotomayor: I'm sorry. I -- I -- they're only -- they're not asking the question on the trial court whether appellate counsel has erred. They are asking a different question. Scott A. Keller: That's correct. But an appellate IAC claim necessarily says, my appellate counsel didn't raise an issue and that issue is something that happened at trial that I thought was error. That issue is -- Sonia Sotomayor: Not just error, but error likely to result in a different outcome. Scott A. Keller: Yes. However, that alleged trial error that would have resulted in a different outcome would have been, in fact, adjudicated in the trial court already. In -- Sonia Sotomayor: But we already know that even under plain-error review, because we've done it in -- in a number of different cases, that trial courts err. Scott A. Keller: But if -- if the Court were reviewing this under plain error, though -- Sonia Sotomayor: The question is, did appellate counsel err in failing to raise something that might ultimately go to the Supreme Court, as has happened. Scott A. Keller: The Martinez trial IAC gateway, though, that already exists, would cover any claim that was not, in fact, preserved in the trial court. So what the Court is confronting now is whether to extend Martinez to situations where the trial court has, in fact, already ruled on the case. So really what this case concerns would be a doubly defaulted claim of trial -- Sonia Sotomayor: They have ruled on -- they've ruled on a question of error below, but not a question of appellate counsel error. Scott A. Keller: That -- that's right. The precise ruling on the appellate counsel issue, that claim in particular, would not have been passed upon. However, that claim is necessarily predicated on an issue of a -- an alleged trial error that would have been adjudicated, and that neither appellate nor habeas counsel raised it. And in that situation, when you'd have to have three levels of error, there's going to be an infinitesimally small number of cases that are meritorious, combined with opening up the entire trial, every single issue, even State law objections to Federal habeas review. That would be taking the Court back to something akin to Fay v. Noia, which was overruled -- Stephen G. Breyer: The same question that I had before. I -- I mean, every -- every instance in which a trial counsel might have objected but didn't, in principle, could be the subject of Martinez. I suppose that's quite a few. I don't know there are any more or any less. So what's actually happened? Is there any information anywhere about whether -- any empirical information about whether habeas courts, Federal habeas courts, have been deluged, or have -- do we know? Scott A. Keller: The answer is yes. In our brief, we've pointed out -- Stephen G. Breyer: Where? Scott A. Keller: -- Martinez has been cited 3,800 times in Federal cases since it was decided, and I would also point the Court to the amicus brief for the Criminal Justice Legal Foundation at page 20. What it did was it looked at the last ten cases in the Ninth Circuit out of Arizona in capital cases. Arizona was picked because that would have been the longest standing State that has that rule, because that was where Martinez came from, and seven out of the ten cases there raised Martinez claims. Stephen G. Breyer: Yeah -- Sonia Sotomayor: How many were granted? Scott A. Keller: None. We are -- we are facing all sorts of collateral litigation in the Martinez trial IAC paradigm. And the Court justified that on the basis that that right was unique. Martinez was just the latest in a long line of cases where this Court has treated the right to trial counsel and only that right as unique, that would be an exception to procedural bars that would apply otherwise. Stephen G. Breyer: Is it fair to say several hundred a year have come up under Martinez out of -- out of, roughly, how many habeas petitions? Out of fifty thousand? I don't know. Hundred thousand? Forty thousand? Scott A. Keller: I do not have those statistics. Stephen G. Breyer: All right. But several hundred a year. Now, is there a reason to think there would be more? I mean, after all, you know, I grant you it's slightly different, you're complaining here about a trial error that was raised and the judge wrongly decided it. And the counsel on appeal should have pointed that out, but he didn't. Just like you point out with the trial judge -- the trial lawyer should have raised, but he didn't. Very, very few are granted, very few. And here, I guess, very, very few would be granted. But the burden would be to read all those. Now, is it -- is it more, do you think? Why would it be more? I don't see why it would be more. It might be. I'm -- that's why I'm asking, though. Scott A. Keller: Well, I'm not sure more actual petitions would be filed, but the courts will certainly see a massive uptick in Federal habeas review of appellate IAC claims. As the reply brief at page 15 noted, a third of the cases were raising appellate IAC claims. And it's not just will these claims be successful. It's are courts going to have to go through them? And -- and consider in briefing this case, what the courts and the States will be presented with. You would be arguing about what did appellate counsel raise, what didn't appellate counsel raise, which claims were stronger, and then what was the underlying trial error. John G. Roberts, Jr.: Would this apply in -- wouldn't -- I mean, this would apply in every State, right? Scott A. Keller: Yes. John G. Roberts, Jr.: Not just States where Martinez and Trevino apply, right? Scott A. Keller: That's right. John G. Roberts, Jr.: And wouldn't that be pertinent in assessing the significance of the number of times this issue is going to be raised? Scott A. Keller: It absolutely would. John G. Roberts, Jr.: If it's going to be raised in 50 States rather than two? Scott A. Keller: It would. And this goes to the point that Martinez recognized, that there -- there's an external factor. There's a deliberate choice by the State to channel a claim. That's not present here. And it will apply in all 50 States. Stephen G. Breyer: Well, yes, that's true, but how many are in the other? How many -- what's the number in the other? What is the -- what is the number? I mean, the norm, I thought, was that you raise an ineffective-assistance-counsel claim in the collateral proceeding. So how many States, actually, does Martinez not apply to? Do you know that? I -- I doubt that it's, you know, a small number, but I'm pretty certain it isn't every State. Do we have any idea here? Scott A. Keller: At page 33 of our brief, I don't have the precise number, but we do cite various cases that show that Massachusetts, Wisconsin, Ohio, Oklahoma, the Martinez Rule does not apply, because, effectively, what happens there is the proceedings are stayed so that the trial-IAC claim can be raised at that time and not -- Elena Kagan: But in -- in most States it does apply; isn't that right? Scott A. Keller: Correct. Elena Kagan: Yeah. Yeah. And then, General, I think that your brief did the right thing in terms of thinking about Martinez to say why did Martinez make the exception that it did and ask whether those same factors suggest an analogous exception here. I think that that's the right way to go about thinking about this question. So, I mean, it seems to me that your main theme here is this idea that you did get one shot; is -- is that -- is that correct? Scott A. Keller: Combined with the unique right to trial counsel -- Elena Kagan: Yeah -- Scott A. Keller: -- and the -- and the -- and the significant -- Elena Kagan: Okay. Scott A. Keller: -- systemic costs. Elena Kagan: Okay. So the unique right, I mean, I think we've talked about. It's -- trial counsel, for sure, is the most, most, most important, but appellate counsel is pretty important too. But just let's think about this you -- you got one shot already. I guess I'm just not sure I understand it, because it seems to me what Martinez said is, you wouldn't -- you wouldn't get a shot to make your trial -- ineffective assistance of trial counsel claim, your IATC claim, and only if we made the exception that we did would you get a shot to make that trial counsel claim. And here, similarly, only if we do the same thing will you ever get a shot to make a claim that your appellate counsel was deficient. And people do have an independent, freestanding constitutional right to effective appellate counsel. Scott A. Keller: But Martinez focused on the fact that there was a particular trial error and a particular type of trial error that was not being able to be raised. And appellate-IAC claims are going to be based -- Elena Kagan: I think if you read -- Scott A. Keller: -- on that trial error. Elena Kagan: -- Martinez, Martinez basically does not talk at all about the underlying error. It talks about the ineffective assistance claim. Now, of course, ineffective assistance is important because, you know, it's not just the lawyers there for show, it's -- it's to remedy or prevent some underlying claim. But the same is true here. If Martinez was trying to figure out how to ensure the fairness of the trial process, this would be trying to figure out how to ensure, through effective counsel, the fairness of the appellate process. And it seems to me quite analogous, indeed identical -- Scott A. Keller: But in -- Elena Kagan: -- just on a different level. Scott A. Keller: But in Martinez, the ineffective assistance claim was a trial error. The litigation necessarily applies -- Elena Kagan: But here -- but here it's an appellate error. Ruth Bader Ginsburg: But one thing that's the same is that the State habeas would be the first opportunity to raise this. You can't raise ineffective assistance of appellate counsel on the appeal. That's obvious. So your -- the -- the State habeas is the first time you could raise it. And in considering this question, I'm sure you anticipated this, Justice Scalia, in Martinez, said there's not a dime's worth of difference between an ineffective assistance of trial counsel -- the issue in Martinez -- and those where Petitioner claims his direct appeal counsel was ineffective. Was he wrong in thinking there's not a dime's worth of difference? Scott A. Keller: He was wrong in this instance. And the reason is because Martinez was trying to maintain a baseline where at least some court had adjudicated the underlying trial error, and even as Martinez itself reaffirmed the general rule of Coleman. And if this Court were to start extending that now to appellate-IAC claims, it would be returning the Court to something akin to Fay v. -- Elena Kagan: But, again -- Scott A. Keller: -- litigation -- Elena Kagan: -- General, you're sort of -- Scott A. Keller: -- at some point. Elena Kagan: -- redefining it so that it fits your position. But Martinez was about having some court evaluate the ineffective assistance of trial claim, and this is about having some court evaluate the ineffective assistance of appellate counsel claim. And is there an underlying thing that we're trying to get at? Sure. In Martinez, it was ineffective assistance of trial counsel to ensure that the trial process was fair. Here, it's -- it's -- it's having some court litigate the ineffective assistance of appellate counsel claim in order to ensure that the appellate counsel is fair. So the two are quite analogous. Scott A. Keller: But under that reasoning, it would be -- the right to counsel necessarily has to end at some point. It could always be that you could then show ineffective assistance of State habeas counsel or Federal habeas counsel. Elena Kagan: It -- it ends, I think -- you're exactly right. And I think it ends where the Constitution gives out. Because we've said that although the State does not have to set up an appeals process, once it sets up an appeals process, you are entitled to effective counsel in it. And so that's where it ends. Scott A. Keller: That's right as a constitutional matter. However, State procedural bars under Coleman and Martinez still apply. And the cost of federalism and comity, particularly in a situation like this where the State trial court will have necessarily already decided the issue, and upsetting that is going to be precisely what the Court was trying to avoid in Coleman. And that's why when -- the first sentence of Coleman is, "This is a case about federalism." And indeed this case is too. Elena Kagan: Yes. And then there was Martinez. And as you said, in Martinez and in Trevino, we really went through the three factors that you talk about in your brief: How important is this? Is this the only shot? And, you know, does the State have something to do with this, or something. Is that the third one? And, you know, I'm -- I'm suggesting it's pretty important, and this is your only shot. Scott A. Keller: But the difference is it's not your only shot because the claim is going to be about an underlying alleged trial error. Here, opening up the claims for appellate-IAC -- Elena Kagan: But this claim -- Scott A. Keller: -- you're going to have -- Elena Kagan: -- is not about the underlying trial error. This claim is about effective assistance of appellate counsel. And -- and -- and that's about ensuring that the appellate process has integrity and fairness attached to it. Scott A. Keller: But, Justice Kagan, at root here, the issue is a supplemental jury instruction which was not preserved, which was correct, and there would have been no prejudice from in any event. And this is the type of case the Court should be worried about. There are going to be these State law objections of something that came up at trial, although this is an odd posture because it was not preserved in fact, but that would be the case the Court would have to be worrying about. And then we're going to be here twice over that claim being defaulted, arguing about not necessarily whether there was -- did appellate counsel make this decision or that decision. It's going to collapse into an underlying review of what happened at trial. And that's going to apply for all errors at trial on federal habeas, which is something this Court has long avoided, to undo the judgments issued by State courts, particularly when they are doubly defaulted claims that were, in fact, considered by at least one court before. Elena Kagan: But, General, that assumes that a -- that some court is going to say, if there was a trial error that we can see out there, then there was ineffective assistance of appellate counsel. But that's not correct for many of the reasons that people on -- I mean, that everybody acknowledges. To have ineffective assistance of appellate counsel, it's not because you failed to make an argument about any old trial error; it's going to be a special and rare thing. Scott A. Keller: And, Justice Kagan, precisely because it's going to be rare, that it's going to be an infinitesimally small number of cases are going to be meritorious, that has to be weighed under Martinez's equitable calculus against the huge systemic cost of opening up the entire trial on Federal habeas review to every little State law objection and evidentiary objection. Here, it's jury instructions. Samuel A. Alito, Jr.: Why will it be a small thing? If you can identify looking back that there was an objection that should have been granted, and it might have -- might have led to a different result at trial but it wasn't raised on direct appeal, then there's going to be ineffective assistance of -- of appellate counsel. Scott A. Keller: Exactly, Justice Alito, and that's why it will collapse. Also, too -- Sonia Sotomayor: I'm sorry. That's not the test -- that's not the test. The test is, would it have resulted in a -- a difference on appellate review, not at trial. Scott A. Keller: Well -- Sonia Sotomayor: There's -- the appellate review is on the basis of the record as it exists, not on one that should have existed. Scott A. Keller: Yes, but it's going to collapse into an analysis of what was the alleged trial error, because that would be what appellate counsel should have been trying to raise in that situation. Also, if I can back out, what we're talking about here is not just success on the merits of the claim. Raising a substantial claim of appellate-IAC, that standard is the would reasonable jurists debate standards that the Court is familiar with from the certificate of appealability standard. That is not a high threshold to survive. And so the number of claims that would flood into courts on Federal habeas review would be many. It's -- Stephen G. Breyer: Well, you'd have to show, wouldn't you, that -- that the -- any reasonable lawyer would have raised this -- would have won this claim and made a difference -- raised it, won it, and it would have made a difference. Scott A. Keller: You'd have to show that, but this case -- Stephen G. Breyer: Yeah, but that's not that easy to show, just as it's not that easy to show in a -- in the -- in the same situation in the trial. Scott A. Keller: But that's analyzing whether the claim would succeed. As far as -- Stephen G. Breyer: No -- Scott A. Keller: -- on court -- Stephen G. Breyer: I -- I accept that, and people raise all kinds of things in habeas. You know, they're -- they're -- this is a -- district judges are kept busy with these habeas petitions, I accept that. That's why I'm -- I'll read the empirical -- I -- I'm curious to know just what the situation is empirically. Scott A. Keller: And -- and they're going to be even busier and it's going to divert their attention from claims that would otherwise be meritorious. Extending an exception like this to an acknowledged set of claims that have an infinitesimally small chance of merit, that is not a good use of judicial resources. That's not why the writ of habeas corpus exists. And the equitable judgment inherent in -- in Martinez and various other cases on habeas review have noted that that equity must weigh in, and we would be inundated with all sorts of claims about even State law and -- Stephen G. Breyer: The other side has been brought out. I mean, there is the occasional claim where let's suppose the appellate lawyer just really didn't even bring an appeal. He had a two-page brief and the trial was rife with errors and a serious penalty. It was attached and -- and no relief whatsoever. He can't bring that to any court. Do you see that? That's the other side of it. Even if there are only a few. Anthony M. Kennedy: Or you could bring it on State collateral. Scott A. Keller: You absolutely -- you could bring it as is -- Stephen G. Breyer: He has to have -- he has to have failed to do that, and -- or at least the State collateral review has to also have been inadequate. And so we have to have a couple of situations where they are both inadequate or you don't even get into the Federal court. So the standard for winning, which you concede is quite -- is very tough and -- but suppose it's met, that's -- that's, of course, what's annoying on the other side. Here is a person in jail forever or worse, and the trial filled with errors and didn't have decent counsel anywhere and what a mess. I mean, shouldn't there be some remedy? And there is none. And that's why Justice Scalia wrote that there's no way to stop this extension. Scott A. Keller: Well, first of all -- Stephen G. Breyer: He wasn't for it. (Laughter.) Scott A. Keller: First of all, the miscarriage of justice -- actually in this instance, exception to overcome procedural default -- already exists. And so that would capture any cases of actual innocence that Your Honor would be discussing. Stephen G. Breyer: Where -- where does it exist? Scott A. Keller: McQuiggin v. Perkins. The -- you can overcome a procedural default for a miscarriage of justice. Wholly separate from Martinez. And in that situation you could overcome a procedural default using that -- that actual-innocence gateway. Now, as Justice Kennedy noted, though, State habeas would be the place to raise that claim. And if the claim was adjudicated in trial court, a record was made for appellate counsel and the habeas counsel, and then neither appellate -- Stephen G. Breyer: Actual innocence means he was actually innocent. Scott A. Keller: Well -- or actually innocent of the death penalty. Stephen G. Breyer: Yeah. Scott A. Keller: And that would be another way that that type of claim -- Sonia Sotomayor: Well, that's an interesting open question. Scott A. Keller: For a different day. (Laughter.) Scott A. Keller: But the question before the Court today is whether to extend the narrow exception for trial IAC claims when the court has recognized that the trial is the main event; appeals are not central due to determination of innocence or guilt. There's a significant difference between appeals and trials, as the Court has noted in Ross. And the costs of opening up the entire Federal trial do not warrant that extension. Elena Kagan: General, could I just -- I guess I got a little bit confused in your exchange with Justice Alito, because you had been pressing this is just going to be an infinitesimally small -- infinitesimally small, I think that that was your phrase. And Justice Alito said he thought it would happen all the time, and then you said yes, and then you went back to infinitesimally small. So, which is it? Scott A. Keller: The answer is, there's going to be an infinitesimally small number of claims that are actually successful, meritorious at the end of the day. However, the courts and the States are going to be faced with a wide number of -- Elena Kagan: Right. Okay. I thought that his point was different, that it was actually not going to be infinitesimally small. But let's say that it is going to be pretty rare, as you say. You know, then I think it really is Justice Breyer's question. It's like, okay, it will be rare. But the alternative is that those rare, good claims, where there really has been a defective appellate process and a violation of the constitutional right to a fair appellate process has been violated, and there's no way to correct for that in the same way that there was no way to correct for the -- the trial -- the ineffective trial counsel that we talked about in Martinez and Trevino. Scott A. Keller: You'd still have the actual-innocence exception, and also Martinez reaffirmed the general rule of Coleman. And what State procedural bars necessarily will do is bar certain claims that otherwise could have been raised. But when a trial court has adjudicated the case and neither appellate nor a habeas counsel have raised it, the universe of cases that we're talking about here combined with the cost on the other side of opening an entire Federal trial up do not warrant that extension. And -- Elena Kagan: It did reaffirm the general rule of Coleman except to the extent that this was your only shot. And this is your only shot to raise a claim of ineffective assistance of appellate counsel, which is a violation of a constitutional right. Scott A. Keller: To raise that particular claim, but that particular claim -- Elena Kagan: That's all we're dealing with here. Scott A. Keller: But it will be predicated on an underlying trial issue. And that's the difference. The trial IAC claim in Martinez, that was the trial error. That was the particular trial error the court was concerned about, and that unique bedrock right. Here, in contrast, when the Court has recognized repeatedly that appeals are quite different from trials, and that an appellate IAC claim is necessarily predicated upon an alleged trial error, the Court has adjudicated that alleged trial error. And separating it out and just saying that the appellate IAC claim itself has not been raised, that has to be seen, though, in the context that the underlying claim has. If there are no further questions, we ask the Court to affirm the judgment of the Fifth Circuit. John G. Roberts, Jr.: Thank you, counsel. Mr. Kretzer, three minutes. Seth Kretzer: The point at which my friend elicited a little bit of laughter in the courtroom is when he talked about whether or not actual innocence would apply to actual innocence of the death penalty, and he said that would be an issue for a future day. I think it bears to note that the error in this case, in Mr. Davila's case, was a guilt/innocence phase error. In other words, error that arose at the guilt/innocence phase. In other words, had the jury been allowed, properly instructed, Mr. Moblin -- with Mr. Davila's theory of defense, he would not have been able to get the death penalty. Neil Gorsuch: Counsel -- Seth Kretzer: This was the critical issue in the case. Neil Gorsuch: -- I don't know whether we'd create a couple of strange incentives if -- if we went down your road. If procedural default by State habeas counsel, ineffective assistance of appellate counsel is cause, I can see a world in which State habeas counsel might have an incentive not to raise it, you know, might actually be ineffective assistance of State habeas counsel to raise the issue, because Federal habeas may be more forgiving. So what do we about that problem, number one? And, number two, do we also create an incentive for States to stop using collateral review to test IAC claims? They don't have to do that. It's generally thought to be favorable to defense that they do do that, because it gives defense a chance to present evidence and prepare and do things like that. Some States don't permit it. Oklahoma, my old jurisdiction, it was very hard for defense counsel. And don't we create an incentive to go back to that, the bad old days? And -- and so by adding more procedure and perfecting this, do we actually wind up hurting the defense interests in this case? Seth Kretzer: Any State habeas attorney who would deliberately fault a claim from State habeas because they think they could get an ultimately more favorable meritorious review in Federal court would necessarily be violating any number of rules of professional conduct. As an initial matter, they would be -- Neil Gorsuch: Why? Why? If it's -- if it's -- if it's the effective best strategy for your client, I would think that's exactly what you'd do. Seth Kretzer: Well, as an initial matter, one would necessarily be perpetrating ineffective assistance on their own by deliberately defaulting a claim from State habeas. There's very few attorneys out there who would deliberately open themself up to a susceptibility of ineffectiveness contention if, for no other reason, you're kicked off the court appointments list. There's any number of reasons why lawyers would have a duty of candor to court not to deliberately strategically try not to raise a claim here, so that, in fact, they can get some more favorable forum later on. Outside the death penalty context, has to remember that, of course, the process goes very slowly. And so one might, in a non-death case, in a general felony case, might -- one might already be free from custody by the point they would have this aired in Federal court. The number of Federal courts actually having merits hearings on Strickland claims is incredibly small. And considering that habeas is designed -- Federal habeas is designed to prevent and correct severe malfunctions of the State trial system, that's probably a very good thing. And yet, in cases where the underlying ineffective-assistance-of-appellate-counsel claim is so integrally intertwined with the underlying strength of the appellate claim that was not raised, I think there's serious pause, because all that Mr. Davila is asking is for the same standard as that which exists in Martinez. Bedrock principles, where the situation -- the contention has to be raised in a writ. The -- the two situations are exactly analogous. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 91-712, United States v. Humberto Alvarez-Machain. General Starr. Kenneth W. Starr: Mr. Chief Justice, and may it please the Court: For over 100 years this Court has steadfastly adhered to what has become known as the Ker-Frisbie doctrine. Under that doctrine, the jurisdiction of courts is not impaired by the fact that an individual was unlawfully brought before the court to stand trial. That doctrine has served as the backdrop for the executive branch's negotiation of numerous extradition treaties, including our treaty with Mexico. This case, involving the forcible abduction of an individual from Mexico to stand trial in this country in connection with the torture and death of special agent Enrique Camarena of the Drug Enforcement Administration brings this doctrine once again before the Court. In this case, the lower courts concluded that the Ker-Frisbie doctrine does not apply where there is an extradition treaty in effect, the extradition treaty was arguably violated by the abduction, and where the foreign government protests the abduction. Harry A. Blackmun: General Starr, as a preliminary matter, has the State Department Legal Advisors' Office joined your brief? Kenneth W. Starr: The legal advisor is not on the brief, but the brief expresses the views of the United States, which includes the Department of State, and Justice Blackmun, there should be no significance to the fact that they are not shown on the brief. Their legal advisor, Mr. Williamson has in fact opined that in his view it is entirely appropriate and proper for courts to exercise jurisdiction under circumstances such as these. The Government speaks with one voice with respect to this case. Harry A. Blackmun: Nothing formal to that effect, however? Kenneth W. Starr: He did provide-- Harry A. Blackmun: Just opined? Kenneth W. Starr: --A letter or an opinion, that is correct, but that is a customary way, Justice Blackmun, in which the legal advisor expresses his views. In our view the-- Speaker: May I-- Kenneth W. Starr: --Yes. John Paul Stevens: --Before you get into your argument, why is this case a little different than some of the other Ker-Frisbie cases, has the doctrine ever been applied to a case involving the crime committed in another country by a national of that country? Kenneth W. Starr: By a national of that country, I believe the answer to that question is no. John Paul Stevens: So this is a unique... this is a case of first impression? Kenneth W. Starr: The facts are different, yes, but I think the doctrine itself, Justice Stevens, speaks quite broadly to the courts, that it is the role of the courts to try cases, and not to involve themselves with how the individual came into the court. John Paul Stevens: But in the Rauscher case, of course, that was critical how the individual-- Kenneth W. Starr: Yes, because under that... that is exactly right, and I think that gets to the core of this case. The distinction between Ker on the one hand and Rauscher on the other. Justice Miller's opinion in the Rauscher case examined very carefully the background of the treaty, the Webster-Ashburton treaty-- John Paul Stevens: --And they also emphasized the fact that he was a fugitive and an American citizen, whereas the facts here are much different. Kenneth W. Starr: --The facts here are different, but the point remains, Justice Stevens, that the doctrine itself has been the broad doctrine that one simply does not inquire into how... the court does not inquire into how the individual came there unless, and this is Rauscher's point, there is a violation of a treaty. A treaty is law. It must be respected as law, but here it is uncontested that there is no express provision of the treaty that speaks to this-- John Paul Stevens: But you do concede that if there were a violation of the treaty, that the Court would not have jurisdiction? Kenneth W. Starr: --Depending on the precise terms of the treaty, I don't want to speak so broadly as to say any violation might give rise to a divesting of jurisdiction. But certainly if we had a situation where, as in the Rauscher case, there is a clear treaty provision, the doctrine of specialty, well-understood, discussed at great length indeed. That doctrine finds its way into the text of our treaty with Mexico. It is quite well-settled that if a state is going to perform an official act and render a fugitive over, then that state has an interest in that individual only be charged with a crime that has been laid at his feet. But note that in Rauscher, the only relief for Rauscher in contrast to the situation here, was that he had to be tried for murder and not for cruel and unusual punishment. There was no requirement that Rauscher be returned to the United Kingdom where he had found asylum. John Paul Stevens: He would have to return before he could be tried for cruel and unusual punishment. Kenneth W. Starr: He might have to be-- John Paul Stevens: That's what the case holds-- Kenneth W. Starr: --Before he is tried for a crime other than that for which the nation rendered him over. I think this is a very important aspect of this case: to what extent does the extradition treaty operate exclusively with respect to our relationships with Mexico, and I think it is vitally important for me to make one point: that the extradition treaty is a tool, it is a valuable tool, but it is only a tool. We deal with the Government of Mexico quite informally. There are numerous instances of informal renditions of individuals outside the treaty terms. There have been instances where there have been informal renditions of individuals where it would appear that to extradite them might run afoul of the terms of the treaty, and Mexico therefore chooses, for political reasons, to-- John Paul Stevens: --It is perfectly clear, there is no precedent for our kidnapping a foreign national when that national's country is asserting jurisdiction over him. Kenneth W. Starr: --There is no case that involves those specific facts, Justice Stevens. I think that I concede to you. What I do not concede is that the insight of Ker in any way is compromised by the point that the individual happens to be a foreign national, and when the Court thinks as to the circumstances that might well arise, terrorism, narcotrafficking, there may very well be circumstances when it is the sober judgment of the United States Government that extraordinary action is required. And that is a matter that is entrusted in this Court, speaking initially through Chief Justice Marshall in the Head Money cases and in the Ship Richmond case said these are issues ultimately for the political branches. If the-- Antonin Scalia: General Starr, is it any less a violation of international law to kidnap a foreign national from a foreign country than an American national from a foreign country? Kenneth W. Starr: --I do not-- Antonin Scalia: Can I assume that we are not supposed to go in and just snatch people from foreign countries without their consent? Kenneth W. Starr: --I think it certainly could be maintained that as Mexico can reasonably maintain, that there was a violation of Mexico's sovereignty, and in your hypothetical, certainly a violation of sovereignty. What I don't want to readily concede, Justice Scalia, is that a violation of sovereignty is necessarily a violation of international law, of customary international law. Antonin Scalia: That isn't the point I am making. Whether it is a violation-- Kenneth W. Starr: Correct. Antonin Scalia: --of Mexico's sovereignty depends upon whether the person snatched was a Mexican citizen or not. Kenneth W. Starr: The answer is no. It is the territorial integrity that would have been compromised. Antonin Scalia: And indeed, an American national might have more cause to complain about the violation of international law by his country than a Mexican national might. Kenneth W. Starr: It is certainly clear from the standpoint of the Nation that its sovereignty has been violated, and that is a very serious matter. Chief Justice Marshall in Ship Richmond said that is a matter for the political branches. Indeed, in the Head Money cases he said this is a matter that may entail the most delicate kind of contretemps between nations, including the possibility of hostilities, but of this, the courts are to have no cognizance. Harry A. Blackmun: General Starr, historically, has the situation ever been reversed, where Mexico has come and raided us and taken someone? I am old enough to remember the days of Pancho Villa. [Laughter] Kenneth W. Starr: There are in fact episodes, in fact, at footnote 23 of our opening brief we do recount a situation which is quite similar to that. Harry A. Blackmun: What would this country do if it happened? Kenneth W. Starr: But in terms of what this country would do, in fact, what we saw in the Sidney Chaffee case I think is quite illustrative. Individuals go into Canada and kidnap a Canadian businessman and bring him to the United States to stand trial. It would not be our position, Justice Blackmun, that notwithstanding the affront to Canada's sovereignty or to Mexico's sovereignty or to the United States' sovereignty, that the courts of those countries were divested of jurisdiction. That is the narrow point that we are making, that these are matters that are entrusted to the political branches through the diplomatic process, to examine and to explore and to resolve. Anthony M. Kennedy: Do we decide this case, General Starr, on the assumption that there has been a violation of international law? Kenneth W. Starr: I don't think that you need to assume that there has been a violation of international law, but we are prepared, Justice Kennedy, to say that, assuming arguendo that there was, nonetheless, the Government's position should prevail. Anthony M. Kennedy: Do you concede that there is a violation of international law? Kenneth W. Starr: I do not concede that there is a violation of international law but for purposes of argument, I am prepared to say that if there were a violation of international law, still Ker-Frisbie applies, just as it applies when there is a violation of the Constitution of the United States. John Paul Stevens: But there is no violation of international law in either Ker or Frisbie. Kenneth W. Starr: Oh, there clearly was a violation of international law-- John Paul Stevens: Maybe civilian law possibly, but the man did not have an asylum status in that case. Kenneth W. Starr: --Well, Justice Stevens, I have to respectfully disagree that there was at least a violation of Peruvian sovereignty by virtue of... as the Court has described this case-- John Paul Stevens: But he did not have asylum status, he was a mere fugitive. Kenneth W. Starr: --But he was nonetheless, and this Court... when I read the Court's opinion in Ker it does not place any emphasis at all or any significance on that individual's status as an American citizen and as a fugitive-- John Paul Stevens: --makes that point critical-- Kenneth W. Starr: --But Rauscher, again, talks about the point, and we have no quarrel with that as embodied, as reflected in the fact that the extradition treaty with Mexico incorporates the specialty principle, but that is a narrow principle-- John Paul Stevens: --it has the distinction between Mexican nationals and those who are not Mexican nationals doesn't it-- Kenneth W. Starr: --Yes, it does, and in fact, I think that is a very important point. One of the reasons, Justice Stevens, that it is somewhat impracticable to proceed under the extradition treaty is that Mexico has no obligation to extradite its nationals. The United States will and does. The Government of Mexico has never extradited one of its nationals under the terms of an extradition treaty. It has done so in-- Sandra Day O'Connor: --But, General Starr, the treaty in Article 9 does say that if Mexico doesn't extradite one of its own nationals, that nevertheless, the United States can require Mexico to prosecute the person there. Kenneth W. Starr: --There is no question we have a right under Article 9.2 to have it submitted-- Sandra Day O'Connor: My concern, frankly, is that it is not so clear to me that the extradition treaty doesn't contemplate that that is the exclusive process to be followed. When you read Article 2, that says for the designated offenses, including murder, extradition shall take place subject to the treaty, and if you look at Article 9 which says the country doesn't have to yield up its own nationals, but will have to prosecute, I think one could come away thinking the treaty covers this case. Kenneth W. Starr: --I think with all respect that would be a misimpression. First of all, and foremost is the legal backdrop of our negotiation, Justice O'Connor, of this treaty. This treaty, along with our 102 other treaties, was negotiated against the backdrop of Ker-Frisbie, which has been very generally understood throughout the world, but certainly by the courts of this Nation as meaning that courts are not divested of jurisdiction even if there is an unlawful abduction. But now let me move to the treaty. I think, with all respect, that represents an overreading of the treaty. The treaty in various terms speaks in terms of requesting, the party requesting and invoking the treaty. If I leave nothing else with the Court other that Ker-Frisbie, it is this: the extradition treaty is employed only in some cases. We continue to have relations with Mexico informally outside the umbrella of the treaty, including when the terms of the treaty would be violated. I'm sorry. Sandra Day O'Connor: But isn't that always possible, that parties to a treaty, like parties to a contract, can agree to some other specific arrangement? Kenneth W. Starr: Yes, and it's one of the reasons why individuals should not be seen as having enforceable rights under this particular treaty. Which in contrast to the practice that is embodied in the treaty at Rauscher, this is a treaty that should not be seen as giving rise to privately enforceable rights, even-- Sandra Day O'Connor: Don't... don't extradition treaties, if they apply routinely, give rise to individual enforceable rights that they-- Kenneth W. Starr: --Well certainly, it can be argued that if there is a violation of the treaty... but my point is a very important and narrow one here, which is this treaty was crafted with this backdrop in mind of Ker-Frisbie. And if, if what we wanted to accomplish was what has been suggested by the other side, then there was a very readily available tool; the Harvard Project, in 1935, crafted a proposed insertion in extradition treaties, article 16, this is referred to in the briefs. That's quite clear that the Court shall not proceed under those circumstances. There is nothing here at all in the treaty itself about the courts being divested of jurisdiction. And it would be quite extraordinary for the Court to conclude that it's all right to proceed with the prosecution if there's been a violation of the Constitution of the United States, but a violation, at most accepting the other side's submission, of an implied obligation. David H. Souter: --General Starr, do any-- --Go ahead. Thank you. Do any of our other extradition treaties include what you refer to as article 16? Kenneth W. Starr: They do not, and they do not for a reason. We would not readily accede to such a limitation on the ability of the executive branch under various circumstances to proceed by other means; and certainly not to give an argument or a right to an individual to say, I do not have to face these serious charges against me by virtue of my reading of an implied obligation in the treaty, or in that instance, an express obligation. David H. Souter: Just to-- Kenneth W. Starr: And unless we were willing to engage... I'm sorry. David H. Souter: --No, you finish your sentence. Kenneth W. Starr: Unless we were willing to enter into a Webster-Ashburton type treaty and then bind ourselves with respect to the doctrine of specialty. We've done that here, but that's all that we have done. David H. Souter: So it would be... it would be correct to say that in no presently operative extradition treaty of the United States there is any express bar to the United States' resort to some means other than extradition to get the person back. Kenneth W. Starr: That is true. David H. Souter: Okay. Is it... may I ask you another treaty question? Your brief on page 32 refers both the U.N. charter and to the OAS charter, which the court of appeals referred to. Did... did this abduction violate the terms of either of those charters? Kenneth W. Starr: No, we would not concede that they do. We certainly do understand the point of the Government of Mexico that its sovereignty was violated, but by virtue... the record is not terribly extensive in this case, but footnote 2 at least adumbrates briefly the background. That is to say, no DEA agents were in the territory of the Government of Mexico, and this activity followed on the heels of informal discussions with representatives of the Government of Mexico. We did not, in fact, physically intrude directly into the territorial integrity of the Government of Mexico, but we do not suggest that these were not our agents. But in terms of whether there was a violation or not of the U.N. charter and the like, I think the law is clear, Justice Souter, that that does not give rise to privately enforceable rights. Again, what underlies, I think, the Ker-Frisbie doctrine, is the principle that it's not for courts to involve themselves in these sorts of very delicate determinations as to whether there were violations of international law and the like; that these are matters that are to be adjusted between the Governments of the United States and Mexico and any other affected country. And that's the assurance that the Court has. We are held to account to the Congress of the United States, which knows how to legislate. I should add, Justice Stevens, with respect to the Webster-Ashburton treaty, that the Court was not of one voice in that case. As you will recall, there was, of course, the dissent by Chief Justice White. But more than that, one of the-- John Paul Stevens: Justice White made the argument that there's nothing express in the treaty. Kenneth W. Starr: --But one-- John Paul Stevens: But the majority said that it wasn't necessary to be express. Kenneth W. Starr: --And what the majority said, Justice Stevens, is the Congress of the United States in those two statutes had clearly made its view known. And the point I was making to Justice... may I conclude with Justice Souter? The point I was making with Justice Souter is Congress knows how to step in and legislate. It has done through... done so through the Mansfield amendment. It did so in the legal backdrop of Webster-Ashburton, and the Court did place emphasis on that and we think that was an important aspect of the case. That is not so here. There are no confirming statutes here. This is a very general treaty. There's no... and our colleagues on the other side admit there's no express treaty provision, and it is extraordinary-- John Paul Stevens: Upon the statute point in the case you refer to, one Justice concurred separately on that ground alone. Kenneth W. Starr: --That's correct. John Paul Stevens: The Court as a whole did not regard that as an essenatial part of its decision, it was the second ground of its decision. Kenneth W. Starr: Justice Miller's opinion is quite scholarly, lengthy, much of it can be referred to as dicta, but I do think that he was placing emphasis... my reading may be different with all respect, was placing emphasis on the fact that its understanding of this treaty, with the doctrine of specialty, with which we have no quarrel-- John Paul Stevens: --created it in that case. Kenneth W. Starr: --But they created it against the backdrop of the practice of nations. And when you look-- John Paul Stevens: The State law decisions were their principal reliance. State court decisions in the United States. Kenneth W. Starr: And when... when you look at what Ker did, Justice Stevens, in the last page of the opinion it spoke about authorities of the highest respectability, including State law authorities, State v. Brewster out of Vermont in 1835 involving the abduction of an individual from Canada. And the Vermont supreme court said, and this Court unanimously said we have no quarrel with that, these are authorities of the highest respectability, that it is not for us to question how that individual came from Canada into Vermont, if he was kidnapped. And Ker then went on, what happens if there is that sort of violation? An individual may find himself extradited to Canada to stand trial for kidnapping. There are other remedies that are available. There are obviously diplomatic and political remedies that are available, Ker noted that. But that the cost to society, I think that was an insight of Justice Harlan in United States v. Blue, the costs to society are simply too great to say because you came, in our view, unlawfully into our jurisdiction, we're going to divest ourselves of jurisdiction. That is a very heavy cost for society to bear, and that is one of the reasons that I think Justice Black spoke so forcefully to this in Frisbie itself, where... the assertion there, interstate, not going across international lines to be sure, but there was an allegation of a severe beating and a violation of the Federal Kidnapping Act, and Justice Black said no. There may be a violation of law and there may be remedies for those violations of law, but if you have been charged with a crime, you have to stand trial for that crime. John Paul Stevens: General Starr, let me just go back to one point, and then I'll... I'm taking more of your time than I should, I realize. Do you think you can compare two cases? Suppose if a Mexican fugitive fled into Texas and was kidnapped by Mexican authorities and brought back into Mexico on the one hand. In the other case they came in and apprehended an American citizen in Texas and took him to Mexico. Do you think they would be equally offensive to our sovereignty, or do you think our sovereignty would be more offended by the kidnapping of the American citizen as contrasted with the Mexican fugitive? Kenneth W. Starr: I think our... our territorial sovereignty would be equally violated in each instance. I think our sense of violation is obviously enhanced if one's own citizen is affected. But the key point, the nationality principle... but it still would not be our position, Justice Stevens, that the courts of Mexico were divested of jurisdiction. That's exactly what we told, with all respect, the Government of Mexico in the episode that we recount in footnote 23, the Martinez episode. They come across... there is, in fact, an abduction from Mexico into the United States. We say that was improper. Martinez has to go back to stand trial in Mexico for kidnapping. We responded to the extradition request, but we told the Government of Mexico, with all respect, I'm sorry, the courts are not divested of jurisdiction, that was the holding of the Ker case. And we think the Ker case spoke in very broad terms, including looking at English authorities, which are very much to the same effect. The authorities throughout, and especially in this country, have been that there is no reason for a court not to try a case just because of an unlawful apprehension. Let other remedies suffice, but the remedy of divesting the Court of jurisdiction is too heavy a cost and it also, quite frankly in my judgment, tranches on separation of powers concerns, especially when the order is to repatriate the individual against the will of the executive branch. John Paul Stevens: Can I suggest one thing on the costs. In the other cases, if the American tribunal can't try him, he's not going to be tried at all. Whereas here it's not the same cost, because he's subject to trial in the state from which he was abducted. Kenneth W. Starr: Well he is subject to... I think if a careful parsing of 92, by the way is given, all that 92 says is that it shall be submitted to the proper authorities. There's no requirement of prosecution, there's the requirement of submitting the matter to prosecutorial authority. John Paul Stevens: Well, at least he's subject to prosecution there, whereas in the Peru case-- Kenneth W. Starr: That is-- John Paul Stevens: --The man was not subject to prosecution in Peru. Kenneth W. Starr: --But my final point with respect to that is that does not vindicate the sovereign interests of the United States. It is critical to note that Enrique Camarena was tortured and murdered when he was serving in his official capacity trying to stop the flow of drugs from Mexico into the United States. And the district court found that it had extra... that it had subject matter jurisdiction. That is crystal clear, and that distinguishes this from a crime that might somehow indirectly affect the interests of the United States that carried... that is carried on overseas. I'd like to reserve the remainder of my time. William H. Rehnquist: Very well, General Starr. Mr. Hoffman, we'll hear from you. Paul L. Hoffman: Mr. Chief Justice, and may it please the Court: This case does depend on a choice between the line of authority that begins with Ker v. Illinois and the line of authority that begins with United States v. Rauscher, and in the line of authority starting with United States v. Rauscher, this Court has made it clear on several occasions, an unbroken chain of occasions, in Johnson v. Brown, in the Ford case, in United States v. Cook, that the jurisdiction of the United States, the authority of the United States can be limited by treaty obligations. That is the basic principle of Rauscher and Rauscher really stands as an answer to all of the arguments that the Government has made in this case. In the Rauscher case, there was no explicit rule of specialty, in the Webster-Ashburton treaty of 1842, nor was there any explicit mention that a violation of the rule of specialty would limit the jurisdiction of the Court. In fact, in that case there had been a conviction of somebody. Mr. Rauscher had been convicted. He was physically before the Court, and yet this Court decided that our international obligations under the Webster-Ashburton treaty were more important and the Court found that in the language of the treaty, in the manifest purpose and object of the treaty, the Court had to find that there was a rule of specialty, and the Court did not defer to the executive branch version of that rule of specialty. In fact, there had been a diplomatic controversy raging between the United States and Great Britain for more than a decade on this very point, and the British Government had made its position very clear that a rule of specialty was required because of the background rule of customary law that the parties had to have intended by creating the language that they created in the treaty, which is the same argument that we make here. The Government of Mexico has made it very clear that they understood, as Canada understood, that extradition treaties, when they place specific limits on how people can be rendered, mean that. The deal was article 9, with respect to obtaining the presence of a Mexican national before this Court. That was the deal that was made, and in the context of that treaty and its purpose and the entire structure of it, it must mean that the United States is not free to kidnap Mexican nationals to circumvent that. Byron R. White: How about Americans in Mexico who are charged with having committed a crime, in America? Paul L. Hoffman: Justice White, it would be our view based on the language of the treaty, its purpose and the fact that it is the exclusive means, that Americans should not be kidnapped consistent with this treaty either, because the limitations, for example, on the political offense doctrine and the other limitations in the treaty also, we believe, should lead a court to conclude that kidnapping to circumvent those limitations would also be a violation of the treaty. But with respect to article 9, it is different. There are very few cases of kidnapping, there are very few cases... there are no cases of kidnapping of a national in the Ker-Frisbie line that the Government argues is a backdrop. Article 9 makes it very clear what the deal was with respect to Mexican nationals, as Judge Browning in the Verdugo case in the Ninth Circuit found that one could base a decision, a court could base a decision on article 9 that there was a specific arrangement, but our belief is that-- Antonin Scalia: I don't understand what you mean by a specific arrangment... what article 9 said if you don't turn it over you may consider prosecution. Paul L. Hoffman: --Your Honor... I'm sorry... Justice Scalia, what article 9 does, as it says, if you want to obtain personal jurisdiction over a Mexican national you have two alternatives. I mean, the alternatives are you ask and either extradition will be granted or the case will be submitted for prosecution. It doesn't mean that you can kidnap to obtain jurisdiction. Antonin Scalia: It does not go on to say and nothing else. It is a treaty that gives to the United States benefits that the United States did not have before. You can get extradition, and if you don't get that you might also get prosecution, and it doesn't go on to say and that's it. Paul L. Hoffman: But it can't be understood as also suggesting that a kidnapping in violation of those terms would be proper. The history-- Antonin Scalia: --nothing about the point-- Paul L. Hoffman: --But those words can't be read in isolation. I think the whole text of the treaty indicates that the parties agreed on specific limitations on how you would get jurisdiction, and it's in the context and the Vienna Convention and the rules in Rauscher indicate that one has to read those treaty terms in the context. Antonin Scalia: --The rule in Rauscher, I mean the rule you suggest may be a reasonable one, but it wasn't the rule that was pronounced in Rauscher. Rauscher said and in the words of Mr. Justice Miller, we feel authorized to state that the weight of authority and of sound principle are in favor of the proposition that a person who has been brought within the jurisdiction of the court by virtue of proceedings under an extradition treaty can only be tried for one of the offenses described in that treaty. That is a quite different principle. If you are using the treaty to get him here, you have to abide by the terms of the treaty. Here, the treaty is not used to get him here. I don't, I mean, there may be good reasons, but Rauscher isn't the reason. Paul L. Hoffman: Justice Scalia, I think that the principle in Rauscher is that the court may find an inherent provision that's not specifically stated. Our case is not a case based on the rule of specialty, but it's based on an even more fundamental rule, and the Court's analysis in Rauscher certainly would permit this Court to look to the background rules of customary law; as they did in Rauscher, it would look to the history, where Secretaries of State of the 19th century, from the beginning of our extradition treaties on said that abductions violated the treaty, they were not consistent. Byron R. White: You don't suggest that Mexico could not have voluntarily turned over... turned over one of their nationals for a trial in the United States? Paul L. Hoffman: I would suggest that the Mexican Government would certainly not turn over a Mexican national because of the restrictions-- Byron R. White: Would it violate the treaty? Paul L. Hoffman: --No. Justice White. Byron R. White: Has it ever happened? Paul L. Hoffman: I do not know that Mexico has handed over a national in the course of our relations. Anthony M. Kennedy: But you don't think it would violate the treaty? Paul L. Hoffman: No. Our position-- Anthony M. Kennedy: Do you? Paul L. Hoffman: --No. Byron R. White: So it wouldn't be that the treaty would not be the only way of securing the presence of a Mexican national in the United States? Paul L. Hoffman: There has been a long history of informal relations between Mexico and the United States, and those are perfectly consistent with the treaty and with our version of the treaty, our position on the treaty. Byron R. White: You don't think that if Mexico turned over one of its citizens informally, not under the treaty, would the defendant have a-- Paul L. Hoffman: If Mexico-- Byron R. White: --If they turned him over and he was being... he was charged with a crime here, would he have a valid motion for dismissal of the case? Paul L. Hoffman: --I think Mexico has the ability to defease that right from him, I mean, I think that and that is perfectly consistent with Rauscher and the specialty cases. William H. Rehnquist: So what you are saying maybe it's Mexico's right and not the individual's right? Paul L. Hoffman: No, well, it's both. It's both and I think in the case of a-- William H. Rehnquist: If an individual's right can be defeated by Mexico saying we don't care-- Paul L. Hoffman: --And that was true in Rauscher. In Rauscher Great Britain could have decided to allow Rauscher to be tried for a lesser offense than the murder that they extradited him for. That is true in every specialty case that the foreign sovereign has the absolute right to take away the principle of specialty that's asserted by the individual. William H. Rehnquist: --Doesn't that suggest then that it's the foreign sovereign's right and that the individual may be a third-party beneficiary so long as that... but it isn't primarily the individual's right. Paul L. Hoffman: But there is a long history in this country of self-execution, of the notion that extradition treaties are self-executing, and extradition treaties serve different purposes. To be sure they serve the purposes of mutual cooperation and law enforcement, but they also serve the purpose of protecting sovereign interest and they serve the purpose of protecting individual interest and that has been understood in the cases from the very beginning which have given individuals the rights to claim interests which are really sovereign rights too. In this particular case, the sovereign rights and the individual rights are almost identical, and they coincide in the sense that for a Mexican national, Mexico owes a duty to the respondent in this case to protect him and offer the benefits of Mexican law, and so when they are asserting their sovereign interests to prevent the United States from circumventing this treaty and bringing him to the United States they are also protecting his interests. The interests are really in the same alignment in this case and under Rauscher and Johnson and cases before and after that, individuals have been given the right to claim benefits under treaties. William H. Rehnquist: But you agree that if Mexico had not protested this and said we don't care about this, then the treaty would not bar the trial of this person? Paul L. Hoffman: If Mexico had given its consent, I think that would be very similar to what Justice O'Connor talked about with respect to contracts. If Mexico and the United States enter into a different agreement and if they do it in the context of a consensual rendition, then it is true that that respondent would not have the ability to assert this right in the court. Sandra Day O'Connor: What is your case authority for that proposition? Paul L. Hoffman: With respect to the informal renditions? The line of... first of all, Ker v. Illinois is certainly a case in which the fact of an absence of protest by Peru was noted, that Peru did not assert its sovereign interest in preventing an abduction from its territory to the extent it had it, that the court was very clear to say that Peru had not asserted that right, and in many of the cases that have followed Ker, Ker is the only international abduction case in this Court. But in the cases since then, courts have gone out of their way to point out that the foreign sovereign had not protested, and I think that that is consistent with the theory that the foreign sovereign is in a position to consent to a rendition outside of the terms of the treaty. Byron R. White: Well, suppose that it happened in this case and the United States, well, do you think the rule of specialty would apply then? Paul L. Hoffman: The rule of specialty would apply in an informal case? Well, there is certainly some authority. This Court has not decided that question, there is certainly authority in lower courts that an informal rendition would include a rule of specialty. That is not an issue that certainly applies in this case because there was a clear, unequivocal protest, there is no doubt about Mexico's position. There is also no doubt about the violation of international law, and in reading this treaty we would submit that there can be no doubt that the United States can't come into Mexico to circumvent the prohibitions in article 9 of the treaty. One of the ways to look at it, I suppose, is that the U.S. position would be that if they had asked for extradition formally and then they were denied and Mexico said instead what they say before this Court, we will not extradite Dr. Alvarez-Machain, what we will do is try him as we have tried many others associated with the case, allegedly involved in the Camarena case, and the United States Government says, no that doesn't satisfy us. We want something more than that, and so we will kidnap him. Presumably if the request had been made then that would violate the treaty. Sandra Day O'Connor: Mr. Hoffman, assuming that the kidnapping was a violation of international law, do you assert that gives a U.S. court any power to remedy the situation? Paul L. Hoffman: Justice O'Connor, I believe that that-- Sandra Day O'Connor: In a subsequent prosecution of the individual? Paul L. Hoffman: --That raises different questions, clearly, than the ones upon which this case was decided. I think that there are strong arguments for the authority of the courts to enforce a customary prohibition in international law in this case. The Mollocoptus principle does involve a violation, this kind of violation and a protest meaning that there has to be repatriation, but I think that those would raise very different questions and the authority of the United States to overcome that customary principle might be greater than in the case of a treaty where the courts have a constitutional role that's been recognized. Sandra Day O'Connor: Well, if we were to conclude the treaty doesn't cover this, do you fall back on some violation of international law? Paul L. Hoffman: Justice O'Connor, there were alternative grounds for affirmance that were presented to the Ninth Circuit and the courts below. Those have not been ruled upon either by the district court or the Ninth Circuit and presumably those would be litigated if this Court finds that there is no provision in the treaty. One of the things that, to return to Rauscher for a moment, the point that the Government has made about the statutes really don't amount... this Court has already rejected that, I think in Rauscher and Johnson v. Brown, where the Court has said that the statutes were not an essential ground for the decision, and clearly there were no statutes in Ford and Cook of the kind that the Government claims. Nor were there any explicit treaty provisions that dealt with the consequences of seizure in violation of the treaty limitations. With respect to the Ker-Frisbie, the Ker doctrine, the Government has claimed that Ker stands for a much broader proposition than the actual decision in Ker would suggest. In Ker, there was no... under our presentation of this case, Ker would be decided the same way. In Ker there was a private abduction and so it was not a state-sponsored case of kidnapping, that's... and the Chaffee case that was mentioned by the Government is another case of a private abduction and I think that under customary law and under what Mexico and Canada have understood this treaty to mean, it is state-sponsored kidnapping that would be prohibited, not necessarily a private abduction. So Ker is limited to that situation. In addition, the Court went out of its way to say that there had been no protest and therefore Peru's sovereign interests were not at stake, and that that is a key distinction between that case and this case. In the cases since Ker, the courts have, the cases have all fallen into situations where there has been consent or acquiescence in the informal renditions or where there had been private abductions, and that's true... our recitation of the foreign cases which says that they appear to be in alignment too, that really the Ker doctrine that the Government claims as a backdrop principle has not been known widely in the world, has not been known in this country, and certainly would not have been known to Mexico as meaning that the United States could engage in state-sponsored kidnapping and that that would not affect the jurisdiction of the court to try somebody. William H. Rehnquist: If there were a case concededly controlling from this Court, governing a particular... would it make any difference whether Mexico knew about the case or not? Paul L. Hoffman: No, Chief Justice Rehnquist, if this Court were to find that Ker stands for a broad principle that notwithstanding treaty obligations a court should try the person who comes before it no matter how that person comes before it, then obviously the treaty would not, well, it would apply. William H. Rehnquist: What you're saying then is that the holding of Ker, the teaching, whatever you want to call it, has not been understood in the international community as broadly as the Government is saying it has? Paul L. Hoffman: That's correct, and I don't think it's been understood by lower court cases. Now there is some broad language about what Ker means, but the cases, I think, have been very careful to distinguish between the different situations that point out the absence of protest and I think that the Rauscher line stands for an equally important line of authority and policy interest. What this Court said in Johnson v. Brown was that treaty obligations, the enforcement in good faith of treaty obligations is of vital importance to the Nation, and it was understood from the beginning. Anthony M. Kennedy: Well, counsel, I think your point that this was not against a background where Mexico knew of our policy is much diminished in force by the Government's citation of a letter in 1906 from the acting Secretary of State pointing out to the Mexican Government that Ker is on the books and that the Government of the United States follows that principle with reference to persons taken from foreign sovereignty. Paul L. Hoffman: But the Martinez case is a different case, and it is fully consistent with the position that we are asserting before this Court. In Martinez the person was abducted... excuse me, that was abducted by private kidnappers. Mr. Felix was not a U.S. Government agent sent across the border to capture somebody. A private abductor brought someone across the border and the United States took the position that Ker-Frisbie applied in that situation and there was no violation at stake, and the United States extradited the kidnappers, and so the Martinez incident is-- Anthony M. Kennedy: But the point is that the Mexican Government has been advised of this doctrine and of its applicability. Paul L. Hoffman: --But Justice Kennedy, the Mexican Government was never advised and the United States has never asserted... and it's my belief that the United States has never asserted before this case that the United States reserves the rights with its extradition partners to itself engage in kidnapping from other countries to avoid the limitations and extradition treaties, and that's our main point, that the extradition treaty... and this is the point that Mexico-- Antonin Scalia: What... you're referring to the limitations in the expedition treaty, and you referred earlier to the limitations in Article 9. There are no limitations in Article 9. You can read it from beginning to end. There is no limitation. Paul L. Hoffman: But Justice Scalia, the limitation is the fact that Article 9 talks about how the United States may obtain personal jurisdiction over a Mexican national. Antonin Scalia: You create the limitation by simply positing that it can't be done any other way. It does not say in Article 9 or anywhere else in the treaty-- Paul L. Hoffman: But Article 9-- Antonin Scalia: --That it can't be done in any other way. Paul L. Hoffman: --Article 9 comes with a long and historical heritage in the sense that before Article 9 the Mexican Government said it would not extradite its nationals. In every one of the extradition treaties before, Mexico took the position it would not under any circumstances extradite nationals. The Secretary of State, as this Court noted in the Valentine case said that it was our understanding that we couldn't even ask for Mexican nationals. It would be inappropriate under the treaty to do that. So Article 9 was a step in the direction of the kinds of interests that... the law enforcement interests that the United States was concerned about, and so what Mexico gave up in Article 9, it said number 1, we will consider extradition for the first time, and number 2, if we decide not to extradite, as it is our right not to do, we will submit the case for prosecution. Antonin Scalia: But there's no prohibition of any other manner of getting the individual back to the United States except to the extent that some such prohibition exists in international law, quite apart from the treaty. Paul L. Hoffman: Well, but there's no prohibition in... no explicit prohibition on the fact that you can't execute summarily the person that's extradited, or you can't torture them. I mean, what we're saying is that the understanding that States have when they enter into extradition treaties, and it's not just the respondent saying it, but Canada has said it to this Court, Mexico has said it to this Court, that the U.S. position in this case is a shocking position and a new position, and it is understood, just as it was understood that a rule of specialty should be found to be part of the Webster-Ashburton Treaty, that this could not be allowed, and just as words were added, a provision was added-- Antonin Scalia: Would it be any less shocking to them if they had no extradition treaty with the United States and the same thing occurred? Paul L. Hoffman: --No, it would be shocking in both-- Antonin Scalia: Of course, it would be no less shocking at all. It seems to me you're not relying on the treaty. You're relying upon a general rule of international law. Paul L. Hoffman: --There was a... I think that is not the case in the sense that just because the United States engages in egregious conduct that violates basic principles of the international legal order and it violates them in many different ways doesn't mean that it doesn't also violate the explicit provisions... the clear intent of this treaty, and I think that-- Antonin Scalia: The clear intent. Certainly not the clear language. Paul L. Hoffman: --That's correct, Justice Scalia. There's no... Mexico has explained very clearly in its brief why it believed it was not necessary to ask the United States for such an explicit provision, because it never believed that the United States would engage in that conduct, and if the United States had asked for that, had said we consider this to be optional, if we want to ask under the treaty we'll ask under the treaty, but if we don't ask under the treaty, we'll kidnap, they said they would have picked up their briefcases and left and we wouldn't have extradition treaties. John Paul Stevens: Mr. Hoffman, can I ask you a question about the text of the treaty? Article 17 does have the rule of specialty and it's spelled out in careful detail. Was that a customary provision in extradition treaties before the Rauscher decision? Paul L. Hoffman: That is what the Court refers to in Rauscher, that it had been the custom that when a person had been handed over in that manner that they could only be tried for that-- John Paul Stevens: Was that a custom independently of any written language in treaties-- Paul L. Hoffman: --Yes. John Paul Stevens: --Or was it a customary provision of treaties? Paul L. Hoffman: Yes, it was a customary-- John Paul Stevens: It makes a big difference it seems to me. Paul L. Hoffman: --I don't know if I can answer that. I believe that it was a customary prohibition, but I cannot answer whether-- John Paul Stevens: The opinion itself doesn't refer to any such provision in the treaty, and I had assumed that they had implied that that was just a fair way to read the treaty, that if we followed the procedure-- Paul L. Hoffman: --My understanding, and certainly the Justice Friendly decision in Fiacani would suggest, that principles of international comity would require the same result, that if someone is handed over informally as sovereign nations have the right to do that that principle would still obtain, that essentially what has happened is that the State that has handed the person over has essentially given up a sovereign right to give that person asylum, and so the authority is limited in terms of prosecution to what... to that piece of sovereignty that the Government has given up. And I think that extradition treaties have to be read in the context of those sovereign interests that this Court has recognized from the beginning of its work. William H. Rehnquist: --Mr. Hoffman, certainly the Court in Frisbie read Ker very broadly. It said this Court has never departed from the rule announced in Ker that the power of a court to try a person for a crime is not impaired by the fact that he had been brought within the Court's jurisdiction by reason of a forcible abduction. Paul L. Hoffman: Well, Chief Justice Rehnquist, that's true. Frisbie reads that very broadly in that context, but the Frisbie context is very different. Under the extradition clause within the United States, for example, there is no right... sovereign right that one State has to delay or deny extradition to another, and so there are no sovereign issues there, and the question is whether the due process clause may be used to remedy that kind of police conduct. William H. Rehnquist: But if you're right that the fact that it was a governmental kidnapping is important, there was... it's a governmental kidnapping in Frisbie, too. Paul L. Hoffman: Well, but the reason that it's important because it's a governmental kidnapping is that it invokes our treaty obligations. I mean, our-- William H. Rehnquist: Why should the treaty obligations be more important when a court is determining jurisdiction than perhaps violations of the Constitution of the United States? Paul L. Hoffman: --Well, I think that obviously the Constitution is more important from our standpoint as Americans than treaties, but treaties have been very important to this country's history, and I think this Court has recognized that treaties may place a limitation on the authority of the United States Government to seize, and that those limitations must be fulfilled, and it's not just because it's a treaty obligation, it's because those treaty obligations are part of a web of international relationships that are essential to this country, and have been thought to be essential to this country from the beginning of time. William H. Rehnquist: That really doesn't distinguish them from a constitutional principle. In fact, as you concede, a treaty is subordinate to the Constitution. Paul L. Hoffman: But the Constitution does... was found in Frisbie not to place limits of that kind. It was found that the due process clause, which was the clause that was relied upon in Frisbie, was found to be satisfied by giving that person a fair trial. Moreover, the only... I think in the Frisbie type case there's a kind of inherent futility. If you send the person back as a remedy for that violation the person will be back again, so unless you actually affirmatively grant them immunity from prosecution, they're going to be tried before that court no matter what. That's not true here. The treaty obligation limits the authority, and in fact the remedy is different in the sense-- William H. Rehnquist: So in this case the accused murderer perhaps never will be tried. Paul L. Hoffman: --I don't think that the Court can assume that, because Mexico has-- Byron R. White: Well, I thought that was your point that you were just making. Paul L. Hoffman: --No, but the point is that it will be a different... what will happen is different, and in fact in this case the policies of Frisbie are satisfied to some degree because Mexico will agree to prosecute. Mexico has stated to this Court that it will live up to its obligations under Article 92, and it's given the Court very good reason for believing that that's true, and so the underlying policies of Ker-Frisbie about immunity from prosecution don't apply because Mexico will prosecute, and that's the bargain that the United States made, and it made it willingly, that Mexico would be able in a case like this, which after all involves also a murder of a Mexican citizen. The events occurred in Mexico... Mexico has an interest. Antonin Scalia: That's no bargain. All it says is that Mexico may prosecute. That's what the treaty says, not that it must. Paul L. Hoffman: Well, but that's a traditional form of that kind of treaty provision-- Antonin Scalia: You mean they say may when they mean must? Paul L. Hoffman: --No. What it means is that... and the United States insists on this too, that obviously there's prosecutorial discretion based on the kinds of evidence that are presented. The United States hasn't presented evidence, as far as anyone knows. Antonin Scalia: Are you telling me that Article 9 means that Mexico must prosecute-- Paul L. Hoffman: No. Antonin Scalia: --If there is evidence to prosecute? Paul L. Hoffman: No. What Article 9 says-- Antonin Scalia: Does it mean Mexico can prosecute if it feels like it, and if it doesn't feel like it it need not prosecute? Paul L. Hoffman: --No. What it means is that Mexico is under a good faith international obligation to submit the case for prosecution, and if the case warrants prosecution it will prosecute, and that is the same arrangement that the United States made. I mean, the United States has made no great a commitment to Mexico, that if the reverse situation is the case... and this is a treaty that has benefits and limitations for both sides that are important. This protects Americans, too, and if the shoe were on the other foot, and if the Mexican agents come into the United States to Los Angeles and kidnap the DEA agents that they have requested under the extradition treaty in this case, I don't think that anyone would believe that this treaty... that it would be consistent with this treaty to go outside that extradition process that's set up by the treaty and to kidnap those DEA agents, bring them down to Mexico, and say that it's fine for them to be tried. The treaty cannot be read that way. That would be... I think it would be blatantly a bad faith interpretation of the treaty to allow either country to perform in that way. Mr. Chief Justice, I-- William H. Rehnquist: Thank you, Mr. Hoffman. General Starr, you have 3 minutes remaining. General Starr, may I ask you one quick question before you get onto what you're otherwise going to say? Do you understand the rule of specialty to have been a customary principle of international law, so that technically its inclusion in this treaty would have been unnecessary? Kenneth W. Starr: I think that the court did not come... I don't understand that to be the case. I understand it to be the case that the practice of nations was one that had given rise to various disputes. The court in Rauscher then examined that practice and then examined the specific context of the Webster-Ashburton Treaty itself, came to the view that the doctrine of specialty was in fact understood to be a resolution of the conflict in that particular instance, and then secondly that that understanding was confirmed by statutes passed by Congress, so that briefly is our understanding of Rauscher. Antonin Scalia: General Starr, do you agree that Mexico had an obligation to prosecute under Article 9-- Kenneth W. Starr: The... my... I'm sorry. John Paul Stevens: --If the evidence was adequate? Kenneth W. Starr: My understanding of the treaty, I take it at its terms, is that they shall submit it to the prosecution, but it's up to the prosecution to then determine to the appropriate authorities. We would simply submit it to the Government of Mexico, but there's no express obligation in 9(2) for a prosecution to actually be brought. There's... it would be completely consistent with the literal language of the treaty for the prosecution to be declined. Antonin Scalia: Well, don't you think there's a good faith obligation to prosecute if they thought the evidence warranted it? The United States doesn't think that's what this treaty means? Kenneth W. Starr: I don't think the treaty by its terms-- John Paul Stevens: I understand what the treaty by its terms said. Kenneth W. Starr: --Requires... obviously, the parties to any contract or covenant or compact should proceed in good faith, but nonetheless there is no specific requirement. Now, very, very briefly, legal backdrop is very important. This Court has said that recently, that the legal context is important, and therefore the understanding of Ker is quite important. The executive branch has relied on our understanding of Ker, and when we look to what Ker itself says in addition, as confirmed by what Justice Black said in Frisbie v. Collins, what Justice Miller said in citing his authorities of highest respectability, it was not only common law authorities but English authorities, including his lead authority was an English authority where an individual had been seized in Belgium by an English police officer, and yet the principle stood that the court does not divest itself of jurisdiction by virtue of a forcible or illegal, flagrant if you will, kidnapping, the point remains that the jurisdiction of the court remains intact. That is the legal backdrop. It was reaffirmed by the Government of the United States to Mexico as Justice Kennedy noted. That has been our clear understanding, and more than that, those who believe that the practice of international relations should be more enlightened have had a proposed provision there on the books for almost a half-century in the Harvard project. It has not found its way into a single one of our treaties. That I think is terribly important. I thank the Court. William H. Rehnquist: Thank you, General Starr. The case is submitted.

Warren E. Burger: We will hear arguments next in 74-712, United States against Bornstein. Mr. Jones, you may proceed whenever you are ready. Keith A. Jones: Mr. Chief Justice and may it please the Court. This case under the False Claims Act, raises out of respondent’s fraudulent supply of non-conforming electron tubes for use in army radio communications kits. The facts were as follows; in 1962, the signal supply agency, acting on behalf of the Department of the Army, entered into a contract with a private company, Model Engineering and Manufacturing Corporation, for the supply of radio kit sets. Each set was to contain a transmitter, a receiver, a power supply, transformer, and radio accessory kit. A radio accessory kits operated with 4X150G electron tubes, the Contract required that these be “JAN” branded. “JAN”, J-A-N is an acronym standing for Joint Army Navy. The manufacturer is authorized to use the JAN designation, only after its manufacturing process has passed certain Government test for quality control and the tubes themselves pass certain Government inspection tests. Thus by calling for JAN tubes in the contract, the contract in effect require the furnishing of tubes that were certified as having met certain Government standards as to both manufacture and performance. The requirement of JAN tubes in the contract can therefore be seen to be more than a mere technical formality, although the record is silent on this point, it may reasonably be inferred that the radio sets, which as I have indicated, included both receiver and transmitter will be used for the Army for field communications, and that a tube failure can impair the military operations that might be dependent upon such communications. The rigid quality control and performance standards, represented by JAN branding, is therefore served to minimize the risk of such a tube failure. This consideration I believe, indicates the practical importance of the contractual requirement that the tubes to be supplied would be JAN tubes, and it also underlines the seriousness of the respondents’ fraud, which I will now describe. The respondents who are the owners and operators of a corporation, United National Labs, that entered into a contract with the prime contractor, Model Engineering for the supply of the JAN tubes called for by the contract. It is undisputed in this case that the respondents caused and are responsible for all the acts of their corporation, United National Labs, and therefore it is appropriate in further describing the facts in this case to raise the corporate veil and talk solely in terms of the respondents’ individual acts, attributing the acts of the corporation to the respondents as well. The respondents were dealers in electron tubes and they entered into the subcontract with Model Engineering, knowing that the tubes to be furnished there under were to be used in the military procurement contract. At the time, they entered into this subcontract, the prevailing market price for JAN tubes of the type specified in the contract was approximately $40.00 per tube. Instead of buying and supplying these kinds of tubes, the respondents instead bought cheaper tubes at prices ranging from $15.00 to $18.00 and they falsely stamped each tube with a JAN designation. As we have here a case of fraud, pure and simple, committed solely for the purpose of making a dishonest profit. The respondents made three shipments of a total of 397 falsely branded tubes, the tubes were packaged in 21 separate boxes, and each box was accompanied by a packing list to which the respondents have fixed a false government inspection stamp. The respondents billed Model Engineering, the prime contractor for the tubes, on three separate invoices. In turn Model Engineering incorporated these tubes into the radio kit sets that it supplied to the Army, and it billed the Army for the tubes on 35 separate invoices or claims for payment. Each of these claims for payment represented falsely because of the respondents’ fraud, that the electron tubes furnished in the radio kit sets were Government inspected JAN tubes. The Government paid these 35 claims for payment. When respondents’ fraud was subsequently discovered after some negotiation, Model Engineering, the prime contractor, paid the Government a total of a little bit more than $16,000.00 for the breach of contract that had been occasioned by the respondents’ fraud. Harry A. Blackmun: Did Model paid it or did they, was it withheld from the Government payment to Model? Keith A. Jones: Well I think that the Government owed Model monies in connection with some other contract and that the $16,000.00 odd here was withheld from that other payment. Harry A. Blackmun: In this connection, is, are the respondents responsible, liable to Model? And if so, has Model ever instituted suit against them. Keith A. Jones: Well, that raises two questions, one of contract law that I cannot answer because these respondents are individuals and I do not know whether they would be liable in contact to Model Engineering, it was their corporation, United National Labs that actually was in the privative contract relation with Model. The second question is a factual one and I simply do not know the answer to it, and I do not think it is in the record. Speaker: Well certainly there is incipient liability, is there a possibility of a fraud-- Keith A. Jones: Yes there is and that is the basis for the Government’s concession that it would be appropriate in determining double damages to allow a certain credit for the payment that Model Engineering made, I will get to that aspect of the case in a moment. William H. Rehnquist: Well if they defrauded the Government the defrauded Model too. Keith A. Jones: That is correct. William H. Rehnquist: So it would not have to be based on contract well is suppose? Keith A. Jones: The respondents is individuals themselves might be liable in tort, perhaps that is so Mr. Justice Rehnquist. At any rate, under the theory that they will be liable in one form or another, we have not pressed the full double damages liability but rather have indicated that some kind of allowance may be appropriate on account Model’s payment to the Government. Speaker: Like in the full amount -- Keith A. Jones: Like in the full now but only as against the double damages that had to be competed-- Speaker: --expect that amount in view? Keith A. Jones: No we do not expect, that is correct. Speaker: Substantially doubled. Keith A. Jones: Well, I will get to the double-damages aspect to the case in a moment. Now first I would like to layout the rest of the facts in the-- Speaker: If there is liability there, then I suppose your suggestion, I think there was one in the brief of the respondents’ profiting by the fraud may well evaporate. Keith A. Jones: Well, I certainly hope so. A trial in the case, the District Court determined that the Government’s actual injury from the breach of contract was approximately the same that Model had paid to the government that are $39.70 more. The District Court further determined that respondents acts in supplying the falsely stamped tubes thereby causing a submission of false claims to the Government violated the False Claims Act, and the respondents have not contested that determination either in the Court of Appeals or in this Court. The issues in this case pertain to the consequences that flowed from the District Courts finding of a violation of the False Claims Act. There are two issues; one concerns the question of whether there are multiple forfeitures that maybe imposed against respondents for their violation. The Government takes the position that the respondents here are subject to a total of 35 $2,000.00 forfeitures under the Act. One for each of the 35 false claims for payment that where madders has resulted to their fraud. The respondents’ assert that they are subject to only one forfeiture payment because they say their fraud affected only one subcontract, and that is how they would measure the number of forfeitures under the Act, and the Court of Appeals sustained the respondents’ position. Warren E. Burger: Is it Government practice from the accounting side to require a separate voucher for each shipment? Keith A. Jones: In this case there were actually 8 Government vouchers of payment, Model submitted 35 invoices for payment. Warren E. Burger: They accumulate them and then pay in groups, apparently. Keith A. Jones: Yes, that is apparently what took place in this case and I do not know over what course of time the various claims and payments were made. The other issue in the case is, we have already talk about a little bit, is the question of the proper measurement of double-damages. Both Courts below sustained the respondents’ contention that the Government’s single damages under the Act for purposes of computing double-damages, is limited to the amount of the Government’s injury less its recoveries from the prime contractor. Accordingly, the Courts below determined single damages of $39.70, and double damages of $79.40. Our position on this issue is that for determining single damages you look to the Government’s actual injury at the time of the discovery of the fraud, to get double-damages, you double that amount. The Government’s injury was $16,000.00, to double that you get $32,000.00, but we have further submitted that the respondent should be allowed a credit against that $32,000.00 double-damages liability in the amount of the recoveries from the prime contractor. Now before turning to an analysis of these two separate issues, I would like to point out to the Court the combined effect of the Court of Appeals decisions on these issues taken as a whole, and that effect we feel is to eviscerate the False Claims Act as the deterrent to subcontractor fraud. The Court imposed upon the respondents in this case a poultry penalty of only $2,079.40, and that penalty -- penalty imposed by the Court of Appeals permits the respondents to retain over three-quarters of the illegal gain that they made on by supplying the Government with cheap tubes rather than the JAN tubes required by the contract. And we submit that the puny threat of such disproportionately small penalty is unlikely to deter any subcontractor from attempting to defraud the Government. If the fraud goes undetected, the subcontractor reaps a dishonest profit and pays no penalty whatsoever. If on the other hand, as in this case the fraud is discovered, the subcontractor nevertheless pays back to the Government only a small of fraction of the dishonest profit on the illegal gain. Byron R. White: But is he not subject to criminal prosecution and is it not their deterrence on the criminal side? Keith A. Jones: There is some deterrents on the criminal side, it was not terribly effective in this case. Byron R. White: Well, you have just said that if fraud is not discovered there is no deterrence, this is true crime also is it not? Keith A. Jones: Yes, but what we are now talking about is placing at least a substantial deterrence once there is a discovery. I would further point out that although these respondents were prosecuted and convicted of a conspiracy, apparently, there is no criminal statute, which by its terms would prohibit the substantive act of causing a false claim to be made. If you look at 18 U.S.C 287, it punishes the making of false claims. What we are concerned with in this case with regard to contractors is causing a third party to make false claims. Speaker: [Inaudible] Keith A. Jones: Well, I do not know if you can be an aider and abettor, if there is no substantive crime by another person, and there would be no substantive crime by the prime contractor because he unknowingly made a submission of false claims. Not saying there is no possible criminal punishment other than under a conspiracy clause, but I am just pointing out that the criminal and the civil statutes are not coterminous, that is by no means positive that you can always punish criminally the kinds of act that we are now trying to impose a civil penalty on. To summarize the Court of Appeals decision, the Court of Appeals has in our view converted the False Claims Act into little than an inexpensive license to defraud the Government. License moreover, so I have just indicated, that must be paid for only if the fraud is discovered, and we believe congress could not and did not intend that result. Indeed as I know, hope to show, Congress intended a very different result indeed. I begin for purposes of convenience of exposition, with the question of double damages, because I have one important thought to add to what we said in our brief on that issue, and I would like to address at the outset. Respondents’ contention here is that the prime contractors payment to the government of a single contract damages, in effect absolves the respondents from any liability under the False Claims Act double-damages provision. And this contention can fairly be tested I think, by asking what would the consequences have been, if the single contract damage as payment have been made not by the prime contractor but by the respondents themselves. Could respondents have insulated themselves from any liability for double-damages, by coming forward after the discovery of the fraud, merely with the payment of single damages? William H. Rehnquist: What if before the discovery of the fraud, what if the day after they sent the stuff, they simply had a change of heart, and before the Government ever discovered the fraud they sent single damages. Keith A. Jones: Well I would think that from a purely, trialling logical reading of the Act, that double-damages would have in fact been -- the liability for double damages would in fact have been incurred as of the date of the fraud. But there might be a question of whether had there been a payment the next day, that had actually been an injury to the Government. William H. Rehnquist: But you say the liability for double-damages becomes fixed when they cause to be submitted to the Government, the false-- Keith A. Jones: Well that is, well, the violation of the Act has become complete at that point. Byron R. White: Or otherwise I suppose anytime the—prime contractor or anybody else defrauds the Government, seems to have defraud the Government, he could reduce his liability to single damages by paying. Keith A. Jones: Well that is exactly our point. The respondents seem to think that-that they or the prime contractor can come in after the fraud has been discovered and after the injury has already been sustained and reduced their liability under the double-damages provision of the Act, from double-damages to single damages merely by coming forward voluntarily with the payment. But that is clearly not the case, respondents could not have escaped their own liability for double damages simply by offering single damages. William H. Rehnquist: Yet if Model had discovered the fraud and refused to submit the invoices to the Government, then although the respondents’ fraud was complete they never would have been become liable to the Government. Keith A. Jones: Well in that case, there might not have even been a violation of the False Claims Act. Byron R. White: It would not have caused anybody -- Keith A. Jones: It would not have caused the submission of a false a claim and there would have been no injury to the Government for purposes of the double-damages provision either. Well, we believe that this analysis that I have just gone through, which I am sorry to say was not set forward with any clarity on our brief, is dispositive of respondents double-damages claim in this case. I would recommend to the Court the reading of our brief for further arguments on this point, but I would like to turn for the remainder of my argument to the question of multiple forfeitures. The first clause of the False Claims Act, which is the relevant clause in this case, provides, and I quote with some deletions, none of which I hope change the substance. Any person who shall make or cause to be made any claim upon the United States or any department or officer thereof, knowing such claim to be false, shall forfeit and pay to the United States the sum of $2,000.00. As well, as established as to prime contractors, this language imposes a separate $2,000.00 forfeiture for each False Claim for payment. Since the Act imposes a forfeiture on any false claim the statutory volition is complete upon the presentation of the first false claim, and a forfeiture arises on account of that violation. Each additional false claim constitutes a separate and complete violation of the Act that gives rise to an additional forfeiture. As a prime contractor, who for example knowingly submitted 35 false claims for payment to the Government, unquestionably would be liable for 35 separate forfeitures. We believe that the same reading of the Act before supplies to subcontractor fraud. In the first place, it was established by this Court’s opinion in United States exrel. Marcus against Hess, that a subcontractor violates the Act when its fraud causes the prime contractor to submit a false claim for payment to the Government. The subcontractor’s violation is complete when the prime contractor submits its first false claim and a forfeiture arises at that time. Every additional submission of a false claim is a separate and complete violation of the Act that gives rise to an additional forfeiture. In short, the plain language of the Act requires the number of forfeitures to be determined in the same fashion, whether the fraud originates with the prime contractor, or as in this case, the subcontractor. This we believe to be as sensible and natural result, because after all the Government’s injury is the same whether the fraud originates with the contractor or the subcontractor, the need for deterrence is the same, whether the fraud originates with the contractor or the subcontractor, and there is no reason to distinguish between these two cases. The respondents’ argument moreover, which is that you measure the subcontractor’s forfeitures by the number of subcontracts, has utterly no basis in this statutory text, which has nothing in the language of the Act that produces that result. And not only is our results supported by the statutory text, serves the twin purposes of deterrence and restitution that underlie the Act. As we have pointed out in the brief, and I would not repeat those arguments here, there will be a mockery of the legislative intent to lump, as respondents would have this Court do, all the subcontractors fraudulent practices and their elections into a single statutory violation. Now, this more or less furnishes the Court with our affirmative presentation on this issue, I will address what seemed to me to be the two threads of argument that the respondents present here. One appears to be that the False Claims Act should be narrowly construed in the manner of criminal statute. Well, I am not sure what kind of narrow construction they would intend since there is no apparent basis in the language of the Act for their result anyway. But I would point out that the Court has already rejected the principle of construction upon which they rely. In the United States ex rel. Marcus against Hess, the Court held that the forfeiture provisions of the Act imposes civil not a criminal sanction, and perhaps more to the point in United States against Neifert-White Co. the Court stated, and I quote, in the various context in which questions of the proper construction of the Act have been presented. The Court has consistently refused to accept a rigid restrictive reading, even in the time when the statute imposed criminal sanctions as well as civil. The statute no longer imposes any criminal sanctions. It is a wholly civil statute that should be liberally construed in a manner that will effectuate its underlying purposes of deterrence and restitution. Respondents’ argument appears to be that although 35 false claims for payment were presented to the Government in this case, they nevertheless have committed only a single causative act, a single act of causation deserving of a penalty. It is difficult to know what basis the respondents’ have for making that suggestion. In the first place it is clear that they have committed many separate fraudulent acts, they falsely stamped each of 397 electron tubes, they falsely have fixed government-- false government inspection stamps to each of 21 packing list. They have submitted 3 false invoices to the prime contractor and they made false oral representations to the contractor as well. Byron R. White: Could the Government take the position that there are 190 in effect false claims, 199 false claims, affected by the respondents? Keith A. Jones: Well I think the suggestion is that the Government could take the position that there were 397 violations of the Act as a consequence of the false stamping of each of the 397 tubes. The Court of Appeals seems to assume that the stamping of the tubes would constitute a violation of the Act and of the second clause of the Act. I think that it is arguable whether the Government would be able to prevail the cause, the categories of documents with respect to which false entries are punished under the second clause of the Act, would not appear to include the tubes -- Byron R. White: You have all kinds of numbers, you have 199-- Keith A. Jones: Well the 199 is a number of the respondents’ drew out of the hat, and I think they arrived at because there were 397 false tubes and they said well, each radio kit set contains two tubes and therefore a 198 kit sets would include false tubes. No one on the government side has ever suggested that the figure 199. The only figures that I can run through them are 35 false claims under the first clause of the Act. 397 falsely stamped tubes under the second clause of the Act, but I question whether you could find a violation with regard to that. 21 falsely stamped package list, and that probably is a violation, causing the Government to issue-- Under 2? Keith A. Jones: Under 2, but we are-- Speaker: Which is not involved. Keith A. Jones: Which is not involved, none of these other numbers are involved. 8 false vouchers issued by the Government, also under the second clause, and 1 conspiracy, and 3 false invoices issued to the prime contractor. But we are just the taking the position here that the false claim submitted in violation of the first clause without regard to any of the other clauses of the Act, constitute a basis for the forfeitures. We would say that the respondents’ course of fraudulent conduct, whether it is conceived of consisting of one act or many, nevertheless cause the submission of the 35 false claims, and it is the number of false claims that is determinative of the number of forfeitures under the Act. Lewis F. Powell, Jr.: You take that position even though there is no indication, as I understand it that the subcontractor had any control over the number of invoices-- Keith A. Jones: That is correct, Mr. Justice Powell. Lewis F. Powell, Jr.: But if he filed 500, would your position be the same? Keith A. Jones: Well we might not have seek to impose 500 penalties but as a reading of the Act-- Lewis F. Powell, Jr.: At a principle under your theory you would take that position. Keith A. Jones: That is correct, we take the position that respondents could reasonably have anticipated that the prime contractor might submit more than one false claim for payment as a result of their fraud. More generally, our position is that when a subcontractor seeks to defraud the Government, he does so at its peril and at the anticipatable risk that the prime contractor will submit multiple false claims as a result of the fraud. There were 35 such false claims filed here, we think 35 forfeitures should be imposed. I would like reserve-- Warren E. Burger: One of the reasons for submitting frequent claims is to get the money back into the capital of the performing contractors, is that not so? Keith A. Jones: Yes, I think-- Speaker: If they do not want to wait a year or year and a half-- Keith A. Jones: I assume that is right when you have a contract that extends over a long period of time, you have payments during that time. I would like to reserve the balance of my time. Speaker: Very well. Mr. Rossmoore. William Rossmoore: Yes Sir, may I—Mr. Chief Justice and may it please the Court. I represent the respondent Gerald Page in this matter. I do not think there is any dispute as to the facts, with one exception, that is Mr. Jones’ statement that the repayment by Model to the Government was made in the form of a deduction from other contractor -- from other contracts between Model and the Government. I think the documents which are included in the Government’s appendix make it quite clear that the deduction was from payments due under this very same contract. I pointed out the numbers involved in my brief on pages 17 to 18, and I think if you will look at that you will see it is perfectly clear that it comes under this same contract. Well, addressing myself first to the question of the number of forfeitures, Mr. Jones here dealt with a different numbers that might be used, and as a matter of fact, the Government’s position from the beginning of this litigation has not been at all consistent. As Judge Gibbons pointed out in the decision in the Court of Appeals, originally the Government based its claims for forfeitures, not at all on vouchers submitted by Model to the Government but on its claim that the respondents submitted 30 invoices to Model and it asserted 30 forfeitures on that basis. The shift came when I think it found out that there were only three invoices and then this theory came in that the respondents were now liable for the one forfeiture for each of 35 invoices submitted by Model to the Government, plus one forfeiture each for the joint act of misbranding the tubes, one forfeiture for the combined acts of submitting 21 packing lists, and one forfeiture for the combined acts of submitting 21 certificates, a total of 38, I take it that at this point they are now asking only for 35. I think that what this demonstrates is that in fact the Act as the Government reads it is not all clear. I submit however, that if properly read the Act is clear and I note that Mr. Jones in reading the Act to this Court persisted in reading from the codification in 31 U.S Section 231. As I have pointed out in my brief that is not the correct wording of the Act, this Court has so recognized that in the U.S. ex rel. Marcus against Hess case, the Neifert-White, the Rainwater case, and other cases. If you read the Act as it is actually written, I think that you will find -- William H. Rehnquist: Where in your brief is that? William Rossmoore: That is on pages four and five of my brief, Sir. The Act does not say that anyone who submits a false claim or causes the -- pages four and five, Mr. Justice Brennan. Anyone who -- does not say that anyone who causes the submission of a false claim shall forfeit $2,000.00. It says that anyone who commits any of the Acts prohibited by the prior criminal section, that was Section 5438, shall forfeit $2,000.00. Now one of the Acts prohibited by Section 5438 is the causing to be made of a false claim. But the forfeiture is imposed by the statute on the Act committed by the respondent or the defendant in the Trial Court. It is not impose on the submission of one or more false claims, as long as the respondent caused the submission of a false claim he then becomes for that Act liable for one $2,000.00 forfeiture. And I think that whether or not this is now solely a civil statute, the criminal statute having been absorbed elsewhere. It was written as a criminal statute originally and the language which was quite clear that forfeitures were to be only to be imposed for Acts committed by the person charged with the forfeiture. And I think it is for that reason that I have stressed the correct reading of the statute, the correct language as it actually exists on the statute books. Warren E. Burger: Well as applied to this case, do you think that operates as much of a deterrence for this kind of corrupt conduct on the part of the contractors? William Rossmoore: Well, the deterrent effect as it works out in this case may, certainly is not as great as if you impose 35 forfeitures. The deterrent affect comes from the criminal statute and I think the record here shows that these, both of these respondents were charged criminally, did plead guilty and were sentenced. Now, the fact that they were not deterred previously, that is true of both any deterrent statute and any criminal statute. They could have gone to jail for a long period of time and they could have been fined, I think it is $10,000.00, this being a first offense, those penalties were not visited upon them. But I think the threat of the criminal, the criminal process, the threat of the jail term would certainly be a much greater deterrent than the possibility of fortuitous imposition of fines. Warren E. Burger: There is nothing uncommon about having civil penalties in a situation like this be a vastly more of them criminal in terms of-- William Rossmoore: Nothing at all, and in many cases it so works out. And some of the -- I guess even in the Hess case, the criminal penalty is actually imposed were greater than -- would have been imposed have the defendant there been prosecuted criminally. But the purpose of the statute, and I think this Court has recognized it in the Hess case, is to provide restitution for the Government. Speaker: Is that all, just restitution? William Rossmoore: I believe that is all. And I think that that is the language of the Court in the Hess case so states. We think that the chief purpose of the statute here was to provide restitution to the Government of money taken from it by fraud, and that the device of double damages plus a specific sum was chosen to make sure that the Government would be made completely whole. Now, it may also incidentally have a deterrent effect and somebody who is starting out to commit a fraud might examine, sit down and say, well gee, if do this, it is going to cost me seventy thousand dollars or a hundred-thousand dollars, I do not give a damn about the criminal penalty but I am not going to subject myself to that. I do not think that is the way people get into this kind of situation, I think as the record shows here, these respondents actually backed into it. They entered into a contract which they could not fulfill and then they have found out that the way they could fulfill it was committing the fraud, and they were involved not in considering the penalties at all, they certainly were not considering the number of forfeitures. They certainly committed illegal acts, they certainly were subject to the criminal penalties and they are subject to the civil penalties that this statute provides. William H. Rehnquist: Well, they certainly caused to be presented a claim to the Government, under the RS 5438 that you have set forth at pages four and five of your brief, did you not? William Rossmoore: Yes, there is no question about that, but the question is are they to be charged with a $2,000.00 forfeiture for each act then committed by somebody else over which they had no control. William H. Rehnquist: But would the language caused to be presented? -- William Rossmoore: Yes, but the witness statute says as anyone who commits an act shall be fined $2,000.00, the Act is causing to be presented a claim or claims. William H. Rehnquist: Well, I do not read 5438, if you look at the top of page five perhaps, I have missed something that you have seen, look at the top of page five of your brief, any claim upon or against the Government of the United States or any Department or Officer there of knowing such claim to be false, fictitious or fraudulent. Now that just says claim, it does not say -- William Rossmoore: That is right Mr. Justice, but if the Section 3490 says that the forfeiture should be visited upon the act committed by the respondent not by the --not upon the claims submitted. The Act causes the claim, yes, but the punishment or the penalty or the forfeiture goes against the act committed. William H. Rehnquist: But the Act prohibited is causing to be submitted a claim. William Rossmoore: That is right, Sir. But one act can cause the submission of one claim or a hundred claims or 400 or 397 claims in this particular case. And perhaps it can be made clear that Government’s argument is that somehow the subcontractor gets off easier than the contractor in this case, because if the contractor himself were committing the fraud he submitted 35 claims. Well that is true, but the contractor had the power each time that he submitted a claim and let us assume he knew he were submitting a false claim to say gee, you know I have talked to my lawyer and I realized I am going to be in trouble, I am not going to submit anymore of these, I may be stuck with what I have submitted but I am not going to submit anymore. The subcontractor does not have that option, he is done, he did his -- he committed his fraud, he submitted the false goods and then he is subjected to the multiplication of claims by acts over which he has neither knowledge nor control. And that is why I say that the act -- that the impact of Section 3490 is on the act committed by the respondent not on the subsequent acts committed by the contractor, even though that is one of those subsequent acts, this is a necessary change, it is the claim submitted. Speaker: [Inaudible] William Rossmoore: Yes, the act that the respondent here committed was causing a claim to be submitted, it was not submitting one or 35 or 397 claims. I suppose the problem with the statute and the problem that this Court and many of the lower courts have wrestled with is that it does find its impact in such a great variety of situations and there has not been no broad statement as to what the rule is. It has been applied on a case-by-case basis and the Courts of Appeals has come to different conclusions although most of them I think, except for the Court in the Ueber case agree with the position that we take in this case. And at the risk of being presumptuous, I would like to state what I think might be a formulation of a rule for consideration by this Court which would operate fairly, and which would be in accordance with the language of the statute. And that is that a forfeiture should be imposed for each act or series of acts or cause of conduct by the defendants in the case involved, which result in the payment of a false claim or claims by the United States. This formulation puts the emphasis where it belongs on the acts committed by the person charged with the forfeiture. So much for the forfeiture question, I would want the touch briefly on just two thoughts with respect to the double-damages issue. One is, and I think it is clear, in again in Mr. Justice Black’s opinion in the Marcus against Hess case, that the double-damages provision originally came in to this statute because of the key term provision, the informers’ provision, whereby it was thought that most of these actions at that time would be brought by informers, the informer would get half of the recovery and the Government would then be made whole by its half of the recovery. Obviously if that was the intent, if the Government had already been paid or reimbursed as it was in this case by a credit in the same contract, no informer would consider bringing a suit, there would be nothing to sue for, the Government had not been damaged. Warren E. Burger: What about other related statutes like 18 U.S Code 2001, was there ever informant fee involved under that? William Rossmoore: That is the criminal statute is it not? I think there were informant fees but it did not relate to the question of damages, there are many statues where there are informant fees. I think the Public Contracts Act, the situation has worked out pretty much as we contend here that any payment by the Government is first deducted before the doubling of damages. The informer feature still remains in our statutes although in a much modified form in the 31 U.S.C Section 232, which is the successor to the revised statutes 3493. At present though, and it is only under limited circumstances, the informer can get up to one-fourth of the recovery but it is still there. One final thought, in the Hess case itself or in the Trial Court in U.S. ex rel. Marcus against Hess, there were a number of instances where the Government discovered the fraud before it made payment. The defendants’ argued that since the fraud had been discovered, there were no damages and therefore there should be no forfeitures. And the District Court decision which was eventually affirmed in this Court held that true there were no damages to be doubled but there was still a claim for forfeitures. This was pointed out again in this Court in the Rextrailer case on page 153 footnote five. And I think that in at least in part answers the question of whether the Government can first double the damages and then deduct any credit. I think the answer is that it cannot and should not both because of the history of the way this statute was put together in the key term actions and because of the interpretations that have been placed upon it. I will yield the rest of my time to Mr. Ballan for further comments, he represent Mr. Bornstein. Warren E. Burger: Mr. Ballan. Jack Ballan: Mr. Chief Justice and may it please the Court. I do not wish to be repetitive. I hope you will bear with me if I am. I would like to just emphasize a few points that perhaps have also been mentioned before. One is that this statute ambiguous, and indeed the last paragraph of the Circuit Court’s opinion indicates, when it cries out for interpretation or revision and perhaps that is why we are here. And I raise this because I think that the Court’s have been struggling with this ambiguity and these ambiguities and these overlapping sections, and have come up with reasonable guidelines, not sufficient admittedly but reasonable guidelines to date. And may I say that in each case that I have read I can find no exception. There has been a minimization of claims from the subcontractor through the contractor. In other words, this is the only case that I know off and I stand to be corrected if I am wrong, where the acts of the subcontractor have been maximized rather than reversed. Even in the Ueber case, which is very heavily relied upon by the Government, there were 442 false invoices submitted to the general contractor -- by the two general contractors by the subcontractor, they were reduced to 54. And it makes it clear in this case that there was a pass through that these invoices that were ultimately submitted arouse out of truly arouse out of it and truly were caused by the acts of the subcontractor. In this case, I think it is fair to say that we did not truly cause the 35 claims to be filed. We did cause claims to be filed but not 35, and as I think Mr. Justice Powell indicated the Government could have got to 500 in this instances, if it wished to, it could look for all types of false documents and include them in their false claims. But this would be a gross injustice, I think and it would be a misreading of the statue which admittedly has some problems. Now, I think it is fair then to say that the subcontractor here should be charged with his acts, and not the fortuitous acts of the general contractor, which are as has been said before, totally beyond his control. Now Mr. Chief Justice, you have indicated some concern about deterrence as we are and we are not here to defend or prove certainly of what was done, but the deterrence does in fact take place with the criminal sanction, which was imposed and can always be imposed by the statute here and that these two gentleman received a two-year jail sentence which are in stipulations, which was suspended, and as businessmen certainly that is quite a serious deterrent. Warren E. Burger: Does Congress’ numerous statutes provided these kinds of deterrent civil penalties in very large amounts? Jack Ballan: I think you are right, Sir. To my knowledge very-- Warren E. Burger: Very well, from the civil penalty being much-much greater than the criminal penalty. Jack Ballan: Well, we are dealing with this statute and how it has been interpreted, the Government -- the petitioner has relied heavily on Marcus and Hess, which is the only Supreme Court decision to deal with the question of multiple forfeitures. And in that case also, there was a reduction, a minimization of-of claims and of penalties or forfeitures because the Court’s have been struggling with this ambiguous statutes and have been in each instance reducing them to a reasonable level and a reasonable standard. With respect to the double-damages, may I just say that in this instance, the statute says double-damages sustained are to be charged against the subcontractor, these two individuals, and may I suggest that there were no damages at all in this case. That when the restitution was made, when the payment was made by Model, the contractor, who never went after the respondents herein, although he might have or it might have. When that payment was made of $18,000.00 to the Government, the Government was rendered whole financially and economically-- William H. Rehnquist: Well supposing, I am hurt in an automobile accident and I incurred $2,000.00 hospital bills, and as approximate result of the negligence of the driver at the other car. Now, if I have hospital insurance that pays me offer that right away, you would not say that none of that—I never would sustained those damages would you, in dealing with the tortfeasor? Jack Ballan: No, I would not say that, I would agree with the implication of your question. However this is a question of fraud and I do think that when we are dealing with a tort action or a negligence action that the approximate causes are certainly the responsibility of the original tortfeasor. But in this instance, with a fraudulent claim, with fraud being charged the response I think they should be charged only and I think the statutes and the cases indicate with their acts of fraud. William H. Rehnquist: Well as a matter of principle, I would think you would extend proximate cause further when you are dealing with someone who defrauds than with someone who is merely negligent. Jack Ballan: Well Sir, Mr. Justice Rehnquist, in this case our problem is that the upper limits of that are totally beyond our control and do result in very unfair consequences. For example, this contract with which we were subcontractors was a two-million dollar contract. There were, as the Government pointed out, about five or six component parts and these sets that were sent out, we provided a small part of one of those five or six parts, namely two tubes for each unit. Now, the total of that we have received was approximately about $13,000.00 or $16,000.00 I believe was what we received in payment. Now, we are unable to control the ultimate or the subsequent subdivision or multiplication by the general contractor when he submits his invoices-- William H. Rehnquist: Okay, that is an argument on the forfeitures point, but you are making an argument on the double-damages point. Jack Ballan: Well on that, I making a statutory argument, Sir, and I am referring to the rationale of the client case, which is the only Circuit Court decision on this matter, and in that case, they read the statute, which does not provide for when the doubling takes place. And they felt that a rationale approach would be to fix the amount lost if there is restitution made, as it was in this case, to then subtract the difference and then double and they came up with a figure indicating that there was really no loss to the government, it was miniscule. If Model had not made restitution, had not paid $18,000, then we certainly would have been held accountable for a doubling of a loss of 16,000 to 18,000 or namely 32,000 to 36,000. But the payment was made. There was no law sustained by the government except in its subsequent prosecution of this matter. I believe that the rest has been stated by my colleague and I will probably repeat anything unless there are any questions. Thank You. Warren E. Burger: Mr. Jones. Keith A. Jones: Thank you, Mr. Chief Justice, I just wanted to address myself to the argument that there is some difference between the revised statutes and the False Claims Act, as codified in the 31 USC. It seems to me that there is no difference whatsoever in the language of practical effect. In either case you look to determine that whether there was a false claim. If so you ask, did the subcontractor cause it? If so there was a violation, then in this case you look to the second false claim, did the subcontractor cause it? Yes he did by his fraud. That is th second violation. William H. Rehnquist: What if you should just look though to the act of the subcontractors as your opponents are suggesting, and say that what is forbidden by RS 3490 is the doing or committing of the act, the subcontractor's act is single in submitting the thing to the prime. Keith A. Jones: The reason I think that that is inappropriate analysis is that the doing or committing such act refers to the act described in 5438, and the acts described in the 5438 are the causing of false claim to be submitted. William H. Rehnquist: Okay, how many times do the subcontractor in this case cause a false claim to be submitted? Keith A. Jones: 35. William H. Rehnquist: I would think you could argue equally well that it did it once. Keith A. Jones: Well, he argues that his fraudulent course of the conduct constituted a single causative act or that is that essence as I take it of that argument. It seems me that that is wrong for two reasons which inter-relate. One is that we have here multiple acts if you are focusing upon the acts of the respondent we have isolated some 400 odd different fraudulent acts. On the other hand if you are concerned with the act as defined in the statute, that act is to cause the false claim and then it seems to me you have to look to determine whether a false claim was submitted and if so whether there was act or acts of the respondent that caused that submission and in this case, each one of the false claim was-- the submission jof each one of the false claim was caused by the respondent within the intendment I take it of Section 5438. Thank You. Warren E. Burger: Thank you gentlemen. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 02-1080, the General Dynamics Land Systems, Inc. v. Dennis Cline. Mr. Verrilli. Speaker: Mr. Chief Justice, and may it please the Court: The very essence of age discrimination is the disparate treatment of older workers based on the false assumption that productivity and competence decline with old age. The Age Discrimination in Employment Act protects workers 40 and older from that kind of disparate treatment. It should not be stretched to cover claims by workers 40 and older that they have been treated disparately on the basis of their comparative youth. Sandra Day O'Connor: Well, Mr. Verrilli, it... perhaps you can say that the language in the statute, because of an individual age... individual's age... is somehow ambiguous. But to what extent do we have to give some deference to the agency position on the thing? Because the Government is here taking a position contrary to yours based on agency interpretation. Speaker: They... they are, Justice O'Connor. That interpretation deserves no deference for three reasons, which I'd like to summarize and then first elaborate on. The first is that, under Chevron, the question... the question of deference is not dependent on whether there's a definitional ambiguity in the... in the specific operative language, in this case of Section 623(a), but on what the... what that language means as read in the context of the Act. And Chevron says, using all of the traditional tools of statutory construction, and applying that test we submit, as... as I hope to elaborate this morning, one cannot come to the conclusion that there... there... that this statute can be fairly read to authorize the kinds of youth discrimination claims that are at issue here. The second reason, however, is that even if there were... even if there were ambiguity in general, which we submit there is not, under the holding, the express holding in Mead, the... the EEOC's regulation here is not entitled to Chevron deference, and the reason for it is this, and this is at page 227 of the Mead opinion in 533 U.S. The very sentence that states the holding in Mead says, a regulation is entitled to Chevron deference if it is... if it is promulgated in the... if the agency has been given by Congress the authority to promulgate rules with the force of law, and we acknowledge that is true here. But the second half of the test... this is in the statement of the holding in Mead... is that the rule has to be promulgated in an exercise of that authority, and the regulation that the EEOC is here defending today was not a... a rule that was given the force of law by the agency. In fact, the agency made... the Department of Labor, when it initially promulgated this regulation, made a deliberate decision not to promulgate it as a rule with the force of law, but instead to promulgate it solely as guidance to the public about its... about its enforcement authority and it was... Anthony M. Kennedy: How... how do we know that? Speaker: Because that is what the Department of Labor said in the Federal Register when it promulgated this. Anthony M. Kennedy: What... what... what did it say specifically? Speaker: It said, we are promulgating this as a matter of enforcement guidelines for the... guidance... so the public knows how we intend to enforce the... the... the statute. It did not promulgate a rule of law. And then when it was re-promulgated by the EEOC in 1981... and again, the cites for this are on page 17 of our reply brief... when it was re-promulgated by the EEOC in 1981, the EEOC made a deliberate choice, which it explained in the Federal Register, not to have this be a substantive rule with the force of law, and in fact it did not comply with, and stated it was not going to comply with, the 30-day notice period that is required for substantive rules of law so that... Anthony M. Kennedy: Well, if we could call this an enforcement position or an enforcement policy on the part of the agency, and you're going to probably say we can't... shouldn't call it that... but if we could, doesn't the Government get some deference? You say it gets no deference at all? Speaker: If... well, it would get Skidmore deference, Justice Kennedy, and I think Christensen specifically says that, that it gets Skidmore deference if it's an enforcement guideline and not... and not a... a rule of law... substantive rule of law. But here, Skidmore... applying Skidmore, no deference is due to this regulation principally because it is a regulation that the... that has not been enforced in anything like a consistent manner. To the contrary... Antonin Scalia: That... that's a different issue, but let's... let's come back to the point of whether it is promulgated as an interpretive regulation or a substantive regulation. You are taking the position that only substantive regulations are entitled to Chevron deference? Speaker: The... the holding in Mead, Justice Scalia... Antonin Scalia: Only... only... only substantive regulations? Mead does not say that. Speaker: The... the holding in... the sentence that's in Mead that says... Antonin Scalia: All of the regulations of the SEC, for example, virtually all of them are interpretive regulations. Speaker: The question under Mead is whether it was a regulation that was promulgated that... that has the force of law, and they... David H. Souter: No, but your... your... point is... Antonin Scalia: That does not equate with interpretive. Speaker: Not necessarily. But here they made a deliberate decision that it wasn't going to have the force of law and they, for example, in 1981... Antonin Scalia: No, they didn't. They... they promulgated it, on page 17 of your brief, as an interpretation rather than a substantive regulation, and that's what it is. Speaker: Right, right, Justice Scalia. But they did not comply with the 30-day notice period, which is required... Antonin Scalia: You don't have to for... for interpretive regulations. Speaker: But for rules with the force of law you do. Antonin Scalia: For substantive regulations you have to. You do not have to for interpretive regulations, but that does not mean that an interpretive regulation does not... is not entitled to Chevron deference and is not fully as... as effective as... as laying down the rule of law as a substantive regulation. That's never been the... the rule. Speaker: The question here is whether the agency intended this to be a rule of law or... or guidance of its own enforcement authority, and it... and it clearly intended the latter and it has acted in a manner consistent with the fact that it's the latter and not the former, because it routinely refuses to enforce the principle that the Government is here advocating today. Indeed, in every single instance in which this issue has come before the Department of Labor and the Equal Opportunity... and the EEOC... since the mid-1970's, in every single instance the... the Department of Labor or the EEOC has blessed a... an employment practice that provides comparatively older workers with a benefit not available to workers... to all workers 40 and older so... David H. Souter: Mr.... Mr. Verrilli, I... I will assume you're... you're right on the... the application of Mead here, so far as the reg goes. What about the... I think it was the 1997 adjudication? Speaker: The 1997 adjudication, it seems to me, is not something that can give rise to Chevron deference, because that... they were just acting pursuant to their own view of what the... of... of what their... what the statute... David H. Souter: Wasn't it binding... wasn't it binding on the parties before them? Speaker: It was binding on the parties, Justice Souter, but, of course, even if... if the Court were to conclude that under Mead you get Chevron deference, and I don't think you can for that reason, you still have the problem, in our view, which is the more fundamental problem, which I'd like to address, which is that... Stephen G. Breyer: Before you leave me, can I just read you two sentences from Mead? First sentence says, it is fair to assume generally that Congress... that Congress contemplates administrative action with the effect of the law when it provides for a relatively formal administrative procedure, which you say doesn't exist here. Next sentence, that said, and as significant as notice and comment is in pointing to Chevron authority, the want of that procedure here does not decide the case for we have sometimes found reasons for Chevron deference even when no such administrative formality was required and none was afforded. So, as I read that last sentence, I certainly thought that if Congress so intends, we should give Chevron deference to a rule that has not complied even with notice and comment. Speaker: Yes... Stephen G. Breyer: So I couldn't read Mead as saying you have to have that or you don't get the deference. Speaker: But I think the fundamental point for us under Mead, and then I'd like to move back to the main... the Chevron analysis, if I could, but the fundamental point for us under Mead, Justice Breyer, is that the agency made a deliberate decision here not to have this rule be one that was a binding rule... Antonin Scalia: Well, I... I don't know how often an agency says what this agency said here, that we are promulgating this as an indication of how we intend to enforce the law. And you're saying there is a chasm between rules that are issued with that kind of a statement and rules that are issued otherwise. The agency says, in one case, this is the law, and in the other case, this is how we interpret the law. I... I don't see that that makes the difference. Speaker: I don't see how the agency could, Justice Scalia, think that this had the force of law, because they didn't follow it themselves in the manifold in this decision of which the issue... Stephen G. Breyer: Well, that's... that's a different point. David H. Souter: That's a different point. Well, isn't... isn't that your... isn't that your stronger point that... that combined with the... the relatively abbreviated procedure, they have, in fact, in a number of instances not followed it and they have never affirmatively, as... as a... as an administrative movement, they have never affirmatively enforced it. Isn't... isn't... Speaker: That's... that's all correct and we... I think that does summarize our point more strongly. David H. Souter: Which I think goes to the Chevron point. Speaker: Going... I agree with that, Justice Souter... but going back to the main question of whether you even get to ambiguity under Chevron, we submit that the answer to that question is no, because Section 623(a) is not to be read in isolation. The fundamental principle of statutory construction is that it needs to be read in context, and the relative contextual indicators here, we submit, foreclose the argument that Congress intended in the ADEA to authorize the kind of youth discrimination claims that are at issue here. Ruth Bader Ginsburg: Why, Mr. Verrilli, when we have... what is it... 623(f)(2)(B)... that makes an express provision for older worker versus younger worker. If that were the general interpretation of the statute, then this specific provision relating to an older worker vis-a-vis a younger worker would be unnecessary. Speaker: I respectfully disagree with that, Justice Ginsburg, and... and... I'm... I'm looking now at page 3a of the statutory appendix to the Government's brief where the... where provision is located. (B)(i) is in the statute, as the preamble to the Older Worker Benefit Protection Act states, to... to provide employers with an affirmative defense to a charge that they have discriminated against comparatively older workers by providing them benefits at a lower level than comparatively younger workers. And what... what (B)(i) says, which I take it is the provision Your Honor is referring to, is that, in that situation, even though the comparatively older worker is being disfavored, the comparatively older worker has an affirmative defense, if the older worker can... if the employer can show that the... that it spent as least as much on the benefit for the older worker as it did for the younger worker, even if the benefit is less, and so that... Sandra Day O'Connor: Well, does that provision cover your situation, do you think, here? Speaker: We... we... Sandra Day O'Connor: I mean, could you fit yourself, your client's situation, under that provision? Speaker: Yes, Justice O'Connor. We can shoehorn ourselves into that provision. Sandra Day O'Connor: And why... is that still pending in the court below, that argument? Speaker: It is... it is still pending in the court below. That's correct, Your Honor. Sandra Day O'Connor: So, no matter what we do, you would take the position that that provision will cover this case? Speaker: We do think so, Your Honor. Of course, the respondents won't agree with that, I'm quite sure, and I... and I don't think that that's going to solve the many problems that the Sixth Circuit's decision gave rise to here. For example... Anthony M. Kennedy: Well, that... that's my next point. The... the briefs try to tell us that there's going to be cataclysmic consequences if we don't rule your way. This safe harbor provision gives very substantial protection against that, does it not, or... or does it? Speaker: Yeah... let... if I... I think it gives some protection, not complete protection, but I think there are a whole range of other negative consequences, Your Honor, that I'd like to address, if I could, and then... and I will certainly directly address the safe harbor provision. First, there are a number of employment practices out there where the nation's major employers have engaged in efforts to retain older segments of the workforce and to bring back elderly citizens back into the workforce by doing such things as providing for workers over a certain threshold age, very often 55, the ability to work part-time rather than full-time, to have flex-time schedules, to have... to have jobs that don't involve travel. They've changed the terms, conditions, and privileges of employment for people over a certain age to keep them in the workforce. The safe harbor here applies only to benefits, Justice Kennedy, and therefore, would not protect that kind of behavior, and although the United States talks about the safe harbor with respect to benefits, I would point out the brief of the United States is notably silent on the question of whether the interpretation being advocated here would make illegal that kind of conduct. And we submit it would because it clearly prefers the comparatively older to the comparatively younger with respect to terms, conditions, and privileges of employment, so... Anthony M. Kennedy: Has the EEOC taken an enforcement position with reference to some of the practices you've just... Speaker: Yeah. Anthony M. Kennedy: or... or non-enforcement positions? Speaker: Yes, yes, they have. There are DOL and EEOC letters which approve those practices, but it's hard to see how one could possibly approve those practices consistent with an interpretation of Section 623(a) that imposed a rigid rule of equality for everyone 40 and over. Sandra Day O'Connor: One of the amicus briefs pointed to a number of Internal Revenue Code provisions and ERISA provisions that appear to be implicated if you go with the Sixth Circuit view here, and perhaps would be in opposition to the interpretation, given the language... Speaker: Yes... Sandra Day O'Connor: by the Sixth Circuit. Now, have you commented on those various provisions? Speaker: We have, Justice O'Connor, and this is actually the second category of adverse effect, it seems to me, that you have if the... if this decision stands and if the rule of law is what the... what the Government advocates. Many of those provisions, which are detailed quite effectively in the ERISA Committee brief, provide for... for things such as employees with... employee stock option plans, ESOP plans, are allowed, once they become 55 years old, to diversify their stock holdings. Employees, when they retire at 59-1/2 can withdraw money from their retirement plans without facing the tax penalty. There are a host of provisions like that. One point to be made is that it seems to me irreconcilable with the existence of those provisions to interpret 623(a) this way, but the other point my... my friends the respondents say, yeah, but you don't have to worry about that because the rule that the later-enacted statute governs over the former-enacted statute will take care of it. I'm afraid that's not so for the following reason. All of the examples I just gave, and many others in the... in the ERISA Committee brief, were statutes that Congress enacted before 1990, and I submit that 1990 is the relevant date for the later-enacted statute, because it has... has... that's the... the Older Worker Benefit Protection Act was passed after Betts and it was passed in 1990, and it was that statute that made the ADEA applicable for the first time to fringe benefits of the kind that those regulations govern. So you have a serious problem, at a very minimum, with respect to all of those regulations, it seems to me... Antonin Scalia: Mr. Verrilli, what do you do with Section 623(e), which prohibits any advertising by an employer indicating any preference, limitation, specification, or discrimination based on age? Now, age there could not possibly mean what you say it means in 623(a), that is, old age, because then it would just prohibit preferring older people. So what do you say it means then? Speaker: Well, I say... Antonin Scalia: It means young... Speaker: I... I... Antonin Scalia: In (a) it means old age and in (e) it means young age? Speaker: I have a lot to say about it, Justice Scalia. The first thing is this: The critique that the Government levels at us with respect to that provision is equally applicable to their interpretation What they say is that, you know, if it were lawful under the statute to grant a preference for old age... it doesn't make any sense to say that's it not lawful to advertise for old age... of course, what... if... if age means chronological age here, then you wouldn't be able to state a preference for chronological age in an advertisement, even though it would be perfectly lawful substantively to have a policy that said you're going to open positions to only people 40 or older. So I don't think they get any mileage out of that... out of that, because I think they've got the same kind of linguistic difficulty that we have here with respect to it. And I think what that shows, Justice Scalia, is... Antonin Scalia: No, but it... it still has some meaning and some beneficial effect with their interpretation, whereas with your interpretation of age, it has no conceivable beneficial effect. You have to read it there as meaning young age and you read it in (a) as meaning old age. Speaker: Well, I think you could read it as meaning old age, but I think the truth of the matter is that the word age is something of a chameleon. It's a word that is very sensitive to context and it's going to have somewhat different connotations throughout this statute, and I think it's quite clear that it does. It's a different connotation, for example, in Section B of the statement of findings and purposes, where it's quite clear that Congress is not talking about chronological age. It has a different connotation in the seniority provision, which you can find at page 3a of the Government's statutory appendix, which talks about involuntary retirement, down near the bottom of the page, that an employer's plan cannot require the involuntary retirement of any individual specified by subsection 631 of this title because of the age of such individual. Now, in a sense, that means chronological age, but not in the sense that my friends on the other side about 623(a), because what it means really is once you've become old enough that you've bumped up against the age limit, and there are other provisions in 623 in which age functions in exactly that way. I just don't think... I think this really is a case like Robinson against Shell Oil, where the word employee takes on different connotations in different sections, like... like Scheidler, where the word enterprise in the various subsections of RICO takes on different connotations depending on exactly how it's being used. I think the word age here takes on different connotations in different sections in the statute. Stephen G. Breyer: You must have thought of this and tried it out. It doesn't work, but as I was reading it I thought perhaps individual might refer to older individual. Speaker: Well, I think... I... Stephen G. Breyer: If... I mean, but that must not, but I'm sure... why didn't it work? Because if the... if you... if you have... if you read individual throughout... cite (1)(a)(i) is older individual. The only place it has bite is where you get to the end, because of such older individuals... Speaker: I think... we've thought about it in this sense, Justice Breyer, and I think it dovetails what I... what I think is our key contextual point, which is that statute only protects people 40 and older, and if what Congress was concerned about was a rule that precluded arbitrary discrimination in favor of the comparatively old as well as the comparatively young, it's an exceedingly strange thing to do to draw a line at age 40, because, of course, people under 40 are much more likely to be subject to discrimination on the ground that they're comparatively too young than are people over 40. Anthony M. Kennedy: I... I thought it was a big deal when you had your 40th birthday, I mean... Speaker: [Laughter] Speaker: Not anymore, Your Honor. [Laughter] David H. Souter: But is it... Speaker: But in any... David H. Souter: isn't the... isn't the answer to... to the... to the argument that you've just made is that as... as a general proposition, anything that in effect interrupts or skews employment for somebody over the age of 40 is very difficult for somebody over the age of 40 to deal with, regardless of which way the discrimination is working? That is not as a general rule true of younger people, and that's why it would make sense for... for the... for the interpretation that... that was being suggested, to draw the line at 40. Speaker: I... I think... I think that's the... the best statement of the argument on the other side and I think it's the Government's effort to defend the line on that basis, but I don't think it works, because the reason that people 40 and over have a problem once they suffer an adverse employment action... and the Government itself acknowledges this in its argument... is because they are then subject to discrimination on the ground that they perceive... they are perceived as being too old. That's the problem, and that's the only problem the Government has been able to identify that people 40 and over suffer is that kind of... David H. Souter: Well, the 41-year-olds are perceived as being too old in relation to people less than 41, and it still means that when somebody looks at a 41-year-old, they... the 41-year-old is just not as attractive an employee as somebody, you know, a year... a year younger or two years younger. Speaker: Yes, Justice Souter. I think that's true, but... but 623(a) isn't an all-purpose prohibition of arbitrary employment decisions respecting people 40 and over, and after all, that same kind of critique could be made of... if an employee is fired because they're not fit enough or they have the wrong color hair or... Ruth Bader Ginsburg: Mr. Verrilli, it does... what Justice Souter suggested does fit with the comment of Senator Yarborough that was put out, that said that the 42-year-old would have a claim if the 52-year-old were preferred, say, for hiring or promotion. Speaker: It... it does. That's the only thing in the voluminous history of this... of this enactment and all of its amendments that provides any support for the Government's view here in response, but it... and it... but it does provide some support for that, I agree. But I really think... Anthony M. Kennedy: The... the part of your explanation about the... the diminished hurt to the 40-year-old was within the... was within the universe of society as a whole, but within the context of his own or her own company, this is hurtful. These are people at that age who have younger children being educated and so forth, and if they find discrimination within their company, it doesn't help much for you to say, well, society as a whole doesn't discriminate against. Speaker: I think... I think, Justice Kennedy, that it's... it's important to go back to the source for this statute to understand what Congress was trying to do, the circumstances of enactment of this statute. After all, Congress could have, either in 1964, when it passed Title VII, or in 1967, when it enacted this statute, simply have put the word age into Title VII and had it operate in exactly the same manner Title VII does. But it made a deliberate choice not to do that. The reason it did, I submit, is because the recommendations of the Secretary of Labor in response to the directive of Congress were that the problem of age discrimination in the workplace is fundamentally different than the problem of... than the problems that were addressed by Title VII. And the critical difference is this, that the... the kinds of discrimination that Title VII addressed was discrimination on the basis of characteristics that are always irrelevant to a decision about who should be hired, fired, or promoted, or demoted. And what the Secretary of Labor said is that age is different, the age is not only irrelevant, age distinctions are not always arbitrary, and I submit the Court... the opinion for the Court in Betts identified exactly that principle, that this is a different kind of problem warranting a different kind of solution. The problem was that there are stereotypes that exist that... that... on which employers act that... that prospective employees are... don't have the competence or the productivity to handle a job because they are too old, and that was the problem that this statute tried to address and it's why it tried to address it in such a fundamentally different manner than Title VII. Context makes all the difference here. Again, and... and I think the Court really did recognize that in Betts. Justice Kennedy, in Betts, you had the operative language privileges... terms, conditions, and privileges of employment, identical in Title VII to... and the ADEA. But what the Court concluded in Betts was that that language had a different meaning. In Title VII it included fringe benefits. In the ADEA it did not include fringe benefits, and the reason for that was because reading the provision not in isolation, but in the context of the rest of the statute, it was quite clear that Title... that the ADEA was meant to address a different kind of problem, and that there was age-based decision-making that was appropriate and not invidious and that ought not to be prohibited by law. And I submit that the kind of age-based decision-making that's at issue in this case is precisely the kind of age-based decision-making that Congress did not want to make unlawful. And the reason for this is quite... is quite simply that people at the end of their working lives are in a different position, especially with respect to retirement security measure, which is what at issue... is at issue here, even than a 41-year-old, someone else in the protected class. And so when an employer acts, as General Dynamics did here, with the union, to come up with a solution that protected them from a harsh outcome and protected their reliance interests, it's simply not anything remotely within the contemplation of Congress when it... when it... in the prohibitory... prohibitory sections of the ADEA. If the Court... Ruth Bader Ginsburg: Do we know the numbers, Mr. Verrilli? We have, I think, some 200 people in the class that's suing the 40 to 49-year-old. How many were grandfathered in the 50... Speaker: I... I believe it's... I believe it's a comparable number, but I have to confess, Your Honor, I don't know for sure what the exact number is. If the Court has no further questions, I'd like to reserve the balance of my time. William H. Rehnquist: Very well, Mr. Verrilli. Mr. Biggerman, we'll hear from you. Mark W. Biggerman: Mr. Chief Justice, and may it please the Court: The real issue here is whether this Court should add an additional element to the ADEA's prohibition language. And the answer, we submit, is no. The ADEA prohibits discrimination against individuals 40 years old or older because of their age, not because of their older age. Petitioner would have this Court change that language to require that individuals 40 and older also be relatively older than any other group of employees with whom they... Ruth Bader Ginsburg: Mr. Biggerman, how do you deal with the relaxed physical tests for, say, 50 or over? As Mr. Verrilli mentioned, the flex-time, the reduced hours for people who are well over 40... 55, say, so that the... could... could the 40 to 55 age group then sue because they have to meet in full the physical fitness requirements, they can't have the flex-time, they can't have the reduced hours? Mark W. Biggerman: Your Honor, those are encompassed in affirmative defenses. What we are asserting here is simply whether the respondents have a cause of action. Ruth Bader Ginsburg: So is your answer yes, that would be discrimination? It might be a defense but it would be prohibited discrimination under this Act to make those special accommodations to older workers? Mark W. Biggerman: That would be prohibited subject to an affirmative defense. Ruth Bader Ginsburg: What would the affirmative defense be? Mark W. Biggerman: For example, a bona fide occupational qualification. Ruth Bader Ginsburg: Why in the world would that be a BFOQ? You don't have to be over 55 to do the job, quite the contrary. Special accommodations are being made so that they're able to do the job. It doesn't fit with any BFOQ decision that I know. It's a very extraordinary applicational definition of BFOQ, bona fide occupation qualification essential to the job. Antonin Scalia: So what happens is that a piece of legislation that everybody thought was meant to aid older workers, especially those towards the end of their working careers, ends up harming them. You... you... you cannot make special arrangements to let them do flex-time. You can't make these accommodations... a very strange consequence of this legislation. Mark W. Biggerman: Your Honor, we... we... we submit that Congress set forth specific examples as to when there are exceptions that can be made. Ruth Bader Ginsburg: But do you have... the exceptions are in the statute. You gave me the BFOQ, I think it's quite clear that that wouldn't work in this case. What else would be? We have, as you said, this would be discrimination. How could the employer then defend against it? What is there in the statute that would give the employer an affirmative defense? Mark W. Biggerman: Your Honor, what would give the employer an affirmative defense to have, as you said, a more... to permit... if you could repeat the example? Ruth Bader Ginsburg: To make special accommodations to older workers, no physical fitness test, shorter hours, flex-time, and that's not available to people who are under 55, say. Mark W. Biggerman: Well, I... I think that... let me expand a little on my answer. I think that Congress' goal here was to make age a neutral factor in employment. Now, I don't think that Congress intended to permit any special considerations for age unless they're set forth in the statute. Sandra Day O'Connor: But what about all the sections in ERISA and in the Internal Revenue Code that allow various provisions for benefit plans, for retirement, and for stock option exercise and so forth that are going to be at odds with your interpretation. Mark W. Biggerman: Your Honor... Sandra Day O'Connor: I mean, there are a whole array of laws that will be directly affected if the Sixth Circuit view is affirmed. Now, what do we do about all that? Do you think Congress really intended such a result? Mark W. Biggerman: I don't think that the ADEA conflicts with those provisions because a cause of action, unlike in this case, 12(b)(6), this case should not have been dismissed, it should have been allowed to go forward. And in the employer... in any situation which those regulations or those statutory provisions under some other law... IRS... Stephen G. Breyer: One thing... I see that point... that one thing that everybody, I think, is saying in one form or another, is one thing that isn't covered in 2 is hiring and firing people. So every time an employer dismisses a person over the age of 40, he will either be hit with a lawsuit by the older one, or if he tries to lean over a little backwards in favor of the older... and I don't want to be too prejudiced in favor of the older though I am in that category... the... the point is that every time he then tries to be at all sympathetic to the older person, the younger one hits him with a lawsuit. And so what the Federal courts become is an employment court to discover in each instance whether there was cause, and moreover, no employer could possibly lean over even a little bit favorable towards an older person, and that's why I think what we're saying is your... I would say it... your interpretation will blow up this Act, destroy it. An Act that was intended to help older people will now suddenly become an Act which turns Federal courts into labor courts, deciding in each case that anything happens to a person over the age of 40, whether the employer was or was not justified. Now... now that is... I'm putting it strongly, but I want to hear what I think they're telling you on the other side, which is what I thought I was articulating. Mark W. Biggerman: Your Honor, I would... I would analogize that to this Court's decision in McDonald v. Santa Fe, when, prior to that in McDonnell Douglas, this Court said... set forth the first prima facie requirement as requiring a minority under Title VII. Yet in McDonald v. Santa Fe it said no because of sex. That is when you can sue like in the Age Act. Anthony M. Kennedy: Well, that... that brings me back to the answer you gave to Justice Ginsburg's question and it was again reflected in Justice Breyer's. Am I correct from inferring from your answer... I don't think you said it quite this way... that in Justice Ginsburg's hypothetical regarding flex-time and... and no physical fitness test, you would say that there is a violation there? That's what I carry away from your... from your answer to her, and that directly relates to Justice Breyer's concern that he just expressed. Mark W. Biggerman: Your Honor, I must... I must humbly confess that I don't have a grasp of the entire statute in every situation in every regulation. I wish at this moment I did. But I would give you the general answer, that Congress intended to make age neutral, and if there were no exception, no exemption in the statute or no regulation that provided an affirmative defense, then that would be impermissible if it was based on age. Antonin Scalia: Now, I... I have to tell you that... that as currently advised, that seems to me so fanciful a version of what Congress intended that I would not interpret the statute that way. Now, I will go along with you if you can tell me that, with respect to this ambiguous statute, I am bound by Chevron or Mead to... to accord deference to the agency's interpretation. Your... your... the people on the other side say that there's no such requirement. Do you think there is a requirement here? Mark W. Biggerman: Your Honor, I definitely think that deference is... Antonin Scalia: What are you relying on? The agency guideline? Mark W. Biggerman: 1625.2 of the interpretive guideline. Is that what you're referring to? Antonin Scalia: Yes. Mark W. Biggerman: Yes, which was also supported by the agency adjudication in the 1997 adjudication, which was confirmed by the entire commission, which is the only... Antonin Scalia: Do... do you agree with the description of the other side that that was not promulgated by notice and comment rule-making? Mark W. Biggerman: It was my understanding that the EEOC promulgated it by notice and comment. Stephen G. Breyer: Yes, but they said that they did it simply to go along with the Carter administration's request or requirement that even interpretive rules be promulgated by notice and comment rule-making even though the ADA does not require that. Now, that's what they actually wrote in their brief, and is that accurate? Mark W. Biggerman: It's... it's my understanding that that is accurate. Stephen G. Breyer: All right. Stephen G. Breyer: If that is accurate, why would Congress have intended, and the relevant pages of Mead use the word Congress in one paragraph five times to try to figure out what Congress wanted in this respect, why would Congress have wanted the courts to defer to this kind of interpretive regulation, which if it's taken seriously would destroy Congress' own ends? That's a pretty tough question. Mark W. Biggerman: It is. Stephen G. Breyer: I'm putting it... I'm overstating these slightly because I want to elicit clear answers from you. Mark W. Biggerman: I... I... it's not my belief that this goes against Congress' intentions. I think the Congress set out to set forth specific exemptions, including the Older Workers Benefit Protection Act, in which there are instances when older workers can be favored, and so therefore I don't think it went against Congress' intention. I mean, the Older Workers Benefit Protection Act set forth a whole bunch of additional exemptions after this regulation was already in place. John Paul Stevens: Mr. Biggerman, may I ask you two questions? The first question is, when was the statute enacted? Mark W. Biggerman: The ADEA? John Paul Stevens: Yes. I think the sponsor of the statute, the Secretary of Labor, was a former law professor of mine, so I think it goes back quite a ways. Speaker: [Laughter] Mark W. Biggerman: Your Honor, I... I think you're right. John Paul Stevens: Well, it's a good many years ago, wasn't it? Mark W. Biggerman: It was a good many years ago. John Paul Stevens: And the second question is, what... what is your comment on this sentence in the district court's opinion: Every Federal court to address the issue has held that a claim of reverse age discrimination is not cognizable under ADA This suggests that there's a long history of viewing the statute in one... one way and that perhaps there are substantial reliance interests out there that would build up over a period of many, many years. Would you comment on that aspect of the case? Mark W. Biggerman: I... that statement by the district court was incorrect. The decision in the Mississippi Light... Mississippi Power and Light decision had been rendered before the district court's decision and that was at least one decision that... John Paul Stevens: When was that case decided? Just shortly before the district court's decision? Mark W. Biggerman: No, Your Honor, it was a little bit before that and I'm looking for the cite. John Paul Stevens: Well, isn't it true though, as a general matter, the courts had generally read the statute the way the district court read it? Mark W. Biggerman: As... as a... see, Your Honor, Hamilton came out and then all of the district courts followed the Seventh Circuit's decision in Hamilton without really interpreting the ADEA. They just simply followed that. So, yes, there is a body. The majority of the body did go in that direction, but simply relied on the Hamilton... John Paul Stevens: But do you think that the... the business community has... was justified in relying on that rule for a good many years? Mark W. Biggerman: I don't think so, Your Honor. I think in light of the EEOC... John Paul Stevens: You think the statute's so clear? Mark W. Biggerman: The statute and the EEOC... Antonin Scalia: The EEOC during all this period continued to say that... that it worked both ways, didn't it? Mark W. Biggerman: Not in its only binding opinion. In its only binding opinion it followed the language of 1625. The letters, the opinion letters by the Secretary... the Department of Labor... and the EEOC before, those aren't binding. The binding... Antonin Scalia: Well, the question isn't whether they're binding. The question is whether the business community could rely on them. I mean, here are your... your... you have this guideline out there, this regulation, I would say, and incidentally I don't know why you accept the proposition that interpretive regulations are somehow different from substantive regulations insofar as their authoritativeness is concerned, but you have the regulation out there, but you have the agency saying to the business community in an opinion letter, don't worry about it, we're not going to enforce it that way, and indeed we're going to amend the regulation. Now, you know, what... what... what am I to make about that as far as Chevron deference is concerned? Mark W. Biggerman: Your Honor, I would... I would ask that you look at the top at the commission and what they did in the binding opinion, and I think that is what is entitled to Chevron deference. Ruth Bader Ginsburg: But the... the regulation itself seems to have some internal tension, if not inconsistency, because what you're relying on is what it says in 1625.2(a) and then (b) goes on to say, but the extension of additional benefits, such as increased severance pay to older employees within the protected group, may be lawful when the employer has a reasonable basis to conclude that those benefits will counteract problems related to age discrimination. That seems to be just a recognition that the older you get, the more problems you have, and so if you can... if this... this regulation says, yes, you can give benefits. Mark W. Biggerman: Your Honor, again I would come back to the... the statement that in order to fulfill the requirements set forward in (b), reasonable basis, you need facts. That's an affirmative defense, which we don't have. That goes above and beyond a simple cause of action. The employer could use that as an affirmative defense to defend its action. Sandra Day O'Connor: Not unless there's a law allowing it. I don't see one. I mean, there is no provision unless you shoehorn it under this (B)(i) section, that allows any out for the employer, is there? Mark W. Biggerman: I... I don't understand. Sandra Day O'Connor: For the employ... well, I'm taking up your time. You have only a few minutes left. I just don't see a provision allowing the affirmative defense. Mark W. Biggerman: Am I to understand you, Justice O'Connor, that you don't see a provision in the statute that allows the same affirmative defense as in this regulation? That's correct. This... this is outside, but again, it's the EEOC interpreting the Act. As we all know, a statute doesn't cover every instance. Does that answer your question or would you like me to go... William H. Rehnquist: Go ahead. Mark W. Biggerman: Okay. I... I would just like to say that the Age Discrimination Act, the prohibition language says, because of age, and this Court has before, in Consolidated Coin, ruled that the fact that one individual loses out to another individual within the protected class, it doesn't matter. It's because... it's whether the individual loses out because of age. That... that's the critical thing here. The... John Paul Stevens: The example that's given in the paper is the... the 51-year-old and a 42-year-old are both applying for a job and no matter which one gets it you can't discriminate on account of age. How could a decision to employ the 51-year-old be a discrimination on account of age? What... what would be in the employer's mind if it's an age-based decision? Mark W. Biggerman: Your Honor, are you asking me for an example as to why someone might want to hire... John Paul Stevens: How... how could that... how could that, within the meaning of the statute, be a discrimination on account of age if they hired the older person? Mark W. Biggerman: Congress found that at age 40 and over any discrimination on the basis of age injures the individual. John Paul Stevens: But the decision to hire the older person, how could that be a... would it have to be just the unique situation where the employer doesn't like 42-year-olds? Mark W. Biggerman: Well, it... there may be... the employer may want a situation where they want the prestige of having someone with gray hair as opposed to less gray hair for a consultant position or for a television anchorman. Antonin Scalia: Well, that wouldn't be discrimination on the basis of age. You just like gray-haired people. Some young people have gray hair. John Paul Stevens: They'd be just in favor of gray-haired people, yeah. Speaker: [Laughter] Mark W. Biggerman: But... but if... if they had a requirement in their policy that it had to be only 51 or older... Antonin Scalia: Well, it's... Mark W. Biggerman: Right. Antonin Scalia: You could be 51 and still have dark hair. Some of us... Speaker: [Laughter] Stephen G. Breyer: Maybe they're moved by humanity, or is that an unfortunate thing to take into account in the law? Mark W. Biggerman: It... it is not, Your Honor. Stephen G. Breyer: So maybe they want to keep this older person around because it's the decent thing to do... Mark W. Biggerman: But the statute... Stephen G. Breyer: and then the younger person comes in and sues. Mark W. Biggerman: The statute prohibits discrimination on the basis of age. It just simply sets the protected class at 40 and over. That's our argument. If there are no further questions. William H. Rehnquist: Thank you, Mr. Biggerman. Mr. Clement, we'll hear from you. Paul D. Clement: Mr. Chief Justice, and may it please the Court: Absent an affirmative defense, the Age Discrimination in Employment Act prohibits discrimination on the basis of age against members of the protected class and is not limited to claims brought by the older members of the class. John Paul Stevens: Mr. Clement, now, Justice Ginsburg gave some examples of employment practices that favor older persons, for which I don't think there's an affirmative defense. Am I correct that there isn't? Paul D. Clement: There's no affirmative defense in the statute, Justice Stevens, and let me address those hypotheticals, because I think these seemingly benevolent instances of using age may be beguiling, but I think in reality even those benevolent uses of age implicate the interests and concerns of the Age Act. Take, for example, an employer who's willing to exempt employees over 50 from a physical fitness test. Well, the first question I would ask is, if you're willing to exempt workers over 50 from the physical fitness test, is the physical fitness test really a legitimate occupational qualification? And should that be used to exclude workers between 40 and 50 from the workplace? Ruth Bader Ginsburg: Let's take the hours because you certainly couldn't use that claim that that... that maybe you didn't need this test. The claim isn't that it necessarily screens out the older workers, but the employer doesn't want to put them through the strain of the test. But let's... let's move to the flexible hours, reduced work hours, we're not going to give those benefits to younger people within the protected class, only 50 and over. Paul D. Clement: Justice Ginsburg, it seems to me that stereotypes that older workers are going to be more strained and can't work as hard and need time off are precisely the stereotypes the Act is designed to prohibit. Now, it's different if a worker... Ruth Bader Ginsburg: Well then, how... how in the world could the agency then adopt 1625.2(b) that allows increased benefits to older workers if the employer can show that those older people have more problems? Paul D. Clement: Justice Ginsburg, 1625.2(b) is limited to benefits, and Charles Shaner, who's the general counsel of the EEOC at the time that the Older Worker Benefit Protection Act was passed, explained that the statutory affirmative defense that would be implicated here on remand, 623(f)(2)(B)(i), is a simplification of that regulatory defense. And I think what the Act as a general matter does is it recognizes that benefits are more difficult because it's tied up with issues of retirement age and the like, and so a more flexible approach is necessary with respect to benefits. But with respect to core employment, hiring, firing, promotion, and compensation, the Act reflects a judgement, as stated in the purpose, that they want to promote the employment of older people on the basis... John Paul Stevens: Now, Mr. Clement, just... I want to be sure I have an answer to my question. With respect to employment practices, such as that described, am I correct in... in agreeing that if an employer uses a stereotype to... to reach that conclusion, there would be no affirmative defense for it? Paul D. Clement: I... I think that's right. Unless this Court were, I mean, if this Court has a... has a very flexible view of age in the prohibition, I suppose it could allow the agency to adopt a flexible affirmative defense along the lines of Weber. Let me also... Paul D. Clement: Why not? Paul D. Clement: Let me also say that the statute specifically gives the EEOC, in 29 U.S.C. 628, the regulatory authority to make exemptions, and I think if there are specific concerns with particular practices that seem benevolent and are benevolent, then the EEOC can make a regulatory exemption. But with respect to these seemingly benevolent... Antonin Scalia: Where... where is that authority? Paul D. Clement: 29 U.S.C. 628. It's in the statutory appendix, I believe at page 4a, and that... and that is... that is a sweeping authority. It gives the EEOC both the authority to make interpretive regulations and substantive exemptions from the statute. Anthony M. Kennedy: Well... well if... if your submission is that stereotypes are... are deplored and prohibited by the Act, how could the EEOC make an exemption to the contrary? Paul D. Clement: Well, I think, as I said, if... I think that... that the Act is perfectly consistent with the idea that these stereotypes should play no role. The purpose clause of the statute says it wants to promote the employment of older workers, but how does it say it wants to promote the employment of older workers? By having them judged on their ability rather than age. And I think it reflects a judgement that an employer that has age in mind and not ability when trying to favor an older worker is not going to be able to reverse the process when they're working to the detriment of a worker. Stephen G. Breyer: So then in any instance in which the employer quite honestly is moved by some human feeling that is related to an older person, that the Act would rule out? Paul D. Clement: I... I think that's right, Justice Breyer, but what's... Stephen G. Breyer: All right. Now, is there any reason to think that that's what Congress had in mind, any reason to think that it... that it... that it really wanted in this respect, because most human beings are moved by these kinds of emotions, they wanted to prohibit that? Paul D. Clement: Two responses, Justice Breyer. First... Stephen G. Breyer: Helps other people. Paul D. Clement: First, I think that the natural human instinct to favor an older worker would be to cut a break to a worker who's been with the company many years, and if that's what an employer wants to do, it's perfectly free under the Age Act to say, if you've been with us 30 years or 20 years, we're going to cut you a break. To the extent that's not the motivation, but it's purely age-based, then there is an indication in the statutory history, and that indication is the colloquy between Senators... Stephen G. Breyer: I thought that was ambiguous, somewhat ambiguous. Paul D. Clement: Well, the colloquy is not at all ambiguous. Antonin Scalia: Who... who heard that colloquy? I mean, were they the only two people on the floor? I'm really supposed to get... Speaker: [Laughter] Paul D. Clement: Justice Scalia, all I can tell you is that... Antonin Scalia: We don't really know, do we? Paul D. Clement: Justice Scalia, I can tell you this. The same number of people heard that colloquy as heard the colloquy that this Court relied on between the same two Senators in interpreting the Age Act in Betts and in United Airlines against McMann. On two occasions this Court has recognized that those two Senators have important views on the Age Act because they were the principal sponsors and the floor managers of the bill, and as the icing on the cake, the Court relied on Senator Javits again in the Criswell case. But... William H. Rehnquist: How... how much use has the EEOC made of Section 628 when it can issue exemptions or that sort of thing? Paul D. Clement: Mr. Chief Justice, I don't know the exact number of times, but I know there is a pending exemption right now that's been... that's been promulgated... William H. Rehnquist: Are there... are there... are there other exemptions that have actually been granted? Paul D. Clement: There... there are, Mr. Chief Justice, and the one that they're working on now is to give employers greater flexibility to coordinate their retirement benefits with Medicare benefits in response to a Third Circuit decision in the Erie County case... John Paul Stevens: Well, may I ask... Paul D. Clement: so that's not just statutory authority that's never been used. John Paul Stevens: May I ask you a similar question? To what extent has... how many enforcement proceedings has the EEOC commenced to... to enforce the reverse discrimination aspect of this statute? Paul D. Clement: Justice Stevens, there's one time where they did enforce it and that was a full committee proceeding. The decision was circulated to the full commission, so that is a binding decision on the commission. John Paul Stevens: So they did... there is one example of an enforcement action? Paul D. Clement: Right. John Paul Stevens: In all these years, only one? Paul D. Clement: Well, but there are only a handful of examples that go the other way and with... I think it's important to understand that with respect to the entire universe of EEOC decisions, as opposed to Department of Labor decisions, there's this one decision that comes up in a non-benefits context where they apply the regulation. There are three other decisions that come up in a benefits context... Ruth Bader Ginsburg: In that... in that very context, Mr. Clement, you didn't mention this Court's decision in O'Connor against Consolidated Coin, where was it the 52-year-old had a claim for relief when the 41-year-old was preferred. If I understand your argument, you... you are saying that equally the 41-year-old would have... have a claim if the 52-year-old were preferred? Paul D. Clement: That's correct, Justice Ginsburg. That's exactly what the Senate colloquy said that... and that colloquy was picked up in the regulation, which is a binding regulation with notice and comment rule-making. David H. Souter: It says in the colloquy... Well, leave... leave... no, please go ahead. Stephen G. Breyer: It says in the colloquy, could not turn down either. Paul D. Clement: Right. There would be... Stephen G. Breyer: It doesn't... they were clear, turn down either... Paul D. Clement: Right. Stephen G. Breyer: and choose the other. It could be... can't... Paul D. Clement: No. It said there would be discrimination whichever way the decision went, and I don't think that's all that unusual. I mean, anytime in the Title VII context that you have an employee who's fired for sex or race... Paul D. Clement: Whichever way it went, if it was... Paul D. Clement: somebody will sue. John Paul Stevens: whichever way it went, if it was based on age, I still don't understand how one could hire the 51 because he discriminates against 42-year-olds. Paul D. Clement: I... I think, Justice Stevens, you could have a presumption or a stereotype that older workers are going to be better. I suppose it's also true that you could have a situation where, for some other benefits reason, an older worker wasn't going to have as many benefits or would get paid less... Antonin Scalia: But the problem with your stereotype argument that the Government's trying to drive out of people's minds age, just the way it's trying to drive out of people's minds race, sex, and the other things against which you can't discriminate, is that the Government doesn't try to drive it out of their minds, it only... only over 40. Under 40 it's perfectly okay to have these... these... these thoughts of age. You just simply cannot regard this statute as a statute that is directed against some moral disapproval of... of taking age into account. Paul D. Clement: Justice Scalia, the statute, when it was originally enacted, had the protected class only between 40 and 65, so I don't think the fact it's... now only has a lower bound tells you anything in particular about the prohibition. Paul D. Clement: Mr.... Paul D. Clement: And I thought you said it well for the Court in the Consolidated Coin case that this is not a statute about protecting individuals against the burden of being over 40 or to protect against over-40-ism. It protects people in the protected class, which is crystal-clearly defined to be individuals over 40, from discrimination because of age. The Act doesn't care if the worker in the protected class who loses out is the younger of the two. The Act is triggered whenever an individual in the protected class loses out because of his or her age. Thank you, Mr. Chief Justice. William H. Rehnquist: Thank you, Mr. Clement. Mr. Verrilli, you have 4 minutes remaining. Speaker: Thank you, Mr. Chief Justice. We're prepared to submit our case. William H. Rehnquist: Very well. The Court... the case is submitted.

William H. Rehnquist: We'll hear argument next in No. 87-339, the City of New York, City of Miami, City of Wheaton and National League of Cities versus the Federal Communications Commission. Mr. McGrath, you may begin whenever you're ready. Stephen J. McGrath: Thank you, Mr. Chief Justice, and may it please the Court. The petitioners are here pursuant to Writ of Cert to the Court of Appeals for the D.C. Circuit. And the issue is the authority of the FCC to preempt through the promulgation of certain minimal guidelines as to cable television signal quality, to preempt all local franchisers from promulgating technical standards as to signal quality. Now the Commission has adopted a deregulatory approach to technical standards explicitly as to signal quality. Now, in the past going back to 1972, the Commission itself had promulgated certain technical standards. It has recognized over the years, however, that these were incomplete and that they didn't cover certain problems such as ghosting of a picture. Nevertheless, in 1985, after the passage of the New Cable Act, the Commission determined to no longer continue these standards and after comments, issued a ruling in which these prior standards were continued as guidelines that could be included by franchisers in franchise agreements but that no other standard, whether a similar standard which was more stringent, or a standard for some other quality of signal quality could be promulgated by local franchisers. Now, the D.C. Circuit, finding more persuasive the argument of the Commission that it continue to have a broad delegated preemptive power which this Court had recognized in the Capital Cities case under the old Communications Act, that this continued under the New Cable Act, and held that as long as one technical guideline was adopted by the Commission as to a particular classification of channels, that they can preempt any standards by local franchisers. But even the Court of Appeals had some difficulty with the approach of the Commission. The only classification of channels for which any standards, now guidelines, had ever been promulgated were the traditional broadcast channels. There had never been any standards or guidelines adopted for what is now the majority of cable televisions channels. The satellite but unencoded broadcasts, CNN, that sort of thing, the encoded broadcast, HBO, and then a fourth category that the FCC had promulgated, that is, the two-A interaction. For those other three types of channels, they had never promulgated any standards. And the Court of Appeals was troubled by that. And pointing to certain aspects which I'll get into a little later in the Cable Act that it would be very difficult, specifically the renewal process, be very difficult for franchisers to take part and make full use of renewal process without there being some standards. And therefore remanded that aspect back to the Commission to reconsider. Byron R. White: Which category does the City want to-- Stephen J. McGrath: All categories. Byron R. White: --Have they proposed standards for all categories? Stephen J. McGrath: We have standards that were included in the contracts back in 1983. Byron R. White: For all of them? Stephen J. McGrath: Yes, Your Honor. And these include not just the four guidelines that are discussed by the Commission. We put in an engineering report below which first indicates the insufficiency of the ones that are guidelines under the FCC and that under those guidelines, if those minimums were all that were met, the resultant picture would be ghosting, would be distortion, would be clearly an unacceptable picture. Byron R. White: Do you think the issue is different with respect to the first category where the-- Stephen J. McGrath: I don't think so, Your Honor, because the Commission has taken a broader approach than the Court of Appeals has approved, but we think the issue is not merely with these other three categories, it's not merely-- Byron R. White: --Well, the Commission has some standards for Category I, right? Stephen J. McGrath: --Category I and none for II, III and IV. Byron R. White: None for the others but how about Category I? Isn't the issue there different than with respect to the categories that the Commission-- Stephen J. McGrath: Not really, Justice White, because under the Court of Appeals approach, they can merely through the issuance of the most minimal standard fulfill their entire regulatory responsibility. Byron R. White: --And your argument is the same with respect to all of them as long as they're's not any real conflict? Stephen J. McGrath: Yes, Justice White. Byron R. White: And if you can prove that in question in the first category, why, it goes without saying to the other categories. Stephen J. McGrath: Yes, Justice White-- Byron R. White: We're only talking about Category I in this case, aren't we? Stephen J. McGrath: --I disagree, Justice Scalia. Antonin Scalia: Are you appealing II, III and IV? I thought you got what you wanted on those? Stephen J. McGrath: No, we don't-- Antonin Scalia: For the time being, anyway, until the FCC decides what it's going to do? Stephen J. McGrath: --No, the Court of Appeals remanded for them to consider. Antonin Scalia: Right. Have you brought that remand here? Have you objected to that remand? Stephen J. McGrath: Yes, Your Honor, because we think it's an issue of law. It's not a mere matter for the Commission to consider the interworking and how to resolve the interworking of their issue standards and a requirement under the Renewal Provision. It's our position that reading those is an issue of law that makes it clear under all categories that we are preempted only when standards are issued which could conflict with our standards. Antonin Scalia: I didn't understand that. Stephen J. McGrath: Where none are, there's no conflict. Now, we submit that the Court of Appeals applied the wrong preemption standard by adopting what it called a more persuasive argument, and reached a result that's in conflict both with the purposes and the provisions of the Cable Act. Turning first to the preemption, as Justice Brennan said in the Louisiana case, that touchstone of preemption is Congressional intent. And as this Court's recognized a number of times, where there are two legitimate schemes of regulation, Congressional intent to preempt should be clear, there should be no presumption of preemption, and that where possible, those two spheres of regulation should be accommodated so that they can stand together. Now, the Commission really has taken the position that within this area of technical standards, they're allowed to preempt the field. Then as Justice White remarked, our position is they are not entitled to preempt the field and in fact, the only preemption is where ours cannot stand together with the guidelines issued by the FCC. John Paul Stevens: Mr. McGrath, will you help me with one thing? I've got a little lost in this case. Stephen J. McGrath: Yes, sir. John Paul Stevens: What is the statutory provision on which the Commission relies for its authority to adopt the regulations. Stephen J. McGrath: Okay, it's in 624(e). Now,-- John Paul Stevens: And that's the sole authority that they rely on, 624(e)? Stephen J. McGrath: --Well, they've made some oblique comments indicating they may be relying upon the old Communications Act, but it's our position that that's at an end. John Paul Stevens: But you think they rely exclusively on 624(e)? Stephen J. McGrath: Yes, Justice Stevens. Antonin Scalia: May I get back to what we have in front of us here? I thought we just had Category I, not II, III, and IV, because the question presented as you set it forth in your brief is by a vote of 2 to 1, the Court of Appeals upheld an FCC order preempting local and state cable television technical standards which are more stringent, etcetera, etcetera. And then it goes on and says, the questions presented are whether the Court of Appeals applied an erroneous legal standard. Now, on II, III and IV, it wasn't 2 to 1; it was 3 to 0, wasn't it? So I assumed you accepted the Court of Appeals decision on those? Stephen J. McGrath: With respect, Justice Scalia, I don't think Judge Mikva agreed that there should be a remand as to how the renewal provision worked with the power under 624(e). I think his position is consistent with ours, that is, the standards, if there are no standards or if there are standards which can stand with our local standards, there's no preemption. It really doesn't matter what-- Antonin Scalia: But you bring before us dispositions, not legal theories, and the disposition on II, III and IV was 3 to nothing. And I did not understand that to be what you were complaining about. I thought you'd accepted that remand to the Commission. Stephen J. McGrath: --With respect, Justice Scalia, I believe Judge Mikva would have voted to annul the rule rather than merely to send it back for reconsideration. Antonin Scalia: Well, it's a very confusing question presented if you're seeking to bring that here too. Stephen J. McGrath: Turning to the statutory, to the Cable Act, itself, the Commission has pointed to one of the stated purposes of the Act, that is to limit needless regulation. However, the preeminent purpose is to establish a national policy as to the cable industry. Now, they did not choose to effectuate that policy as had been done under the Communications Act through a broad, vague delegation of power to the FCC. There were other problems that they meant to deal with. For instance, the FCC itself had moved in and out of the regulatory process and that's indicated in the authoritative report that Congress that was prepared for this legislation. So instead of giving the FCC broad power, they clearly delineated in the Statute the regulatory authority of the Federal and the state and local agencies. They also had the purpose of assuring that the cable companies be responsive to the community needs. Accordingly, they made the franchise process the preeminent regulatory structure, and they set up national procedures and standards to assure that those structures, that the franchisers remained responsive to the needs of the localities, but at the same time, applied national standards. Now, looking at the most relevant statutory provisions dealing with requirements for facilities and equipment confirms that in that area, the regulations must be intensely local. First, looking at Section 624, the Congress stated-- Antonin Scalia: Where are they? Stephen J. McGrath: --In the original Act at Section 624. Antonin Scalia: I understand. Where are they in the briefs? Stephen J. McGrath: They're in the Appendix. Starting at page 116 of the Appendix to the Petition. In Section 624, they've empowered franchisers to include pretty much any requirement relating to facilities and equipment. And the report makes it clear that just about any requirement relating in any way to the operation of a cable system can be required to be put into the proposals and can be enforced by the franchiser. The next relevant section is 625 which deals with modification. Now, Congress, as the Commission itself has indicated, had a concern. William H. Rehnquist: Will you tell us where do you think 625 is and what exact sentence it is you're quoting from so we can follow it? Stephen J. McGrath: I'm sorry. It's 625. William H. Rehnquist: 625(a)(1) appears to be on page 120 of the Appendix. Stephen J. McGrath: Yes. And immediately thereafter at page 125 is renewal. Sandra Day O'Connor: Are we talking about the Joint Appendix? Stephen J. McGrath: No, the appendix to the Petition, Justice O'Connor. William H. Rehnquist: Oh. So we're now on renewal in your argument? Stephen J. McGrath: Modification, Justice Rehnquist. Now, there was a problem back in the 70's and the early 80s, that both municipalities expected and the cable companies hoped to meet very sky high requirements, both as to services and to equipment and facilities. Congress recognized this problem, passed this provision, which allows upon a showing that attaining a particular requirement was commercially impracticable that the franchisee can be relieved of the requirement. Perhaps most importantly is the next provision, the renewal provision. Now, this again was to face a problem, a foreseen problem that cable companies that had expended vast capital resources to establish a cable system would not be unreasonably denied a renewal. And the thrust of the statute set out a detailed procedure controlling the renewal process, specifically when there's a dispute. And the whole process is intensely local. The first step of the process is an inquiry into how the cable operator has performed under the prior contract, and the needs of the community. That's on notice, not to the Commission, but on notice to the members of the locality. Antonin Scalia: Mr. McGrath, what do you do about 624(e), which is on beginning at the bottom of page 118. Stephen J. McGrath: My point is this, Justice Scalia. Antonin Scalia: Which says, let me tell you my problem with it. It says, the Commission may establish technical standards relating to facilities and equipment which a franchising authority may require in the franchise. Now, it seems to me the natural reading of that is the Commission may establish those technical standards which and only which the franchising authority may require. Otherwise, it seems to me, everything after, which, is meaningless if we follow what you think-- Stephen J. McGrath: Justice Scalia, do you mean that the "which" refers back to the technical standards? Antonin Scalia: --Right. Relating to the facilities and equipment... may establish technical standards which a franchising authority may require in the franchise. Stephen J. McGrath: That would make their role essentially advisory. That they could promulgate certain standards and it would be up to the locality to include that in the franchise process. Antonin Scalia: That's right. I read that as saying the FCC may establish those standards that can be required. Stephen J. McGrath: Oh, you're reading it as limiting what can be done by the franchisers. Antonin Scalia: Well, what does it mean if it doesn't meant that? Which the franchising authority may require? What would it mean if it doesn't mean what I just said? Stephen J. McGrath: Oh, no. I think one could reasonably... and that has not been our position, but one could reasonably read this to say the Commission could issue advisory technical standards. However, it has always been our position that they can issue binding technical standards. The issue for the Court to resolve is whether or not that empowers them to issue certain standards and tell the localities that they can't issue other technical standards which can't... which can-- Antonin Scalia: I'm not saying, binding. I'm saying they may establish technical standards which a franchising authority may require. I think the only way to read that is they may establish those standards that can be required. Stephen J. McGrath: --With respect, Your Honor, only by-- Antonin Scalia: If it only means what I think you're saying, if it only means that they can issue advisory standards, you wouldn't need which a franchising-- Stephen J. McGrath: --No, that's not our position, it's never been. I'm just trying to point out that this is a very vague and ambiguous statute and might even be reasonably read to be advisory. Now, we agree they can issue binding standards, but binding in the sense that if we tried to pass some standard that was in clear conflict, it can't stand with it, then that's the extent of their preemption. Antonin Scalia: --It doesn't say, which a franchising authority must require. It says, it shall issue, or may establish standards which a franchising authority may require. If it said it may establish standards which they must require, then it would mean what you say. But it doesn't say, which they must require. It says it may establish standards which they may require, meaning only these may they require and no others may they require. And that is what the FCC has done. Stephen J. McGrath: Well, first the actual wording of the Statute, I don't think that is a reasonable reading. Antonin Scalia: Well, it says, may and not must. Stephen J. McGrath: With respect, Justice Scalia, it refer back to the facilities and equipment. They can issue technical standards relating to the facilities and equipment. It's the facilities and equipment which we may include in the-- Antonin Scalia: Oh, you think the "which" goes with facilities and equipment? That's a very strange reading of the English language, I think. It's on page 118 and 119 of the Appendix. Stephen J. McGrath: --With respect... if you go back to Section 624(a)-- Antonin Scalia: Well, but why do we need to go back to 624(a) when we're talking about 624(e)? Stephen J. McGrath: --All I'm trying to indicate is they frequently refer to facilities and equipment that may be required. That's why I read this provision, which a franchiser may require, as going back to the facilities and equipment. We can require any number, any different types of facilities and equipment. William H. Rehnquist: That's just a very strange... here's how the sentence reads: The FCC may establish technical standards relating to the facilities and equipment of cable systems which a franchising authority may require in the franchise. You think it's perfectly logical to read that as relating as to mean only that the franchising authority may require the facilities and equipment to be in the franchise? Stephen J. McGrath: With respect, Judge, that's our reading of the Statute. Antonin Scalia: You mean the FCC cannot require any standards for unrequired facilities and equipment, if the people put in some facilities and equipment that haven't been specifically required by the municipality, the FCC cannot establish standards for them? Is that a reasonable reading of it? Stephen J. McGrath: Justice Scalia, the whole structure-- Antonin Scalia: It can only establish standards for required facilities and equipment and if the municipality chooses not to require any, no FCC standards apply? Stephen J. McGrath: --Well, if no jurisdiction require particular facilities and equipment, I don't see what the purpose of them issuing the guidelines would be. Antonin Scalia: It seems to me the, which, has to relate to standards and not to facilities and equipment. Stephen J. McGrath: Well, getting back to the... this is the only provision on which they rely, and if they're reading is given full force, they in essence read out substantial provisions of 625 and 626. Under 626 in the renewal process, one of the findings which can be the basis for a denial of renewal is that the quality of the service under the prior contract in light of the reasonable needs of the community has not been satisfactory into the quality of the service. And one of the particulars that they point to is the signal quality. Now, if the FCC can issue these minimal guidelines, how are we to turn down renewal based upon the signal quality if we're not able to point to specific guidelines? The Federal guidelines certainly are not going to enable us to do this because as we put in our affidavit below of an engineer, all that's going to result following those guidelines will result in a snowy picture. And a cable operator can say, you can't deny my renewal based upon this because I've complied with the Federal guidelines. And there's a further step under the renewal process. The whole process is aimed at clear determination consistent with-- William H. Rehnquist: We'll continue there at 1:00 o'clock, Mr. McGrath. William H. Rehnquist: Mr. McGrath, you may continue. Stephen J. McGrath: Thank you, Justice Rehnquist. I'd like to return to the discussion of Section 624(e) and Justice Scalia's interpretation of that provision. Now, we submit that a reading of that provision as providing that there can be only technical standards where the Commission has promulgated such standards is inconsistent with the statute. Now, first at page 116, Section 624(a)(1) empowers a franchiser to require that in proposals, that the franchiser may establish requirements for facilities and equipment. These are highly technical matters, and we submit that only through... and technical standards would naturally be part of a requirement for facilities and equipment. Possibly more relevant at page 127, as I stated before, there's a delineated process in which renewal can be accomplished, and there are a limited number of findings which can be made to support a denial of renewal. One of those findings is laid out at page 127. And if I can quote it: "The quality of the operator service including signal quality has been reasonable in light of community needs. " First of all, we submit that without technical standards, there's no way in which such a finding can be made. We'd be left to basing unsatisfactory signal quality, assuming the Commission issued no guidelines, upon subjective complaints. Byron R. White: Well, that just gives you more authority. Stephen J. McGrath: But if one reads 624(e) the way I believe the Chief Justice and Justice Scalia read it, we would not have the power to issue any standards unless the Commission first took the affirmative step of allowing us, in essence, passing their own regulation and then we'd be allowed to adopt that. Now, if we're only empowered to pass the regulation at the whim of the Commission and the Commission decided not to pass any regulations this section would in essence be read out of the Statute. And we submit the Commission's also probably the last entity that could determine whether signal quality is satisfactory in light of community needs. John Paul Stevens: Mr. McGrath, why is that so? I mean, subsection (b) includes things like quality of operator service which I guess means whether maintenance people would come in, and so forth, and you don't have to have any standards on that. The response to consumer complaints, you don't have standards on that. And billing practices, there are no standards on that. Why couldn't they make findings dealing with each of these subjects without any standards saying what the maximum or minimum was? Stephen J. McGrath: Justice Stevens, the main thrust of the renewal procedure is to set up a due process kind of procedure. John Paul Stevens: I understand. Stephen J. McGrath: Whether or not it's absolutely impossible to make this finding, it would seem quite reasonable, and we submit compelling to be able to base the determination upon whether or not they satisfied certain kinds of standards. John Paul Stevens: Do you think that this means by the same argument that the FCC must promulgate regulations dealing with billing practices and how to respond to consumer complaints? Stephen J. McGrath: No, Justice Stevens, my argument is just as Justice Scalia read 624(e), that the only entity that's empowered to allow technical standards to be placed into franchise agreements is the FCC. We submit, no, that in fact, both the local franchiser in light of 626 and the general provisions of 624 is similarly empowered to issue technical standards. John Paul Stevens: You mean the local. But they are to the extent consistent with the Title, and I suppose with regulations promulgated by the FCC pursuant to the Title. You don't claim a right to promulgate inconsistent regulations? Stephen J. McGrath: No, our position-- John Paul Stevens: And if there's a regulation out there that says, there shall be no regulation in this area because we want the free market to set the standards, then it's inconsistent with the regulation. Stephen J. McGrath: --No. Our reading of the Statute is that they can issue standards, and as long as our standards are not inconsistent. Not that it's inconsistent with the policy of the FCC. They're empowered here to issue standards, not to set broad policy. John Paul Stevens: Well, but if they have the power... where do they get the power to issue. You said you think they only get the power from the 1984 Statute, don't you? Stephen J. McGrath: Yes, Justice Stevens. John Paul Stevens: Why is it then that their order reads, as an amendment of the preexisting '72 rules rather than as a brand new-- It seems to be we're relying on preexisting authority as well as-- Stephen J. McGrath: Well, as I mentioned earlier in my argument, they do make references to the earlier Communications Act, but do not clearly state in their briefs that they are relying upon that Statute. John Paul Stevens: --But if that Statute-- Stephen J. McGrath: We believe to some extent that they are relying on it, and that that's improper. John Paul Stevens: --Now, why is that improper? Is there anything in here that repeals the prior statute? Stephen J. McGrath: Well, in essence there was no prior statute. If you'll look, the Midwest Video case,-- John Paul Stevens: Well, do you contend that the '72 regulations were invalid, also? Stephen J. McGrath: --Not at that time, but there's a long case load going back to Southwest Cable through the two Midwest Video cases and finally the Capital Cities case where this Court recognized that the Commission under the Communications Act had broad regulatory powers. But as Justice Berger, Chief Justice Berger pointed out in his concurrence of the first Midwest Video case, because the Communications Act was passed ten, 20 years prior to cable television, in essence it was the Commission and this Court that was setting broad policy decisions that had to be made by Congress. Congress has made those policy decisions. Has decided that regulation is not to be done broadly through a vague delegation of power as pursuant to the Communications Act, but under the specific guidelines of the Cable Act. The Cable Act gives some duties to the Commission. It gives some duties to-- John Paul Stevens: You take the position that unless affirmative authority for an FCC regulation can be found in the Cable Act of '84, it has no such authority to regulate in this area? Stephen J. McGrath: --Yes, Your Honor, that's our position. Now, I have a few minutes left. I didn't have a chance before, but I'd like to reserve a few minutes for rebuttal. William H. Rehnquist: Thank you, Mr. McGrath. We'll hear now from you, Mr. Wallace. Lawrence G. Wallace: Thank you, Mr. Chief Justice, and may it please the Court. Historically, the Commission applied technical standards requirements to so-called class one channels which are channels used to deliver broadcast signals of television stations because that was the clearest authority that the Commission had under the ancillary jurisdiction doctrine of the Southwestern Cable case. The Commission began to regulate in this area before Congress enacted any statute dealing specifically with cable casting. Because the technical standards that the Commission adopted were principally focused on the signal both visual and oral that the worst located subscriber would actually receive on his set, and because the other classes of cable were coming through the same system, the standards for Class I channels tended also to control the quality of signals for the other classes. And for that reason, the Commission never did adopt standards specifically with respect to the other classes. But it is now considering that question on remand in this case. We did not raise any question about the correctness of that remand. The question that the petitioners have presented with respect to the Commission's authority to prescribe maximum standards for Class I channels will necessarily have a spillover effect to what the Commission can do about the other classes of channels. So they're is a relationship there regardless of whether technically the other classes are before the Court on this petition. The regulation that is at issue here-- Antonin Scalia: Do you understand them to be before us? Lawrence G. Wallace: --I had not understood them to be before the Court except in the spillover effect that would necessarily occur from the decision here. The FCC Regulation that is at issue explicitly prohibits local franchising authorities from enforcing more stringent technical standards for cable casters than the standards that the FCC has prescribed. After the standards are set out on the preceding pages, then on page 87 of the Appendix to the Petition, the Commission Regulation is quite explicit that these rule sections or less stringent versions of them may be used as standards by state or local regulatory authorities, no technical parameter in excess of the above rule sections may be required. And the way local authorities require standards is through the franchising process or the renewal process in the franchise agreements. So there's no doubt that the Commission's intent, as its report and order explain unmistakably as well, was to prevent the local authorities from enforcing more stringent standards on the cable casters. And this case therefore presents no occasion to consider guides to interpretation that the Court has adverted to in other cases that would disfavor preemption when there's some ambiguity about whether preemption was intended. The question in the case is whether this regulation exceeds the scope of the Commission's statutory authority. We do not claim that the statute itself accomplished this preemption of more stringent standards or that the statute required the Commission to preempt local authority in this way-- And in this respect, the case is similar to the Capital Cities against Crisp case in which the preemption flowed entirely from the Commission's regulation adopted in the exercise of its broad authority to further the national communications policy and not from anything in the statute, which at that time didn't even refer to cable casting. Antonin Scalia: You also would not agree with the reading of 624(e) that I was suggesting earlier? Lawrence G. Wallace: I would agree with it entirely, Mr. Justice, with the possible exception that it starts off saying the Commission may establish technical standards. So that the discretion is in the Commission whether to establish the technical standards. And what has been remanded by the D.C. Circuit in this case is the question of whether the Commission could preclude local authorities from establishing their own technical standards with respect to Classes II, III and IV, if the Commission has not established any technical standards. And of course that could be resolved by just having the Commission establish some technical standards. Byron R. White: You don't think anything about Classes II, III and IV is here? Lawrence G. Wallace: Not directly, no, sir. Byron R. White: Directly? Do we have to face it either way we decide it? If we decide either for you or for the other side, we still don't reach II or III or IV? Lawrence G. Wallace: I agree with that, Mr. Justice White. John Paul Stevens: Yes, Mr. Wallace, but is it not true that your theory might make a difference, does it depend on the existence of some Federal standard, there's some minimal Federal standard under Title I for Title I but not under Titles II, III and IV, isn't that the point? Lawrence G. Wallace: That is correct. John Paul Stevens: And the question I have in my mind is whether we agree with you on Title I, do we just leave open the question on Title II, III and IV, or will we necessarily have decided that? Lawrence G. Wallace: Well, I think you do leave it open because we did not petition from the remand. John Paul Stevens: I'm not questioning about the remand but the question I have is whether without promulgating any technical standards at all, could the FCC under the statute say we think the best way to achieve quality signals and all the rest of it is by letting the free market have full play, and simply say, we will promulgate none, and we forbid the states and franchises. Lawrence G. Wallace: That's what the Commission did with respect to II, III and IV, and we argued in the Court of Appeals that we could do that, and they said not without explaining how that relates to the franchising process. And now the Commission is reconsidering that, so we're making no contention here. John Paul Stevens: But my question is whether you would still make the same legal... because if you're right on that, this is an awfully easy case. But I don't know whether you're really arguing that or not. Lawrence G. Wallace: We're not arguing it that way because that question is back before the Commission and the Commission has not spoken yet. Byron R. White: Yes, but now can you win on Class I on the ground that you are urging without winning on II, III and IV? Lawrence G. Wallace: Well, on Class I, the Commission has prescribed technical standards within the meaning of 624(e) on page 118 of the Appendix, which says, the Commission may establish technical standards. The Commission has established technical standards for Class I, and those are the standards which it has said a franchising authority may require. And that's how we can win on Class I. Byron R. White: Well, but I thought you were trying to defend, and I think you do, the power of the Commission to preempt. Just say, just on the grounds that we can forbid locals from establishing technical standards, whether they're in conflict or not? Lawrence G. Wallace: But we have not argued that in this Court. That is what is on remand. In this Court, we have argued that the Commission has established standards and said that Class I and said that the local franchising authorities may not exceed them in requiring standard policy. Byron R. White: Well, doesn't that go to the power of the Commission to preempt? Because except for the power to preempt, just the fact that there are regulations there wouldn't preempt locals? Lawrence G. Wallace: Well, the forum of the regulation that is before the Court here is a form that includes an explicit preemption provision but that form is encountered in a situation where a Federal Agency has concluded that certain options should be preserved for the regulated industry. In that respect, this case is like Fidelity Federal Savings against de la Cuesta where the Federal Home Loan Bank Board concluded that federal savings and loan associations should be allowed the option to use due on sale clauses if they wished. They didn't want to require them to use them so the only way to preserve the option unambiguously was to say that the option cannot be taken away by state regulatory authority. Sandra Day O'Connor: Well, I guess, Mr. Wallace, you're also taking the position that even apart from the regulation adopted by the FCC preempting that any promulgation of standards by the FCC would effectively preclude the franchising authority from having stricter standards? Lawrence G. Wallace: If, it would depend on-- Sandra Day O'Connor: You are arguing both things? I that right? Lawrence G. Wallace: --It would depend on if the Commission told cable casters, these are the standards that you must use, and you can't deviate from them up or down, then that would preclude a requirement that would require them-- Sandra Day O'Connor: Well, what if all the FCC did was adopt some standards without telling anybody anything else? Lawrence G. Wallace: --Then that would leave an ambiguity which is not present in this case, and might lead to the conclusion that the FCC did not mean to preempt local authority from applying a more stringent standard. But here-- Sandra Day O'Connor: Now, as I understand it, you take the position that the reason the FCC wants to promulgate standards of this type is to encourage competition? Is that right? Lawrence G. Wallace: --Well, to encourage the development of the cable industry including in the competitive environment, yes. But also to encourage technological change. Sandra Day O'Connor: At the renewal stage, I gather it makes no difference if there's another cable company that can put out a stronger better signal and meet high standards? Lawrence G. Wallace: But what the Commission's reports and orders, both in '74 and in '85 said is that we're dealing with a national market for this equipment. And it isn't just a matter of competition in the particular community. Sandra Day O'Connor: Well, I gather the competition only occurs in the first instance of granting a franchise, not at the renewal stage. Is that right? Lawrence G. Wallace: Well, there can be competitive applicants for renewal, but one of the things that the '84 Act did was to limit the discretion of local authorities to deny renewals. It put in safeguards for the renewal applicant that did not previously exist. Sandra Day O'Connor: And today under that amendment now a franchising authority could not deny renewal because it had a better offer from some other company offering stronger and better facilities, equipment, and signals? Lawrence G. Wallace: It could not. It could not if the renewal applicant is meeting the standards prescribed by the Commission. What the reports and orders in both '74 when the Commission first imposed nationwide technical standards, and in '85 when the Commission concluded that it needed to prescribe a standard that could not be exceeded in requirements imposed by local authorities, what these reports emphasized was that a multiplicity of standards would cause cost inefficiencies in the industry. And if some of the larger wealthier systems were to move the industry to more expensive equipment, this could cause problems of cost ineffectiveness for small systems that may have only one or two thousand subscribers and might not be able to get less expensive equipment. And there was a great problem with rapid technological innovation in the development of equipment that standards might be prescribed in ways that would make technological innovations not meet the standards. And by the time of the '85 report and order, there were more than 18,500 local jurisdictions with franchising authority, and a diversity of standards that would have to be changed in order to accommodate technological innovations, and it might be conflicting with one another, would impede the development of cable casting and the ability of cable casting on a nationwide basis to compete with other technologies. William H. Rehnquist: Mr. Wallace, what about the renewal procedure? Supposing that New York City has given a franchise and they've got 300,000 people and at the time of renewal, 200,000 subscribers say, these signals are awful, it's all snow. Can the franchisee say, well, you can't go into that franchiser because they haven't shown we haven't complied with the minimum standards of the FCC? Lawrence G. Wallace: If the local system concluded that notwithstanding these 200,000 complaints the cable system is in fact complying with the FCC standards, then its only option would be to go to the Agency and say these standards are inadequate. But that would be a an implausible conclusion to reach. They might reach it. And the reason it would be implausible is because the standards don't vary from locality to locality and they're, they're, what they prescribe-- William H. Rehnquist: Well, what if the standards prove to produce snow in every locality? Lawrence G. Wallace: --But the standards are defined in terms of what the subscriber will receive, the poorest located subscriber, and because the signal is coming through cable, it isn't affected by terrain or configuration of buildings, so that if complaints were to be received in one place, comparable complaints presumably would be received elsewhere. William H. Rehnquist: You say the standards are described in terms of what the person sees on their set? Lawrence G. Wallace: That is correct. That is the main thrust of the standards. To some extent, it also defines standards for transmission but the main thrust of it, and what the standards are designed to assure is an acceptable quality of picture and of sound on the screen of every subscriber including the most poorly situated, the one farthest from the head end, and the standards are all directed toward that. So it would be implausible that one community would be having problems that others wouldn't, if the standards were being met. John Paul Stevens: Mr. Wallace, may I ask you a question about the statutory authority which I think is the bottom line here for the regulation. As I understand your argument thus far, you rely exclusively on 624(e), the section that deals with the situation where the Commission has promulgated standards. And as I also understand it, under Titles II, III and IV, there were no Federal standards, and the Commission still asserted the authority to preempt in the same way. And I would like to know what the statutory authority for that position was, because if that's valid, it would seem to me this case would a fortiori. Can you tell me that? Would rather do it in one bite rather than two. You're going to be back up here for II, III and IV, anyway, if it's all that clear, make a clean sweep of it. Lawrence G. Wallace: Not necessarily, because the Commission, you might adopt standards, but-- John Paul Stevens: I still would like an answer to the question, if there is one. Lawrence G. Wallace: --Well, one answer is 624(e) itself could be interpreted to say that the Commission could decide that zero is the technical standard that may be required in the franchise. Another possibility is to refer back to authority under the Communications Act itself and the broad standards. We don't think it's necessary in this case for the Court to resolve whether the Commission retains authority to deal with cable casting apart from the provisions of the '84 Act. Although we think the answer to that is probably, yes, and I would refer the Court particularly to page 79 and following of the Appendix to the Petition. Since the Commission is still applying to cable casters signal leakage limitations which the Commission enforces itself. And those have historically been based on Section 302 of the Cable Act which gives the Commission authority to regulate devices that interfere with radio reception. And the Commission is particularly concerned about leakage from cable systems that interfere with airplane communications. John Paul Stevens: 302 is a Section of the '84 Act? Lawrence G. Wallace: No, it is a section of the '34 Act. John Paul Stevens: Okay, so that you do contend that we need not look entirely to the '84 Act in order to find the statutory-- Lawrence G. Wallace: No. Well, we think the '84 Act suffices of purposes of what's before the Court. John Paul Stevens: --I understand that. But I'm trying to find out, if we disagreed on that, to what extent do you think it is appropriate to go to an earlier statute to find authority. Lawrence G. Wallace: We think the authority is there as it was there for the '74 report and order. We think that the Congress did not in any way disapprove of the preemptive order that the Commission had issued in '74. John Paul Stevens: And therefore the '84 Act did not withdraw any authority that previously existed under your view? Lawrence G. Wallace: No. However, the main thing is that the '84 Act mirrors what the Commission had developed as the difference between its jurisdiction over technical standards and the local authorities' jurisdiction over facilities and equipment is elaborately developed in the Commission's regulations, and the same terminological breakdown was explicitly used in the '84 Act. William H. Rehnquist: Thank you, Mr. Wallace. We'll hear now from you, Mr. Farr. H. Bartow Farr, III: Thank you, Mr. Chief Justice, and may it please the Court. As the Commission has indicated, the issue in this case is different from the issue in the usual preemption case that comes before the Court, because here there is an express statement by the Commission that it intends to preempt local regulations. The basic question then is the question that the Court has been discussing which is, what is the scope of the Commission's authority under the Cable Act? Is it broad enough in fact to allow the Commission to issue the regulations that it has. We think that the authority is broad enough, for a couple of reasons. First of all, the Commission was specifically given authority in Section 624(e) to establish technical standards. And there are no limitations in that grant of authority. We think that language is broad enough not just to give the Commission the power to pick some numbers, which seems to be the interpretation that the Cities argue for, but a power also to consider the policies that go together within picking the numbers. Now, the Commission, I think everybody concedes could have established more detailed or more stringent standards than the ones it did. But what it decided as a matter of Federal policy is that the best way to serve the goals to encourage better technology and to keep the cost of cable services reasonable was not to have any additional regulation, but in fact to let the industry itself develop the standards that would achieve those goals. Now, obviously, to suit that policy, there must be preemption of additional local standards. Otherwise, in fact, the policy couldn't be carried out. Antonin Scalia: That made a lot of sense to me until I realized these standards you're talking about are performance standards. What you've just described makes it sound as though you're describing technological standards so that the municipalities won't force technology into one direction or another. But you're telling me that what the Commission has come up with anyway is performance standards, hasn't it? H. Bartow Farr, III: Well, they are performance standards that involve obviously a technical component. And the question for the industry of course is what kinds of facilities and equipment will meet those particular performance standards. I think that is what the Commission has aimed at. If you look at the history of technical regulation, there is a ten-year period of course where the Commission has followed exactly the same policy before the Cable Act as it now is pushing in the same, in the regulations since then. Before that, however, from 1972 to 1974, the Commission followed exactly the policies the cities would like it to have to follow now. Speaker: You mean to 1984, don't you? H. Bartow Farr, III: No, I'm sorry. It's from '72 to '74, that's right. And then in '74, they changed the regulations and followed them that way for a decade. But from '72 to '74, they had just this policy that the cities are arguing for where they imposed minimum standards and allowed the cities to go above those standards and impose whatever technical standards they wanted. And in '74, the Commission came back to the issue and said, this has been a disaster. What is happening is that we are having inconsistent regulations. The cities are competing with each other to outdo each other in these requirements and the opposite of what we hoped would happen is happening. The cost is going up, and technology is being stifled. So it changed its regulations and for ten years prior to the Cable Act, followed a policy of preemption. Now, the particular argument that the cities make, therefore, if you look at it carefully, would mean that what Congress did in 1984 is it said to the Commission, you cannot follow the policy that you've been following for ten years... ten years where the technology of cable expanded enormously, and you must go back to a policy that you tried for two years, and gave up on as a failure. And what we are saying is that if you look at the structure of the Act, and particularly Section 624, which deals with these matters, there simply is not any indication that Congress intended to do that. Sandra Day O'Connor: The language of the Act to the uninitiated is a little confusing, though, because in 624(b), it says the franchising authority may establish requirements for facilities and equipment. H. Bartow Farr, III: That's correct, Justice O'Connor. Of course, 624 does not make any specific reference to technical standards. And I think what essentially 624 and 624(b) and (e) do put together is to essentially have the same structure that the FCC regulations have. The FCC didn't try to regulate many aspects of facilities and equipment, like safety codes and things like that, whether they met fire codes. They did regulate this one area of technical standards, and I think the language fairly tracks that. Now, I would just like to touch briefly on the point about renewal that has been made several times here, because I think the cities have said, referring not to 624, but to Section 626, that they really can't have a renewal process unless they have their own standards. And I don't think that that's so. First of all, there are the FCC standards. So if you are looking for a set of objective standards, the FCC standards are ones that cities can use in their franchises. Sandra Day O'Connor: Well, I guess their argument though is those are so minimal that they want to do better, that they don't do well enough. H. Bartow Farr, III: Well, Justice O'Connor, I think that that points up one of the differences here. I think that there is a difference between the power of the Commission essentially to establish regulations and to make them preemptive which I think is what this case is about. I think there is a separate issue which is whether these standards are adequate standards for the purposes that the cities would like to use them. They are of course free to do several different things if they don't like the particular standards. They can go to the Commission, for example, and say, we have particular local conditions which are causing us a problem that makes your standards inadequate. And we would like a waiver from the Commission in order to allow us to use some additional standards or more detailed standards. And the Commission has the power to grant that waiver. They even have a procedure for it. Or it can go to the Commission and say, change the standard. We think the Federal standards should be higher. They should be more detailed. What the cities can't do though I think is what they are asking to do here, which is to say regardless of what your standards are, however high they are, we can always impose our own idiosyncratic standards on top of those. And it is that, I think, what the Commission was concerned about. John Paul Stevens: Mr. Farr, do you think they could do that if the Federal standards were withdrawn entirely? H. Bartow Farr, III: I think that the issue would be the same one, Justice Stevens. I think again that would not be a question of basically the power of the Commission to regulate. John Paul Stevens: They would withdraw them but continue to preempt? H. Bartow Farr, III: That's right. But I think the question there would not be the basic question of whether they have the power to preempt but whether the decision to do so was arbitrary or capricious. And I think in the case of the channels II, III and IV below, that is what the Court of Appeals in essence said. We said, you know, you have broad powers in this area but at some point we are concerned that if you exercise them in a particular way, that is not defensible just as a matter of their exercise, but not as a matter of the existence of the power in the first place. John Paul Stevens: And would you agree with Mr. Wallace the power is still derived from 624(e)? H. Bartow Farr, III: I think that is the power that the-- John Paul Stevens: Even if there is no Federal standard, just the power to preempt all standards and say the free market shall be the only standard? H. Bartow Farr, III: --What I think Justice Stevens is that 624(e) conveys the power to the Commission to regulate in the area of technical standards, and I think that is a source of power for the Commission to do that. And if their explanation was sufficient, if they could show for example that even without standards, the goals of the Act could be met, I think that would be perfectly legitimate. Thank you. William H. Rehnquist: Thank you, Mr. Farr. Mr. McGrath, you have three minutes remaining. Stephen J. McGrath: Thank you, Chief Justice. As to Justice Stevens' inquiry as to the source of the power under the Act, I'd refer you to footnote 7 in which we set out the wording under the New Cable Act, and it amends the Communications Act Section 2(a) to provide that the provisions of this Act, the Communications Act, shall apply with respect to cable service to all persons engaged within the United States as provided in Title IV, the Cable Act. And at footnote 16, we've indicated there was a prior Senate version of that kind of amendment which might more reasonably support their argument. That version was rejected and this version was adopted. And I want to point out that there is a claim that the Federal policy is to protect the national market, that there be standardization. We submit, Your Honor, that that's a matter that was decided by the Congress. If one looks at 624, it's clear that the standards are those that are to be responsive to the community needs, it's the local franchiser. Even if we don't have the power to issue technical standards, our broad power to require equipment and facilities would necessarily reject the argument that the effect on national suppliers is a consideration under the Act. Congress decided those kind of problems would be dealt through the modification process. If they're not commercially practicable, then they fall. Finally, I'd like to point out that this claimed continuance of the prior dual regulation, it's always been the FCC's position, at least under the Communications Act, that it would regulate the operational aspects and leave to the localities some small area of protection, protection of the equipment from the elements. And that approach is confirmed by a reading of Capital Cities. The purport to have a broad power in this area. They are now trying to continue that under the Act. At most, they've been given some power as to technical standards but it certainly in any event is not a continuation of what was being done prior the the Act. Thank you, Your Honors. William H. Rehnquist: Thank you, Mr. McGrath. The case is submitted.

Joel M. Flaum: May it please the Court. Before proceeding with argument at the suggestion of the office of the clerk this morning, I was informed that correspondent from respondent's attorney failed to reach the Court that was dated February 20 at 1970. In that correspondence the asked that the Court please disregard the second argument entitled the case is moot, to the extent that the Court to entertain that and unless there are questions in that regard, the petitioner would stand on his brief on that point. Warren E. Burger: We take a note of that problem. Joel M. Flaum: Thank you Your Honor. Potter Stewart: Do you agree that the case is not moot, do you not? Joel M. Flaum: Yes, we do Your Honor. We argued at some length in our brief, it would want to – with this position I would like to go forward. Potter Stewart: That's no longer an issue between. You keep your voice on that. Joel M. Flaum: Yes, Your Honor I will. William O. Douglas: Now who filed this, you? Joel M. Flaum: Yes, Justice Douglas this was filed by the -- William O. Douglas: By you or by the -- Joel M. Flaum: The State of Illinois, is the petitioner. William O. Douglas: I know but I said who filed this memo on mootness? Joel M. Flaum: The point was raised in the respondent's brief, we replied in a reply brief. And then the letter was forth coming last week from the respondent asking that it would be withdrawn as a point. Turning to the instant case, Your Honor, the case which we feel is one of the first impressions certainly, factually before this Court. However, a little more than 100 years ago in the federal district court in New York, when George Davis was put on trial for perjury, shortly after the onset of that trial, the defendant became unruly. This was during certain statements being made by the prosecutor. The defendant was removed from the court during a motion for a new trial, the trial judge ruled. He was absent during a part of the opening only because of his own disorderly conduct. It does not lie in his mouth to complain of an order which was made necessary by his own misconduct. Now, 101 years later people in the State of Illinois asked this Court to review and reverse Court of Appeals for the Seventh Circuit's decision in Illinois v. Allen. Allen was indicted for armed robbery in 1956, tried in the criminal court of Cook County Illinois and sentenced to a term of 10 to 30 years in the penitentiary. He is presently on parole and I am informed that parole -- from beginning of the trial, Allen insisted on his right to question jurors on the voir dire examination, embarked on deliberate and knowing course of disruption outburst and threats which finally culminated in his removal from the courtroom during most of the presentation of a states' case. We contend the facts are not in dispute. William O. Douglas: Was he present for some part of the trial? Joel M. Flaum: He was present Your Honor for the entire defense. In fact, relative calm was to obtain when the defense began its presentation. He was left; he was taken out during the voir dire examination which he was conducting. Byron R. White: So, he was not there for the opening? Joel M. Flaum: He was not there for the opening. Byron R. White: Nor for any of the evidence in states' case. Joel M. Flaum: Not of the states' case. He was given opportunity to come back immediately after and before the voir dire, and immediately before the presentation of the states' case. Invitation was extended by the trial judge through counsel to have him return. The dialog upon his return was such that it clearly informed the trial judges. Byron R. White: There was appointed counsel was -- Joel M. Flaum: There was. Byron R. White: He was present throughout the states' case? Joel M. Flaum: Throughout the entire states' case. Byron R. White: And did he cross-examine the witnesses? Joel M. Flaum: He did. Byron R. White: Did he make an opening? Joel M. Flaum: He did, Your Honor I would draw that I'm not sure if he chose to be -- Byron R. White: What is the Illinois practice? Was the opening made immediately after jury? Joel M. Flaum: There is. Byron R. White: By both side and -- Joel M. Flaum: By both. The reason we contend the facts in this case are not in dispute is that pleading of the Court of Appeals even in its majority opinion as well as in the Seventh Circuit -- the dissent of Seventh Circuit and the opinion -- per curiam opinion of the Illinois Supreme Court clearly on agreement on the nature of the conduct here. Of the 10 reviewing judges who had an opportunity to examine the record all 10 agreed on the conduct only two felt constrained by the constitutional prohibition as they read it to rule that Allen was unlawfully removed from his trial. Just briefly, the respondent threatened the life of the trial judge, ripped his attorney's file and arranged the court in such a way that the judge felt his removal was necessary. I might add that there was a warning in all of these cases. Some of the commentators on this area have suggested that if this rule of exclusion is allowed that it be appropriately done in areas where there are warning. The Court of Appeals in its majority opinion found adequate warning by the trial judge and I suggest there is more than one warning included in the administrators from the trial court for the respondent to remain silent. Speaker: How long is the trial? Joel M. Flaum: Mr. Justice Harlan, I believe the trial took approximately two-and-a half days. It was a jury trial; it was a simple case of an armed robbery of a tavern. Allen was identified by the bartender and in turn Allen identified the victim. The defense was insanity in -- the year-and-a-half before the defendant had been declared incompetent. He had been restored and his defense from sanity was rejected by the trier of fact. We are here today because we feel, we have asked this Court to review because we do not believe that the constitution in the United States compels the result which the Seventh Circuit reluctantly I might add arrived at. We feel that the right of confrontation through its birth in the common law, certainly and its adoption by the Sixth Amendment wasn't meant to broaden the exceptions that the common law recognizes. And this Court in 1926 in Salinger versus United States specifically mentioned that while the common law was brought into the purview of the Sixth Amendment's right to confrontation it certainly wasn't meant to make the exceptions not included in that new amendment. This Court had in Diaz versus the United States in 1912 clearly addressed itself to the issue of waiver. Now, in that case the murder case out of the Philippines tried on the Philippine Code, the court concluded that what they were reviewing was a substantial equivalent of the Sixth Amendment. The court -- the issue in Diaz as presented or the claim made was that the Supreme Court -- in the Supreme Court here that he did not waive the right of confrontation but that he could not waive it. This Court held that waiver was possible, was permissible and did obtain in that case. In that case, the defendant voluntarily left. The Court sent a message to the presiding judge that he wouldn't return. Significant, we feel in this case are two things. One, the Davis case which the only direct American president other than the prior Illinois case in 1956. On this point was mentioned in Davis favorably -- in Diaz favorably and what is significant is that Diaz they're residing Davis which was an involuntary removal case. We feel that if waiver is recognized, certainly the waiver by an escapee from a courtroom that the unruly defendant is not be accorded treatment different in the escapee. Diaz makes it clear that a defendant walks out or escapes, waives his right to be present as the trial can continue. We believe there's no difference between a defendant who walks out of the courtroom and a defendant who was ordered to move because his courtroom conduct makes a fair and orderly trial impossible. If there's waiver in the prior case -- the former case, we think there's waiver in a latter. Now, on the issue of whether waiver has been recognized our research indicates only the Davis case in 1869, two English cases, one a felony case, one is misdemeanor case, Rex v. Brown and Rex v. Berry, also in the 19th century. But it's been never rejected by court of review as we confine. Further, we suggest that this Court in dictum in the Diaz case in a subsequent case in Schneider versus Massachusetts has adopted the waiver principal and that the dictum allows for its application here. I might add that in dictum, in Schneider versus Massachusetts the capital case involving whether the defendant was entitled to view the scene when the jury left to do that. Mr. Justice Cardozo specifically added -- no doubt, the privilege of confrontation may be lost by consent or even at times by misconduct. So, in the Schneider versus Massachusetts case that wasn't an issue when we -- William J. Brennan, Jr.: I'm just wondering, is the correct analysis really that waiver or is it rather when may a courtroom, the right to be present by this conduct? Joel M. Flaum: Your Honor we have -- William J. Brennan, Jr.: It just doesn't seem to me in this instance as I understand it this respondent was funded protested. Joel M. Flaum: Yes he did. Yes he did Your Honor. William J. Brennan, Jr.: His removal from the beginning. Now, really he was absent voluntarily in that sense, was it? Joel M. Flaum: No. William J. Brennan, Jr.: And we dealt waiver, haven't we ordinarily and in terms of a voluntary relinquishment of a known right? Joel M. Flaum: I think that's true Your Honor. William J. Brennan, Jr.: Then why is it this really a question whether the constitutional right has been forfeited by the conduct? Joel M. Flaum: Well -- William J. Brennan, Jr.: Isn't that at least more realistic perhaps more honest analysis? Joel M. Flaum: Well, I think in -- if I might disagree to an extent Mr. Justice Brennan, I feel waiver is applicable in this case for this reason. The dialogue between the judge and the defendant in this case was one of not a lack of communication. They seem to be understanding, the warning seem to be clear. Certainly when one reads the record in this case, the defendant had no problem in making his intentions known. The Court of Appeals found, they set a patient and very tolerant judge. I think that when the dialog reaches the level it did in this case where the inclusions of the warnings, which might result if in fact the conduct does not cease that waiver would not be stretching the concept to apply it here. I think it would also lend to a more flexible rule of discretion and if I might suggest a more easy handle for courts below, if this Court so ruled that waiver was permissible in this instance. We find that the commentators while acknowledging limited authority on the case seem to be pretty much unanimous in their feeling at least to the visceral one that removal is the appropriate remedy. We in our study found that the development of the right to be present was early cast in jurisdictional terms and we suggest that if it has any vitality today it may only be perhaps in capital cases -- Thurgood Marshall: Did you say removal is the remedy or one? Joel M. Flaum: One of the remedies Mr. Justice Marshall. We suggest that we just broaden the trial judge's discretion to include this as one along with content and what apparently has been permitted by lower court's binding and gagging. Our feeling is that it doesn't fall outside binding and gagging. In fact, it's a much more reasonable and much more desirable end for justice to have the exclusion when it's positive under the case like this. William J. Brennan, Jr.: (Inaudible) Joel M. Flaum: And that Your Honor. William J. Brennan, Jr.: (Inaudible) Joel M. Flaum: I will. We feel that there is -- the policy reasons toward adopting the exclusion over other forms are one, contempt may not really satisfy the situation. In this case, we had a man faced to the possible life sentence. Our feeling is that contempt in cases like that may not live level well with a defendant bent on disrupting the trial. We feel the scene of binding and gagging and I question whether the right of confrontation is any better preserved by the defendant found gagging and maniacal. It brings the service to the Court that in which this action takes place. Hugo L. Black: (Inaudible) would you say, we must find the facts -- Joel M. Flaum: Mr. Justice Black, in this case below, the defendant at the outset announced his unwillingness really to participate in the trial processing. He informs the judge (voice overlap) -- Hugo L. Black: To do w hat -- Joel M. Flaum: That he would not participate in the trial. Not in a voluntary passion. He informed the court, “You have a right to restrain me, but you haven't got the right to remove me and you're not going to remove me.” And that the court replied, we will determine that. The defendant, “No you're not, there's not going to be a trial, I'm going to sit here and you're going to talk and you can bring out your shackles and straight jacket and put them on me and take my mouth but it will do no good because there's going to be no trial.” Potter Stewart: And at what time at one point he said the judge is going to be a corps here? Joel M. Flaum: Yes he did, prior to noon recess, -- another time I mean to stress very strongly Your Honors how tolerant this trial judge was. The defendant announced that the judge would be a corps upon his return -- defense return from the lunch time -- lunch recess. There is -- Thurgood Marshall: Is he out on bail or he is in custody? Joel M. Flaum: He was in custody Your Honor. Thurgood Marshall: Well, that was slightly of (Inaudible), wasn't it? Joel M. Flaum: Well, the record is vague but there is some indication that when this defendant left the courtroom and went to the anteroom he intended to be a little physical with the property in the lock up. So, -- Thurgood Marshall: That is what I was saying. Isn't it your position just to say that in the courtroom could be a matter? Joel M. Flaum: Yes, yes it is. Thurgood Marshall: Well I'm still in fact, you don't have to argue that this is better than Shack (ph) v. Williams. Joel M. Flaum: No I do not, I think it's a lesser -- Thurgood Marshall: It was on the same level, it's -- Joel M. Flaum: No, Your Honor I would suggest that this is a milder form of -- Thurgood Marshall: But you don't have to win that? Joel M. Flaum: No, I understand. But when you said it's on the same level I -- we might -- Thurgood Marshall: I was saying that Second Circuit case which we will be shackling. Joel M. Flaum: (Inaudible) yes sir. Thurgood Marshall: Yeah. Joel M. Flaum: Yeah, well I think the exclusion is much more preferable remedy to that and a much milder. Warren E. Burger: Does the Court of Appeals in the District of Columbia Circuit which reverse a conviction because the court shackled the gaged of the defendant. Other remedies should have been taken. Joel M. Flaum: Mr. Chief Justice, that's our view that it would the shackling and gagging what it's brought with is the parallel prejudice to the existing procedure in addition to disruptive conduct that may be taking place by the defendant's actions. Warren E. Burger: Now, this disruptive conduct began at the very moment that the proceedings opened before they had picked the jury, doesn't it? Joel M. Flaum: In fact, Mr. Chief Justice it preceded that because in pretrial before another judge of the Cook County Circuit Court where he made a motion for a change of judges -- substitution judges we thought is based on prejudice. He again there caused some sort of a scene and we -- so you can trace it back there. But, yes this started immediately and we suggest upon no propagation. There's an absence totally of any dialog for example between a prosecutor and the defendant. So, there's no act of -- to state apart from the judge in incurring the raft of the defendant by any spoken word in the opening statement or the like. Your Honors, we would add one other fact and that is that we recognized in whenever asking this Court to acknowledge broader jurisdiction discretion and a trial judge -- that's a weighty problem. However, if the police of this country can be entrusted with stock and first discretion which we suggest is a low visibility situation. Certainly, the entrusting to a trial judge subject to appropriate review of the opportunity to expel and -- Potter Stewart: (Voice Overlaps) -- I'm just quite to say your analogy, the police can't be trusted with what? Joel M. Flaum: No Mr. Justice Stewart, our position is this, that we recognize we're asking for the recognition of a broad discretion in the trial judge. Potter Stewart: Right. Joel M. Flaum: And recognizing that in any discretion case, there's a chance that the review is always difficult because of the area of discretion and is quite often intruded by Court of Appeals in very limited fashion entrusting great beliefs that a trial judge normally acts very fairly. We say this is not a low visibility situation. We're trying to lay any fear in that regard that this will not become a wholesale tool of a judge annoyed with the look, smart talk of a defendant. Potter Stewart: Certainly, I suppose General Flaum that all would agree that a trial judge is in trust of a great discretion and what procedures he is going to follow and keeping order in this court room. No question about that but here we have a claim of a violation of a specific constitutional right that i.e, the right of confrontation. So, the fact, there's great discretion really doesn't meet the claim of your adversaries, isn't it? Joel M. Flaum: On that specific point Mr. Justice Stewart I would agree. However, on the violation of the constitutional right, constitutional right commentators in this Court have recognized is mainly to ensure the opportunity for cross-examination and it's a collateral benefit of that, the opportunity to observe the demeanor of the witnesses. Certainly, exclusion -- Potter Stewart: They have to face the witnesses and have the witnesses on the stand facing the defendant. Joel M. Flaum: That's true but -- Potter Stewart: And there are at least three ingredients for this confrontation. Joel M. Flaum: Well, I would suggest Mr. Justice Stewart in Barber and Page the last Sixth Amendment case, not at all on point but written by this Court in '68. The first to stress that I don't mean to exclude that the third but -- in more field that first to it are the greater. In this case, the counsel continued with the cross-examination -- there wasn't that denial of the right of confrontation and the demeanor of the witnesses certainly remained a possibility because none of them were excluded. It seems to us that he reach a point and that constitutional right, you cannot have both -- you can't be entitled the both, the right and a ruin of it. And it seems that -- Potter Stewart: By a -- Joel M. Flaum: The ruin of it, and it seems here that we have a case where defendant is bent on and clearly by his statements so destroying any right. Warren E. Burger: Well didn't he tell the judge that in so many words at the outset there is going to be no trial? Joel M. Flaum: That's exactly. Warren E. Burger: How to make me sit down, there's going to ramping in the courtroom. And you'll have to carry me out. That a current stage of the judge that he was going to destroy the trial (Voice Overlap) Joel M. Flaum: We feel Mr. Chief Justice that's at least one of three clear indications that he -- when brought back and insisted that there would be no trial in two of the returns where the invitation of the judge that you have a record that seems to me patently clear in an attempt by the judge to bring the defendant around to reasonable conduct and a clearing decision by the defendant to in no way entertain it until and this is significant until the defense began and then there was calm. In fact, we found the defendant stating in affect that he realized that his conduct was improper. It can also stand as a certain reflective process that he probably had throughout the trial but just chose to use in one case -- Warren E. Burger: But how many times did the court warn him? Joel M. Flaum: We find at least three and perhaps four -- for the fourth one, Mr. Chief Justice has to be a reading into statements. It does include the word, “warn.” Court of Appeal's majority opinion in reversing concluded that he was warned and did not spell it up. But they found as well as the Supreme Court of Illinois, a warning encompassed in the dialog between the judges. Thurgood Marshall: Your reading of the opinion and judgment with the Court of Appeals, this man is free, is that right? I don't see anything about right on Illinois to try him again. Joel M. Flaum: Well, this man is -- Thurgood Marshall: I mean, legally free not illegally as he is now. Joel M. Flaum: Right, he is on parole. And if this court were to affirm the Court of Appeals, he would be no longer subject to any of the vital consequences that stem from a pro-violator and he has year or so or more to go. So we -- Thurgood Marshall: As you read the Court of Appeals' opinion, and this same matter comes up tomorrow in Cook County, how would -- could the judge legally handle that? Joel M. Flaum: Well, as I read the Court of Appeals Your Honor, we feel that he can either try a contempt citation or he has to bind and gag him and in this -- in my jurisdiction and in my city we had the unsightly scene of a bound and gag defendant recently with the Federal Marshall placing his hands in front of the gag so that no words would come forward through the gag. Now - Thurgood Marshall: On the Second Circuit we didn't have that problem. When he would gag he would gag. The Court of Appeals upheld him (Voice Overlaps). Joel M. Flaum: Yes I do, I'm familiar with that case. I would suggest Mr. Justice Marshall, that it's our view that not only must justice be done but there ought to be the appearance of justice and if I might in that assumption, we do a tremendous disservice to promoting that kind of a scene and in the rewarding conduct which in no way one can sympathize with. If we have got an incompetent defendant then he shouldn't be on trial. But certainly one which is a pure deliberate act of volition as it was in this case, it's very hard to not find that the limits of the constitutional right have been exhausted. Potter Stewart: Well, I understand that your theory to be that he waive the right of confrontation or that there was no denial of the right of confrontation? I thought your argument was the former when it began but when you began talking about how he really did have the right of cross-examinations through counsel than that (Voice Overlaps) -- Joel M. Flaum: We acknowledge in the stricter sense Mr. Justice Stewart that there was a classic denial -- if the denial of the right of confrontation presupposes never removing a defendant from the view of the actual trial scene and we acknowledge that. What I was suggesting perhaps not too clearly was that of the -- what commentators have suggested are meaningful benefits of the right of confrontation. We're not totally denied when he had counsel continuing to go forward with the cross-examination. Potter Stewart: But your argument is that he waived it. Joel M. Flaum: That he waived it. Potter Stewart: And you do concede that it was technically violent. If he had not waived, it was violent. Joel M. Flaum: Yes, it was violent. The removal is a technical violation, if one can call up into play the word “violation” if you buy our waiver. Potter Stewart: Well, had there been no waiver, it would have been a violation? Joel M. Flaum: It would have been a violation. Warren E. Burger: As I read the Supreme Court of Illinois opinion, they didn't say it was a waiver but that is conduct operated as a waiver. Is that not about the way they put it? Joel M. Flaum: Yes it is Mr Chief Justice I -- Warren E. Burger: They equated it to a waiver rather than saying that it was a waiver? Joel M. Flaum: That's correct, I would imagine that I've been opposing simply because as a trial, I'm used to the waiver of the signed paper, of the jury waiver or whatever but you're absolutely correct. They did not call it direct waiver as much as they did by interpreting it from the conduct (Voice Overlaps) Potter Stewart: Is it not a forfeiture? Joel M. Flaum: Not a forfeiture. Potter Stewart: You don't set that suggestion, I think very wisely. Joel M. Flaum: Yeah, I -- Hugo L. Black: He waived anything. What if he waives during the trial, did you tell him he was not going to be tried? Joel M. Flaum: Well, there is right of the state Mr. Justice Black. Hugo L. Black: Why? Joel M. Flaum: We feel that the right of the state cannot be denied to the trial and to acknowledge his -- Hugo L. Black: (Voice Overlaps) You say he waived what? Why didn't he waive the whole but he had told you he didn't want to be tried? Joel M. Flaum: Well, we feel he does not lie within his kin to make that ultimate decision. I think he didn't -- I think he did not want to be tried or he certainly he didn't want or perhaps I might suggest Mr. Justice Black that maybe he did want to be tried but in furtherance of his particular defense, this kind of disrupted conduct may have been very calculated. That's just our position of course in (Voice Overlaps). Hugo L. Black: What – you must be talking about trial or talking about forfeiture and talking about waive? What you have here is the man who defies the court and told he was not to be tried. Isn't it? Joel M. Flaum: Yes it is. Those are his statements, Mr. Justice Black. Hugo L. Black: And he kept making a noise to keep himself from being tried. Joel M. Flaum: Well, I -- Hugo L. Black: What difference it would make whether you call it the forfeiture or waiver? Joel M. Flaum: Well, I just suggested that our theory be labeled waiver, we felt because it's one that we think is very workable if in -- by that I mean the trial judge reasonably interpreting conduct can find a waiver in a situation like that. That's why we have leaned toward the waiver conducts also because as our reading of the dictum of cases that could preferably dealt with waiver in this Court that words like -- that he can waive it by his misconduct as Mr. Justice Cardozo said, suggest to us that was the route that we might appropriately offer up to this -- Byron R. White: Well, Mr. Flaum I gather when the Illinois Supreme Court said they equated it to it, and when you equate something to something -- it's not the something, isn't that right? Joel M. Flaum: Technically that's correct Mr. Justice. Byron R. White: Technically, actually. Well, all you're saying, when you say it's equated the waiver is that you arrive at the same result as if he would. Joel M. Flaum: As if he would, that's true. Warren E. Burger: Yes, their precise language was such misconduct was in turn effective as a waiver. It has the operative effect. Joel M. Flaum: Yes sir. Perhaps we should have practiced our claims of waiver as effective as a waiver. We just felt, it would not be misleading to offer up to this Court the concept nakedly as waiver and that it would not be difficult one of the application if accepted by the Court. I wonder if I might reserve a minute or two for reply? Warren E. Burger: Very well. Mr. Harris. H. Reed Harris: Mr. Chief Justice and members of the Court, may it please the Court. The facts are not in dispute but I believe they -- Warren E. Burger: Would you raise your voice counsel, we seem to have a little difficulty with acoustics today. H. Reed Harris: The effects are not in dispute but I feel that they need some elaboration -- so that the Court can more accurately understand the situation of this trial. The respondent William Allen on August 12, 1956 at about 3 o'clock in the morning walked into a tavern, went to a corner of the bar where no one was around and when the bartender came over to ask him what he wanted to drink, the bartender saw a gun -- Allen said, “I want the money,” the bartender took the money and gave it to him and Allen left. A few hours later Allen was apprehended. He was searched, no gun, but approximately $200.00 was found in his presence. The officer said, “Where did you get the money?” And Allen said, “Oh I robbed this bar this evening.” With that, he was taken to the police station and subsequently there was a line up. When Allen was walked in with several other suspects to be viewed by the owner of the bar and the bartender both of whom were in the bar when the robbery occurred before he could be identified, Allen said, “Hey, I recognize you, you look familiar, didn't I rob you this night?” Last night? Warren E. Burger: How is this relevant now on our issue? H. Reed Harris: Because I'm trying to explain Allen's behavior. Allen was then indicted and while in jail, there were several attempted suicides. Allen had a prior mental history back in the early 50's -- he was committed and served some time in a mental hospital. Subsequently, a pretrial sanity hearing was held in 1956, it was determined that he could not cooperate with his attorney and he was sentenced to a mental institution. Warren E. Burger: But that issue is out of this case long since, isn't it? You haven't raised it -- H. Reed Harris: No, I have not raised but it bears to -- I think it's important for the Court to realize the type of person who Allen was and what the trial judge was confronted with. I don't feel that the trial judge in the warnings realized that he was dealing with a person who has a prior mental history and may not -- although the issue is not before this Court and may not have been in full control of his faculties at the time he was tried. And the fact that you may say to someone, if you don't sit-down and be quiet you're going to be removed and warn him once or twice and he continues to disrupt the proceedings and to remove that person -- that's different than dealing with a person who has complete control of his faculties who may realize what the Court is saying. When Allen was subsequently -- Thurgood Marshall: Did Allen realize what he was saying when he said, “You're not going to hold any trial (Inaudible)?" You have been talking about what the judge didn't understand but I mean -- do you say Allen didn't mean that when he said it? H. Reed Harris: No, he did mean that. Thurgood Marshall: He did? H. Reed Harris: He did mean that because he wanted to conduct his own trial. Thurgood Marshall: What should the Court do then? Let him break up? H. Reed Harris: Well, no. Because, when Allen was brought to trial, he requested the right to represent himself and the Court granted him that right. He began to conduct a voir dire examination and during the conduct of that examination -- after some 14 pages of transcript of examining the first witness, he began to make statements about his case. The state objected. There then became a dialog between Allen and the judge. The judge warned him not to make statements, conduct himself only to the qualifications of the jurors. The dialog continued, Allen said he was going to conduct this trial as he knew how the judge warned him, any statements and I'm going to deny you the right to represent yourself. Some more dialog, Allen continued to be disrespectful to the court because he wanted to conduct his defense the only way he knew how. He is not a skilled attorney, he is an indigent who was on trial for his life but this time he said life and the judge said liberty. But the issue involved is because Allen at this time was a three time loser. This was his fourth conviction. And it was possible for him to be sentenced for the rest of his natural life in the penitentiary and this may explain that the court be the dialogue between the judge and Allen with respect to life and liberty but the court was arguing him. Thurgood Marshall: What was the judge did do have been? H. Reed Harris: Pardon? Thurgood Marshall: What was judge to do then? Let him conduct the trial the way he wanted to conduct it? H. Reed Harris: Well, if he did not, if the judge felt that Allen had the competence to conduct the trial in the beginning he should have let him proceed. If he felt that he did not have the competence but he began -- Thurgood Marshall: Well, he didn't know he was going to carry on like that at the beginning, didn't he? H. Reed Harris: Well, then you don't begin a dialogue for two minutes and say, “Now, do it right, do it the way it should be done or I'm going to deny that right. Why don't you have a recess, why not go into the chambers, why not sit down with the man?" If the judge knew that he had a prior -- Thurgood Marshall: Well, who got in the courtroom -- in the mean time? H. Reed Harris: But the judge realized this before he gave him the right. He should have known that a person he was dealing with and if he is going to give that person the right -- Thurgood Marshall: Well, how could he have known that? H. Reed Harris: Because his record was before him. The judge had -- I presume -- Thurgood Marshall: The record was before the judge? H. Reed Harris: Well, the judge knew of his prior commitment to a mental hospital because the defendant made a request to the court that he wanted an order from a prior judge. This order was a commitment of him to a mental institution several years ago. I'm sure that the trial judge must have known that this man was just restored to sanity after being committed only a years ago. Thurgood Marshall: (Voice Overlaps) Do you have any reasons form to know that? Nobody raised it. Did the lawyer raise it? H. Reed Harris: It wasn't raised by the lawyer but when -- Thurgood Marshall: Was it raised by him? H. Reed Harris: By Allen? Thurgood Marshall: Yes. H. Reed Harris: Only with respect to a -- reference to a order from a previous judge as to his commitment. Thurgood Marshall: And when was that? H. Reed Harris: That was during this dialogue between the courts. Thurgood Marshall: Well I'm saying at that stage, what should the judge do then? H. Reed Harris: He should recess the court, sit-down with the defendant in chambers, take five minutes out and explain to him very simply in a calm passion rather than an argumentative passion and say, “Here's what's going to happen." I mean they conducted -- Thurgood Marshall: I would suggest that he would go in and ask the defendant, “How do you want me to run the trial? Is that what you want?" In that situation, the judge had a choice according to the Court of Appeals of three things and he chose one of them. H. Reed Harris: Well, there were two rights which -- Thurgood Marshall: We have already talked of binding and gagging? H. Reed Harris: Well no. Thurgood Marshall: Was he? H. Reed Harris: Pardon me. There were two elements, first was, denial of Allen's right to represent himself. This was denied first. This is what brought about the second confrontation between Allen and the court because Allen objected that he is not being permitted to continue to represent himself. The court had appointed an attorney that day to sit with him to protect the record. There is no evidence in the record that Allen and this attorney had any discussions about his case whatsoever. Allen did not want him. He refused to accept him, but the judge said, “You sit down, he is going to conduct your defense." He said, “No, he is not. I don't want him." The judge says, “You sit down and be quiet or else I'm going to have you removed." Allen refused to sit and be quiet. He didn't want the attorney who was being appointed. The judge says, “remove him" and he was taken out of court. Thurgood Marshall: Is that still a choice made by Allen? H. Reed Harris: Pardon? Thurgood Marshall: Is that a choice he made that judge says, “You need to keep quiet or get out" and he didn't keep quiet? H. Reed Harris: He has a choice, after he has given the right to defend himself and that right and is now denied, just sits still and sit in a chair and have an attorney who he doesn't know represent himself, have an attorney who he hasn't talked to or who may know nothing at all about the case. Is he to just sit there or is he permitted to protest when he thinks our violation of his rights. And at this point in time (Voice Overlaps) -- Thurgood Marshall: But how the court does by saying you're going to be at corps on lunch time, is that protest? H. Reed Harris: Well, Allen was in custody, I am sure that this is something that was said in the heat of the dispute between the court and Allen and I doubt very much if the judge took that seriously. Of course the Judge was a form of -- Thurgood Marshall: In the New York case, Ben Vento (ph) picked up an old chair and told him and mentioned the judge. H. Reed Harris: Yes he did, but that was after the trial had commenced. In Allen, it was a logical growth from his being denied his right to represent himself. Byron R. White: Mr. Harris, are you arguing that as a matter of the Confrontation Clause, there are no circumstances under which and if defendant may be removed from the courtroom for misconduct and the trial proceed without him. Are you going that far? H. Reed Harris: I am going that far because I believe that under today's technological advances there are alternatives for dealing with the unruly defendant which will preserve his right to confront the witnesses. I do not believe that an attorney without his client to communicate with him is capable of properly conducting a cross-examination. Byron R. White: What are the alternatives? H. Reed Harris: The alternatives are a glass sound proof booth which could be constructed. Such a booth was actually used during a sanity hearing in 1956 in California, and I have in my possession photographs of that booth. The defendant, the State of California built a booth which was 12 by 12, that was sound proof glass, it was air conditioned, there was a telephone in the booth. In the booth was a guard with the defendant. When the defendant first got in the booth as soon as the hearing began he picked up the chair, he was sitting in and he smashed against the glass. They recessed the court and then built an iron chair which was bolted to the floor. There were clamps which were built onto that chair so the defendant was then seated in the chair with the clamps around his leg, he had a telephone with which to communicate as soon as his attorney who was sitting just outside the booth. Warren E. Burger: This is all very interesting but did you propose that some time or did the counsel propose (Voice Overlap) H. Reed Harris: I propose that to the Court of Appeals in the Seventh Circuit and I'm late -- Warren E. Burger: It was a little late wasn't it? It wasn't proposed to the trial judge -- H. Reed Harris: No it wasn't. Warren E. Burger: Do you suggest that was a viable alternative? H. Reed Harris: No, I did not and it was not proposed at that time. But this is a possible solution. The only problem with this solution -- Byron R. White: Is there any other? Do you suggest the gagging or something? H. Reed Harris: Well, I suggest the possibility of close circuit televising the trial to another room where again he can see the proceedings and -- Byron R. White: What about gagging? H. Reed Harris: I feel that he should be -- if the court will not accept close circuit television or a booth then he should be gagged, he should remain in court because even though he's gagged and he can't talk to his attorney, you can still hear what's going on. And it's completely different for a defendant to be in court and to hear what's going on so at a recess he can talk to his attorney rather than try and read a transcript during a recess and tell him what should or should not happen or should be set in cross-examination. Byron R. White: Well, now certainly you don't contest the very premise all of the gag which is that the government has a right to try in the key, doesn't it? H. Reed Harris: Yes. Byron R. White: Is that the very premise of at least are just safeguards about the accused to see that he gets the kind of trial that the constitution guarantees? H. Reed Harris: That is correct. Byron R. White: But certainly, he has to recognize the government's right to trial, doesn't he? H. Reed Harris: Yes. And I also believe now -- Byron R. White: Doesn't that suggest that he may then by his misconduct that he prevents the government from trying it? H. Reed Harris: Well I think I -- Byron R. White: And he may by that misconduct? H. Reed Harris: I do not believe that we can permit or the court should permit a defendant to disrupt the trial, to cause a mistrial to delay the trial by conduct. And I feel that his right to be in court is mandatory so he can see what is happening and confer with his attorney. If he attempts to purposely disrupt the court, I do not think that a contempt sentence is going to be effective because assuming a series of contempt convictions over a period of time during this time there maybe witnesses who could testify, who will now no longer be available and thereby through indirection he may be serving three or four contempt terms and avoid serving a much more serious term for the charges that are brought against them. I think that there are more effective ways of gagging and binding a defendant rather the one which was used in the recent trial in Chicago where the seven defendants. Bobby Seals was chained with a sort of a make shift gag on his mouth. Had the court used a straight jacket and the hospital gag as we used in a recent Ohio trial. The defendant would have been immobile and he wouldn't have been able to bite through the gag and other noises to disrupt the proceedings. Byron R. White: Well, I take it if you have a number of defendants who are equally abstract with your thought would be that each should have to have his own cubicle, state would have to provide -- what is that? H. Reed Harris: Well, to close circuit the trial, I mean a cubicle I think is impractical because as was done in the senate hearing in California when the defendant got in the cubicle as a last effort to disrupt the proceeding -- he then pretended to be asleep during the entire hearing which lasted two or three weeks. I think the close circuit television could be -- it's mobile, it could be setup and the cost is nominal. Every bank and savings and loan association and the basis of a country have closed circuit TV every time (Voice Overlaps) -- Potter Stewart: Probably that doesn't preserve his right to confrontation. H. Reed Harris: Yes, but at least he will be seen the witnesses and he will be able to communicate with his attorney and tell him how to cross-examine. Potter Stewart: It preserves some time but it does not preserve his right to confrontation. H. Reed Harris: Well, that depends on how the right of confrontation is defined. He is to confront him for what purpose? I think the purposes were there one so the -- he can face the witness, the defendant and cross-examine. There is a second reason for the jury to see the witness. And reflect on his demeanor and his testimony. I don't think either of these rights would be violated if he is placed in a separate room. Thurgood Marshall: Suppose he is put in a separate room or in the chamber and we find at the end of the trial that the telephone which sometimes happen, is that all in 15 minutes? H. Reed Harris: If the phone is out of order -- Thurgood Marshall: Do we have new trial? H. Reed Harris: No, because I would think that there should -- there would be a marshal in the room with the defendant who could -- if the phone is out of order, he could very simply communicate by a runner to the court that the phone is not working and let's get it repaired or recess for 10 or 15 minutes. Thurgood Marshall: But if he didn't do it, does he have to have a new trial? H. Reed Harris: Well -- Thurgood Marshall: Well, he didn't have is right of confrontation for 15 minutes I understand that's your argument. H. Reed Harris: Well, he would still have the opportunity to see what is proceeding if the phone is not working because he now tries the phone to his attorney, it would only be a matter of minutes for him -- for a runner to go from the room where he's watching the trial to the court. Let's say the phone is not working, that's recess. During that time he can communicate with his attorney and they can very simply go over what he was unable to tell him on the telephone. Hugo L. Black: He says from the beginning and sticks to it and I am not going to be tried. I will do anything to prevent the trial and what (Inaudible) is the telephone -- he still wouldn't be tried? H. Reed Harris: Well -- Hugo L. Black: That's his plan but he intends, what goes with that? Why should the state have to govern, would have to go to all of that trouble to try unless the court should become absolutely impetus to carry on the responsibilities? H. Reed Harris: Because the court still has a responsibility and the courts do have a responsibility and we should not permit certain defendants to use of the power of the courts and dictate to them what or what is not going to happen. Hugo L. Black: Let's say but I'm not going to be tried well would he cooperate anymore if you put him on somewhere where he could get a telephone and call up his lawyer? H. Reed Harris: Yes, but at least he would -- Hugo L. Black: (Voice Overlap) for other reasons? H. Reed Harris: But he is not disrupting the orderly process of the trial which is going on. He would not be disrupting the orderly process of the trial. The trial would proceed, he would not have the opportunity to disrupt it which could be done if he was gagged or bound in court. Or by ranting and raving because the question then becomes at what point in time does a trial judge say to a defendant who is objecting certain things which a trial judge may be saying that he has now waived his right to be present. Hugo L. Black: Well, as a lawyer, what do you think is, what would you suggest that a judge is under a duty to do but the defendant announces you will not be tried and conducts himself so as to prevent a trial in the courtroom? Or do you think would really be the best? H. Reed Harris: I would either have him bound and gagged or I would build a glass -- Hugo L. Black: (Voice Overlaps), wouldn't it? After about an hour to alternative, that was pretty bad. H. Reed Harris: Why should that look bad? Historically this right has been -- defendant has always been bound and gagged, if he tries to cause a disturbance. And the court is almost every state in the union. Hugo L. Black: But, you take (Voice Overlaps) better. Now, what else would you think would be better? H. Reed Harris: Well, I think the best thing is the closed circuit to trial too. I think the next best thing would be the close circuit television of the trial to the defendant. Remove him so he doesn't disturb -- Hugo L. Black: What are you going to do when you get out of the small county like our practice at once he didn't have anything like that, is it? H. Reed Harris: Okay, if you can't televise the trial, if you can't build a glass booth, then bind him and gag him and keep him in court. Warren E. Burger: Now, this seems to be the theory that this numbly disabled defendant had from the start and reading from a transcript here where he said to the judge after getting his second warning, you have the right to restrain me but you haven't got the right to remove me and you're not going to remove me. H. Reed Harris: That's correct. Warren E. Burger: That's the theory of your case here and that was his theory of case of the trial. H. Reed Harris: That is correct. Warren E. Burger: Pretty good analysis on his part? H. Reed Harris: Well, he spent a lot of time in prison reading law books Your Honor and he relied on that recent Illinois Supreme Court decision, the Decimian (ph) case which counsel referred to where a defendant did cause a disruption -- he was removed from the courtroom for a moment and at which time the attorneys approached the bench. They discussed with the court that this might be a violation of his rights at which time he was brought back in. His conviction was subsequently reversed on other grounds but the respondent has advised me that he had read that case and he realized that he had certain rights and he was going to preserve his rights. Hugo L. Black: I'm not saying it should have been done but of course, we are not ready to say (Voice Overlaps) -- H. Reed Harris: Pardon? Hugo L. Black: Suppose the judge could simply say, “Alright, you say you will not be tried, I will let you go to jail and stay until you're ready for a trial. I will declare mistrial in this case and when you want a trial you can get him." H. Reed Harris: Well, I think the court had the right to do that but the problem inherent in that is that there were four witnesses against-- Hugo L. Black: But that is about the claim? H. Reed Harris: Yeah -- no, I don't because there were four witnesses against the respondent. Let's say he goes to jail for six months for contempt of the court. He comes out, the judge says, “can you stand a trial again," he says, “no I'm not." He's back in jail for contempt. He is in jail for six months. Meanwhile, one of the witnesses now moves to California, one dies, one become sick and something happens to the other one. He comes back, he is not ready to stand trial Your Honor try me and there's no more witnesses. So, he has -- Hugo L. Black: Well, that's the life – things that happen and different would always happen. H. Reed Harris: Well, but you see if -- Hugo L. Black: I remember trying a case once in 12 years that's a murder was committed. It's no plenty witnesses there. H. Reed Harris: Well, but there are certain circuits in where witnesses may disappear, they may die. One of the problems inherent in this case -- this case would be retried today. I believe that two of the witnesses have died and one has subsequently been indicted by the grand jury in Cook County, Illinois. So, all the four witnesses against him, there would just be one witness who can possibly testify. Hugo L. Black: You would agree, won't you that something has to be done to keep the court -- the big subject to such indignity with such frustrations of justice. H. Reed Harris: Yes, I do. But, now to continue on with what happens at Allen is that once the trial began he was brought in, after the voir dire was concluded. The judge says, “You can stay here if you remain quiet." He was non-committal as to what he was going to do. The trial began, the first thing that was done is that his court appointed attorney made a motion of good witnesses. The respondent looked around he didn't see his friends who were supposed to be in court. His sister -- he got up and said, “where's my witnesses? How can this trial go on?" And with that the judge ordered him removed out of court. He was in court four times the next, that afternoon which was during the prosecution's entire case. There were four witnesses. Two testified -- they saw him commit the crime, two testified that he admitted to him that he committed the crime. And the point in testimony was reached, “do you see the man who did that?" And the witness would look around and say, “no, I don't" and the judge would say, “bring in the defendant" and they dragged this guy in with handcuffs in a prison uniform that was stenciled across the front maximum security and they'd say, “that's the man." And then they say, “Remove the defendant," they drag him out again four times in and out. Warren E. Burger: But I thought you were arguing a little earlier that he shouldn't been bound and gagged and kept all the time, wouldn't that be (Voice Overlaps) reminder? H. Reed Harris: Sure, keep him in court, but don't bring him in and out of the court every time you want to identify him. I mean, even in the most primitive of identification in police line up, they just don't bring one person out and say, “is that the man who did it," they at least bring several out. Here, he said, “Did you see the man in the courtroom when you look around?" There are several faces, “no I don't." “Okay, bring in the defendant." One guy comes in, that's the man. Hugo L. Black: Don't you think this man was given about as fair a trail as it would possible for him to get? (Voice Overlaps) in the courtroom? H. Reed Harris: In the reading in the record, I will acknowledge that the court appointed attorney for him did an excellent job. The trial judge who was in his 70's who may have had certain preconceived notions about justice because he was a former prosecutor for many years as a first instance -- in Cook County, was also very tolerant with this defendant. However, I felt that he should have been more tolerant. I felt that once this dispute began, he should have taken the opportunity to sit-down with this defendant and explain to him what he was going to do in a conversational tone in chambers, the whole thing would have taken five minutes and not in the heat of argument where the defendant may not be paying attention on what's going on because he wants to preserve his right to represent himself. Thurgood Marshall: How many times does this man had been convicted? Three times? H. Reed Harris: He was convicted three times and I'm advised that there were other charges against him which he was never prosecuted on. Thurgood Marshall: How old was he? H. Reed Harris: When he was convicted -- he is 38 now, he was convicted in 57, he was -- Thurgood Marshall: I was wondering about why he needs all these fatherly discussion. He is quite a mature person. H. Reed Harris: He -- well, I don't I -- it's not so much him, it's what he stands for which is the right of the defendant to be tried and preserve his rights and protect those rights. Thurgood Marshall: What I don't understand is under your theory every other person in that courtroom has to act with demeanor in respect for the court except the defendant. Is that your position? H. Reed Harris: I think that the defendant also has to conduct himself with respect but you can exclude a spectator from the courtroom without violating the constitutional rights of the defendant but I believe that you cannot do that to the defendant because he has the right -- the defendant was on trial. Thurgood Marshall: Regardless of what he does. H. Reed Harris: Regardless of what he does, he has -- if he wants to go to sleep during the trial, that's his right. But if he demands the right to be there, don't exclude him so he can't see what's going on. And if he tries to disrupt the proceedings, don't let him be successful, deal with him, but preserve his right in the event all of a sudden he gets a change of heart that he wants to know what's going on. Thurgood Marshall: All your point is it is why he wants to be there. H. Reed Harris: Well, anytime a defendant is tried, that's all the court really knows it, that is there because you have no knowledge as to what he is doing in his mind whether he is thinking about the baseball game that may be going on next week or something else. Thurgood Marshall: Is that your idea of confrontation, he is there bound and gagged? H. Reed Harris: The constitution does not require that the defendant sit and be alert and pay attention to the trial -- it just requires that he be there so he has the right to confront the witnesses. Thurgood Marshall: Well, what's the difference between him sleeping outside and sleeping inside? H. Reed Harris: Because, if he changes his mind that he wants to pay attention and wants to defend himself he can then do it. Thurgood Marshall: Well, he had four chances to change his mind. H. Reed Harris: Well, no, he was warned once about conducting his trial then that right was denied him. I believe he was just warned twice about his being removed and when he didn't pay attention he was then removed. And I don't think those warnings were sufficient. This is actually a case of first impression; this court has never really ruled on this issue. The case as I cite -- the Hopt, case, the Shields to the Lewis case deal with examination of jurors or jury instruction outside the presence of the defendant and these cases rely on due process of the Fifth Amendment. The Diaz case came out of the Philippines which although the Philippine Government Act had a similar provision as the right of confrontation which was supposedly based on the Sixth Amendment. Diaz expressly waived his right to be present during the trial.One of the reason it was because the trial took several months and they would recess for 30 or 60 days and he has lived way far from the court and it was inconvenient from the Bean (ph) court so we said, "We'll proceed without him, there's only one or two – it's just going to be heard," "my attorney will be there, he can handle it for me." I don't believe that would, what Mr. Justice Cardozo said in Schneider is applicable because that was a case involving whether a defendant had the right to go to a view of a scene with the jury under Massachusetts law that right did not exist although the right exists in most of the jurisdictions. Mr. Justice Cardozo was in the violation of the Fourteenth Amendment because at this time the certain rights out of the Sixth Amendment first time have been said that and incorporated and applied to the states under the Fourteenth Amendment. The Sixth Amendment historically -- the right of confrontation, it's not clear where it came from. Some people say that some commentators say it comes basically from the evils of the Star Chamber proceedings in England. Others say it stems from the injustice which happened to Sir Walter Raleigh who was tried in 1603 for treason. This in effect was really an early political trial. Queen Elizabeth had died and her successor, I believe was King Charles wasn't pleased with Rollie. Rollie had caused the death of the (Inaudible). Warren E. Burger: Very well, you have one minute left Mr. Flaum. Joel M. Flaum: Mr. Chief Justice and may it please the Court. Just on the two main cases relied upon by the respondent writing in Schneider versus Massachusetts, Mr. Justice Cardozo stated Hopt v. Utah has been distinguished and limited and what was said in Hopt v. Utah under subject of the presence of the defendant was dictum and no more, we may say the same of Lewis versus the United States and if I might state the second on the state of the record Mr. Kelly who was counsel for the defendant below was appointed on October 14th the next proceedings were December 11 in the case. He was granted the right to be co-counsel in his case. It was only when he was disrupted during the voir dire that the judge asked that he let his counsel take over and that's when first right ensued, and leave the court with Justice Stewart. The Court of Appeal's decision can be sustained only by the most slavish reading of the Sixth Amendment. I respectfully ask this Court to reverse. Warren E. Burger: Thank you Mr. Flaum. Thank you Mr. Harris. The case is submitted.

William H. Rehnquist: We'll hear argument now in Number 97 1184, the National Federation of Federal Employees v. The Department of the Interior, and a companion case. Mr. Smith. David M. Smith: Mr. Chief Justice, and may it please the Court-- This case involves the Federal Labor Relations Authority's interpretation of its own organic statute. The Authority has concluded that the Federal Service Labor Management Relations statute obligates an agency to bargain over union initiated proposals offered during the term of a collective bargaining agreement. William H. Rehnquist: Didn't the agency at one time have a different position and then changed its position just as a result of the decision of the Court of Appeals of the District of Columbia Circuit? David M. Smith: Mr. Chief Justice, the Federal Labor Relations Authority indeed did originally come down on the opposite side of this question in its IRS I decision. However, subsequent to the reversal by the Court of Appeals for the District of Columbia the Authority reevaluated the issue and changed its mind, and decided that the statute did, in fact, obligate the agency to bargain. William H. Rehnquist: How much choice did it have in the light of the court of appeals decision? David M. Smith: The Authority has in several cases, Your Honor, chosen to nonacquiesce in a court of appeals decision with which it disagreed. We cite in brief cases where we've done this when we disagreed, so the Authority could have, given the multiple venue provisions of our statute, have chosen not to have followed the Court of Appeals for the District of Columbia's decision in this case, but did, in fact, reconsider its original position and decide that the D.C. Circuit was, in fact, correct. Anthony M. Kennedy: Are the terms and the substance of the reconsideration set forth on remand from the agency in the IRS case? Has the agency issued any other adjudicative dispositions or any rules to indicate that it continues to adhere to this position and to add to its reasoning in any respect? David M. Smith: Yes, Justice Kennedy, the Authority has, on numerous occasions, subsequent to its IRS II decision in 1987, adhered to the position it took in IRS II and determined that mid term collective bargaining is required under the statute. The Authority said originally in the case on remand from the District of Columbia that it had reconsidered the issue and thought the District of Columbia Court of Appeals was correct and, despite several reversals by the Fourth Circuit Court of Appeals, the Authority has stuck to its position. This has, in fact, been our position since 1987. Antonin Scalia: Mr. Smith, you're here representing the Authority which is, as I recollect, three individuals, no more than two of whom can be from the same political party, appointed for 5 years and not removable except for cause. David M. Smith: That's correct. Antonin Scalia: And also appearing is... in today's argument is the Solicitor General, who, I suppose, is appearing on behalf of the President of the United States. David M. Smith: Well, he will, of course, tell you on whose behalf he is appearing. I appear on behalf of-- Antonin Scalia: Well, so we have a disagreement between these three individuals and the President of the United States regarding a statute that goes to the internal management of the personnel of the executive branch. Is that a fair description of what's going on here? David M. Smith: --I think we interpret the statute differently. The agencies of Government have a view-- Antonin Scalia: And you want us to give deference to these three members of the Federal Labor Relations. Authority in preference to the views of the President of the United States as to what the efficient management of the personnel of the executive branch requires? David M. Smith: --Well, there are several points raised there, Justice Scalia. We don't think deference is required in this case because we think the statute is clear that there is an obligation to bargain midterm. If you think it unclear, yes, we would seek deference in this case. The Congress, of course, passed the Federal Service Labor Management Relations Statute. While it was signed by a President we are, in effect, carrying out the will of the Congress, not necessarily the will of the President, in what we do vis a vis Federal sector labor relations. Ruth Bader Ginsburg: Mr. Smith, how could it be the will of the Executive, since the Executive is always an adversary in all the proceedings that are before the FLRA, so Congress set you up to be an arbiter between the unions and the Federal Executive. David M. Smith: That is, of course, correct, Justice Ginsburg, and on the several occasions when we've had the privilege of being before the Court before, we are virtually always in opposition with agencies on-- Antonin Scalia: I'm not questioning whether you're an arbiter. Of course you are. But the question is, do you come here with some assumption of validity of what you have done in the narrow situation where what is at issue is the internal management of the personnel of the executive branch, and the President has chosen to disagree with you to such a degree that he's willing to go to court about it? I mean, initially, very often two agencies of the Government disagree, and that is usually resolved internally, but here we have two agencies disagreeing, and they've come to the Court and asked us to settle it and the question... it's a very narrow question I'm asking. In settling this particular question, do you really think we... it fits our scheme of Government to give deference to these three individuals, never elected by anyone, appointed without removal power by the President, over the views of the President, and I have serious doubts whether it's proper to give deference in that situation. David M. Smith: --Justice Scalia, I would only point out that the members of the Authority are on a quasi independent body. As you noted in your question to me earlier, they are appointed by the President, confirmed by the Congress, and can only be removed by the Congress for good cause, so the President in the scheme of things-- Antonin Scalia: But Congress is not free to create any scheme of things it wishes. I mean, maybe Congress does want that scheme of things and does not want the President to be in control of the personnel of the executive branch, but I... that's just not the way I read the Constitution. David M. Smith: --Well, at the end of the day, Congress' statute has articulated several rights that Federal sector employees have when they bargain collectively under the statute, and if it is that we read the statute different from the agencies of Government, so be it. William H. Rehnquist: Maybe the Pendleton Act, passed back in 1983, was unconstitutional, if Congress can't do anything to regulate the way the Executive deals with Federal employees. David M. Smith: Well, clearly Congress can, Mr. Chief Justice, do things to regulate the way the Executive deals with its employees. We've-- Antonin Scalia: Well, it can tell them, as the Pendleton Act did, just what the President must do, but it can't tell the President to obey somebody else as to how he should treat Federal employees. Isn't that a different question? David M. Smith: --Perhaps it is, but we are at this point reevaluating some 20 years of judicial review of Authority decisions, and disagreements between the Federal Labor Relations Authority and agencies of Government over what the Federal Service Labor Management Relations Statute requires are not rare. They're commonplace. Speaker: Mr. Smith, tell me a little about the practicalities of this situation. Since the CADC decision saying that midterm bargaining is allowable, how often has that been sought in the jurisdiction of the District of Columbia by unions with Federal employees? David M. Smith: In point of fact, one of the points we make, Justice O'Connor, is it's very seldom come up. The basis upon which the Authority originally thought that there was no right to engage in midterm bargaining, and upon which the Fourth Circuit specifically concluded that there's no right to engage in midterm bargaining, was that this would cause enormous disruption to the Government, it would lead to inefficiencies, and all the rest. Well, we're here after 11 years of midterm bargaining being the law of the land in every court of appeals in this country except the Fourth, and there are no problems. There are no cases. We've had no controversies. Speaker: Well, have there been requests by the unions for midterm bargaining? David M. Smith: Yes, there have. Speaker: And... frequently? David M. Smith: Well, yes, there have, but to a certain extent we're in the complaint business. We don't know when there's a request to engage in midterm bargaining and it goes down without a dispute, but what comes to the attention of the Federal Labor Relations Authority and the courts is when there is a disagreement over whether or not there's an obligation to engage in midterm bargaining, and there have been few disagreements that have come forth. Speaker: Well, because within the CADC you've taken the position that it's okay, so it just goes forward. Do you know how often that these requests have resulted in arbitration so that it's resolved? David M. Smith: The... noted in the copetitioner's brief are only five instances in some 12 years that there have been disputes resolved by the Federal Service Impasses Panel involving midterm bargaining, so they've been rare indeed. Speaker: This is a very curious proposal for midterm bargaining, a provision that says, we have the right to have midterm bargaining, isn't it? I mean, it's a very curious provision that was sought after in this case. David M. Smith: I don't know that I understand the use of the word curious. It's more limited than that, though, because as we point out the obligation and the right to engage in midterm bargaining only pertains to matters that are not contained in or covered by the collective bargaining agreement, which of course is-- Speaker: Where does that-- David M. Smith: --the rule in the private sector. Speaker: --Where does that come from? I mean, I can understand a position that says the FLRA has the power to decide when or whether midterm bargaining should exist and what sorts, but you're saying it doesn't have the power, that even if it thinks midterm bargaining is terrible, it has to allow it because of the statute, so if that's so, then why can't they reopen in the middle of the term every closed agreement? David M. Smith: Justice Breyer, the Authority reads the statute as creating an obligation to engage in midterm bargaining without limitation. However, we think that rule would not be appropriate, so we have developed and applied the private sector rule to the Federal sector. Speaker: Where... if you're talking about the... your position differing from the Government I would be repeating myself, but I don't see how you can read the statute as you do, which is that it forces midterm bargaining, it requires it. That's your position, isn't it? David M. Smith: If the union... I want to be clear-- Speaker: It requires it at the request of the union. David M. Smith: --On matters that are not covered in the collective bargaining agreement. Speaker: Where does it say that in the statute? What I don't see is how you can say the statute requires midterm bargaining, but by the way, only on certain subjects, in a statute that says not a word about midterm bargaining. That's why I'm having trouble. I'd like you to explain... I can understand how a statute could delegate to the agency the power to decide whether and under what circumstances, et cetera, et cetera, namely the SG's position, I think, basically. David M. Smith: Yes. Speaker: But I don't understand the position that it would require midterm bargaining even if the Authority were to say, midterm bargaining's the worst idea we've ever heard of. David M. Smith: It requires midterm bargaining because there's a broad obligation in the statute to bargain with no limitation on the time or circumstances when bargaining is to occur. Speaker: Okay, so in your view, if they come in, the union, and they say, we signed an agreement 3 weeks ago, and it promised to say nothing for 10 years, but by the way, we want to reopen everything right today, midterm, in your view, does the statute require that? David M. Smith: Absent the Authority's contained and covered by policy which the Authority has adopted to place reasonable constraints on midterm bargaining, it would. Speaker: Mr. Smith, I don't understand that, because I thought that the... that even the D.C. Circuit had made it clear that you could have a zipper clause, so as Justice Breyer phrased the question, the union could say in the collective bargaining agreement we promise not to ask for midterm bargaining during the term of this contract. So the answer to his question is the zipper clause, but that would be something to bargain for, is that not so? David M. Smith: Certainly the agencies can bargain for zipper clauses to put an end to any midterm bargaining, and that could be a provision in a collective bargaining agreement. Speaker: Why couldn't the union come around in midterm and say, by the way, we want to renegotiate the zipper clause? I mean, how can you lift yourself by your own petard that way? If the entire agreement is up for midterm bargaining, why isn't the zipper clause up for midterm bargaining? David M. Smith: We don't start with the premise that the entire agreement is up for midterm bargaining. The premise is, those portions of the agreement that are... those matters that are not contained in the agreement can be negotiated midterm. Speaker: That was Justice Breyer's point. I don't know where you get that limitation from. It's contained in the National Labor Relations Act, but it's not contained in your legis... I mean, there's a significant difference between the two, and I would think, if that difference meant anything, it would mean that everything is negotiable midterm if anything is negotiable midterm. David M. Smith: There are many broad divisions in our statute that provide for basic rights without limitation and without explanation. It's the Authority's responsibility, as this Court has recognized in interpreting decisions of the National Labor Relations Board, to fill in the gaps. Speaker: Well, when you fill in the gaps on the general question of the permissibility or perhaps the obligatory nature of midterm bargaining, I assume that what you're doing is interpreting, if I remember the statute correctly you're interpreting the phrase, reasonable in... the word reasonable in reasonable times as those times at which collective bargaining is obligatory. Am I right that you're saying, well, midterm bargaining is a reasonable time? That's what you're interpreting, isn't it? David M. Smith: Yes, sir. I-- Speaker: Okay. Do you have a similar word that you're interpreting when you come to the conclusion that they are obliged to bargain on matters which are not covered by the agreement but they in fact would be precluded from bargaining on matters that are covered? Is there a textual basis for it the way there is on the time question? David M. Smith: --I don't think so. I thought I'd answered that question. Absent the Authority's contained and covered by doctrine, which of course is adopted from the private sector, I think there would be no specific limitation on the right to engage in midterm bargaining. Speaker: May I ask you just a technical question about the agency's position? You say that midterm bargaining with respect to a matter covered by the agreement would be barred. I think it's the position that a matter that the union had raised and had failed to get an agreement on, in other words which it had dropped in the initial collective bargaining, would also be barred? Is that correct? David M. Smith: That's correct. Speaker: What about a matter raised by the governmental agency upon which nobody got any agreement in the collective bargaining agreement? Would that be barred as well? David M. Smith: It would, of course, depend on the nature of the bargaining history and what transpired at the bargaining table. If it was dropped in exchange for another concession, yes, it would be barred, but I'm reluctant to-- Speaker: Well, is the rule exactly the same whether the union wanted something or whether the agency wanted something-- David M. Smith: --I-- Speaker: --which did not find its way into an express provision of the collective bargaining agreement? David M. Smith: --I think that's-- Speaker: You treat each side identically? David M. Smith: --Yes. Speaker: So that I suppose, then, the agency could protect itself, as it were, from being subject to midterm bargaining on a subject that it didn't want to be... it didn't want to have to bargain on midterm, simply by raising it and trying to get an agreement favorable to itself, and if it failed, that would be it until the collective bargaining... the original collective bargaining agreement itself came up for renewal, is that right? David M. Smith: That's our point. I'd like to-- Speaker: So it's not just things that are covered by the agreement, then, that are... you're precluded from midterm bargaining, but things that were raised and not made into an agreement at the bargaining session? David M. Smith: --In the Authority's IRS II decision, Mr. Chief Justice, we broadened the matters that would be precluded to include matters that were contained in or covered by the collective bargaining agreement and matters that were waived, either waived by bargaining history, or waived by a zipper clause. If I could reserve the remainder of my time. Speaker: Okay. Thank you. Thank you, Mr. Smith. Mr. O'Duden. Gregory O'Duden: Mr. Chief Justice, and may it please the Court-- I'd like to spend just a moment taking the Court through a textual analysis here and explain how we get to our conclusion that midterm bargaining is required by the statute, and then I'd like to spend a moment, if I could, talking about the practicalities in connection with midterm bargaining. The question was asked earlier, where is it in the statute that provides for the FLRA's conclusion that midterm bargaining is required. Obviously, if you look at the statute you see in section 14(a)(4) of the statute that it imposes on the agencies and the unions the obligation to engage in bargaining for the purpose of arriving at a collective bargaining agreement. Well, what does that mean? I think the answer to that is to be found in the statute's definition of a collective bargaining agreement. When you turn to that definition in 7103(a)(12), what do you see? You see that it says that a collective bargaining agreement is an agreement entered into as the result of parties bargaining. That's a very broad definition. It includes-- Speaker: Well, it's almost tautological, too, that a collective bargaining agreement is the result of collective bargaining. Gregory O'Duden: --That is the way Congress chose to define it, though, in a very broad fashion without qualification, without temporal limitation, and it certainly did not choose to define that phrase as the respondent wants this Court to redefine it, namely, to mean only a basic, comprehensive agreement. Speaker: What about... just... I just want to be sure you focus on... I see a broad word. Gregory O'Duden: Yes. Speaker: I see an Authority. Gregory O'Duden: Yes. Speaker: It looks a little like the NLRB, looks a little like the labor statutes, a little like a lot of statutes that delegate to the Authority questions to decide what is or is not... to fill in the blanks. So what I don't get is the position that says, they don't have the authority to fill in the blanks. They have to, no matter what they think-- Gregory O'Duden: Well, of course-- Speaker: --permit midterm bargaining. Gregory O'Duden: --Of course, to the extent the statute is ambiguous the Authority is performing a classic function. Speaker: That's exactly... I understand that argument. Gregory O'Duden: Okay. Speaker: I'm saying the reason my question is on a different argument is on your position which is more extreme than that, which is the position that says, even if they think it's a terrible idea, they'd still have to allow it because the statute requires it. That's the argument I don't fully understand, and why I was asking. Gregory O'Duden: Even if the Authority thought it was a terrible argument? Speaker: Yes. You-- Gregory O'Duden: Well, I think that the statute answers the question that is presented to the Court, and that's of course what the NTEU v. the FLRA case was about. Speaker: --In other words, are you satisfied with the... you think the law is correctly satisfied with an opinion that says, these things are up to the Authority. Language is broad, up to the Authority. If they think it's a good idea-- Gregory O'Duden: Absolutely. Speaker: --sometimes, always... yes, all right. Gregory O'Duden: And of course it was just a couple of years ago in the Fort Stewart case where this Court recognized that it was the Authority's job to give a rational interpretation to the statute, and it was entirely proper to give deference to the Authority, notwithstanding the fact that it was adjudicating disputes between employees and Federal agencies. Speaker: Well, that argument has to rest on your notion that the statute, then, is not clear, it's ambiguous on the question. If you leave it open to the Authority, then you have to say the statute's ambiguous, that's why it's open to the Authority. Gregory O'Duden: That's right. Our starting point-- Speaker: And that's your position. Gregory O'Duden: --Our starting point is that-- Speaker: Yes? That is your position? Gregory O'Duden: --Our position is that if the statute is ambiguous, then this case is uniquely suited for deferral to the Authority's interpretation of those words. Speaker: Well, then you haven't answered my question, because I'm confused. Is it your position that the statute is ambiguous, or is it clear? Gregory O'Duden: No. It is our position that the statute answers the question presented to the Court. Speaker: Well, if the statute is clear, then the Authority would not have an option. It has to be one way or the other, I think. Gregory O'Duden: No. As I said earlier, I don't think that the Authority does have an option to conclude anything other than what the D.C. Circuit said 10 years ago, but to the extent that the party, the respondent is now suggesting, as the Fourth Circuit did, by the way, that the language is ambiguous, if that is the premise, then-- Speaker: Well, it's a pretty good argument in light of the fact that a court of appeal has differed from the D.C. Circuit and says yes, indeed, the statute requires something else. I mean, it does appear to be somewhat ambiguous. You can't find in the text anything referring to midterm bargaining, certainly. Gregory O'Duden: --No, and we've never-- Speaker: And you do find in the text references to a collective bargaining agreement. Gregory O'Duden: --Yes, but-- Speaker: Not a continuing process. Gregory O'Duden: --But that begs the question, of course, of what a collective bargaining agreement is, and that's why you have to go to the statutory definition of that phrase. Speaker: Well, you really have two positions, don't you? One is the statute is clear and, second, if the court doesn't agree with that, it's at least ambiguous and the agency could do what it's done here. Gregory O'Duden: That sums up our entire argument, Your Honor. Speaker: Mr. O'Duden, before you finish, I do hope that you will get to what seems to me a very key issue here. It's, Chief Judge Wilkinson put great stress on the absence of a provision like 8(d). He said, if you're trying to be like the NLRB, the NLRA says, specifically says no bargaining on subjects that are already included in the contract. The FLRA doesn't have similar language to deal with. Gregory O'Duden: Right. I think that the absence of this 8(d) proviso ultimately is of no consequence here. I think it's almost counterintuitive. It's a kind of no exception proves no rule type of argument. I think it's important to bear in mind that even before this 8(d) proviso was added to the NLRA there was no question under that statute that employers did have to engage in midterm bargaining. I think that the principle-- Speaker: But was there any question whether they had to engage in it even with regard to issues that had been decided in the collective bargaining agreement? Gregory O'Duden: --I believe that there was some question along those lines, and that's why-- Speaker: Which is why they adopted the proviso. Gregory O'Duden: --That's why they adopted the proviso. Speaker: So by parity of reasoning, without the proviso, they would... if you say, they must bargain midterm, it seems to me they must bargain midterm on everything. I don't know-- Gregory O'Duden: Well, obviously the Authority has interpreted the statute in a different way, and thought it was appropriate to fill that gap by adopting the covered by doctrine. Speaker: --You're telling us the statute is clear, as your argument number 1. Gregory O'Duden: With respect to the obligation to engage in midterm bargaining, yes. Speaker: How about with respect to the obligation to engage in midterm bargaining with respect to matters previously bargained upon? Gregory O'Duden: As my cocounsel says, the statute doesn't speak to that directly, and that is the reason why the authority filled in the gap to furnish the covered by doctrine. The principle that the parties-- Speaker: Well, if you think the statute is clear that there must be midterm bargaining, I don't know where you get this qualification. You're the one that wanted to walk through the statutory text. Gregory O'Duden: --Yes, I do. Speaker: But you... what is it you point to to show that there may not be midterm bargaining with respect to matters previously decided? Gregory O'Duden: I think that that is an appropriate function for the Authority to have performed here in interpreting the policies of the act and trying to balance the competing interests here in favor of collective bargaining versus the interest in having repose during the term of the agreement. Speaker: It can add provisions that the act doesn't contain? It can say, even though the act says you must bargain midterm without qualification, we are going to import a qualification because it's, quote, appropriate? That goes beyond-- Gregory O'Duden: If that is a reasonable construction of what the plan of the statute was, yes, I think it is appropriate. Speaker: --That's what Justice Kennedy asked you, is it a construction of any provision in the statute, and you can't come up with any. Gregory O'Duden: Your Honor, the principle that the parties do not have to engage in bargaining regarding matters contained in the contract is such a well settled principle of labor law, it's such... a principle that's so well integrated into the labor law jurisprudence-- Speaker: So well settled that Congress found it necessary to say it explicitly in the National Labor Relations Act. If it was so well-- Gregory O'Duden: --That was 30 years before they wrote the statute and, given that fact, I think that it's hardly surprising that Congress didn't choose to spell it out when it came time to write this statute. I think it's important, if I may finish by emphasizing the benefits, the good things about midterm bargaining. It allows the parties flexibility to deal with topics that are not covered by the parties' agreement such as health and safety issues that might arise during the term of the agreement. The respondent will no doubt get up and say that it will be terribly disruptive to the Federal Government if it has to put up with midterm bargaining. We know that we have lived with this regime for 10 years now all over the country, except for the Fourth Circuit, and there's simply no indication of any kind of disruption along the lines that are described by the respondent. Unless there are further questions, I thank the Court for its time. Speaker: --Thank you, Mr. O'Duden. Mr. Gornstein, we'll hear from you. Irving L. Gornstein: Mr. Chief Justice, and may it please the Court-- A Federal agency has a duty to negotiate with a union for the purpose of arriving at a collective bargaining agreement. Once such an agreement is reached, the agency does not have an ongoing duty to negotiate over union initiated proposals for the purpose of supplementing that basic agreement during its term. Speaker: On the threshold question raised by Justice Scalia as to whether or not we should give Chevron deference to the petitioner agency here rather than to the President and to the executive branch as a whole, you did not take the position that Chevron deference cannot be given to the petitioning agency, did you? Irving L. Gornstein: That's correct, we did not, and the reason is, this Court's decision seems to have... seemed to have settled that question, including the Fort Stewart Schools decision and others that, as a general matter at least, the FLRA is entitled to Chevron deference. Is the reason because the Federal Labor Management Relations Agency has more expertise on this general subject than does the Government Executive's establishment in general? That would not be the reason. I think the reason would be that Congress has delegated the authority to the FLRA to administer the act, to decide on fair labor practice charges, to adapt policies to further the purposes of the act-- Speaker: Well-- Irving L. Gornstein: --and that is consistent with the general way, the approach the Court takes in deciding whether an agency gets Chevron deference. Speaker: --Well, but Chevron deference means that because of this delegation it develops an expertise, does it not? Irving L. Gornstein: Well, that does become part of it, but I would just say that it's first and foremost the delegation of authority that leads to Chevron deference, and expertise is a factor that goes along with that. Speaker: And what do you rely on primarily for saying we don't owe deference to this decision? Irving L. Gornstein: That you do not owe deference to this decision because Congress has clearly resolved this issue in the text of the act. Unlike the National Labor Relations Act-- Speaker: So you also take the position that the text is clear but just directly contrary. Irving L. Gornstein: --That's correct, Justice O'Connor. Speaker: The text being the efficiency of Government text? Irving L. Gornstein: No, the text being 7114(a)(4). Unlike the... which appears on the white petition at 27a. The... unlike the National Labor Relations-- Speaker: What exactly is the language that you refer to? Irving L. Gornstein: --The precise language is, shall meet, negotiate in good faith for the purpose of arriving at a collective bargaining agreement. Speaker: It's the singular, a collective bargaining agreement? Irving L. Gornstein: It is the combination of arrive and collective bargaining agreement. The ordinary and only, the established meaning of collective bargaining agreement is comprehensive term agreement. The product of negotiations that occur midterm are amendments, or supplements, or modifications to a collective bargaining agreement. They are not collective bargaining agreements themselves. So if you have a single collective bargaining agreement, a term agreement, and it is amended four times during its term, the product of that is a single collective bargaining agreement consisting of the original provisions and the amendments. It is not, as they would suggest, five separate collective bargaining agreements. Speaker: Mr. Gornstein, I don't understand how it works differently on the union side than it does on the management side, because I think you agree that if management wants to... chooses to negotiate midterm, it can, and that will end up with something, some kind of agreement, whatever you call it. Irving L. Gornstein: It will. It will end up with either an amendment, a supplement, or a modification to the collective bargaining agreement. Speaker: Well then, why can't you call when the union initiates it the same thing, a modification? Irving L. Gornstein: You can call it that, but that's not what's provided for in 7114. What's... management changes is provided for in 7106, which is in 25... 26a of the white petition, in (b), which describes the duties that managements have to negotiate not just at the point that it's arriving at a basic comprehensive collective bargaining agreement, but also throughout on a continuous basis, so if management exercises management rights at any point during the course of the agreement, it has a duty to negotiate by virtue of the duty spelled out in 7106(b)(2) and (3). Speaker: Well, do you read the effect of that provision as negating a similar authority for the union? Irving L. Gornstein: It-- Speaker: You read the provision saying that if management makes certain changes it must initiate-- Irving L. Gornstein: --That's correct. What I would-- Speaker: --midterm bargaining. Irving L. Gornstein: --That's-- Speaker: You read a negative in that. Irving L. Gornstein: --I don't think you necessarily have to read the negative. You just note that there's no corresponding provision for union initiated changes which forces the petitioners to fall back on 7114 itself to find any obligation. Speaker: May I interrupt? I'm just looking at (b) now. It would preclude any agency and any labor negotiation... organization from negotiating. That doesn't say who must initiate the negotiation. And then you go to (2). (2) doesn't tell you which one has to initiate the negotiation, does it? Procedures which management officials will observe in exercising any authority. Irving L. Gornstein: But the whole subject is about management rights, 7106, and what that is qualifying is the exercise of management rights, so what that is saying is that when management exercises rights, that it does not have to negotiate with respect to number 1, but it may, but it does have to negotiate with respect to the procedures which management officials will observe in appropriate arrangements, and I don't think anybody has disputed that 7106(b)(2) and (3) is exclusively about impact and implementation of bargaining over exercises of management rights. Speaker: But Mr. Gornstein-- --If management exercise some... put into... some new procedure into effect, and the union came to them and said, we'd like to negotiate about that because... would they have to negotiate or not? Irving L. Gornstein: They-- Speaker: This is a midterm request that we now negotiate about the change you've just made. Irving L. Gornstein: --They... we would have to negotiate about that, yes. Speaker: Even though it's a midterm request made-- Irving L. Gornstein: That's correct, as a result of 7106(b)(2) and (3). Speaker: --You're not as-- --It's only the procedures. I mean, you can make the change. You just have to-- Irving L. Gornstein: That's correct. I misspoke if I said more than that. We have... we can make the change, but we have to bargain over the procedures and the impact of those changes. Speaker: --Why doesn't that... the Author... look, that particular provision that Justice Stevens mentions says... doesn't give anybody the authority to negotiate collective bargaining. If the management says, we're going to contract out, and if the union says, it's midterm but we want to protect our people when you do, you have the right to do it, it says... it says nothing precludes them from negotiating appropriate arrangements for employees. It says nothing precludes it. Well, where do they get the authority to do it? The obvious place is right over here in 7114(a)(4), where it says, a collective bargaining agreement, which isn't defined and, since it isn't defined, the obvious thing is that by a collective bargaining agreement, they meant... well, they meant whatever's reasonable given the whole statute, and they delegate authority to the FLRA to decide. I mean, that would be the sort of basic, naive approach to this. Why isn't that naive approach-- Irving L. Gornstein: Well, Justice Breyer, you state the case-- Speaker: --Right, yes. Irving L. Gornstein: --as well as it can be stated for the other side, and-- Speaker: All right-- Irving L. Gornstein: --but the answer to that is-- Speaker: --the other side. Irving L. Gornstein: --that in 7106, if Congress inserted the words, at the election of the agency into number 1, in (b)(1)-- Speaker: 7106(b). Irving L. Gornstein: --That's right, 7106(b)(1), it inserted the words, at the election of the agency there, and deliberately did not insert those same words into (2) and (3), and the entire purpose of that was to transform what looks like a nothing precludes into something that says, nothing precludes (1) but (2) and (3) are required, and that is the source of the obligation. Speaker: On a related-- Irving L. Gornstein: It does not go back to 7114. Speaker: --Related, why... this is... might be... I... you know, there's a general authority here, as there is with most agencies, like the NLRB and others. It says that the Authority has broad power under the statute to resolve issues relating to the duty to bargain in good faith, it has what I'd call a normal agency power "to take such other actions that are necessary and appropriate to effectively administer the provisions. " so given those normal provisions, I don't know why we'd even refer to Chevron. I mean, here you have a word, a collective bargaining agreement. It's very broad. It should be stretched at least to cover (b)(1), (2), and (3), and you have a general delegation of authority to the agency. Again, I'm putting the argument because I want to get your response. Irving L. Gornstein: Well, the answer is that the term, collective bargaining agreement, is not subject to the kind of interpretation that you're suggesting. Collective bargaining agreement, the established meaning of that in the private labor field, is comprehensive term agreement. When this Court in its decisions refers to collective bargaining agreements, it is always referring to comprehensive term agreements. When it refers to the products of midterm discussions, it is talking about supplements to the agreement, modifications to the agreement, amendments to the agreement, and that is... the FLRA does not have authority to read that term in a different... other than in its ordinary usage. Speaker: May I just get your help, because I really am having trouble with following part of your argument. I'm looking at (b)(3), about appropriate arrangements for employees, and supposing an agency decides to contract out a portion of the work, and it does not make any appropriate arrangements for employees whose duties will be changed by that transfer. You're saying that it's perfectly clear that only management could initiate negotiations to... about those appropriate arrangements? Irving L. Gornstein: No, Justice Stevens. We're saying that the only bargaining that takes place arises by virtue of management making the change, and then once management makes the change midterm, the union could request negotiations, and in fact management is required when it makes the change or even before it makes the change to offer the union an opportunity to negotiate over impact of implementation. Speaker: Does that mean that whenever management makes a significant change that triggers a union desire to negotiate with somebody, in that case, midterm negotiation initiated by the union would be appropriate? Irving L. Gornstein: Well, I would say that it's not initiated by the union per se, because when management makes the change it must offer the union an opportunity to negotiate over-- Speaker: Where do... where does the statute say that? Irving L. Gornstein: --Well, that is how (b)(2) and (3) have been interpreted in light of the very same executive order experience that preexisted the act. Speaker: You don't get that out of the text of the statute. Irving L. Gornstein: Well, it is an interpretation of the text of the statute. Speaker: Well then, the... then it isn't all clear from the text itself. Irving L. Gornstein: Well, not from (b)(2) and (3), but it is clear from... that the duties in 7114 are limited to negotiation for the purpose of arriving at a comprehensive term agreement, and then 7106(b)(2) and (3) picks up only midterm bargaining as a result of management changes. Speaker: Well, why just midterm bargaining? I mean, as I read (b) it would have been procedures or the exercise of authority to reassign work, which occurred in the past. Irving L. Gornstein: Correct. Speaker: When a new collective bargaining agreement, as you use the term, is being negotiated. Irving L. Gornstein: That's correct. 7106 applies to both. It's unrestricted. It's not limited to either midterm or bargaining at the point of reaching a comprehensive term agreement. Speaker: Well then, doesn't it make sense that, just as those rights would otherwise exist for the collective bargaining agreement, as you use the term, those rights as far as this section is concerned could also exist midterm? I mean, it doesn't narrow in on some nonexistence of midterm authority. It just says-- Irving L. Gornstein: Well, whatever rights exist under 7106(b)(2) and (3) that there are, whatever those rights are, and we would say they are limited to bargaining about impact and implementation of management changes, not the substance of-- Speaker: --Yes. Irving L. Gornstein: --but those rights, yes, they apply midterm as well as at the point of the comprehensive term agreement. The point is, there's no corresponding provision for union initiated changes through proposals that have nothing to do with management changes, or that have nothing to do with the impact and implementation of management changes, and so unions must fall back and the petitioners must fall back on 7114, which only creates a duty to negotiate for a comprehensive term agreement. Speaker: Does that mean that what we're fighting about... I really have trouble knowing how important this case is, that if you concede that every time management makes a change it has a duty to negotiate about it. Is it very often going to happen that the union is going to request midterm bargaining when the management has done nothing? Irving L. Gornstein: Yes, and that's the problem in the case. Speaker: I see. That's what you're worried about. Irving L. Gornstein: Yes, that's the concern. Speaker: They just come up with a brand new idea. Give me an example, would you. Irving L. Gornstein: Justice Stevens, anything could come up in the term that could come up-- Speaker: Give me a specific example of a specific kind of request by the union that we're fighting about in this case. Irving L. Gornstein: --Well, in this particular case we're fighting about inserting a provision. Speaker: Oh, I understand. Irving L. Gornstein: But in other cases there's a proposal about relocation expenses, about working at home, about parking, about-- Speaker: In other words, the union... I see. Irving L. Gornstein: --any matter that could come up, any matter that-- Speaker: The union initiates a request for more parking space or something. Irving L. Gornstein: --That's correct. Speaker: Okay. I have trouble with 7106(b)(1), exactly what it does. It says, at the election of the agency you can negotiate, and then it has some things that would appear to be pretty important. Does that mean that the union cannot initiate bargaining about the subjects in (1)? Irving L. Gornstein: That's correct. Speaker: If you're right, which is that the collective bargaining agreement is a term of art, always meant to refer to the end of term agreements, and anything in the middle is called a supplement to a collective bargaining agreement-- Irving L. Gornstein: Or an amendment, or a modification-- Speaker: --Or an amendment or something like that, then what would forbid a union and the agency from negotiating in what you consider the correct end of term agreement a promise that on certain matters they could open it up in the middle? I mean, you see... does that require any stretch of the statute? I mean, that's what's really before us, too, isn't it? Irving L. Gornstein: --What is before you is not what you just said. It's something that completely duplicates the statutory duty. Your hypothetical was to open up a particular matter. Speaker: Well, they would make a list. They make a list. Irving L. Gornstein: That's correct, and that would present a different question than the question we have in this case, which concerns solely whether they can propose something that replicates entirely the rejected scheme of open ended midterm bargaining. Speaker: Well, to be specific, then, let me rephrase it, taking your definitions. What in the statute would forbid them from at the end of term putting in a clause that says, we will have midterm bargaining on matters not covered by this agreement? Irving L. Gornstein: What... that would be precluded by 7103(14)(C), which appears at 25a of the white brief and that... what that says is that a proposal is not negotiable if it is specifically provided for by a Federal statute, and here Congress has specifically provided for the basic bargaining structure, and it has rejected open ended midterm bargaining, so a proposal that merely duplicates that is not a permissible subject of bargaining. I did want to-- Speaker: While you're on that section of... subsection (12) defines collective bargaining so that the units have to negotiate... meet at reasonable times. Can't you say that in the event of a change in the workplace it's a reasonable time to negotiate about that right after it occurs? Irving L. Gornstein: --Well, on... 7103(12) is a definition. Ultimately the duty that you find, Justice Kennedy, is in 7114(a)(4), which also talks about meeting at reasonable times, but it ties the meeting at reasonable times to the overriding duty, which is to negotiate for the purpose of arriving at a collective bargaining agreement. Speaker: Yes, but (12)-- Irving L. Gornstein: So reasonable times would be for the comprehensive agreement. Speaker: --But (12) defines collective bargaining as meeting at reasonable times to reach agreement, not a collective bargaining agreement, but to reach agreement with respect to the conditions of employment. Irving L. Gornstein: But collective bargaining means the performance of the mutual obligation, and the mutual obligation that is referred to there, it begs the question of what is the mutual obligation. The mutual obligation is the obligation, and the only obligation, which appears in 7114(a)(4). Speaker: Mr. Gornstein, I'd like you to comment on the opinion in the D.C. Circuit following up the original decision, Judge Edwards and Judge Silberman joining and saying, this is all a tempest in a teapot, after all, the agency can negotiate for a zipper clause, and that's the end of it. Irving L. Gornstein: I think the problem with a zipper clause... and what a zipper clause is is a provision that would say, the union agrees not to negotiate about anything midterm. The problem with a zipper clause are several. First of all, no one has ever said that a union must negotiate a zipper clause other than two judges in that opinion. The FLRA has never said that that is something that is mandatory and, if they have-- Speaker: How about a reopener clause? Irving L. Gornstein: --Well, I-- Speaker: Has the FLRA said that that's okay? Irving L. Gornstein: --Well, a reopener clause, like the one that's in this-- Speaker: That's sought here. Irving L. Gornstein: --A complete reopener clause? Speaker: A clause like the one that's sought here. Irving L. Gornstein: That is not a negotiable matter, because it is... that is a matter that Congress has specifically provided for by a Federal statute, and that is that Congress has decided on the basic structure of bargaining, and it has ruled out open ended midterm bargaining. It has specifically provided for the basic structure, and so that is not a permissible subject of bargaining. Speaker: Why isn't the teapot proportion sort of dictated by the position that Mr. Smith described to us, that the... that the... that... I keep wanting to say the board. What do I want to say? The-- --Authority. The Authority takes, that if a matter has been raised by management at the time of negotiating the basic agreement and has been rejected without reaching agreement, that subject is precluded as a subject of bargaining midterm. Why doesn't that protect management and reduce the argument here really to something pretty small? Irving L. Gornstein: Well, if the FLRA interpreted it in exactly that way, which it hasn't up until this point, it would improve the matter some, but you would still have all the unforeseen issues that can be raised, and a union really, in this context, when it can take an issue to impasse and then take the issue to the binding arbitration, has an incentive to raise any issue of any concern-- Speaker: Then why hasn't-- Irving L. Gornstein: --to any Federal employee-- Speaker: --Why hasn't it been doing it to a disturbing degree for the last 11 years outside the Fourth Circuit? I mean, if we were... if this were the first day of creation, I think you might have a stronger argument there, but we've had 11 years' experience, and it doesn't seem to have become a source of great difficulty. Irving L. Gornstein: --We have not had experience in a regime in which this Court has said, there is a duty to bargain midterm. What we have had experience with is a regime in which the D.C. Circuit has said there is such a duty and the Fourth Circuit has said that there is not. Speaker: But not for a while. How many years was it before the SSA decision in the Fourth Circuit? Irving L. Gornstein: I believe it was-- Speaker: About 5 years? Irving L. Gornstein: --It was about 5 years, and I frankly do not know the dimensions of the problem, but the fact of the matter is, a D.C. Circuit decision is very different than a decision from this Court. I would not want to gauge or predict what the experience will be after a decision by this Court based on a single court of appeals decision. Speaker: Except that that court of appeals is in a rather special position, because it's always an alternative venue in these cases. Irving L. Gornstein: It is an alternative venue, but there are many other venues for... as the Fourth Circuit case's experience indicates for Federal agencies to go, and for Federal agencies that did not want to engage in midterm bargaining, like the Department of Energy and the Department of Interior here, there was an option to take the issue to the Fourth Circuit, and that would be true in many other circuits. So I... in point of fact, I just don't think it's a fair test that the Court-- Speaker: Have there been circuits that have followed the D.C. Circuit? Irving L. Gornstein: --There have been no other circuit decisions on this particular issue, on midterm bargaining, other than the D.C. Circuit decision in the Fourth Circuit. Speaker: May I ask you one narrow question? Supposing, on a brand new subject, the union asked the agency to bargain, and the agency said yes, we will bargain, would they have been acting lawfully? Irving L. Gornstein: I would say what... you could call it bargaining, but really what would be going on is the agency... the Government seeking input from whatever source it wants to to solve a problem, including an agency. There's nothing wrong with the Federal Government consulting with an agency when a problem comes up midterm, after the fact. Speaker: No, no, the Federal Government can... I was talking about the agency consulting with the union. Irving L. Gornstein: Yes. Speaker: The union comes in and says, we want to bargain about some more parking spaces and they say, okay, we'll sit down and bargain with you. That would not be unlawful. Irving L. Gornstein: That would not be unlawful, that's correct. Speaker: --But the key is that it would not go to arbitration if it came to an impasse. Irving L. Gornstein: That's correct. Not only that, but if the bargaining did not seem productive from the agency's point of view it could cut it off, and it would not be an unfair labor practice of not bargaining in good faith. Speaker: Could they, do you think, say well, if we can't agree among ourselves we'll let it be arbitrated by the agency? Irving L. Gornstein: That's possible, Justice Stevens. I wouldn't want to rule out single after the fact solutions to problems on particular issues, but what is objectionable here is a clause that commits the agency to open ended midterm bargaining without limit. Speaker: Is... if you were going back hypothetically, putting yourself in the position of a Congressman who thought this... realized this was all going to come up years later, would you have thought, or why not... I'm putting it against you. Wouldn't it have... leave it up to the agency. You know, if these things... we don't know if it will work out well or badly. If it works out well, then they'll follow it. If it works out badly, the FLRA itself will change the rule, as it might have the authority to do. Wouldn't that be a practical... if we're talking practicalities, isn't that practical? Irving L. Gornstein: I think that Congress had a very big concern that it expressed in 7101(b), that this statute should not be interpreted in a way that threatens the effective and efficient administration of justice, and that is... administration of the Government, and that is in 24(a). Speaker: But Congress also thought that collective bargaining would advance the interest of the Government-- Irving L. Gornstein: That's-- Speaker: --in efficient management. Irving L. Gornstein: --That's correct as a general matter, but it did not believe that unending bargaining would, and Congress recognized that there were special needs, and that's what 7101(b) reflects, that there are special needs in the Federal Government and in Government in general that there have to be reasonable limitations that are not present in the private sector. Speaker: Is there anything that suggested that Congress thought that the agency was differently situated than private... in the private sector, where by this time, by the time this statute is enacted midterm bargaining is long established? Irving L. Gornstein: Well, I think there are two things. One is the text of the act, which is very different. There was an open ended duty to bargain collectively in the National Labor Relations Act, subject to a specific exception for matters contained in the agreement. Speaker: Yes, but there was no... nothing originally. Taft Hartley brought in the 8(d) exception, but originally there wasn't anything that said, there shall be midterm bargaining, was there? Irving L. Gornstein: Well, there was an open ended duty to bargain collectively, which the National Labor Relations Act... Authority, the NLRB interpreted to lead to wide open bargaining, and then Congress cut that back to the contained in. But even the open ended term, bargain collectively, is bigger than the term here, which is bargaining for the purpose of arriving at a collective bargaining agreement, a narrower obligation than the original NLR... National Labor Relations Act duty that was subsequently reduced. Speaker: The big difference, as I understand your position, is that there is no disincentive here to raise it midterm, as there is in the private sector. In the private sector, if you come to an impasse midterm and you want to make something of it, you have to call a strike. After you've gone through a big collective bargaining agreement you're usually not going to get your union members to be willing to do that. Whereas here, if you raise it midterm and you go to an impasse, it's cost free. You go to an arbitrator. Maybe he'll rule for you. I mean, it's, you know, heads I win, tails you lose. Irving L. Gornstein: Justice Scalia, I was going to make that point first but I thought the text would go first better. Speaker: For me of all people. Yes. He's basically a policy-- [Laughter] Basically a policy wonk, you're right. Irving L. Gornstein: But that is... yes, Justice Scalia, that's absolutely correct. That was the second enormous difference that Congress faced when it was looking at this act as it compared to the private sector experience. The kind of incentives that would be in play for midterm bargaining are just completely different, and when you can take every issue to impasse, you have the incentive to raise any issue of any concern to any Federal employee-- Speaker: Of course, I'm not really convinced that every mid term bargaining in the private sector that doesn't reach an agreement results in a strike. Irving L. Gornstein: --I... Justice Stevens, what happens is that unions do not raise things midterm in the private sector unless they are of crucial importance, and therefore there isn't a lot of union initiated midterm bargaining in the private sector because their only recourse is to strike at impasse, and it was something which is very difficult to accomplish midterm except over some very crucial issue. Speaker: On that point, is there some source, some body of authority that we could consult to determine how midterm bargaining works in the private sector? Irving L. Gornstein: Justice Kennedy, I think we cited in our brief a text that talked about that this was something that was not done very frequently, and I think that the law review article that we refer to also in the brief discussed the fact that this is not something that is done in the private sector very often. Speaker: Thank you. Irving L. Gornstein: If the Court has nothing further-- Speaker: Thank you, Mr. Gornstein. Mr. Smith, you have 3 minutes remaining. David M. Smith: The very first sentence of the Federal Service Labor Management Relations Statute notes that Congress has examined both the public and private sectors and has determined that collective bargaining is in the public interest. That collective bargaining as set out in the statute has no limitation as to the circumstances when it must occur. We've heard the respondent offer their spin of what collective bargaining agreements mean. They don't look to the term of art in the statute set out in section 7103(a)(8). Instead they say, this is what it's come to mean in the private sector. In point of fact, we have specific terms of art defined in the statute before you that tell you what a collective bargaining agreement is-- Speaker: Well, but he says the collective bargaining agreement in labor relations means an agreement that's negotiated from term to term, and anything else is called a supplementary agreement or an additional agreement. Now, is there some example that you could point to where that isn't so? David M. Smith: --That isn't so in the wording of our statute, Justice Breyer. Stephen G. Breyer: No, no, but I mean, let's find... that's what's at issue, so let's find an agreement somewhere that was made midterm, in any context whatsoever, where it was labeled by some person in a case or in a statute or something to say that's a collective bargaining agreement. They don't use the word supplementary agreement. They don't use the word additional agreement. David M. Smith: We have the word local agreement used in our statute to describe agreements entered into at the local level between those that are not at the national level, so there's one example for you where the word is used. That is specifically set out in section 7114(c)(4) of the statute. Speaker: 7114(c)(4)? David M. Smith: Yes. Speaker: That could be a local collective bargaining agreement in the sense that the Solicitor General uses it. David M. Smith: Which would disprove their-- Speaker: I mean, it could be a local agreement that lasts 3 years, couldn't it? David M. Smith: --Which would disprove the point that there's only one collective bargaining agreement and everything else is simply a modification or a supplement to it. Our view is there can be numerous collective bargaining agreements, and their view that any side agreement entered into as a result of a management initiated change is a supplement to or an addition to finds no warrant in the statute. There's no suggestion in... any place in the statute that says these subsequent agreements are supplement to a comprehensive term agreement. In fact, the words, comprehensive term agreements, are not found in the statute. If I could address one other matter briefly, we have not talked about the negotiability of this provision. We stand on the statutory right analysis and we believe, in fact, there is a right to engage in midterm bargaining. William H. Rehnquist: Thank you, Mr. Smith. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 03-95, the Pennsylvania State Police v. Nancy Drew Suders. Mr. Knorr. John George Knorr, III: Mr. Chief Justice, and may it please the Court: In its decisions a few years ago in the Ellerth and Faragher cases, this Court held that where a supervisor has created a hostile work environment by acts of sexual harassment, the liability of the employer is not strict, but rather is subject to an affirmative defense which centers around the opportunities provided by the employer for corrective or preventive action. The question here is whether that affirmative defense should continue to be available where there is an allegation that the hostile work environment resulted in a constructive discharge, and we submit that it should. In our view there is nothing about a claim of constructive discharge that changes the Ellerth-Faragher analysis of hostile work environments. A supervisor's acts which create a hostile work environment don't produce strict liability because they are not acts of agency; that is, they are not the acts of the employer. They don't bear the imprimatur of the employer. They aren't ratified by the employer, and they are not the sorts of things which could only be done by somebody invoking the authority of the employer. Sandra Day O'Connor: Mr. Knorr, I'm... I had a hard time, in reading the briefs on this case, figuring out what we ought to do with the suggestion that there's a constructive discharge theory. Now, I don't think this Court has ever weighed in on that. It comes out of the labor law context I guess. John George Knorr, III: Yes. Sandra Day O'Connor: I'm wondering, you know, in... in Ellerth and Faragher, what we said was that when no tangible employment action is taken, a defending employer may raise an affirmative defense to the liability. So I'm wondering if we shouldn't just try to look at the facts in this case and ask whether what the supervisors did amounted to a tangible employment action and that would answer the... the question. I... I don't know that viewing it through the lens of a constructive discharge is helpful. What she says is that the supervisors... that she had taken tests to qualify for a promotion, that the supervisors had hidden the results of those tests and had thereby prevented any promotion, and that there was a false arrest I guess. Now, why shouldn't we just look to see if those actions occurred, and if so, whether they amounted to a tangible employment action? Wouldn't that answer the question? John George Knorr, III: Justice... Justice O'Connor, if we haven't made this clear, then the Court has my sincerest apologies because that is exactly what we suggest the Court should do. If the underlying actions of the supervisor amounted... which... which provoked the constructive discharge amounted to a tangible employment action, then there is no affirmative defense. Antonin Scalia: But... but Justice O'Connor is going a little bit further than that. I think she is suggesting that there cannot be a constructive discharge without some tangible employment action because constructive discharge itself attributes to the employer the desire to get rid of the employee, and that desire cannot simply be communicated through some lower... lower people. Now, maybe the... the tangible employment action is the refusal of the employer to respond when the obscene actions of... of the... of the coworkers here are brought to the employer's attention. That would be I... would that qualify as tangible action in... in your part... in your estimation? John George Knorr, III: I'm not sure if it would be tangible action or not, but it would certainly indicate that if the employer didn't respond, that it was in some sense ratifying or approving what it has done. Antonin Scalia: I mean, the point is, how can you have a constructive discharge? The only person that can discharge is the employer. You have to pin it on the employer. I don't know how... how subordinates alone can... can produce a situation that amounts to a constructive discharge. John George Knorr, III: That, Justice Scalia, is partly true and it partly is not true because the precise elements of what you need to prove to... to get a constructive discharge vary quite widely from court to court. And in some courts what you say is quite accurate. There has to be some proof of an intention on the part of the employer, even if it's only through a failure to respond to a complaint, to get rid of the employee. But in other courts... and... and this includes the Third Circuit... that is not really the case. Antonin Scalia: Well, what do you think it ought to be? John George Knorr, III: I think it ought-- Antonin Scalia: There is a right answer to this, isn't there? John George Knorr, III: --Well, that's not a question that we've presented or that the court has addressed. In... in our view, the right answer to that would be, yes, you have to in some sense prove employer intent-- David H. Souter: Is there... is there... you... you say the... the standards vary. Is there any jurisdiction that... for a... that recognizes constructive discharge that does not require the employee to prove that the employee acted reasonably in relation to avenues for redress, filing grievances and so on? Is... is there any... is there any jurisdiction in which the employee's reasonableness in trying to adjust things before leaving is not an element of the... of the claim? John George Knorr, III: --I think that the short answer to that question is yes. There are such jurisdictions and they include the Third Circuit, but I need to be a little more expansive than that because in all jurisdictions, including... including the Third Circuit, there is an inquiry into whether the employee acted reasonably, but... and in some jurisdictions, that inquiry is directed to... to the question of whether the employee tried to resolve this... this matter internally. In other jurisdictions, including the... the Third Circuit, the inquiry into employee reasonableness is tied only to the question of how bad were the conditions; that is, were these conditions so bad that a reasonable person would quit? And in that inquiry, it may or may not even be relevant whether the employee tried to... to resolve it internally. Ruth Bader Ginsburg: But it was in the Third Circuit because the judge somewhere in that long opinion did say that the evidence that she had complained... that that would be relevant, but not essential evidence to show the reasonableness of her reaction treating this conduct as a discharge. John George Knorr, III: I'm not sure the court went that far. The court said that... that it might conceivably be relevant and in... in a later-- Ruth Bader Ginsburg: I thought... I thought it was stronger than... than that. It may be different-- John George Knorr, III: --And it... I'm sorry. Ruth Bader Ginsburg: --in different places because this opinion tended to say everything at least twice. Speaker: [Laughter] John George Knorr, III: My recollection is that the court didn't give very much specific direction on what should come in on a remand in this case. As a general matter, the court of appeals was quite clear that it was up to district courts to decide whether all, some, or none of evidence about anti-harassment policies and remedial efforts should come in. And that-- Anthony M. Kennedy: Excuse me. John George Knorr, III: --I'm sorry, Justice Kennedy. Anthony M. Kennedy: Did you finish your answer? I... I beg your pardon. John George Knorr, III: If... if I could. And that inquiry, in turn, is tied simply into the question of how bad were the conditions. That is, if the conditions were bad enough, it doesn't matter if there was an anti-harassment policy. It doesn't matter if there were remedial efforts made. So the... the inquiry, while it all is... while it is all... while it is always phrased in terms of employee reasonableness, can really be directed to quite different things. Ruth Bader Ginsburg: May I ask you also to clarify? That... you gave Justice O'Connor an answer that surprised me because she said let's stick to this case, and she said that action involving the not... not letting her have her papers, and then the arrest, that looking at those facts, could that be... is that the way the Court should go about it. But the district judge gave summary judgment for you in this case. Is that not so? John George Knorr, III: That's correct. Ruth Bader Ginsburg: So, then on Justice O'Connor's facts, there would be no question whether she acted reasonably, whether it was equivalent, whether it was equivalent to a tangible employment action. John George Knorr, III: In terms of this particular case, in our view it is a little bit... it... it is too late in the day to reopen the inquiry as to whether the underlying actions of the supervisors were or were not tangible. That... that is something that should have been raised at the district court level when we raised the affirmative defense. What I... what I-- Ruth Bader Ginsburg: But there was no trial. This was just summary judgment. There was no evidence submitted. John George Knorr, III: --There... well, there was no trial. There was certainly evidence submitted, and it seems to us that when we as the defendants say we are entitled to the affirmative defense and we are moving for summary judgment on it, it's incumbent on the plaintiff at that point to say, no, you aren't entitled even to assert the affirmative defense because we have this action and this action and this action which were taken, which are tangible employment actions, and therefore you aren't even entitled to the affirmative defense. And that didn't happen. At no point in this case has the respondent ever said that she was subjected to a tangible employment action other than the constructive discharge itself. Anthony M. Kennedy: Suppose we're back before the summary judgment stage and you're telling the trial court what the theory of the case should be. Would your theory be something like this? Whether we use the phrase, constructive discharge or tangible employment action... and we have to use some phrase because the law works with labels... we're interested in the practical aspects of... of these cases, and one of them is this. Were there avenues of redress? And if the employer was... employee was unreasonable in not following these avenues of redress, then there can be no constructive discharge or tangible employment action. Is that your position? John George Knorr, III: No, Justice Kennedy, and I... I guess I-- Anthony M. Kennedy: It sounds like a good position. Why isn't that your position? Speaker: [Laughter] John George Knorr, III: --Our... our position really is that this case and... and hostile environment cases generally which are alleged to be constructive discharges are just like Ellerth, that what you do is you look at what the supervisor did to the employee to provoke the discharge, and if those actions were hostile work environment, if they were... if they were... I hate to use the word merely, but if they were acts of sexual harassment, not arising to tangible actions, if the employee had simply sued on the hostile work environment, we'd have an affirmative defense. Our position is that doesn't change or it shouldn't change because there is also a claim that it was so bad that I had to quit. Anthony M. Kennedy: How is that different from the formulation that one component in almost all cases of constructive discharge or tangible employment action, whatever you want to call it, is the existence or nonexistence of avenues for redress, and if they did exist, whether the employee took reasonable steps to follow them. John George Knorr, III: If that were true across the board, Justice Kennedy, there would be no difference. You're... you're entirely correct. Antonin Scalia: Why does-- David H. Souter: --Then why-- Antonin Scalia: --I'm sorry. David H. Souter: No, no please. I was... why isn't the way to simplify the problem and decide this case for us to say in order to have constructive discharge, there has got to be the element that Justice Kennedy just described, i.e., avenues of redress, reasonableness on the part of the employee in availing or perhaps in some cases not availing of them? If that element is shown, then there is no point in recognizing the affirmative defense because that is in pretty clear contradiction to one element of the affirmative defense. And... and that would make for a fairly simple body of law. Why... why isn't that the appropriate way for us to go? John George Knorr, III: I think that is certainly a way to go, Justice... Justice Souter. If it were... if it were clear across the board in all jurisdictions that to prove a constructive discharge, you do have to have made some effort to invoke a remedial process, just as with the affirmative defense, then that would certainly... that would certainly satisfy our concerns. Antonin Scalia: Why does a... why does a plaintiff bring a constructive discharge suit instead of just a regular sexual harassment suit? Is it... is it a matter of getting more damages? Is that the reason for-- John George Knorr, III: Yes, I think so. Antonin Scalia: --for couching it in those... in those terms? John George Knorr, III: Yes, because then you've got the... the lost wages and so forth for... for the entire time. Sandra Day O'Connor: I'm troubled by that too. I mean, I don't understand why we're using that term at all in light of the case background here. Why isn't it couched in terms of allegations of sexual harassment and tangible employment action? John George Knorr, III: That is... that is the way we think that it should be couched, Justice O'Connor. The... the use of the constructive discharge is... was the plaintiff's choice, of course, and-- William H. Rehnquist: But that... that too is the Third Circuit's theory in the case. They very much relied on the analogy to constructive discharge, didn't they? John George Knorr, III: --Yes. I think that their... their view is that a constructive discharge is... is just the same as an actual discharge. Ruth Bader Ginsburg: No... no court has rejected the constructive discharge. The question is how do you define it. And you said, in response to Justice Souter, that it would be fine if you said, plaintiff, you're in this situation, you're claiming constructive discharge, you come in and... and, in effect, negate what would otherwise be the affirmative defenses. But they-- Sandra Day O'Connor: --Well, I... I thought two circuits hold that a constructive discharge is never a tangible employment action. I mean, that's part of the problem. John George Knorr, III: Yes. That's... that is correct. And... and frankly, I don't think that is a correct analysis either. Our view is that a... a... in a... in a sense a constructive discharge can't ever be a tangible employment action because it isn't an action at all. It's just a construct. Our view is you look at... to what it is that the supervisor did, and if that's a tangible employment action, then there is no affirmative defense, whether... whether or not the employer is-- Ruth Bader Ginsburg: But there's an... there's an intermediary situation and that's the one where there is a tangible action like you get demoted or you get transferred to a... a worse position. And that... that's one category. Another category is you say I was harassed constantly and that amounts to constructive discharge. Another is they did take a tangible action against me, they didn't discharge me, but they were so bad in harassing me and in this demotion, that it amounted to a constructive discharge. That... that constructive discharge is the label used for that too, isn't it? John George Knorr, III: --It can be. An employee can certainly say I was... I was subjected to a humiliating demotion and that was so bad-- Ruth Bader Ginsburg: So I quit. John George Knorr, III: --that I quit. Had she just sued just on the demotion, clearly a tangible employment action, and we would have no affirmative defense. If she also goes on to say, and it was so bad that I quit, I think we again should not have the affirmative defense. Ruth Bader Ginsburg: But the Seventh Circuit goes the other way on that. John George Knorr, III: Yes, they do. And by the same token, if the employee simply says, I was sexually harassed and subjected to a hostile work environment, we would have the affirmative defense. If she goes on to say, and-- John Paul Stevens: Is that true even if the person who did the harassment and so forth but did not otherwise take a tangible action, was the president of the company and said... made the... the workplace impossible to have it for the employee and she quits. Would that be a tangible employment action? John George Knorr, III: --I don't think you'd reach that question, Justice Stevens. I... I think what would come into play there is the idea that there are... there are some people in every organization who are so high up that they are proxies for the employer itself. John Paul Stevens: Right. John George Knorr, III: And so it... it really is-- John Paul Stevens: And that person who's a proxy does not commit a... make a... a tangible decision, doesn't fire her. He just makes it impossible for her to work. Would that be actionable or not? John George Knorr, III: --That would be actionable because it is the action of the employer, and you don't even have to get into the question of whether it is an agent of the employer or not. John Paul Stevens: Even though it was a tangible... even though it was a constructive discharge. John George Knorr, III: I think at that point it... that is all irrelevant because what you're talking about is the act of someone who is the proxy of the employer and therefore the employer is responsible for it. Mr. Chief Justice, if I could reserve the balance of my time. William H. Rehnquist: Very well, Mr. Knorr. Mr. Gornstein, we'll hear from you. Irving L. Gornstein: Mr. Chief Justice, and may it please the Court: An employer is strictly liable for a constructive discharge in any harassment that has preceded it only when the constructive discharge comes about as a result of an official company act, such as a demotion. If the constructive discharge comes about as a result of a supervisor's creation of a hostile environment, then the employer has an affirmative defense and can show that the plaintiff unreasonably bypassed available opportunities for correction. Now, the requirement of an official company act as a predicate for strict liability comes from the Court's decision in Ellerth and is supported by two important considerations. First, a company act is the kind of act that is likely to be documented and subject to higher levels of review, and so it's the kind of act over which the employer can exert the most control. And that heightened potential to control makes it fair to hold the employer strictly liable, even if in a particular case the employer would otherwise be able to show that it acted reasonably and the plaintiff did not. It... it... second of all, furthering title VII's... the... recognizing the affirmative defense when there's not an official company act, furthers title VII's prophylactic purposes because it gives the employer an extra incentive to create policies that will help to prevent discrimination from occurring in the first place and it gives employees an added incentive to complain before problems become Title VII violations. Sandra Day O'Connor: Well, how do you think we should analyze this particular case in light of the Third Circuit's treatment? How does this fit into your formula? Irving L. Gornstein: Well, in this... in this case you might want to... what I was going to go on to say is you might want to initially decide the logically antecedent question of what it takes to... to make out a constructive discharge claim in the first place. And if you did that, you should say that to prove constructive discharge, a plaintiff has to show that there's no reasonable other alternative other than to resign. And a plaintiff who has unreasonably bypassed an available opportunity for correction can't make out a constructive discharge claim in the first place. David H. Souter: When you... when you posit that reasonableness requirement, I take it you... you mean to include that the employee must show either that the employee reasonably availed herself or himself of whatever grievance procedure there was or at least had a reasonable basis for not doing so. Irving L. Gornstein: That... that's correct, Justice Souter. David H. Souter: Now, if... if you do that, what is... what is left of the affirmative defense, whether there was... whether there was a supervisor involved or not, because the affirmative... as I understand the affirmative defense, the affirmative defense is inconsistent with that showing? Irving L. Gornstein: Justice Souter, you are right with respect to the constructive discharge claim itself; that is, proving the constructive discharge will necessarily negate the affirmative defense to the constructive discharge claim. But that-- David H. Souter: So why don't we stop right there? Irving L. Gornstein: --Because it doesn't necessarily negate... proving the constructive discharge doesn't necessarily negate the affirmative case... defense to the claim of a hostile work environment that preceded the constructive discharge. David H. Souter: Yes, but the hostile work environment claim... and if... if we're going to recognize constructive discharge, hostile work environment I... I presume has been subsumed under constructive discharge because constructive discharge says, hostile environment plus something more. And we've been describing the plus something more. And... and in order to prove the plus something more, you've got to prove, as you said, something which is inconsistent with the affirmative defense. Irving L. Gornstein: Let me try to explain to you how this could come up. You could have a situation in which at the moment of resignation, the plaintiff was reasonable in believing that there was nothing she could do other than to resign and reasonable in bypassing the available procedures at the moment of resignation, therefore, could prove a constructive discharge. But it may have been the case that at a prior point in time, she would have been unreasonable in failing to complain about the harassment and therefore be vulnerable to the affirmative defense on the hostile environment claim even though she's proven her constructive discharge. David H. Souter: I understand what you're... I understand what you're saying, but I... I would suppose that if... if the evidence shows that it was... that there was a point at which she could have resolved this or at least a point at which it would have been reasonable to pursue grievances and so on to resolve it, and she didn't do it, that she's going to lose. In other words, if... I... I don't... I don't see how she's going to get to the point that you describe. Irving L. Gornstein: The... the way that she would get to the point that I described, Justice Souter, is if you had an escalating kind of harassment and at the last act of harassment, it would have been reasonable that... for the plaintiff to leave at that point... let us say the supervisor does a lot of things, and then on the last act says, if you come back tomorrow, you're dead. David H. Souter: I... I see your point. I... I have one question in response to the point, and that is, if... if we... if we construct a system that... that recognizes the possibility that... that you just described, are we going to have a system that is just so darned complicated that it's going to be too difficult to administer? In other words, every case is going to involve allegations of what you just say, denials of those allegations. In order to have an administrable system, shouldn't we simply say that if you can prove the constructive discharge, if the... if the element includes the unreasonableness on grievance, no affirmative defense, and just get over with it simply because otherwise it would be just too complicated a system? Irving L. Gornstein: Justice Souter, it would be a simpler system, but the... the system we are proposing really is just superimposing on this problem the same structure the Court created in Ellerth and Faragher. The Court could have devised a simpler rule in Ellerth and Faragher. David H. Souter: You're saying it's my fault. Irving L. Gornstein: Well-- [Laughter] I'm saying that the Court took into account various competing considerations in... in structuring it, and it made for a somewhat more complicated scheme. Ruth Bader Ginsburg: But it wasn't-- Antonin Scalia: --Mr. Gornstein, could tell us what the Government proposes that we do in this case? Sandra Day O'Connor: Yes. That's what I want to know. Antonin Scalia: You... you asked us to remand because why? Irving L. Gornstein: We would say that you would remand because it is possible that there is a... an official company act that caused the constructive discharge. Antonin Scalia: To wit. Irving L. Gornstein: To wit, the sequence of events leading up to the arrest, and that the arrest might be... we're not saying that it is... but it might be an official company act. If it is and the plaintiff could show that that act left her with no reasonable alternative other than to resign, you would have a constructive discharge that leads to strict liability. Antonin Scalia: How... how could the... how could the arrest by an official company act? Irving L. Gornstein: It could be an official company if it is only the sort of thing... if it depends on a grant of authority from the employer to the supervisor and it's only the sort of thing that a supervisor could do. Antonin Scalia: But it patently is not so. I mean, it... it has nothing to do with employment. You don't... you don't arrest somebody because he's your employee. Irving L. Gornstein: Justice-- Antonin Scalia: I mean, it... it seems to me that... that this action you're concerned about is not an employer type of action. It is... it is quite apart from employment. Irving L. Gornstein: --Justice Scalia, I think it could be that you're right about that, but it also may be that it's the type of action where the... the person was wearing both hats, as a supervisor and as a law enforcement officer, and that it was the... only the sort of thing that a supervisor could have done. And all we're saying is that should be fleshed out. If you don't think that should be fleshed out, if the Court didn't think that that was a possibility, then there wouldn't be the need for the... the remand. You could just decide it without a remand and... and reverse on the grounds... to get back to Justice Souter's point, you still, under my scenario have to get to the question of whether a constructive discharge is a tangible employment action. Anthony M. Kennedy: Suppose that the tangible employment action... say, a demotion or an arrest or a firing... could have been avoided if the employee had been prompt and reasonable in pursuing avenues for relief. Irving L. Gornstein: In that-- Anthony M. Kennedy: And a reasonable employee in that position would have done that and they didn't do it. Then it escalates. Then there's the discharge. Irving L. Gornstein: --Then in that situation, there's a constructive discharge, but there's a potential defense to the harassment claim that would depend on whether the constructive discharge is itself a tangible employment action. It only is a tangible employment action if it's brought about by an official company act, such as a demotion. If it's not brought about by an official company act, then the affirmative... no affirmative defense for the constructive discharge because that's been negated by proving constructive discharge. But there is affirmative defense for the prior acts leading up to it that are framed as a claim about hostile environment. There would be an affirmative defense to the hostile environment claim if the hostile environment culminates in a constructive discharge that's not effected by an official company act. Stephen G. Breyer: I... I thought the first... the last thing you said I thought is already there in Ellerth, either at least your tangible discharge or it doesn't or does. You have to show, you know, that they were reasonable in not making... take advantage of a... of a complaint procedure, and insofar as it doesn't, Ellerth already says that there's a... there's an affirmative defense and we had a reasonable complaint procedure in place. So I don't really see that problem. Nor do I see the problem with the Third Circuit. The Third Circuit says working conditions were intolerable, so intolerable a reasonable person would have concluded there was no other choice but to resign. Irving L. Gornstein: May I answer, Mr. Chief Justice? William H. Rehnquist: Briefly, yes. Irving L. Gornstein: Yes. The... what's that's missing is there is that Ellerth requires an official company act to have a tangible employment action as a... not just a change in status from being employed to not being employed. And if there's not an official company act, then the employer has the affirmative defense. William H. Rehnquist: Thank you, Mr. Gornstein. Mr. Bailey, we'll hear from you. Donald A. Bailey: Mr. Chief Justice, and may it please the Court: Pursuant to title VII, the general rule has been is that employers are liable for the discriminatory acts of their supervisors. The question presented is whether a constructive discharge is the equivalent of a formal discharge. One of the greatest difficulties in dealing with the law that we're addressing today is one of semantics. A formal discharge is the equivalent of a constructive discharge by definition. It is a... it is a matter of methodology. The United States and the petitioner would have this Court define the culpability of the employer for the supervisor's acts as a matter of official act. That leads this Court down an incredibly complex road of... of definitional problems. If the Court goes back to Meritor, the Chief Justice's opinion, where the Court held clearly there is no automatic liability for the employer's being responsible for the wayward acts, clearly outside the scope of employment, clearly not authorized, but we're not going to find a... a... an automatic liability. What the United States wants to do and why the respondent believes that the Third Circuit... that the Third Circuit Court of Appeals decided this case properly is to devise a general rule and underline if proven, if the constructive discharge is proven, then the obvious occurs. It's a tangible employment action. William H. Rehnquist: Well, but that's the whole question that is presented in the... in the question here. I mean, I don't think you can just say it's obvious. Donald A. Bailey: Well, it's... it's the... to go back to some of the questions that Justice Souter was... Souter was raising, the issue of the... of the constructive discharge, when proven, reaches a point as a practical matter in litigation that the affirmative defense is no longer viable. And the issue in the question presented is when a... if... if we stick to that issue, is that is a constructive discharge a tangible employment action. Conversely, isn't it reasonable to assume that a constructive discharge, if proven, is an official company act? Stephen G. Breyer: But isn't it the same? Antonin Scalia: Why? Why is that? It seems to me what you're saying is that up to the point where the harassment reaches such a level that a reasonable person would leave, up to that point, the individual could not sue the employer because the employer is not responsible for it. But suddenly when it goes over the edge and it's even worse and the person says, I'm going to leave, suddenly the employer is automatically responsible for it. Why... why... that doesn't make any sense at all. Donald A. Bailey: Your Honor, I believe... Justice Scalia, I believe the... the... you can sue the employer. The issue... and that's... that's the hostile work environment claim that... that this Court was really addressing in Faragher. The issue becomes-- Antonin Scalia: You... you can sue, but you're going to lose unless you show that there was some official action on the part of the employer that... that caused this or... or that the employer didn't have a... a means of remedying it. Donald A. Bailey: --Well, the case would then become a hostile work environment case. Antonin Scalia: Exactly. Donald A. Bailey: There would not be a tangible employment action. This... the... the employee can still sue. The issue then becomes that the affirmative defense is available. The issue here is the affirmative defense is not available. Antonin Scalia: Why? I don't understand. I mean, that's my point. Why is it that up to the point... you know, there's terrible harassment, and the employer could... and the employee could sue. But if the employee sued the employer, she would lose. But when it goes just... just an inch further and is justifiable cause for her to quit, all of a sudden the employer becomes responsible for what he was not responsible for earlier. That... that doesn't make any sense to me. Donald A. Bailey: Okay. I... I don't think it's... it's a situation where the employer is not responsible. It's that the employer has mechanisms available to... if proven, again, if... if they can prevail on the affirmative defense to counteract the charges of hostile workplace harassment. David H. Souter: Okay. May... may I interrupt you with... with this question because it goes to Justice Scalia's question? Isn't... for the reason you just gave, isn't the reason that the claim goes from a hostile environment for which there's a defense to constructive discharge for which there isn't a defense... isn't the reason that in order to get from hostile environment to constructive discharge, the employee has to prove something that she didn't have to prove merely for hostile environment? Donald A. Bailey: Yes. David H. Souter: And that is the element... we're... we're assuming. Donald A. Bailey: Yes. David H. Souter: That is the element that she either reasonably availed herself of... of the... of grievance mechanisms or was reasonable in not doing so. And that's the element that gets her to the more serious claim, and it's also the element that is inconsistent with the affirmative defense. Is... is-- Donald A. Bailey: No, Your-- David H. Souter: --Is that fair to say? Donald A. Bailey: --No. David H. Souter: Okay. Tell me... tell me why not. Donald A. Bailey: It's... it's putting cart before the horse. It's taking the burden that this Court carved out in Faragher and Ellerth and it's putting a burden on the employee which, as a practical matter, the employee has to carry anyway in proving the constructive discharge. We are back at the original question that you asked. David H. Souter: Yes. Donald A. Bailey: And... and we're back where the Third Circuit in its... in its opinion underlined if proven, held that if the constructive discharge... if the constructive discharge is proven, the affirmative defense... and even the... the United States admits this... is in all likelihood not a cogent defense at that point, the constructive discharge has been proven. That's-- Anthony M. Kennedy: Is the availability of avenues of redress and... coupled with a showing that there was no pursuit of those reasonable avenues of redress, is... are those components or facts relevant to determining constructive discharge? Donald A. Bailey: --Yes, they are relevant in this sense. Anthony M. Kennedy: Then we're not arguing about very much. Justice Souter says the constructive discharge is then inconsistent. Maybe another characterization would be superfluous. I mean, the reasonable... the reasonable attempts to obtain redress is inconsistent. I... I think maybe superfluous. What are we arguing about here? Not very much. Donald A. Bailey: I respectfully disagree. Justice Kennedy, in the process of proving the constructive discharge, the salient factual issues that by implication you refer to are going to arise. The employer is going to have an opportunity in... in the real case in controversy in the district court or during litigation and discovery of addressing issues and answering questions about... and this is where we get into a great difficulty with the position of the United States. You know, when does the employee... when does the employee have a responsibility to come forward? Antonin Scalia: Well, it isn't the responsibility of the employee I'm concerned about. It's the responsibility of the employer. And I don't agree with your description of... of what the rule is. That is, if there were no grievance procedures available... and that I agree ought to... ought to pin... pin the tail on the employer. It's his fault and I'd hold him for the constructive discharge. But you say if they were not available or if she reasonably didn't use them, well, I mean, these... these renegade employees who were... who were performing these acts of sexual harassment... suppose they tell her if you file a grievance, we're going to kill you. Now, I'd say that's pretty reasonable for her not to file a grievance. But is that the employer's fault? How... how does that somehow attribute all of this action to the employer? She should sue these individuals. Donald A. Bailey: Justice Scalia-- Antonin Scalia: He... he has in place the grievance procedures. The fact that they threatened her life is... is not at all his responsibility. So how do you... how do you attribute to him a constructive discharge? I don't see it. Donald A. Bailey: --Justice Scalia, it begs a multitude of questions. Those questions relate... and they're probative. They're of probative value in any litigation. And they relate to how that... that scheme, that remedial scheme, the internal, private remedial scheme, how it is enforced, how it's policed. Antonin Scalia: That's fine. But so... so long as you're willing to acknowledge that the mere fact that she was reasonable in not resorting to the grievance procedures, does not establish that it's the employer's fault. So long as you accede to that, you say that's all up for... for proof in... in the... fine. Then... then I'll agree with you. But you're not willing to concede that. Donald A. Bailey: No, Justice Scalia. Antonin Scalia: So then... so then it's not true that it's all available to be discussed in the... I mean, what are you saying? Donald A. Bailey: What... what I'm saying-- Antonin Scalia: It's either relevant or it's not relevant. Now, which is it? Donald A. Bailey: --It's relevant and it's probative in the conduct of the case, but it's not dispositive of a... of a constructive discharge being-- Antonin Scalia: Why is it relevant then? Donald A. Bailey: --being a tangible employment action. The relevant facts... the employee's conduct is always going to be a relevant fact situation for a jury or a court sitting as a fact finder to hear, to contemplate, and understand. There are issues-- Antonin Scalia: There's not an ounce of evidence of any... any... activity by the employer. Not an ounce of any... he has in place a wonderful grievance procedure and the only problem is they threatened her life. And that's why she didn't use it. Now, what is... what is there for the jury to... to consider? Donald A. Bailey: --As a matter of law, it dispenses with the definition that set this Court on the road to Meritor and Ellerth and Faragher, and that is the definition of an employer in Title VII law. Of course, it's the employer's act, if it's an official act, and if there are issues that are-- Antonin Scalia: Threatening her life is an official act by... by his employees. Donald A. Bailey: --To the extent the... how do we define the employer? The board of-- Antonin Scalia: I mean, I cannot imagine an act that's more ultra vires. I cannot imagine an act more unofficial than that. Donald A. Bailey: --Justice Scalia, I... I may not... I may not be understanding your point. I apologize for that. But if I do... if I do understand it correctly, we are now down the road embarking into a multitude of definitions of what the employer is, while in reality to an employee in the workplace, invariably the employer is that immediate supervisor who, as described in... in Faragher and Ellerth, has the power to make those tangible employment decisions. And to that employee-- John Paul Stevens: May... may I just interrupt there because I want to get one thing clear in mind? Is it your view that the constructive discharge can only be caused by a person with the authority to take a tangible employment action? Donald A. Bailey: --No. John Paul Stevens: So your argument would apply whether... if it's just coworkers as well as supervisors. Donald A. Bailey: No. [Laughter] I... I think... I think it can be both. I think, as correctly defined by this Court previously, there are certainly situations where by negligence... in fact, the law of constructive discharge across the length and breadth of our country does include the reality that there are circumstances where there's ratification by omission, acquiescence and negligence-- John Paul Stevens: Well,-- Donald A. Bailey: --of the acts of... I'm sorry. John Paul Stevens: --Let me just put the... a little easier question for you. To what extent in your view is the... is the... is it relevant that the person who did the harassing conduct has some status, enough authority to impose a tangible employment action? Is... to what extent is it relevant? Donald A. Bailey: It's... it's relevant to the extent of imputing that responsibility to the broader employer, the supervisor in other words. It's relevant. But-- John Paul Stevens: And if it's... but if it's not such a person-- Antonin Scalia: --But not conclusive. Right? Donald A. Bailey: --I'm sorry. Antonin Scalia: But not conclusive. Donald A. Bailey: I think in-- Antonin Scalia: Just... just one of a whole mishmosh of things that we sort of chuck at the jury. Donald A. Bailey: --Well, I... I think in... as I understand the original question, we're referring to a coworker-induced discharge, let's say, or... or involuntary quitting. And in that case, Justice Scalia, I... I believe you... you are certainly pointing at something here because the standards of proof factually and perhaps legally are different. They still go, however, at their core to the conduct and actions of the supervisor. Now, unquestionably, the supervisor... the supervisor's actions are not authorized by the employer. Clearly they're not. The imputation that the Congress made of employer liability for agent actions was a policy consideration goal and this worked, in an effort to balance judgments and to balance realities in the workplace and achieve justice in terms of what is fair if you have that hardworking employer who works very, very arduously at structuring a workplace program and enforces it... not the case here... but enforces it and follows through with it, there should be some recognition, some issue of mitigation. And under those circumstances, of course, depending upon what the trial court finds and... and depending upon how this Court decides that constructive discharge if it is a tangible employment action, how... what role it plays and what... what the demands or requirements this Court would have in Title VII situations so that... so that... the official act, which the Government would say is not a tangible employment action, in reality has to be. It's a semantic distinction without a difference. Ruth Bader Ginsburg: Well, I don't follow what you said even in the context of the facts here. You said it's not the case that there wasn't... that there was in place a good grievance procedure and that she availed herself of whatever she could avail herself of. I think that's very murky in this case. She tells one story. The EEO officer tells another story, and we don't know how grievances have been handled in this workplace, whether it has been effective for other employees in the past. We just don't... we have... how can you make a judgment one way or another about the effectiveness of this grievance procedure on the basis of the evidence that's now in the record? Donald A. Bailey: Justice Ginsburg, you are correct in the sense that the facts of the record reflect that the employee, Nancy Suders, went to the... the top dog in the Pennsylvania State Police in the affirmative action and discriminatory area, as a result of education she received on a test... in a seminar taught by that person and because she could not locate an appropriate form. Now, technically speaking... technically speaking... and the district court didn't even get into this, but to do fair and honest response to your question, Nancy Suders did not go and acquire the exact form. She could not find it. She couldn't locate it. It wasn't posted. The record will indicate that in fact Nancy Drew Suders did complain. That complain found... complaint found its way to the bureau of... of the IAD, you know, where they... they look at professional responsibility. She didn't have the correct form, quote/unquote, according to the record. Now, if that's not availing herself... that's a factual determination that has to be made either as part of a... a decision at law by the court as to whether a constructive discharge has been proven. And I assume in the litigation process at some point the trial judge is going to look at that record, is going to look at what is presented. They're going to be considered... considering points of charge and a motion by the defendant to... to be given permission to present an affirmative defense. To go back to what the Government even admits, in many circumstances... and to questions that were raised by... by other Justices here, in many circumstances the... there will be no affirmative defense available because the constructive discharge will have been proven. Now, in this particular case, in the facts in this case, Nancy Drew Suders... and I think this is what offended the sensibilities of the Third Circuit, and... and... and the Third Circuit said that even-- William H. Rehnquist: Are you suggesting that the Third Circuit decided the case the way it did because its sensibilities were offended? Donald A. Bailey: --Legal sensibilities, Justice Rehnquist... Chief Justice Rehnquist. Anthony M. Kennedy: That's as hard to figure out as constructive discharge. Speaker: [Laughter] Donald A. Bailey: Well-- Anthony M. Kennedy: But it... it-- Donald A. Bailey: --Justice Kennedy-- Anthony M. Kennedy: --It seems to me that... that both sides point the finger at the other and say you're using labels. Your... your brief says a constructive discharge is a tangible employment action. And I... and I assume you argue that there's no affirmative defense. Donald A. Bailey: --Yes. Anthony M. Kennedy: So the... the label is of... of immense importance. Donald A. Bailey: Yes, it is. The label... and... and you made reference in earlier arguments this issue of label-- Anthony M. Kennedy: Depending on... depending-- Donald A. Bailey: --legal labels-- Anthony M. Kennedy: --The... the question is, what does it consist of? Donald A. Bailey: --Well-- Sandra Day O'Connor: But you're very unclear on what the employee has to prove to establish constructive discharge. It's very vague to me what it is you say the employee has to prove with regard to the availability or lack thereof of employer remedies. Donald A. Bailey: --Well, it's an objective person test. The employee has got to prove that the harassment was so intense and intolerable-- Sandra Day O'Connor: As to remedies available by the employer, it is unclear to me what position you take on what the employee has to prove. That the employer had no remedial scheme in place or what is it? Donald A. Bailey: --I... I believe that the remedial scheme is not relevant for two reasons. The remedial scheme is not relevant because the employee cannot avail themselves of the procedures in a procedural due process sense of a in-place employer remedial scheme because they are, in the case of a formal discharge, fired, in the case of a constructive discharge, precluded because they are really fired. Formal discharge equals constructive discharge equals official act. Stephen G. Breyer: I'm sorry. I don't understand that part. Donald A. Bailey: Yes. Stephen G. Breyer: The part I don't understand is when you say they are precluded from using a... a corrective opportunity, a preventive or corrective opportunity because they have been fired. I think... doesn't that beg the question? Imagine an employer who has notices in print 4 inches, black print all over the place pasted. If anyone here creates a hostile work environment, threatens you in any way, does anything, I want you to phone this emergency number immediately 24 hours a day, and we will correct it. And... and the... the employee, who is totally not blind, in fact teaches a class that that's what they're supposed to do-- Speaker: [Laughter] Stephen G. Breyer: --and now is subject to terrible harassment, but does not avail herself of those procedures for no understandable reason. Has that employee made out a claim of constructive discharge? Of course, I think obviously, the answer is no, she hasn't. Now I want to know what you think. Speaker: [Laughter] Donald A. Bailey: I... I believe that you are correct, Your Honor. You're correct. [Laughter] Stephen G. Breyer: All right. Now, fine. Now, and if I am correct, if you believe I am correct-- Donald A. Bailey: And that's-- Stephen G. Breyer: --doesn't the argument in this case simply disappear? Because all you have to say is there is no constructive discharge as long as there was a preventive or corrective opportunity in place and the employee was unreasonable in failing to take advantage thereof. Donald A. Bailey: --I... I-- Stephen G. Breyer: So if the employee was reasonable in not taking advantage, she's constructively discharged. But if she's unreasonable, she is not. Donald A. Bailey: --I... I... that part is correct. I... I believe your-- Stephen G. Breyer: That's the whole thing. Donald A. Bailey: --Well, I believe your analysis is erroneous until when what is brought into what's actually going to occur is an application of the reasonable person standard. Your hypothetical quite clearly would put a horrendous burden on an employee unless perhaps that employee is so traumatized, they don't have any faith in those great big 4-inch black letters. Stephen G. Breyer: Fine, and if the traumatized employee by the judge or jury is determined to have been reasonable, she wins. But if she's unreasonable, she loses like any other reasonable person test in the law. What's the problem with that? Donald A. Bailey: Assuming that what has occurred in that process is we've reached a hiatus where the employee has either proven the constructive discharge, the issue then becomes what the issue in this case is. The affirmative defense is then not available. We've reached the same conclusion. Stephen G. Breyer: Yes, of course, I'm saying the affirmative defense is not available because there's no need for it. That's what we've been talking about, I thought, the last half hour. Donald A. Bailey: Your Honor, I don't disagree with that. Stephen G. Breyer: Now, do you win this case, by the way? Because the... the Third Circuit seemed to say, as I read it, that in not taking advantage of the available opportunities, your client was reasonable. In other words-- Donald A. Bailey: My... my client's actions were reasonable. Stephen G. Breyer: --Is that what the Third Circuit said? Donald A. Bailey: That was the Third Circuit conclusion, that my client indeed did act reasonable or... or at very best, when the district court granted summary judgment, there was a disputed material fact as to whether or not there was a plan that was in effect and Nancy Drew Suders took advantage of it. And then the court-- Anthony M. Kennedy: Well, if that's true... if that's true, the case has to go back. Donald A. Bailey: --I disagree. I... I was going to conclude, if... if I may, Justice Kennedy. Then the court says... and they use the word... let's look at the last day. If there's any question, let's look at the last day. And if we look at the last day, Nancy Drew Suders is brought in. The bathroom, the toilet seat, the handle, everything is dusted with stuff... powder. Her test results are taken. They're stuffed in the lingerie drawer. Nancy Suders happens to find them. They set the room up, and Nancy Suders is brought in and her hands are photographed and she's read her rights. And she's called a thief repeatedly and she's told she can't leave. And then finally, hands shaking, having drafted a resignation letter, she presents it. So until the last day, which is where the hypothetical I was left with ended, it might be arguable that Nancy Drew Suders... if we want to craft a rule which says... and we... and if it's possible to do... which says there is some point in time where the burden arises for the employee to take a countermeasure or counteraction, when is that? How do we do that? How can we craft a general rule that way? Anthony M. Kennedy: Just like you always do in the law. It's a question of reasonableness. Donald A. Bailey: I... I agree. And in this case Nancy Drew Suders did every conceivable thing that an employee could do, including contacting the head of the affirmative action in the department-- Ruth Bader Ginsburg: But as I tried to suggest before, Nancy Drew Suders and the head of the equal employment gave different versions of what happened in the... in the only encounter that those two had, which was very far down the road. So is it... if... if the system works, if there's ample notification of it... because she went... the first... the first episode Suders says, I think I may need your help. Nothing specific at all about what's going on. And then very far down the road... one question is did she complain too late. What would have happened? How would this... how can she say constructive discharge or anything if, had she been diligent about complaining, maybe none of this would have happened? Donald A. Bailey: --Well, the facts in the case would indicate that she complained not only to Virginia Smith-Elliot who blew her off... by the way, she only worked there for 5 months. She complained to a State Senator. She did everything. She went looking for help. She was frightened. She could do nothing at this rural barracks at this station. The issue then becomes, in terms of... of if... if we're looking at her actions in terms... in a context of did she take... did she assume that employee burden of reasonably responding, putting all of those things together, that's where the Third Circuit I think correctly analyzed that there... that that Nancy Drew Suders acted reasonably. She was subjected to horrendous conditions at work. She did go elsewhere to complain. She complained to Virginia Smith-Elliot. It's... the difference is that Virginia Smith-Elliot said that Nancy Drew Suders complained about age and a number of different complaints that were being... or... or mistreatments she was suffering, but that she did not raise sexual harassment as an issue. That, indeed, is ironic on the record when you look at these-- William H. Rehnquist: Thank you, Mr. Bailey. Mr. Knorr, you have 2 minutes remaining. John George Knorr, III: If it were really true that to prove a constructive discharge and a central element of that proof would be that the employee either invoked a remedial process or reasonably failed to do so, if that were required as an element of constructive discharge, that would go a very long way toward meeting our concerns in this case. That is not, however, the current state of the law, at least not in all jurisdictions. That is really the only point I wanted to reemphasize on rebuttal-- Antonin Scalia: You... you would find it acceptable that she didn't do it because they threatened to kill her and... right? That's certainly reasonable basis not for filing a complaint, and that... that would attribute the whole thing to the employer. John George Knorr, III: --Justice Scalia, that I wouldn't say is acceptable to us, but that problem-- Antonin Scalia: You could live with it. John George Knorr, III: --That problem-- Antonin Scalia: It's not very logical, though, is it? John George Knorr, III: --It is a problem that inheres in the Ellerth-Faragher affirmative defense from the beginning, and we have taken that defense as we found it. I... I agree that it is not entirely satisfactory to us, but that is where we are. William H. Rehnquist: Thank you, Mr. Knorr. The case is submitted.

Warren E. Burger: The Court will hear arguments first this morning in Searle and Company against Cohn. Mr. Richmond, I think you may proceed whenever you are ready. William P. Richmond: Mr. Chief Justice, and may it please the Court, the question in this case is the constitutionality of a New Jersey statute which places unique discriminatory burdens on corporations which are located entirely outside the state of New Jersey. On its face, the statute involved here is one that simply states that the New Jersey tolling statute will not run against a corporation... unless... I am sorry... will not run as long as the corporation is not represented in the state of New Jersey. Our position is that the purpose of the tolling statute has been satisfied by the adoption in New Jersey of long arm jurisdiction and service of process. The statute also places a heavy penalty upon out of state corporations, and finally, that the purported justifications for the tolling statute are either fictions or are improper, and each of these justifications could be accomplished in less discriminatory fashions. Speaker: There is no question, Mr. Richmond, is there, that Searle does business in New Jersey, and is subject to the long arm statute? William P. Richmond: There is no dispute in this case, Your Honor, that New Jersey does have long arm jurisdiction over G. D. Searle and Company. That is correct. There is also no dispute in this case that Searle does not do business within the state for purposes of its qualification statute. Tolling statutes exist in many states, but their purpose is to protect a plaintiff against having his cause of action lost as a result of not being able to serve the defendant within the state, but the New Jersey statute has a unique and critical difference. In New Jersey, the only way a foreign corporation may get the benefit of a statute of limitations is by registering to do business within the state. This means that New Jersey denies the statute of limitations to all corporations that may be served by long arm jurisdiction. Speaker: Mr. Richmond, does your opposition agree with that? I take it it is your position that to appoint an agent for service, you must qualify to do business within the state of New Jersey. William P. Richmond: Yes, sir. Our position is that there is simply no procedure under New Jersey law by which a corporation could appoint an agent for service of process without more. The plaintiffs-- Speaker: Does your opposition agree with that? William P. Richmond: --No, but the opposition's position is based upon a footnote in the Velmohos case from the New Jersey Supreme Court. The court was not considering in that footnote the extent of the qualification which would be necessary in order to appoint an agent for service of process. All the court was doing was addressing the question of whether a corporation could terminate the running of the statute of limitations by appointing an agent, and the body of the Velmohos case makes it obvious that the court was considering that only two kinds of defendants could be exempted from the statute of limitations. One was the domestic corporation and the other one was the one that was licensed within the state. As I say-- Speaker: If there is any question about the New Jersey law here, certainly we can't determine it, can we? William P. Richmond: --No, sir. We agree entirely that the New Jersey Supreme Court has the right to interpret its statute. However-- Speaker: What about the court of appeals, though? Did the court of appeals have anything to say about it? The Third Circuit? William P. Richmond: --The court of appeals, as a matter of fact, adopted obviously the interpretation of the New Jersey law by the Supreme Court of New Jersey. However, the New Jersey Supreme Court was not addressing the point that the respondent here is arguing. The New Jersey Supreme Court in Velmohos was not stating that in fact the New Jersey statutes permitted a designation of agents for service of process without more. As I say, it was merely that footnote. The body of the case makes it obvious that what they were addressing was the question of only two exemptions. One was for the domestic corporation, and the other was for the corporation license in the state, that is, qualified. Now, many companies, like Searle, may not be sued in New Jersey except under long arm jurisdiction. All they do in New Jersey is send their products into the state for eventual sale, and they promote the products. They don't have offices there, other facilities, and they are not doing business there. These companies are subject, however, to product liability suits for... in instances where citizens of New Jersey claim that the products have caused them some harm. Then, long arm jurisdiction is available. As a matter of fact, in this case, long arm jurisdiction was in fact used to serve process on Searle. This happened ten years after the event which gives rise to the cause of action here, and four years after the plaintiffs concede that they realize that they had a cause of action, or discovered it. The New Jersey tolling statute therefore has the effect of never foreclosing the plaintiff's case on limitations against corporations which may be sued under long arm jurisdiction. Speaker: Counsel, there would still be some kind of a Latchees defense, I suppose, eventually. William P. Richmond: Yes, Your Honor, there would perhaps be a Latchees defense, although that is an equitable remedy. This is a law case. But Latchees would certainly be an inadequate substitute for the certainty and predictability of a statute of defense based... a statute of limitations defense. There is simply no comparison between the two defenses on the basis of planning opportunities for the corporation or its ability to have a reliable defense against liability. Speaker: What would be the other effects on the company if it went ahead and appointed a statutory agent in New Jersey for service? William P. Richmond: If it were compelled to appoint a statutory agent for a service of process, the corporation would thereby be subject to the requirements of the New Jersey law which are applicable to domestic corporations. It would have to have an office for service of process. It would have to file reports. It would have to pay franchise taxes. Furthermore, and at the heart of-- Speaker: Has that been resolved in any particular New Jersey case? It is not possible to merely designate some statutory agent there, without more? William P. Richmond: --I don't believe it has been resolved in any New Jersey case, and I believe the reason is that there is no New Jersey statute which authorizes such a procedure. It is the position of the New Jersey Secretary of State and our position in this case that there is simply no provision in the law which permits that. If you examine the corporation law, it has only provisions which provide for full scale qualification, not simply for designation of an agent for service of process. Furthermore, even if you could only appoint an agent for service of process, it would still create the problem of the burden that we are talking about, because the corporation would therefore be forced to make itself available for lawsuits which would be filed and would not necessarily satisfy the standard of minimum contacts or fairness. Speaker: Is it your position that that doctrine would then no longer be applicable? William P. Richmond: I am sorry, Your Honor. Which doctrine? Our position is that-- Speaker: The minimum contacts requirement. William P. Richmond: --No, our position is that minimum contacts are the touchstone and should be the basis upon which any attempted requirement for licensing or other impact on these foreign corporations is made. What would happen if you submitted yourself to registration of an agent is that lawsuits could be brought in New Jersey which would not necessarily satisfy the minimum contacts requirement. In New Jersey, there is a case to that effect, and in this Court there is a case to that effect. Now, whether that line of cases is correct or not is another matter, but as it presently stands, I believe we would be subjecting ourselves to the risk of cases which would not satisfy the standard that we believe is at the heart of this type of attempt at regulation. Speaker: Well, Mr. Richmond, isn't there also inherent in your argument the claim that a state must have a statute of limitations? William P. Richmond: We believe that a state can have a statute of limitations, but that it would not be unconstitutional for it not to have one. What we say is that whatever statute of limitations it decides to adopt, it must do so evenhandedly. Speaker: So it is an equal protection. William P. Richmond: It must be evenhanded, Your Honor. It cannot discriminate as this one does merely on the basis of whether or not you are a foreign corporation, and in this instance we believe that the statute of limitations which is here, that is, with the tolling provision as part of it, definitely does discriminate. The state of New Jersey is perfectly free to adopt a two-year, four-year, ten-year, whatever statute of limitations or none at all if it chooses, but it must do so evenhandedly, and that is our position. Speaker: Under what provision? William P. Richmond: Under what provision? Speaker: Yes. William P. Richmond: Well, under-- Speaker: Does the due process... equal protection or the commerce clause? William P. Richmond: --This is all three, Your Honor. This is a commerce clause case. We contend that adoption of a discriminatory statute of limitations burdens-- Speaker: Did the court of appeals reject all of those? William P. Richmond: --The court of appeals did not address the commerce clause argument. It was certainly presented to the district court in our memorandum. The district court referred to it in a footnote in its opinion. It found on equal protection but said that even aside from this it would also violate the commerce clause. We briefed it to the Third Circuit court of appeals. Ten pages of our brief there were devoted to it. Speaker: So they necessarily rejected it, though. William P. Richmond: They did not necessarily reject it. Speaker: Why? William P. Richmond: They just didn't address it. Speaker: Well, I know, but you presented it, you claim. William P. Richmond: I don't believe that they-- Speaker: And they sustained the statute over your objection. William P. Richmond: --Yes, sir. They did so on equal protection grounds. Speaker: What do you mean, they did so on equal protection grounds? William P. Richmond: They sustained the statute and addressed their-- Speaker: Well, I know, but they can't sustain the statute unless they reject all of your constitutional arguments. William P. Richmond: --To the extent that they rejected it, Your Honor, they were, we feel, incorrect, and we are asking here that they be reversed on the commerce clause argument and on the other constitutional bases as well. Now, what happens in connection with the commerce clause is that this does indeed constitute a heavy burden on interstate commerce because the defendants are placed in a position of having the added expense and the possibility of adverse judgments when New Jersey defendants would not be subjected to those risks. There is no justification for this discrimination, and every one of the legitimate state interests can be fully accomplished by less discriminatory means. The justification for the tolling statute has been basically on the ground that it makes it easier to serve process, or that there are purported difficulties in service of process for New Jersey residents against unrepresented foreign corporations. However, when you look at the justifications, we believe that it is clear that they are either fictional or that they are in themselves improper. The first of these is that it said that it is harder to locate perhaps the out of state defendant. However, in this case Searle is a Fortune 500 company. There was never any question in this case as to whether or not the defendant could be located. Furthermore, the tolling statute really goes too far in that it permits the plaintiff to avoid the statute of limitations indefinitely, even though he does indeed find out the location of the defendant. Decades could pass during which the plaintiff knew the location of the defendant, and yet he would not be subject to the statute of limitations. The problem of-- Speaker: But he would be subject to Latchess in those circumstances. William P. Richmond: --Yes, sir, to the extent that Latchees can be considered any kind of adequate substitute for the statute of limitations. The problem of locating a defendant, were one to exist, would also apply to in state and out of state corporations alike, and there wouldn't be any basis for discriminating only against out of state corporations. As a matter of fact, a fly by night local corporation may often be much more difficult to locate than a national corporation which is of the size and visibility of a G. D. Searle and Company. Now, there are alternates in the New Jersey law which could be adopted in order to accomplish the legitimate purpose and those include the notion that since New Jersey now has a statute of limitations which applies only when the plaintiff could reasonably be said to have discovered this cause of action, it might be said that the plaintiff would not be subject to limitations until the plaintiff reasonably discovered the location of the defendant. Also under existing law, as a matter of fact, the toll... the statute is tolled by the filing of the lawsuit, and time is given after that within which to file the... to serve the defendant. As a practical matter, cases are not dismissed in New Jersey when the plaintiff reports that he is trying to find the defendant but has been unable to do so. Finally, I suppose the state could adopt the statute which tolls only when the defendant cannot be located. A second justification of the three... there are three justifications basically which have been used... is that the statute relieves the plaintiff of his burden under New Jersey rules of satisfying the court that long arm jurisdiction may not... or that long arm service may not be made within a state and of filing an affidavit to that effect, but the alternative obviously is to ease access to the use of long arm jurisdiction and service of process. This would lift any burden that the plaintiff has without continuing the discrimination against interstate commerce. For example, the requirement for an affidavit at all could be eliminated, and that would lift some of the burden of the plaintiff. It could be adopted, a provision could be adopted whereby elimination of proof to the court at all that service of process by long arm jurisdiction isn't possible would be an alternative. I think few, if any, states have this affidavit provision, probably because its only purpose is... or the only purpose it really serves is to facilitate harassment of the plaintiff by the defendants in connection with service. The third and last justification for the tolling statute is that it relieves plaintiff of the burden of satisfying the court that long arm jurisdiction or service is consistent with due process. Respondent is apparently saying that New Jersey has some interest in forcing the defendant to waive its right to due process or in simplifying litigation by eliminating the jurisdictional questions. This is too heavy a burden on interstate commerce. The burden can't be justified on the basis that the state is relieving the plaintiff of satisfying minimum contact requirements. This Court in Shaffer v. Heitner said that cost is just too high. None of the justifications raised to support the tolling statute based on the alleged difficulty of services justifies the indefinite tolling of the statute of limitations only against out of state corporations. Requiring plaintiffs to utilize long arm jurisdiction is a far less burdensome alternative to the present tolling statute, but there, the respondents contend that this is not a burden on interstate commerce at all, this tolling statute. That is just plain wrong. It is a very heavy burden, because the corporations are subjected to having their assets and... placed under constant jeopardy, being subjected to suits and possibly judgments with local or in state defendants would be able to have dismissed on summary judgment or preliminarily. The lower courts never relied on this justification, presumably because they recognized, as this Court has held in cases like Allenburg, that interstate businesses may not be compelled to register, but the statute effectively requires a registration by the corporation. Indeed, the plaintiff argued in the district court that one of the purposes of the tolling statute was to compel registration by the interstate corporation. The defendant is faced with choices under this tolling statute which we believe to be improper. On the one hand, it can fail to register, in which case it continues to suffer the burden that has been imposed upon it, and may be paying judgments when other corporations would not have to. On the other hand, it can qualify in New Jersey, but by qualifying, and nothing short of qualification is available, by qualifying, it therefore gives up its right not to be treated as a domestic corporation, and is consenting to any and every suit, whether or not it satisfies the minimum contacts requirement. It is subjected also by compulsion to a licensing scheme with all the attendant requirements for maintaining an office, a registered office, filing reports, and paying franchise taxes. We also believe this statute violates-- Speaker: Mr. Richmond, how is the franchise tax computed in New Jersey? Do you know? William P. Richmond: --I do not know, Your Honor, how it is computed. We also believe that the tolling statute violates the Fourteenth Amendment, and it is a problem in that it requires the corporation to give up its fundamental right under due process not to be sued in the state unless minimum contacts are met, that there is no substantial relationship between this discrimination and any legitimate state goal. I might add that it is important to realize that even if one were to qualify today, it would not cure the harm caused by the tolling statute, because for two years, the statute of limitations period, the corporation would continue to be subject to suits which may have arisen many years in the past and are still viable because of the prior applicability of the tolling statute. We respectfully submit on the basis of the foregoing facts that the decision of the Third Circuit court of appeals should be reversed. Thank you. Warren E. Burger: Mr. Cohn? Walter R. Cohn: Mr. Chief Justice, and may it please the Court, the gravamen of counsel's argument today appears to have shifted greatly from a constitutional argument to a burden because they have to register in New Jersey, and I submit to this Court that that is not a proper statement of the law of New Jersey. Speaker: Well, if it is a burden on interstate commerce, that is a constitutional question, isn't it? Walter R. Cohn: Yes, Mr. Chief Justice, but it isn't a burden, I submit to this Court, because of the fact that just because they have representation in New Jersey, there is nothing in the law and nothing before this Court which says that they must register and become domesticated and become subject to the franchise taxes. The franchise taxes, Mr. Justice, are based upon our gross income of the amount of business done in New Jersey. It is a minimum tax. And they can be exempt from that. There is another section of the New Jersey Corporation Business Act, part of the Act quoted by both counsel and myself, which gives a reporting section, and I know it is not before the Court, but it is the same Act that is before the Court. And in the reporting section, a foreign corporation has the option of exempting itself from any franchise taxes by reporting and by having a representative in New Jersey and by filing a form with the Secretary of State. It is an amendment to the Act which was passed in 1973, and will you indulge me by mentioning it, and permit me to, because of the question raised by the Court today? The Searle Company, just as every other foreign corporation, can report to the Secretary of State filing the name of their agent, filing the name of their principal office. The gravamen of counsel's argument forgets the fact that the purpose of this tolling statute is so that the plaintiff can find the out of state defendant. There is no problem on the in state defendant, as counsel says. They must register with the Secretary of State to file a certificate of incorporation in New Jersey, and they do, and it is a simple procedure to find out the name and the registered agent of an in state corporation. Just write to the Secretary of State. It is a simple procedure to find out the name and address of the representative of the foreign corporation if there is a representative available, and the very purpose of this tolling statute is to have that representative available so you can find your defendant. Speaker: Is there some provision in the New Jersey statutes that permits designating an agent for service without registering as a foreign corporation? Walter R. Cohn: We submit there is, sir, and we submit that Justice-- Speaker: Can you give me the citation? Walter R. Cohn: --Under 14(a), there is a provision for a trade name certificate of a corporation. It has to be renewed every five years. Counsel for appellant has submitted to the Court a reply brief with a letter for the Secretary of State, and I have submitted to the Court a letter refuting that argument. I think there are two provisions-- Speaker: Does the Secretary of State agree with you? Walter R. Cohn: --We have not had the opportunity to present that to this Court, because the-- Speaker: Well, you sound as though there were a question about it. Walter R. Cohn: --I don't think that there is, and I didn't know that there was a question, Your Honor. I thought that it was clear. Speaker: Well, the Court of Appeals didn't mention it either way. Walter R. Cohn: No, sir, and I did not think that was a question. I thought it was clear even as a result of Justice Pashman's Footnote Number 10 in the Velmohos-- Speaker: It wasn't even presented in the Velmohos case. Walter R. Cohn: --No, sir, so I thought that wasn't before this Court, and I did not think it an issue to present to this Court. I do not think it is a fact issue. It is not part of your record. It is in nothing in any of the documents in this Court except for the reply brief, which brought in a letter which was not new material. If the question had arisen below, we would have presented to the Court not only Title 14(a) but the trade name certificate provision of New Jersey in Title 56. Speaker: Well, let's assume you are right, that they wouldn't have to register, they would just have to designate an agent for service of process. Then you are arguing there that, well, that is an additional burden that they have to go through, but it is not much? Walter R. Cohn: Well, if the burden is filing a form with the Secretary of State for a representation-- Speaker: You are saying it is a trivial burden. Walter R. Cohn: --It does require a $15 filing fee, and I think the question of $15 is not a burden under our commerce clause and a burden upon the defendant. Speaker: What if you designate the agent, as you suggests, and pay your $15. Then you have an agent for service of process in the state. Walter R. Cohn: Yes, sir, and I-- Speaker: And with respect to what kind of suits could the registering corporation, could the designating corporation be sued in New Jersey then? Walter R. Cohn: --Any suit where there was a basis for the bringing of the action in New Jersey, bearing in mind the International Shoe versus Washington with a minimum contact. Speaker: Well, you would say, though, that suppose there are two corporations. One is fully registered, fully registered, qualified... and then the other one has just designated an agent for service of process, as you suggest. Now, could those two corporations be sued in New Jersey on precisely the same kind of cases, or would there be a difference? Walter R. Cohn: I think there might be a difference if the corporation raised the defense of minimum contacts and form non-convenience, because that is a defense to any defendant, even if... even, Your Honor, if the domesticated corporation was sued in New Jersey. That corporation can sue if the accident was in Florida with the New Jersey corporation being a defendant, New Jersey being the domesticator, and a New Jersey plaintiff. Under the form non-convenience of the minimum contacts, it could be dismissed. The Volkswagen case that this Court decided recently would be extremely applicable to respond to Your Honor's question. Speaker: Well, I don't know, if you have designated an agent for service of process. Walter R. Cohn: That agent is there so that-- Speaker: What if you have registered to do business? Walter R. Cohn: --You are registered to do business. Even a domestic corporation could have that as a defense, much less a foreign corporation domesticated. If the lawsuit was not properly brought in New Jersey, it could be at least the plaintiff's option to find the defendant by having someone in New Jersey upon whom service can be processed. The distinction is enormous between that and the long arm statute. I think that Justice Garth made it in the Third Circuit opinion where he talked about the fact that there are agents under the long arm and registered or representation under the statute. There is a difference in the type of person. If there is a domesticated corporation, then you have the ability to serve, but that doesn't mean that the suit can be maintained. You still have the minimum contacts rule. Now, this Court is asked by the appellants to-- Speaker: Mr. Cohn, I don't really quite understand your argument. Putting aside for one moment the form non-convenience argument, which I understand would be a different... just the jurisdictional argument, supposing this plaintiff, living in New Jersey, had been in Florida and had an accident with one of the defendant's vehicles. If Searle were registered, would not the plaintiff be able to obtain jurisdiction over Searle? Walter R. Cohn: --Of course, sir, but then in the situation-- Speaker: Then that is a different situation, isn't it? Walter R. Cohn: --Well, then the situation is identical that you hypothesized to me as in the Worldwide Volkswagen versus the Richardson. Speaker: There they could have the case dismissed because there was no jurisdiction over the defendant. The defendant had not registered in the forum state. Walter R. Cohn: But they had the jurisdiction over the defendant. The suit was brought in Oklahoma, even though neither the plaintiff nor the defendant were in Oklahoma. Speaker: Well, they purported to exercise jurisdiction through the long arm statute. Walter R. Cohn: Yes, sir, but then you ought not distinguish between the long arm and the purpose of this statute of New Jersey, which is to find the defendant. It was fortunate that I could find the defendant here, because it is a well known company. What about the companies, Your Honor, that are not well known, that are not worldwide, and Fortune 500, as counsel argues? The small company, which can secrete itself intentionally or not. The company from out of state that has no identification on its product. Counsel argues that the tolling of the statute is a detriment to a company because there is no response. There are so many exceptions that have been carved by the courts into that argument at the present time that I present to the Court the fact that even with a two-year statute, the discovery rule. In New Jersey, we have many cases on this today which permits the filing of the lawsuit and maintaining it. When the event is discovered, that can be ten years after the two years, and has been maintained by the New Jersey Supreme Court. We have insanity. We have minors. You have the stream of commerce theory. Suppose the product is sold by the manufacturer, kept on the shelf of the store for ten years, purchased by the ultimate consumer. Five years later the event occurs. There certainly would be a maintaining of that lawsuit in spite of the statute of limitations in New Jersey. The fact that we have this fixed and fast rule of two years is not unique in New Jersey. We have statute of limitations in the 50 states, and every one is different. New Jersey happens to be one that has a distinction between foreign and domestic corporations with respect to the statute, and the legislature made that distinction, and I submit to the Court that is a decision for the state court to determine, as it has in Velmohos, and Justice Pashman's decision that that is a proper distinction. As a result, we have four types of corporations in New Jersey when it comes to the tolling statute. You have your domestic corporation, you have your foreign corporation that is authorized to do business in New Jersey by domesticating. You have your foreign corporation that is not domesticated but has a representative, as Justice Pashman says they must have, and you have the foreign corporation such as Searle that has not domesticated and does not have a representative and thus is subject to this tolling statute. The legislature has made that decision, and we can presume that Searle must have known about it since 1949, the last time the tolling statute was amended by the New Jersey legislature. The legislature did that at the time for a specific purpose, and I maintain to this court that that reason still remains. The burden upon Searle or any out of state corporation for registering is one burden. The burden for having a representative, which is all that is required to stop the tolling of the statute, is another burden so minimal that I maintain that that has not in any way affected the stream of commerce. Speaker: Mr. Cohn, would you make the same argument if New Jersey said that an unrepresented foreign corporation may not have the defense of contributory negligence, say? Would have the same... all they would have to do is the same thing, comply with the-- Walter R. Cohn: Well, New Jersey has not made it, sir. I submit to the Court that they-- Speaker: --I am just asking you, how would you deal with... would that statute also be constitutional on the same theory that this one is? Walter R. Cohn: --I don't think so, because I think Your Honor has posed an entirely different question. We have a statute which I have quoted in the brief on Page 3, 14(a): 13-3, Subpoaragraph 2, where the New Jersey Corporation Act specifically provides that the non-registered, non-domesticating corporation in New Jersey can do many things. It can maintain. It can defend. It can participate in any action, any proceeding, whether it is judicial, administrative, arbitrative, or otherwise. It can hold meetings of its directors. Speaker: I understand all that, but it may not assert one defense that all other defendants can assert, namely, the statute... I am just asking, why wouldn't the same reasoning apply to a second offense, contributory negligence? Walter R. Cohn: Because the reason, Your Honor, that this defense is excluded is for a purpose. It is to permit the New Jersey plaintiff to find that corporation, and if you exclude the contributory negligence argument, I think it may be unconstitutional. Yes, Your Honor. But that is not the purpose of the tolling statute. If you said that the contributory negligence was tied into the tolling statute, I submit yes, it would be unconstitutional, but that-- Speaker: Yes, but your case allows tolling. Say it takes five years to find a defendant, and you spend the five years finding him, and then you say, well, I will wait another ten years to sue. He may wait much longer than the time required to find the defendant. Walter R. Cohn: --Latchees would be a perfect defense in that instance, again. We can only say that the purpose of the statute is to... very explicit that the-- Speaker: Is it clear that Latchees is a defense in an action at law? Walter R. Cohn: --Absolutely, because in this very case after Judge Pashman issued his decision in Velmohos, Searle amended its pleadings to plead the defense of Latchees. They filed a specific motion to do so, and it is part of this case now under the-- Speaker: Does that make Latchees proper? Walter R. Cohn: --I am sorry, sir? Speaker: Does that make Latchees proper? Walter R. Cohn: It makes it a defense. Speaker: It makes it a defense which Searle conceived of. That doesn't mean it would be sustained by the New Jersey courts, does it? Walter R. Cohn: No, sir. It is a fact question then as to what the trier of the fact determines as to whether it is a proper defense. Speaker: Ordinarily, you don't think of Latchees as being a defense to an action at law. Walter R. Cohn: Oh, yes. We have in our court rules and I think there isn't any problem on this, that we have specific defenses which must be pleaded in pleadings by our court rules, and one of them is Latchees. But if you don't raise it, you can't plead it. Speaker: But ordinarily in an action on the law side where you are seeking damages, you have statutes of limitations, not Latchees. Latchees, at least to my mind... perhaps I am wrong... is an equitable defense. Walter R. Cohn: Under our court rules, it is a law defense as well, and under our cases it is a law defense as well. There is no question on that. It may be traditionally an equitable defense, but it is certainly a defense, Your Honor, in a lawsuit, in the law side of our courts. Speaker: You plead Latchees and the statute of limitations in New Jersey? Walter R. Cohn: Yes, sir. Speaker: You plead them both? Walter R. Cohn: Yes, sir, and you must by court rule affirmatively-- Speaker: And if there is a statute of limitations, you still can say Latchees? Walter R. Cohn: --Yes, sir. You must affirmatively-- Speaker: For example, if the statute of limitations is five years, and you filed in four years, somebody could still raise Latchees? Walter R. Cohn: --It always can be raised. Now, the statute of limitations is a defense to that raising of the defense, Your Honor. If you are within the statute of limitations, then Latchees would not apply, but if you are without the statute of limitations, then it would apply. Speaker: You said Latchees always applies. Walter R. Cohn: If you are without the defense of a statute of limitations. Speaker: I see. Walter R. Cohn: I don't know whether I answered your previous question. I was cut off. Speaker: I heard what you said. Walter R. Cohn: I say that Latchees applies in the law side of our courts. Yes, sir. Speaker: Do you think the district court... the district court invalidated the statute, didn't it? Walter R. Cohn: The district court did under the equal protection theory. Speaker: And didn't... wasn't its assumption, at least, that the... that there was no provision for just filing a name, designating an agent? Walter R. Cohn: I don't think that was the district court's assumption. I don't think that came up, Your Honor, until-- Speaker: Well, it's awful close to it in Footnote 17 of its opinion. Walter R. Cohn: --I think that the real reason for the district court's, if I may submit, holding that the statute was unconstitutional was under the equal protection. The trial judge in the district court dealt solely in his decision... the thrust of it was the equal protection argument, thus finding the statute unconstitutional. He thought that the defense was valid where you have the long arm jurisdiction, but I-- Speaker: Let me ask you, what would your position be... I suppose it would be the same... that there is under New Jersey... the only way you could get the benefit of the statute of limitations would be to fully register. Walter R. Cohn: --No, sir. Speaker: Well, suppose that was the only way that a foreign corporation could do it. Suppose you had to make a choice either between the statute of limitations or registering. You just couldn't designate an agent. Suppose that. Walter R. Cohn: All right. Speaker: You still would argue for the statute? Walter R. Cohn: Yes, sir, because without admitting, but for the sake of-- Speaker: I understand. Walter R. Cohn: --responding to Your Honor's question, the domestication of the foreign corporation in New Jersey is not as burdensome as counsel would have this Court believe. If you do become domesticated in New Jersey and are subject to franchise taxes, those cannot be duplicative taxes. If Searle files in Illinois, and I don't know whether or not they do... they are a Delaware corporation with a home office in Illinois... wherever they file they must pay taxes on their income. Speaker: Well, do you think a state could say to a corporation that is engaged only in interstate commerce in New Jersey, that is the only kind of business it does in New Jersey, do you think the state could say, well, we wish you would register, and if you don't we are going to charge you $10 a year? Walter R. Cohn: I think the state under this statute can say you must have a representative in the state, and even if that representative requires registration to the point of domestication, Your Honor, I think that is not a burdensome event in interstate commerce, because if it is really filing a form, and because of that form this defendant and any other state defendant can obtain the benefit of the tolling statute, then that is a minimum burden that the defendant must bear if they wish to raise this defense. They are not prevented from doing business in New Jersey. Their argument is that this is a burden. There isn't a scintilla of evidence in the record or before this Court that it is a burden. They have done business to this date and continue to do business, and there is no indication of any loss of business because to our knowledge there hasn't been. Speaker: Well, one way it is a burden is that they don't have the benefit of the statute of limitations. Walter R. Cohn: There are many reasons that people don't have benefits in a state, and if this benefit doesn't burden interstate commerce, then it is not a burden under the theory of the defendant. This burden is so minuscule if it is, and I only say if it is because of Your Honor's question, because I don't admit under any theory that they must domesticate in order to have the benefit of this statute, they must have a representative, and Justice Pashman in Velmohos is quite clear about that. The representative can be many types of representatives. It is only so that you can write some place where everyone knows and find that person who is authorized to accept service. If you write to the Secretary of State, albeit for a registered agent, for a representative, for the person trading as, you can determine that person who can accept process, and thus the defendant will be able to avoid the argument that they have today and avoid the problem they are in. Presuming that there is any burden, it is so minuscule that I submit to this Court that it is not such that you can overturn a statute which can easily be complied with. Speaker: Mr. Cohn, was there any attempt to institute litigation for this injury other than this particular suit? Walter R. Cohn: I couldn't hear the beginning. I am sorry, sir. Speaker: Was this New Jersey litigation the only one attempted against Searle for the injury that Mrs. Cohn sustained? Walter R. Cohn: Yes. Yes, sir. Speaker: There was no attempt to sue them elsewhere? Walter R. Cohn: No, sir. No. A New Jersey plaintiff-- Speaker: Why did you wait so long? Walter R. Cohn: --Well, in the first place, the event occurred in 1963. It was not until 1969-70 that there was any causal connection between the ingestion of the birth control pill and any trauma that could have occurred, the thrombosis that eventually resulted. We have presented to the district court, and that issue really has not been determined on appeal... it was determined in a second opinion of Judge Meaner in the district court... as to whether there was a discovery rule exception. If you take from mid-July, 1970, which Judge Meaner, the trial judge, found as the discovery date, and you take two years from that, there is only approximately 12 months, 12 and a half months until suit was started. There was a valid reason. We have raised that in the district court. It is not before this Court, because Judge Garth of the Third Circuit said, I do not have to get to the question of whether or not insanity, quote, end quote, constitutes a disability under the tolling provision of a statute. We argued that the emotional bar of the plaintiff, Susan Cohn, was sufficient so that we could not start this lawsuit until psychiatric treatment was complete in 1974, and that was when we started suit, as soon as we knew that we were able to psychologically and psychiatrically. Now, that period happened to be very short in this case, but that is not the real reason that this statute could be argued as constitutional or unconstitutional. Searle still has that defense of Latchees, which they even brought in within the last year. And if we ever get to trial... we haven't had a trial in this case, as Your Honor, I am sure, knows. If we get to trial I would presume I have to meet that defense at the time, and am prepared to, for the reasons I have just stated. The question as to whether or not this is an incident that harms in the stream of commerce to prevent the doing of business of Searle in New Jersey is one which is so minimal that I submit to the Court that the commerce clause cannot apply. This Court has held that the stream of commerce is just as natural a force as a stream of water, even though it was in Justice Brennan's dissent where the language came from, but that is so true. If this defendant is a multi-billion dollar company, worldwide operations, as it claims in its briefs, then this is a minuscule absolutely minute, inconsequential event that we ask for, merely the-- Speaker: You wouldn't make the question turn on the net worth of the company, would you? Walter R. Cohn: --Oh, absolutely not, because this must be a broad, general principle. There are small companies which can secrete themselves intentionally or not throughout the entire world where a New Jersey plaintiff might want to sue that defendant. The principle can certainly not be designated as that which applies to this case only, because it happens that I was able to find Searle in Illinois, a Delaware corporation. I couldn't even have found them if I wrote to the Illinois Secretary of State. The very purpose of this is so that the legislatures determine that any New Jersey plaintiff can find its defendant. Now, it is quite significant, I think, that the New Jersey statute has said that this is very different than any other situation where there is a foreign corporation. The defendant must be found, and the only way to find it is to have some place where an agent is in New Jersey, very distinct from the company doing business, as counsel argues, where they have to have an office. They don't have to have an office in New Jersey in order to comply with this statute. They don't have. And there is no one, in spite of what counsel says, no place in any case, no place in any argument, no place in any statute which says they have to be in New Jersey at all, except to have a representative. Now, that representative can even be in Illinois. A trade name certificate provides for the service upon the Secretary of State. If I write to the Secretary of State for the trade name G. D. Searle, and they have a trade name certificate with someone in Illinois, I can serve the Secretary of State. These cases that Searle cites are idiosyncrata when they talk about the motor vehicle cases. In every motor vehicle case there is an official in a state where you can serve. They are distinct. There is no majority-minority rule on this issue. In the cases that have upheld the tolling of a statute even where you have long arm, you have an official in the state in the motor vehicle cases. Speaker: Mr. Cohn-- Walter R. Cohn: Yes, sir. Speaker: --was any effort to review Velmohos sought here? Walter R. Cohn: Oh, yes. That is before this Court. Speaker: Now? Walter R. Cohn: Yes, sir. There is a petition for certification on Velmohos. Or a motion for argument. I don't know which. That is before the Court. And my understanding is, it is being held pending the decision in this case, but that is just what I was told. There are several cases, Your Honor, before this Court on the same issue. There is a companion case-- Speaker: All involving the New Jersey statute? Walter R. Cohn: --Yes, sir. There is a companion case that Judge Garth decided in the Third Circuit, the Hopkins-Kelsey-Hayes. There is the Cumbs Honda case which is before this Court. They all involve the same issue. And they are all pending the decision in this case. Speaker: And do all of them sustain the statute? Walter R. Cohn: So far, this Court is asked to overturn the Third Circuit on the issue, the New Jersey Supreme Court on the issue, the U. S. District Court, Judge Brockman in the Kelsey-Hayes case on the issue, all cases upholding the statute. And the only one who did not uphold the statute is my trial judge in my case, and he did it for a different reason. He stated that the long arm was sufficient to obtain jurisdiction so the statute should not toll. Speaker: Now, I submit that is a very different thing. The long arm is a court rule. The statute is a legislative enactment. One has nothing to do with the other. The long arm rule, enacted in 1958 in New Jersey, was certainly known, but that is only where you can find the defendant. The very purpose of the statute is to obviate the situation in the long arm rule instance, where you can't find the defendant, where the defendant must come to New Jersey, at least have somebody for process, and that is what we are after here, the maintaining of the ability to find the defendant, big corporation, little corporation, regardless of the incident. That is the penalty the defendant has to pay for not having some representative in New Jersey. Do you think there is any filing with the Secretary of State in all the years that New Jersey has been in business just designating an agent for service of process? Walter R. Cohn: Whether there isn't or there has been, I am not aware of any statistics to give to you, Your Honor, but whether there has or there hasn't is immaterial-- Speaker: Have you ever tried to find one? Walter R. Cohn: --No, sir. The occasion has not-- Speaker: Have you ever tried to serve a foreign corporation based only on its trade name certificate? Walter R. Cohn: --I have not had occasion, but I have written to-- Speaker: In all the years that-- Walter R. Cohn: --In 30 years, I have had occasion to write to the Secretary of State as to whether the foreign corporation had a trade name certificate, whether the foreign corporation had any kind of person in New Jersey. Speaker: --Did they ever answer, yes, it has a trade name, and then you tried to serve them? Walter R. Cohn: The occasion hasn't arisen. It just hasn't. But I have been able to serve by long arm, as I did in this instance. Speaker: Oh, yes. Walter R. Cohn: Pardon me, sir? Speaker: I understand. Walter R. Cohn: Now, it just happens I could find the defendant. That was a fortuitous circumstance. But that should not make an exception to the rule to make this statute invalid. The principle remains as to the fact that you have to have somebody in New Jersey, and Justice Pashman is so clear about that. The fact that it hasn't occurred before, I can only answer Your Honor with the fact that this issue hasn't appeared before this Court, although our statute was passed in 1820. Why it has come up now, a matter of circumstance. Speaker: Well, doesn't this letter that the petitioner appends to the reply brief suggest that at least the Department of State-- Walter R. Cohn: I don't know the question that petitioner asked. Speaker: --Well, the statement is pretty flat, isn't it? Please be advised it is the view of the Department of State that unless a foreign corporation has qualified to do business in New Jersey, they are unable to designate a registered agent for service of process. Walter R. Cohn: I don't know the question asked, Your Honor. I can ask a question and I am sure I can get different answers from witnesses. If I had asked the question, is there a procedure, and can I file a name as an out of state defendant, if given the opportunity, I might get a different answer. This did not come up at any point in the proceedings until a week ago today when I received that reply brief of the appellant. There has never been an issue in this case as to whether the defendant, Searle, can merely file a registration and have a registered agent or a person to designate service. My time is up. Warren E. Burger: Your time has expired now. Walter R. Cohn: Thank you. Warren E. Burger: Do you have anything further, counsel? William P. Richmond: No, Your Honor. Warren E. Burger: Thank you, gentlemen. The case is submitted.

John G. Roberts, Jr.: We will hear argument next in Case 07-1059, United States v. Eurodif and 07-1058, USEC v. Eurodif. Mr. Stewart. Malcolm L. Stewart: Mr. Chief Justice and may it please the Court: The question presented in this case is whether the provision of enriched uranium under separative work unit or SWU contracts is covered by the Federal antidumping duty law. The resolution of that question turns on whether the performance of SWU contracts results in merchandise being sold in the United States. The Department of Commerce, which is the Federal agency entrusted by Congress with the administration of the antidumping duty law, concluded after an extensive investigation that SWU contracts do result in sales of enriched uranium. That determination was reasonable and should be sustained by this Court. Now, the fundamental bargain in a SWU contract is that the customer, the utility, provides a combination of feedstock or feed uranium plus cash, and receives in return a specified quantity and assay of enriched uranium, and by U-235 within the final product. Now, the customer has discretion to choose among varying combinations of feedstock and cash in order to complete the transaction for a particular quantity and assay of enriched uranium; but the enricher has its own discretion. That is, having received the consideration paid by the utility, the enricher is free to make its own determination based on economic considerations as to the relative proportions of feedstocks and SWUs that should be used to make a given quantity of enriched uranium. So the overall -- the character of the overall transaction is comfortably characterized as a sale, because it involves the acquisition by the utility of a product, merchandise, that it didn't own at the outset of the transaction in exchange for consideration. Stephen G. Breyer: I can imagine you could have a grain mill and they have lots and lots of grain absolute identical one to the other. And the farmer takes his grain up and they operate on it, and then he drives away with the grain, milled. Now, it may make no difference to anybody whether the identical molecules are the same; and I think in such a case you'd say they are processing it; they are not buying and selling it. Malcolm L. Stewart: Well, indeed, as we've explained in our opening brief, at common law the distinction between a bailment and a sale in that type of circumstance depended upon whether the miller or the equivalent processor was under an obligation to return the very same thing in processed form. And if that was-- Stephen G. Breyer: You are saying if we have that, in fact, if the -- if the exact situation, if some farmers up in North Dakota send their grain just to be milled -- it's their grain -- up in Canada, and they come back, and it -- you know, it may not be the identical molecule, but it's identically the same; they have done this for 100 years -- now suddenly this -- the Commerce Department is going to say, that's a sale, and the antidumping statutes apply? Malcolm L. Stewart: --We are saying that Commerce could treat it as a sale. And-- Stephen G. Breyer: Well, would it or not? Malcolm L. Stewart: --I think Commerce in that hypothetical -- again, if we were talking about grain being provided by the customer to a miller overseas -- overseas, and then the finished product being brought back into this country, I think the logic of the Commerce determination here would suggest that it would be a sale. Stephen G. Breyer: I agree with you, and I just wonder, what I would like to know, is if any businessman involved in any of these or related things before this decision of the Commerce Department would have thought that that is how the Commerce Department would have treated such a transaction? Malcolm L. Stewart: Well, I don't think that Commerce had before this incident dealt with exactly this type of situation. Antonin Scalia: Well, but common law would have treated it that way, you say? Malcolm L. Stewart: Common law would have treated it-- Antonin Scalia: That's pretty good authority. Malcolm L. Stewart: --It certainly suggests that Commerce could permissibly treat it as a sale. Stephen G. Breyer: I don't know. I'm asking -- the question is the same as the last case, to me: Not whether they could have done it; sure they could have done it. My question is based on my question of whether they had a rule that any reasonable person would have thought that is how they treated it-- Malcolm L. Stewart: I-- Stephen G. Breyer: --Because after all, you have three precedents in related areas, not the direct area but in related areas, that suggest that they wouldn't have treated the millers that way. Malcolm L. Stewart: --I'm not sure exactly which precedents you mean. If -- the one that is -- the administrative determination that is cited most frequently is SRAMS from Taiwan, in which the design house provided, I believe it was a design mask to the foundry, and the foundry manufactured the finished equipment and in concluding that it was the design house rather than the foundry that was properly treated as the producer of the goods, the Commerce Department relied in part on the fact that the design house had intellectual property rights in the design mask. Stephen G. Breyer: You know what, I'm thinking of those things, they're something called "tollers". I don't know exactly what tollers are. They seem to be like people who give haircuts. They're sort of servicers of some kind. They're talking about tollers and -- and subcontractors. And that is a related area. Malcolm L. Stewart: That's correct. And the SRAMs cases is one of the toller or subcontractor cases. And the Department of Commerce relied in part on the fact that the design house had intellectual property rights in the design mask. So it was not fungible property, it was not an input that the foundry could have gotten from another source. The other thing we would say about the grain hypothetical is that when you hear about the farmer providing grain to the miller or the utilities providing feedstock to the enrichers, it may conjure up images of a tangible good that is in the physical possession of the farmer or the utility that is then physically transferred to the enricher. In the case of the miller that is correct. But the way that a utility provides feedstock to an enricher is not by taking physical possession of the feedstock and then by transporting it. Rather, the utility simply makes financial arrangements with the supplier of feedstock, basically cuts a check or transfers funds-- John Paul Stevens: Mr. Stewart, can I ask a question about the scope of discretion involved here? Assume the facts were not exactly as they are here, it is not a fungible product, but that each shipment was separately identified and each shipment was processed as a different batch in France and then sent back. That I assume would not normally be treated as a sale of goods? Malcolm L. Stewart: --Well, I think that Commerce's determination suggests, without squarely holding, that it would treat that as a sale of goods because it would involve substantial transformation of the original item. John Paul Stevens: That's really what I wanted to ask you. Even if the facts were more extreme, just as in the example I gave, do you think the Commerce Department would have discretion to treat that as a sale of goods? Malcolm L. Stewart: We do. And I think it's important, to carry on with the thought I was sketching out previously about the way in which the raw materials are provided to the enricher. If you imagine my buying a suit from a tailor, and the tailor says: The price is $600; $300 of that accounts for the cost of the cloth; $300 is the labor that's involved in sewing it into a suit. Clearly, that's a sale of merchandise, even though the price has been broken up-- John Paul Stevens: But then supposing they send the suit back to a different person for alterations, and they say, well, this is part of the sale, so we want to treat it as a sale of goods? Malcolm L. Stewart: --Well, the alterations would just be a finishing process and that wouldn't involve substantial-- John Paul Stevens: What is the difference between that and what we've got here? Malcolm L. Stewart: --But the point I was going to make about the suit, and it applies equally to the uranium enrichment process, is if I say to my tailor, rather than I pay you $600 and you pay your cloth supplier $300, how about I just give you $300 and I will give $300 to your cloth supplier, and it will amount to the same thing in the end, because you won't have to pay for the cloth? If the tailor accepts that arrangement, the economic substance is exactly the same. And it would seem strange to say that it's a sale if I just pay $600 to the tailor, but it's not a sale if I break down the cost in the way that I've described. John G. Roberts, Jr.: Could you articulate precisely what your test is, because you have been going back and forth between whether the raw materials are fungible and whether there is a fundamental transformation in the product? So, how would you merge those two in an articulable test so that business people can know when they are going to be subject to this regime and when they were not? Malcolm L. Stewart: I think that the Commerce determination -- that Commerce did not purport to either promulgate a regulation or announce a test that precisely defined the term "sale". I think the thrust of the Commerce Department's determination was that substantial transformation was enough, but that the case was much easier by virtue of the fact that the producer -- the enricher dealt with fungible goods and also had substantial discretion to decide how much of the feedstock would be used vis-a-vis-- John G. Roberts, Jr.: You would say your ultimate touchstone is whether there is substantial transformation, and whether it's a raw material or discretion, those go into that determination? Malcolm L. Stewart: --That's correct, although it would certainly be appropriate for this Court if it didn't want to address the situation in which only substantial transformation was present, to say that at least when both circumstances were present there was a sale. And again, to distinguish this somewhat from the miller hypothetical, the miller in making grain into flour may have discretion as to which individual grains to use for a particular batch of flour, but it won't typically have discretion as to what weight of grain will be used to make what weight of flour. And the enricher has that discretion as well; that is, to produce a particular quantity and assay of enriched uranium, the enricher can either use more feedstock and fewer SWU's-- Antonin Scalia: What's a SWU? You lost me on the SWU. Malcolm L. Stewart: --A SWU is a unit of work and it's work in the sense of output; that is, it is the work necessary to separate out a particular quantity of enriched uranium-- Antonin Scalia: If you put in more time with the uranium, with the same amount of 235, if you put in more time you can get out more? Malcolm L. Stewart: --That's right. The amount of -- the separation process or the enrichment process involves a separation of the original feedstock into the enriched uranium and what is referred to as the tails, which is the residue or the depleted uranium. John G. Roberts, Jr.: I'm sure you're prepared for a wide variety of hypotheticals. What about a diamond? You have a chunk of rock that contains a diamond. You send it to Antwerp and they carve it away into something that, I guess you could say it's been substantially transformed. It's not just a rock. It's now a glittering diamond. Is that covered by-- Malcolm L. Stewart: I'm not sure whether Commerce would treat that as substantial transformation. John G. Roberts, Jr.: --Neither am I, and it's kind of -- it's sort of a bit of a concern. It's a fluctuating test that is hard to determine how it's going to be applied in a wide variety of cases. Malcolm L. Stewart: Now, in this case -- in this particular case, Commerce noted that there was no dispute among the parties that the enrichment process did result in substantial transformation. So that -- that uncertainly is not present here. But I agree that there is a gray area with respect to substantial transformation that isn't present when you are trying to answer the question: Is the customer getting back the same thing in modified form or is he getting back a different thing? That is, although the contracts between the utility and the enricher deem the enriched uranium to have been produced with the customer's own feedstock, everybody acknowledges that that is not the fact in the real world. And so, what the customer receives back is not like your diamond hypothetical, in which he receives an improved version of the original product. It is as though you had a diamond company that said, we need inventory all the time, and we're prepared to work out an arrangement where if you send us a raw diamond plus cash, we will send you back a different cut diamond. That would be a sale, regardless of whether there was substantial transformation, because you would have payment of consideration for a product that you indisputably didn't own at the outset. Ruth Bader Ginsburg: Mr. Stewart, we're reviewing a decision of the Federal Circuit. And the Federal Circuit relied dominantly on the Florida Power case in which the same issue was presented, albeit under a different statute. But I -- reading that Florida Power, where the Federal Circuit adopted the Government's position, the Government's position then was that this very same transaction involved the rendition of services and not a sale of goods. Does the Government have a distinction between those two cases, or are you now saying in hindsight you realized that the position that you took before the Federal Circuit in the early case was wrong? Malcolm L. Stewart: I don't think we have disavowed the position we took in the Florida Power & Light case. Now, in all candor, I would have to say the question of the Contract Disputes -- Disputes Act's applicability to SWU contracts is of a lot less interest to the Federal Government now than it was then, because the reason that arose in a case involving the Federal Government was that at that time USEC was a Government instrumentality and we were representing USEC in its governmental incarnation. Now that USEC has been privatized, the Federal Circuit is unlikely to confront the question whether the Contract Disputes Act applies to this sort of arrangements, because these are not -- this is not a Federal entity, in any event. The reason that we think the two cases are reconcilable is that the Contract Disputes Act, as its name implies, is a statute that governs the resolution of disputes between contracting parties. And in that situation, it's much more appropriate to look to the form of the parties' arrangement. And the court -- the Federal Circuit in Florida Power and Light placed a lot of emphasis on the fact that the contract was styled as one for enrichment services. And that is an appropriate consideration to take into account when you are resolving disputes between the contracting parties, but when the whole purpose of the antidumping statute is to prevent contracting parties from entering into arrangements that are mutually beneficial to themselves, but that would and unfairly disadvantage domestic competitors, it was appropriate for Commerce to look behind the form of the contract and to look at physical and economic reality. John Paul Stevens: But isn't it correct that the universe of transactions that is the subject of this Act is sales? Is that not right? Rather than service contracts. Malcolm L. Stewart: Well, it is true that the antidumping statute requires that merchandise be sold in the United States, and we don't contend that the statute applies to price discrimination in services like insurance or banking. John Paul Stevens: But do you -- do you contend the word "sold" is an ambiguous term, requires construction by a particular agency? Malcolm L. Stewart: It is ambiguous at the margins; that is, the classic arrangement, the classic sale is an exchange of-- John Paul Stevens: Do you think Congress intended the ambiguity to be resolved by an agency rather than judges applying the rules of common law and the rules of sales law generally? Malcolm L. Stewart: --Yes, and I think this is a statute that has been around for, I believe, close to 90 years now; and in order for it to remain efficacious in this area, Commerce has to be able to adapt its principles to new forms of transactions. Again, that doesn't mean that Commerce's discretion is limitless, but it has some discretion at the margins. If I may, I would like to reserve the balance of my time. John G. Roberts, Jr.: Thank you, Mr. Stewart. Mr. Farr. H. Bartow Farr, III: Mr. Chief Justice, and may it please the Court: I would submit, as the questions this morning have indicated, one of the difficulties in this case, obviously, is this is the kind of transaction that can be thought about reasonably enough in different ways. It is possible to look at this very narrow set of circumstances where a customer is providing raw materials of the kind that the producer uses to make a good, and to say in that circumstance we could look at it as the customer providing two kinds of consideration for the good it's receiving; or we could look at it, as the Respondents do and as the Federal Circuit did, as saying, the other way to look at it is this is essentially the customer receiving a service on its own goods. Now it seems to me to begin with, the question that is before the Court properly is whether Commerce, which is undoubtedly the agency charged with enforcing this statute, has adopted a reasonable view when it's taken one of those two positions. Stephen G. Breyer: What -- what do we do about the question that is bothering me? Maybe at some point -- maybe it's not a relevant question -- but I will assume for the sake of argument Commerce does have the power to classify it either way. What is bothering me, and maybe that's not in this case, is that as the -- as your brother lawyer just said, this statute has been around for 90 years. There has been trillions of dollars worth of foreign commerce during that time. Yet I don't find cited here any instance in which Commerce ever before said that when you have title to a good, and you send it abroad, for even a big change in it, and then it comes back, that that is a sale. Now, I might -- I don't know all the Commerce cases; maybe they did. But what I found here is like a blank on that side, and on the other side the tolling cases, Florida Power & Light, the pizza case, to the point where I thought, if I was a lawyer advising a client, and that client said if I keep title to the good, am I home free, I would have to say, yes, you are. H. Bartow Farr, III: Okay. Stephen G. Breyer: Now that's the -- the question I want responded to in the legal context of, has Commerce made a significant change in its policy? H. Bartow Farr, III: Several things about that, Justice Breyer. First of all, as we have indicated in our brief, Commerce did have a policy prior to the tolling regulation, where it did treat these kinds of transactions as sales of goods. Stephen G. Breyer: And I read -- at what page do I find all these cases? H. Bartow Farr, III: That is in our brief. I'm sorry, I don't have-- Stephen G. Breyer: Well, roughly. I'll find it. I will find it. H. Bartow Farr, III: --But it's in-- Stephen G. Breyer: But I will see a lot of cases where-- H. Bartow Farr, III: --Where we discuss Commerce's tolling precedent. And then it went and it essentially decided that what it had done in that precedent, it wanted to reexamine that, because it thought in the end what was happening in all of those cases is there was a resale of the merchandise; and it thought it would be a better practice to focus on that sale of the merchandise for purposes of applying the statute. When it did that, however, it found it had created a loophole in the case where there wasn't a further sale. So it has gone back to that. So at least in terms of the precedent, Commerce has been on different sides of that, but they have been wrestling with exactly the problem that I outlined at the beginning, which is dealing with a question that essentially has no ready answer to it and trying to pick among the plausible answers that were available to it. Secondly, just about the specific situation here, I don't believe that there is any chance that the utilities and the enricher in this case could claim unfair surprise or unjust reliance; because they say in their own briefs, they did not set their transactions up in this way in order to try to comply with prior decisions of Commerce. They say -- they make a point in their brief in saying we have perfectly innocent intentions here, that they set their transactions up purely for historical and commercial reasons. So -- now, the other question that Justice Breyer raises is about the cases, and Justice Ginsburg I think mentioned earlier the Florida Power & Light decision. And again, Florida Power & Light is a case in which there is no agency that is before the Court. So at that point there is no question of Chevron deference, no question of whether this is a reasonable position; all that the Court had to decide was, given the possible choices, which did it think was the better choice under those circumstances? And particularly I think it's important in that case, is the Federal Circuit said, this is a case that doesn't fall readily into either of the two categories. So it went ahead and had to decide it on its own. But it seems to me that when you say in a case with an agency involved, and the agency has made one determination, that a case could fall within either of categories -- of categories-- John Paul Stevens: Mr. Farr, are there earlier cases that applied Chevron deference to the Commerce's determination of what a sale is? H. Bartow Farr, III: --No, there are not, Your Honor, that I am aware of. But-- Anthony M. Kennedy: You agree that the Chevron case is not a substantial evidence case? H. Bartow Farr, III: --I do think so, although I must say the line between the two is not enormously clear to me, to be honest. But -- but the fact is if I were trying to figure out where on the side of the line it goes, it seems to me that this is a case in which you are talking about the application of a legal standard to a particular set of circumstances. I mean, in Chevron, you have the situation, is a certain kind of facility a stationary source or whatever? I mean that -- you could say, well, that is a factual question in some way, but it seems to me ultimately the better way to think about it is Commerce's responsibility is to interpret the law in the light of cases that come up. I mean, an agency does not -- is not expected by Congress just to sit back and imagine all the possible situations that could be a sale of merchandise. I think what the agency is supposed to do is, confronted with the circumstance in a particular transaction, to apply its judgment on the statutory language and say, yes, we do think this is a sale of merchandise or no, we don't. John G. Roberts, Jr.: If we are to defer to the agency's interpretation, what -- how would you phrase its interpretation, apart from "this is a sale"? H. Bartow Farr, III: Well, I think -- the narrowest interpretation, and it seems to me the one that is most readily dealt with is, to say, in a situation where a customer provides raw material that is the type of, but not the precise raw material, used by a manufacturer to make the good that it then delivers to the customer, in that situation, we are going to treat the manufacturer as having made a sale of that good for the consideration of the cash and the raw material. John G. Roberts, Jr.: So it doesn't matter whether there is a substantial transformation or not? H. Bartow Farr, III: I think it does, Mr. Chief Justice, in this sense, that we are talking about the sale of the merchandise and that is a new good. So the substantial transformation is essentially what moves the ball from -- from being the -- the raw material supplied by the customer to something different. And the question would be in this case, could Commerce reasonably think that the manufacturer had sufficient control over the new good to be deemed the owner of that? And I think it's important to look, if you look at the -- there are two different commodities that are being talked about in the case of this transaction: One is the feedstock, the raw material; the other is the-- LEU. And the idea that the Respondents posit is, well, this is just a service performed on our material. All we are doing is getting our material back after a service has been performed on it. But as everybody agrees, as a matter of fact, that is simply not so. They are not getting their material back with a service performed on it. They are getting a product that has been produced, manufactured, from raw material that is fungible and in the general inventory of the manufacturer. And in that case, it seems to me, Commerce can say, we are going to disregard the fiction of the parties' contracts that say this really is made from our material, and say we are going to look at the actual nature of the transaction. And in the actual nature of the transaction, as I said, it is not made from their material. John G. Roberts, Jr.: So that -- so that is the critical factor, whether it's made from their material, regardless of whether there is a transformation? If the domestic entity provides wood, wooden two-by-fours, and the foreign entity coats it in a certain way, but they can use any two-by-fours, they are indistinguishable, you would say in that case there's still -- that's still subject to Commerce's position? H. Bartow Farr, III: No, I don't think Commerce would say that. I am to some extent speaking for them here. But I think what Commerce would say is, when you have a fungible raw material in substantial transformation without-- John G. Roberts, Jr.: So it's got to be both? H. Bartow Farr, III: --I think that Commerce would say, if you have both, that clearly can be regarded as a sale of merchandise, and we will regard it as a sale of merchandise. On the other hand, if you only have substantial transformation but not fungibility, then I believe Commerce would say, even in that situation, because it's ultimately the effect on the domestic competitor is exactly the same, we would retain the discretion to treat even that as a sale of merchandise. John Paul Stevens: Would you-- H. Bartow Farr, III: I would emphasize that's not the case. John Paul Stevens: --Would you do that if you thought it was clear as a matter of common law or under the Uniform Sales Act, or something like that, that it was not a sale? H. Bartow Farr, III: I think because of the different circumstances, under the common law, for example, I should make very clear -- but I should make first my answer to you, Justice Stevens. Under the common law, the particular transaction we were dealing with here, where it is not made from the identical material, is clearly a sale under the common law. But if you -- if Commerce were going to say, in a situation where it is made from the identical material, we want to depart from the common law, I think they would have to justify that. John Paul Stevens: Under common law, you don't need deference. H. Bartow Farr, III: Pardon me? John Paul Stevens: I'm sorry. If it were clearly a sale under common law, you wouldn't need to rely on deference. H. Bartow Farr, III: Well, in the end, I think, in the commercial setting, there is a reasonable chance, not necessarily certain because you do have the UCC and you have the possibility, in those situations, the courts might say, in a commercial setting, we are going to pay more attention to the parties' efforts to structure their contracts in a particular way, so that between them, we are going to treat the contract differently. All our position is, is that Commerce, in applying the antidumping law to protect a third party doesn't have to observe the fictions in the parties' contract. John G. Roberts, Jr.: Thank you, counsel. H. Bartow Farr, III: Thank you. John G. Roberts, Jr.: Ms. Halligan. Caitlin J. Halligan: Mr. Chief Justice, and may it please the Court: I would like to start with Justice Breyer's question about the way in which the Department of Commerce has treated transactions for the processing of goods and the uncertainty that their position in this case will cause, not just in this industry but across industries. As you suggested, Justice Breyer -- you referred to -- the Department of Commerce has treated processors who are called "tollers", in the language that Commerce uses, as performing a service. And the transaction for the sale of that service has not been treated as a cognizable sale under the antidumping law. Antonin Scalia: And those have been cases where the very same product is returned with value added, right? Caitlin J. Halligan: Not necessarily. Sometimes that is the case, Your Honor, but not always. For example, in the Taiwan Semiconductors case, which Mr. Stewart referred to and which is cited in our brief, what the U.S. company provided was simply a design to for a chip. The Taiwanese company, which was the processor in the case according to the Department of Commerce, manufactured the chip, provided the silica, used the design of the U.S. company, but no raw materials at all. The Department of Commerce, in its explanation as to why it treated the sale for purposes of the antidumping law as the eventual sale by the U.S. company and did not and could not treat the sale by the processor as a cognizable sale, explained that the statute itself requires Commerce to compare the U.S. price, which is called the export price, the price at which a good is sold or imported into the United States, with the price at which the product is sold in the company's home market. And because a processor does not and cannot either provide all the essential components of the product, because it's only providing the processing service and not the raw materials, and because it does not and cannot set the price at which the product is sold in the United States, it is therefore not the appropriate sale to look at that in terms of the antidumping statute. That's-- John G. Roberts, Jr.: What do you do about the substance versus formality question? I mean, if you do have fungible raw materials, why should it make a difference whether the domestic company supplies those to the foreign company or simply says -- gives them money and says, buy them yourselves? And in the latter case, you would say that's a sale, and in the former case you would say it's not a sale? Caitlin J. Halligan: --First of all, the Department of Commerce has not until this case suggested that fungibility of goods might make some sort of a difference. In fact, in one of the cases that we cite regarding flanges which were, according to the Department of Commerce, fungible, they concluded that the processing service there was not the cognizable sale, the downstream sale of that product was. But more importantly it doesn't change the substance of the deal between the two parties. What the utilities come to the table with is cash, and they provide the feed. It is fungible as a matter of its physical properties. It is a gas. And when the feed is put into the gaseous diffusion chamber, which is the very large installation that the enricher uses to concentrate the two different molecular isotopes, it takes a month for the gas to work its way through this plant. The enricher cannot feasibly segregate different lots of feed, just like you can't with a grain elevator. The analogy would be, with respect to a grain elevator, you would have to run in one farmer's bag of feed, run it all the way through the elevator and through the mill, and wait until the product comes out at the end, and then run another farmer's bag of feed through. That's economically impractical and-- Antonin Scalia: No, old mills used to do that. The farmer used to take his harvest to the mill, and it would be ground right there while he was waiting. Caitlin J. Halligan: --But -- but there is nothing about the economic transaction that requires that it-- Antonin Scalia: That's absolutely true. Caitlin J. Halligan: --that happen, and more importantly, the enrichers don't end up at the end of the day with any feed. They are also-- Antonin Scalia: Your brief constantly assumes that there has been no sale, that throughout the entire transaction, the utility owned what ultimately becomes the rods, as though it was indeed the same feedstock that produced the rod that was ultimately delivered. And that is simply not true. There is a change -- there is a change of ownership. The feedstock that somebody else put into the mix is now transferred to the -- to the electric utility. Caitlin J. Halligan: --It may be the same molecules; it may not be. There is no way to know or to tell. And there is-- Antonin Scalia: That's exactly right. You don't know. So, you had cannot say that there has been no transfer of ownership. Caitlin J. Halligan: --Respectfully, Your Honor, I disagree. If you look at the contracts, and the substance squares with the contracts because, at the end of this transaction, what the enricher walks away with is cash and what the utilities walk away with are the same number of uranium molecules that they came to that plant with. Antonin Scalia: No, we've got the same molecules. I mean, when you are talking about whether there has been a transfer of ownership or a transfer of title, you are talking about molecules; you are not talking about whether you ended up the same in, you know, in monetary terms. You are talk about whether you have the same thing that you delivered to the person overseas. And you don't, or at least you can't say that you do. Caitlin J. Halligan: You can't say for sure because the gas molecules can't be segregated that way. I think that you need to look at two things: I think that you need to look at what each of the parties to the transaction come to the table with and what they walk away with. And with respect to the utilities, they come to the table with uranium. It's a very expensive commodity. The contracts are clear that they hold title to it through the process until such time as they take possession of the concentrated uranium. It is clear from the contracts that there is an intent to maintain a continuous stream of ownership. Antonin Scalia: That makes no sense, what you just said. That contract makes no sense. They hold title to it until they get the uranium rods, right? Caitlin J. Halligan: No, they hold title to it until -- just to provide a-- Antonin Scalia: Most of it is back overseas. It's still mixed with the other fungible U 235. Caitlin J. Halligan: --Your Honor, the contracts provide several things. First of all, they provide that the utilities will deliver their feed within a certain number of days prior to the date on which they will have the concentrated uranium product provided to them. It's 60 to 90 days, depending on the contract. So, pursuant to the contract, they deliver the uranium feed. The utilities run it through their system. And at the end of that diffusion process, they take the concentrated isotopes out and they provide that to the utility. The enrichers don't receive any amount of feed that they can then take on to the open market. By distinction, if you look at a used car sale, for example, which is an analogy the government uses. If I want to trade my car in, I come to the dealer and I bring with me two pieces of consideration. I bring the used car, which is payment in time and I bring cash. I walk away with my wallet a little bit lighter and a new car, and the used car dealer has cash, but also has an item that he can then go out onto the market and sell. That does not occur here. David H. Souter: That's only -- that's only true because apparently they use up all the feed that they get. If, in fact, they found a way to manufacture to enrich more efficiently so that some feed was left over, I presume you would not be here arguing that they could not sell that feed on the open market even after they had delivered the enriched uranium to the buyer? Caitlin J. Halligan: The price terms of the contract provide only for the utilities to pay for the amount of energy that is expended. I would distinguish this from another kind of contract per uranium feed, which we don't contest is covered by the antidumping laws. There is a very small percentage of concentrated uranium, of low enriched uranium that is sold pursuant to what the parties call an enriched uranium product contract, an EDP contract. That sort of a contract is one in which the enricher goes out into the market procures feed and performs a processing service. The utility comes to the enricher, pays them cash and walks away with the product. By comparison, in these contracts, the utilities are providing something that is very valuable. The feed company-- David H. Souter: Yeah, but why are they providing something that is very valuable that, in fact, could not be obtained by the enricher on the open market if those were the contract terms? The enricher buys it in the -- in the -- I forget the acronym in the case that you just described -- and we don't know -- we have no reason to believe the enricher couldn't go out on the market and buy it if, in fact, the utility didn't supply the feed. Caitlin J. Halligan: --Those are very different kinds of contracts, though, Your Honor. The contract in which the enricher simply provides some amount of enriched uranium for a price and procures the feed, which is a sliver of the total contracts -- it's 5 percent even for USEC -- is one in which the enricher is bearing the cost of the feed and the risk of those price fluctuations. The reasons that the contracts are predominantly, almost exclusively structured as services contracts by distinction is that the utilities choose to manage the process of procuring fuel themselves. David H. Souter: Sure. They would rather manage the risk of price fluctuation than, in effect, pay the premium that the processor would have to charge in order to hedge against price fluctuation-- Caitlin J. Halligan: That's right. David H. Souter: --That's why they are doing that. Caitlin J. Halligan: And so, they go out into the market and procure the feed pursuant to whatever arrangements they have with their feed suppliers. By comparison, all they are coming to the enricher for is the service of concentrating that positional isotope into the assay-- David H. Souter: That is a way of looking at it. But another way of looking at it is because they choose to, in effect, take the risk of price fluctuation as preferable to paying a higher ultimate price, they are simply, for that reason, choosing to pay both in cash and in a -- a valuable commodity, i.e., unenriched uranium. You can look at it either way. Caitlin J. Halligan: --They are. But they are choosing to pay two completely different entities in two unrelated and two unlinked transactions. So, it doesn't -- we are not disagreeing that there is a transaction for feed that the uranium -- that the utilities engage in to procure their feed. There has to be. But that is not part of the distinct services contracts for processing only, which is all that the Department of Commerce is looking to shoehorn into this statute here. Antonin Scalia: --Ms. Halligan, try this hypothetical, and it really gives you the benefit of the doubt. Let's assume a department store buys raw wool from some sheep herder, sends it overseas. And it's worth $1,000, this raw wool. It is processed, spun and knitted into sweaters, and then shipped back to the department store. The sweaters, all made from the same wool, not even fungible, so that's why this is even better than your example -- the sweaters when they come back, are worth not $1,000, but $20,000. Do you think it would be unreasonable for the Commerce Department to treat that as a sale of sweaters by the European knitting wool or -- or home knitters who did the sweaters? Caitlin J. Halligan: It would be perfectly appropriate for the Department of Commerce to do what it has done in the past, which is to treat the sale of the sweater by the U.S. companies for $20,000 as the cognizable sale. The only thing that makes this case-- Antonin Scalia: Say it again? Caitlin J. Halligan: --In your hypothetical-- Antonin Scalia: I'm talking about the -- I'm talking about the sale from the European mills to the American department store. Caitlin J. Halligan: --That would be a processing transaction. Antonin Scalia: A processing transaction. It has changed a value of $1,000 into a value of -- what did I say -- $20,000? And that's just processing? Caitlin J. Halligan: Let me give you an example of what the Department of Commerce has looked at. They -- they looked at the processing of pasta. And the -- there the manufacturer came to a company -- this is a place called Certain Pasta from Italy -- it's referenced in the brief -- the company came to the processor with wheat and presumably whatever other products went into the pasta, some milk or eggs. The pasta was processed and made into pasta from the wheat and given back to the U.S. company. The Department of Commerce concluded that the appropriate sales target was not the making of the pasta, the processing of the pasta, but the downstream sale of the pasta in the United States. And that is what the statute requires. Antonin Scalia: They said there was no sale. Caitlin J. Halligan: They said that-- Antonin Scalia: When the pasta was imported, there was no sale into the United States. Caitlin J. Halligan: --No, they said that-- Antonin Scalia: But that's what we are talking about here. Caitlin J. Halligan: --We don't disagree, Your Honor, that there is a product that comes into the United States, it's low enriched uranium. But the statute doesn't target the importation of products. And in that way it is distinct from the companion statute, the countervailing duty statute. What this statute, the antidumping statute, covers is the sale of merchandise into the United States. That means that you have to have merchandise as distinct from services, but by comparison to countervailing duty statute covers both, which is part of how we know that Congress means that distinction tolls. And you have to-- Antonin Scalia: Get back to your pasta case. Was the holding of that case that there was no sale into the United States? Caitlin J. Halligan: --The question before Commerce was which transaction is the appropriate transaction for us to treat as -- as the one that establishes the price all over the United States. Antonin Scalia: That's a different issue. We are not talking here about which transaction establishes the price. We are talking simply about whether there was a sale into the United States. Caitlin J. Halligan: It turns on the same issue, Your Honor, and here's why. In all of these processing cases that the Department of Commerce has looked at, they have explained that the reason why the cognizable sale is the sale of the finished product in the United States, the pasta, the sweater, or whatever it may be, is because the statute gets at price discrimination. And it instructs the Department to look at the price at which the product is sold in the United States. The price for the weaving of the sweaters, even if it does add the sort of value that you are talking about, is not the price at which the product is sold, nor does it reflect all of the components of the transaction, because there is some components that the wool request. So to determine whether there is price discrimination, you have to look apples to apples at which the product is sold in the United States. Antonin Scalia: Now, wait. Suppose these knitting mills in my example, in fact, are selling their sweaters for a much higher price in Europe. Instead of $20,000 for this batch of wool, in Europe they are selling it for $40,000. And they nonetheless sell the wool back into the United States for only $20,000. You are telling me that that transaction doesn't -- doesn't count for purposes of our antidumping law? Caitlin J. Halligan: To the extent that it may-- Antonin Scalia: That you have to look at the price at which the department store then sells to individuals? Caitlin J. Halligan: --That's right. Because that's what the statute is intended to capture. The statute was enacted-- Antonin Scalia: But the department store is not dumping. It's -- it's the knitting mills that are dumping. Caitlin J. Halligan: --But the question, Your Honor, is -- is the price at which the product is sold in the United States. Section 1677(a) defines "export price" and "constructed export price" as the price at which the subject merchandise is first sold in the United States. And that is what you have to look at. It may certainly be true that you may be able to sell a product at less than its fair value to the extent that you are obtaining processing services at a price lower than what you could obtain them in a foreign country. But the -- the bottom line is you have to look at what the statute explicitly instructs, at the price at which the subject merchandise is sold in the United States. Antonin Scalia: Okay. And accepting that, you -- you have to begin the whole thing, however, with a sale, with a sale into the United States, right? Caitlin J. Halligan: A sale and I-- Antonin Scalia: And I thought this is -- this is what you say fails in this case. That is the link of the chain that doesn't exist. You say there is no sale in the United States. Caitlin J. Halligan: --There is an importation of LEU into the United States by the utilities. The utilities consume that fuel in their reactors. They do not sell it onward as the company would sell a sweater or would sell a pasta or would sell Rya rugs. That is something that makes this case somewhat different and-- Stephen G. Breyer: That is pretty important. Tell me -- this is a hard area, obviously. But the -- imagine -- think of all the toller cases that they've had. Now -- now, is this right: That in every one of those cases there were two companies, A and B; and in every one of those cases A sells a finished product into the United States. And also A sends the product to B to have some major thing done on it. In every one of those cases the Commerce Department could say: We can take A as a Respondent; i.e. we think A might violate the law, because maybe it's an Italian company, or we think B might violate the law. Is that true of all those cases? Caitlin J. Halligan: --It is true. Stephen G. Breyer: All right. Now, if it's true of all those cases, then I think what the opposite position is, what Mr. Farr said, I think -- I think, you know, I will -- he will say: Look at page 40 and 41 of their brief. When I look at those pages, I am going to see a lot of cases. And I bet, when I look them up, those Commerce cases are all going to use the word "substantial transformation". And he will say: You see, that's what they did here. Then he's going to add -- I don't mean to put words in his mouth if the words are wrong, but -- but he's going to add: Look at those tolling cases. Those are all cases where Commerce had a choice of which to consider the sale. It could have considered the sale from the processor A to -- to B to A, the sale if it wanted to; or it could have considered the sale into the United States if it had wanted to, to be the sale for purposes of calculating the price. And so in choosing between those two, either of which it could have chosen, it chose the latter sale, the final sale, because that's how they could calculate the price. But in your case there is no such person A, because the utilities are not people who could be respondents. I mean they are not in the same position. There is no sale onwards that they could choose. So we will go to the other guy, the party -- the person who does the processing. Are you following what I am saying? Caitlin J. Halligan: Yes. And then it starts an invidious-- Stephen G. Breyer: And what is the answer to that? Caitlin J. Halligan: --And here is why that's not sufficient. It's the problem of the tail wagging the dog, right? What the United States is saying is that because in this single circumstance we do not have a downstream sale of pasta, or a sweater, or whatever the item might be, and we can't go after that transaction, that, therefore, we are asking this Court to sign off on essentially rewriting the statute. The statute refers to a sale of merchandise. Stephen G. Breyer: Yes. But, remember, they are saying in the tolling cases, in my words: Hey, we could have gone after the processor if we wanted-- Caitlin J. Halligan: But that's-- Stephen G. Breyer: --if there had been a substantial transformation, because the key to this concept of "sale" is the word "substantial" transformation. Caitlin J. Halligan: --Two responses, Your Honor: First of all, the statute doesn't allow that, and I would recommend to the court the remand response that Commerce provided in the Taiwan semiconductor case. Stephen G. Breyer: In which-- Caitlin J. Halligan: The Taiwan semiconductor case which is cited in the brief. It explains why the definition of "export price" and "constructed export price" means you can't go after a processing transaction. Secondly, in order to find for the government here and reverse the Federal circuit, you would effectively have to agree with the government's position that processing services where they are part of the manufacturing operation somehow are within the terms of the statute. And so that would mean that the government can say in this case that because there's no downstream sale that it can capture, it will choose to go after the processing transaction. But there is no way to gauge down the road whether it will make the same choice. And here-- Antonin Scalia: What does -- what does the government do with respect to these other transactions where, indeed, the utility does not provide the feed uranium but just pays for, you know, getting -- getting the rods? Caitlin J. Halligan: --In those cases-- Antonin Scalia: There is no down -- you know, there is no domestic sale there, either. Is it conceivable that there, therefore, can be no dumping in such a case? Caitlin J. Halligan: --No. Those cases -- we -- we do not disagree -- are a sale of merchandise because the utility is paying for the entire commodity. What -- that is a substantial transformation point, Justice Breyer. I would like to -- to return to that. There are many processing transactions which involve some kind of substantial transformation where you have a product like wheat and you turn it into something else like pasta, or wool and you turn it into-- John Paul Stevens: Isn't it true that in all of those cases there is no transfer of ownership of the basic product? And here -- and I am not sure you have really addressed it -- it is a fungible product, and you are assuming you can't tell whether -- when it is in process or whether it is one party's or the other's. But if you could tell and you had some way of identifying just which one here, but they wouldn't care because they are all equally valuable, and if it developed that it was actually a third party's product that was being processed, then there would be a transfer of ownership, and there clearly would be a sale. Isn't that true? Caitlin J. Halligan: --I think not, Your Honor, certainly not for the same reasons that you would have that in -- in a grain elevator. If the enricher goes out and purchases the feed and holds title to that feed while it is enriching it, then, yes, there would be a transfer of ownership. John Paul Stevens: But you have the same contract you've got here, but you are able to identify that, in fact, there is a difference in the -- in the commodity that -- that -- at least not a different raw material that was sent to France and returned. It is just a substitute. It seems to me that -- in that context, within the meaning of your argument, that there would have been the transfer of title to that -- that commodity. Caitlin J. Halligan: First of all, you can't tell -- and I don't think there is any -- any dispute as to that fact. But, secondly, if you look at the common law of-- John Paul Stevens: Well, isn't it true, if you can't tell, the odds are that there is some product the title to which has been transferred? Caitlin J. Halligan: --No, I -- I think you certainly can't tell what molecules come out the other end. I think-- Anthony M. Kennedy: Can't we assume -- let's assume that there is. Caitlin J. Halligan: --Yes. Anthony M. Kennedy: Assume that there are -- are two sources for the uranium, A and B, and it goes to the enricher. A gives it; B gives it. A ends up with B's uranium. Justice Stevens is saying at some point there is a transfer of title. Caitlin J. Halligan: And that's -- that's the operative premise that I am disagreeing with, with all due respect. Anthony M. Kennedy: No. We are asking you to accept that hypothetical, so we can-- Caitlin J. Halligan: I mean the legal -- the legal consequences is -- is what I am-- Anthony M. Kennedy: --Are you saying the utility doesn't have title to what was formerly B's uranium? Caitlin J. Halligan: --The utility holds title to a discreet amount of feed uranium. It's in -- I-- Anthony M. Kennedy: The enrichment is done. It's back in the United States. The utility says: This is my uranium. I have title. Do you dispute that? Caitlin J. Halligan: --No, not at all. Anthony M. Kennedy: How does he get the title from -- to the uranium that was formerly B's uranium? Caitlin J. Halligan: Because-- Anthony M. Kennedy: At what point did that title transfer? Caitlin J. Halligan: --It -- maybe the useful analogy is money -- is money in the bank, Your Honor. If I take $100 and I bring it to the bank, ten 10's, and I take away five 20's, I may not have the same dollar bills that I brought to the bank, but I don't think anyone would argue that, somehow, the bank takes title to my money. I retain ownership of that, and there is nothing in the contract which suggests that there is any change of ownership that is-- John G. Roberts, Jr.: You don't -- you don't retain ownership of that. And if you go to the bank and say: Show me my money, they are not going to say: Well, here's your money. They -- they have title to it. They own it, and you have a claim against the bank to what you gave them. Caitlin J. Halligan: --But the bank could not hold title to that as against me if I came and tried to take the money out of my safe deposit box, nor could the farmers at the -- at the grain elevator be told that they -- they don't have title to the grain. Stephen G. Breyer: --Is there any point in time from the time that the -- the processors get ahold of the uranium until the time it leaves their control that if they went bankrupt, anyone other than the utility could get ahold of the product? Caitlin J. Halligan: No. Stephen G. Breyer: No. Okay. Caitlin J. Halligan: And let me clarify this because it's an important issue. These are very expensive, offshore transactions that the utilities engage in in order to purchase a feed. It is a very valuable commodity. So what is critical to the-- John G. Roberts, Jr.: Well, but if they go bankrupt because -- I mean let's say they don't have all the uranium. They have got five people who shipped them uranium, and they have only got enough for four. Each of the five can't say: I'm entitled to get mine back. Caitlin J. Halligan: --But -- but the system doesn't operate that way, Your Honor. The contracts provide that the utilities have to deliver feed. And it's a very different sort of business that the utilities are engaged in, to go out into the market and make bets based on the price fluctuations for uranium and procure that uranium. The enrichers are not in that business, and so there would be no economic reason or any reason provided for in the contracts for them to proceed that way. I would like to touch briefly, if I can, on the purpose of the statute, because the government relies very strongly on this notion that somehow the processors' sales have to cognizable in order to further the antidumping statute. This law is not a boundless license to protect domestic industry from any competition. There are other statutes that are are written much more broadly in the trade laws; for example, the countervailing duties law, the safeguards law which allows the Department of Commerce to impose quotas or tariffs on the import -- not the sale but the import of any goods, statutes regarding the protection of intellect0ual property rights, all of which are cited in the -- in the briefs. So the notion that somehow to protect the integrity of the statute you need to rewrite it to allow them to address processing sales exclusively is really not -- not well-founded. Finally, with respect to the loophole question that the government has relied on, I think it's important to focus on what is specifically at issue here. The government initially argued that it was critical to address this case and these particular transactions because of concerns about agreements with the Russians. That has been addressed as to U.S. concedes in its reply brief by -- legislation that has been implemented by Congress. The government has consistently in court and in its decisions -- not just in the Contract Disputes Act that you referenced Justice Ginsburg, but in other cases regarding the UCC which relates to the sale of goods, the government has said: These very kinds of contracts for the processing of uranium are contracts for services. They are not covered by statutes that reach the sale of goods or the disposal of property. There is nothing that has changed with regard to the statute or with regard to these kinds of transactions; and, accordingly, we would ask you to affirm the Federal Circuit. If there are no other questions-- John G. Roberts, Jr.: Thank you, Ms. Halligan. Mr. Stewart, you have three minutes remaining. Malcolm L. Stewart: Thank you. One of the things Ms. Halligan said, and I think it's really a central theme of their brief, is that utilities come to the enricher for services and not for goods. And to understand what it is that utilities acquire, I think it may be helpful to ask: Under what circumstances would the utility have a valid breach-ofcontract right? And it is very clear that the enricher's obligation under the contract is to deliver a specified quantity and assay of enriched uranium at a specified time and place. And if the enricher complies with that obligation, it doesn't matter that the enricher decided to -- what they call in the industry -- SWU's to produce the final product. And the utility in that circumstance couldn't file a breach-of-contract claim by saying: I paid for more SWU's than I actually received. Because what the utility had contracted for was a given product. The second thing -- and I think the corollary to that is -- it's potentially misleading to say that every contract is either one for merchandise or one for services, especially when you are contracting to acquire ownership of a commodity that doesn't exist at the time the contract is formed. The only way you are going to get to your ultimate objective is for somebody to create it. And that can generally be described as a service, but it still results in the sale of goods. With respect to the used-car analogy, I understood Ms. Halligan to acknowledge that -- that that would be a sale even though the consideration paid by the customer is partly in cash and partly in kind. And if the customer and the car dealership characterize their contract as one for car-refurbishment services and said that the new car the customer receives shall be deemed to be the used car that it traded in in refurbished form, nobody would contend that that deeming quality should be controlling. Now here the -- the falseness of the proposition that it's the same feedstock is less apparent, but it's equally the case that the utility doesn't receive back its original feedstock. And finally the perspective of tolling regulation in cases, Commerce has essentially said three things: First, we were dealing with a separate question; that is, who is the producer, which sale is relevant, and not whether the goods are covered at all. Second, they said in those situations the tollee was exercising much more control over the ultimate process than is the case here where the utilities don't manufacture anything. They simply pay for one of the inputs. And, finally, Commerce said that if at some level of abstraction there is a tension or contradiction between what we said previously and what we decide today, then what we decide today controls. And Commerce is entitled to make that determination. John G. Roberts, Jr.: Thank you, Mr. Stewart. The case is submitted.

Warren E. Burger: We will hear arguments next in Waller v. Georgia. Mr. Shafer, I think you may proceed whenever you're ready. Herbert Shafer: Mr. Chief Justice and may it please the Court: We are here for three reasons. The first relates to the closure of a suppression hearing over a defendant's objections. The second relates to the statute which authorizes warrantless seizure of "property subject to forfeiture", and it was upheld by the court below. And the third relates to the proper remedy when police treat an otherwise valid warrant as a license to conduct a totally indiscriminate search and a warrantless seizure. I will address these issues each in turn. First the closure. We respectfully submit that the Constitution guarantees open suppression hearings, that suppression hearings may only be closed upon a demonstration of compelling justification, and then only if no means short of closure will achieve the compelling state purpose. William H. Rehnquist: Does your argument extend to the suppression hearings conducted previous to the impaneling of the jury, as well as to a suppression hearing conducted after the jury was impaneled? Herbert Shafer: Justice Rehnquist, we would not rest on so technical a ground. Philosophically, the societal and defendant's interests are in this context so broad that we would not urge that the mere impaneling of a jury is the predicate for the position we urge. We say that, irrespective of whether a jury has or has not been impaneled, that the interests are so broad and so compelling that closure, particularly over a defendant's objections, as in this case, cannot be squared with the Sixth Amendment's commands. Nor, bearing in mind society's interests and the interests of the criminal justice system-- William H. Rehnquist: Mr. Shafer, supposing that you had a suppression motion well in advance of trial, but it's closed by the court. The court refuses to suppress the evidence, it is then admitted at the trial, which is perfectly open. Under your theory, the closure of the motion hearing would have violated the defendant's right to a public trial. What would be the remedy for that violation? Herbert Shafer: --The remedy for that violation, because it is such an egregious affront to the Sixth Amendment right to open proceedings during the entire course of criminal proceedings, and to the First Amendment, that there can be only one remedy without trivializing the significance of both of these amendments, and that would be to send it back for a new trial in its entirety. Harry A. Blackmun: Nothing short of that? Herbert Shafer: Nothing short of that, no, sir. Harry A. Blackmun: Are you positive about that? Herbert Shafer: To treat it as a mere procedural quirk, without cloaking it with all the grandeur of these two amendments, is to demean it. It's too grave an affront to both of these amendments to treat it as anything other than-- Harry A. Blackmun: Well, I took the Justice's hypothetical to say there was nothing wrong with the trial, the trial was open all the way. Why wouldn't you have a suppression hearing repeated, and wouldn't that be enough by way of remedy? Herbert Shafer: --I'm sorry, I don't understand. Harry A. Blackmun: I understood that the hypothetical given by Justice Rehnquist was to the effect that the trial was perfectly open, the trial itself. And why do you have to have a new trial then? Wouldn't a new suppression hearing, so to speak, be a sufficient remedy? Herbert Shafer: Justice Blackmun, we respectfully suggest not. As in the case of a grand jury not being properly constituted, this Court has not sent cases touching upon that infirmity back for the impaneling of a new grand jury, but has vacated the conviction and sent it back for a trial de novo. We believe that openness is of equal significance and that it requires a new trial rather than sending it back for a suppression hearing. There's a more practical, there's a pragmatic reason why this case should not be sent back. John Paul Stevens: Mr. Shafer, may I throw this out at you on that very point. Supposing they suppress the evidence at the suppression hearing that was closed. Would you still think you're entitled to a new trial? You get all the relief you asked for in the suppression hearing except having it open. Herbert Shafer: I don't think you can escape the fundamental affront for the closure. John Paul Stevens: In other words, your answer is you'd say the same result? Herbert Shafer: I would say irrespective of what the result is. I think that this Court cannot countenance closed hearings. It's too important from the standpoint of society, from the standpoint of the criminal justice system, and from the standpoint of the defendant. It's something he's entitled to and ought to have. Warren E. Burger: If you carry your argument to its logical conclusion based on the affront to the system, then even if your client were acquitted you must be pressing for a new trial to vindicate the affront to the system. Herbert Shafer: The problem is I couldn't get here if he were acquitted, Justice Burger. Warren E. Burger: You might if he waived the double jeopardy, you might. Herbert Shafer: Conceivably I might, but realistically, Mr. Chief Justice, it seems-- Warren E. Burger: Well, realistically you wouldn't want a new trial then, would you? Herbert Shafer: --If he were acquitted? I would still feel some discomfiture, though, nevertheless, that over a defendant's protests a courtroom in this republic was closed. Thurgood Marshall: Will you please tell me what provision of the Constitution gives you remedies for your discomfiture? Herbert Shafer: I know of none, Your Honor. But I was trying to answer Justice Burger's questions and I knew of no other way to do it. I withdraw it. No, the Constitution does not protect my discomfiture. It does protect the discomfiture of the public, and that is one of the underlying reasons why we have open hearings. And to that extent, an affront to the public if there is an acquittal cannot be cured, and for that reason there should never be any countenancing of closed courtrooms under our scheme of criminal justice. There was no justification for closure in this case. The state asked for closure on the basis of a state law that the state claimed would disable it from future use of wiretap evidence. Whether or not this is so is something that the Georgia Supreme Court did not decide. And even if the statute were held to require closure in this case while the state played its tapes, the statute could not conceivably authorize closure for the rest of the seven-day hearing, and the tapes took two and a half hours to play. Nothing in the record justified closure. The Georgia Supreme Court said that the trial court legitimately balanced. It balanced nothing. There was nothing in the record to balance. The Georgia Supreme Court's ipse dixit cannot substitute for a trial court record that simply does not exist, and the trial court made no specific findings and closure was improper. And of course, the court perceives, quite rightly, the question of remedy here, and I trust that I need not allude to that further. Moving to the second issue, if the Court please, and that deals with the facial validity of Section 16-14-7(f) of the Georgia Code. We submit that we're dealing with a very special and a very dangerous type of statute. The statute purports to afford basic Fourth Amendment protections in authorizing the warrantless seizure of property subject to forfeiture. It permits a state officer to seize such property without a warrant only if he has probable cause to believe that such property is subject to forfeiture, and then only if he has probable cause to believe that the property will be lost or destroyed if not seized. And the Georgia Supreme Court has construed the statute to permit warrantless seizure only if it is incident to a lawful search, arrest, or inspection. That's pretty awesome stuff, and it seems to comport facially with the Fourth Amendment. Yet we nevertheless suggest to the Court that it is facially invalid. It is our position that the statute constitutes an open invitation to lawless police action so long as property subject to forfeiture is so broadly defined and so long as the judgment required to determine whether such property is associated with a pattern of racketeering activity-- Sandra Day O'Connor: Mr. Shafer, I'm not sure that the question on the statute is properly here. As I understand it, all the property seized which was not covered by warrants was suppressed. So we don't have any of that property in this case, do we? Herbert Shafer: --We did everything in our power to raise this question-- Sandra Day O'Connor: Now, yes or no? Wasn't the property suppressed, the evidence was suppressed as to all property seized except that covered by the warrant? Herbert Shafer: --We're unable to say, Justice O'Connor, what was suppressed and what wasn't suppressed and whether it was within the four corners of the warrant. And the reason that we're not able to say that, Justice O'Connor, is because the trial court resisted each and every attempt we made to present evidence on that question, whether in fact what was seized was the result of a pretextual warrant in the nature of a hoax perpetrated on an issuing judge and subverted, corrupted into a general seizure; whether, had the deponents disclosed to the issuing judge what their intent was, whether he would then have authorized or not authorized them to conduct the sort of search that they did. Sandra Day O'Connor: Well, don't we know what property was suppressed and what wasn't? Herbert Shafer: But we don't know whether it was authorized to be seized. We don't know... excuse me. We do know what was suppressed, but what we don't know was what was left, whether that was legitimately permitted to come in. That's the problem. We don't know that anything should have come in and we don't know whether the judge, had he permitted the officers to obtain the warrant and who were animated and guided by the authorization in the warrant... whether they did what they were supposed to do, and if they didn't whether they converted this otherwise facially valid warrant into a general search. Sandra Day O'Connor: Well, that's your last argument, but I'm trying to see whether this statutory question is even properly here. Herbert Shafer: Well, Justice O'Connor, all I can say in response to that is this. We may have a problem with that, and if so it would be appropriate to remand it. But I remind the Court that the failure to make a clearer record was not due to any conduct on our part. We did everything we could. We tried to get the police officers to come in to testify. The court said it wasn't interested in it. We ain't going to try no search warrant, if I recall, was the response of the court. The district attorney acknowledged that the validity of the search warrant was in issue, at the suppression transcript page 3, 10 and 11. The record is permeated with allusions to the RICO statute and to the fact that the searches were conducted under the authority of the statute. Some of the agents so testified, some of the searching officers so testified. Harry A. Blackmun: What county in Georgia was this tried? Herbert Shafer: Fulton County. Harry A. Blackmun: Right in Atlanta. Herbert Shafer: Sir? Harry A. Blackmun: Right in Atlanta, then? Herbert Shafer: Right in Atlanta. The searches and seizures were virtually, I believe, in 11 or 12 counties, at 160, 170 homes, 287 individuals named in the warrant to be searched, and they didn't stop there. They had a picnic. They just went on and on. But be that as it may, minimally, if the Court has some discomfiture, if I may use that bad phrase, with whether the statute is fully before the Court, minimally there ought to be a remand so that we can argue that question. William H. Rehnquist: Well, if it's not properly before the Court then it simply means that you haven't preserved it to bring it to our attention. We wouldn't do anything with it if it weren't properly before the Court. We wouldn't remand. Herbert Shafer: Well, Justice Rehnquist, this issue has troubled me a great deal, but I have given the Court the very best answer that I can and I have to live and die with it. The mischief with this statute, if I may discuss that briefly. This statute authorizes police officers to do anything they want to do. It's an invitation to anarchy in the context of search and seizure. In spite of the noble purposes set out in the statute and in spite of the gloss put on those purposes by the Supreme Court of Georgia, in actuality to expect a police officer conducting a search and seizure to determine whether he has probable cause to believe that all the property of an individual's home is subject to forfeiture or is part of a continuing criminal enterprise or is subject under RICO to forfeiture is like placing a 10b-5 statement before him and having him determine whether it complies with the securities laws. In practical effect, such a statute would either never be applied because it is manifestly unreasonable to expect an officer to make such a probable cause determination, or the statute would be applied despite its purported probable cause requirement. In short, the statute would stand as an invitation to lawless police action, which is precisely, precisely, what happened here. The fact of the matter is the statute is, as Justice Jackson said on another occasion, a teasing illusion. It is like a munificent bequest in a pauper's will. It promises everything and can deliver virtually nothing. I turn now, if the Court please, to the suppression issue, and it is a melancholy issue in this case. What happened here simply does not make a very pretty picture. The unconstitutional orgy of the way in which this search was executed and the way in which these seizures were made is of mind-boggling proportion. We're not-- Warren E. Burger: Well, do you think there's something inherently wrong with trying to search and seize in 200 or 500 or 1,000 places at once if they have the information? Is that what makes it an orgy, the numbers? Herbert Shafer: --No, sir, no. If I've intimated that, that is not the question. The question is what they did here and the manner they did it, not the numbers. I can conceivably see where thousands are involved in a criminal enterprise and, if probable cause exists and if the executing officers are governed by the authority set out in the warrant, by all means. But what we're dealing here with is, as the trial judge observed, they simply came in and took everything that they could carry out. There was no effort made-- Warren E. Burger: But some of it was suppressed, was it not? Herbert Shafer: --Yes, it was suppressed because it was irrelevant. They seized love letters which were irrelevant, they seized report cards of children which were irrelevant, they seized bounced checks which were irrelevant, they seized credit applications which were irrelevant. It was suppressed because it was irrelevant. It was not suppressed because of the heinousness, the revulsion that the trial court felt, that it should have felt, for what they did and how they did it. We're not talking in this case about the constable that blundered. We're talking about constables who knew very well what they were doing and who embarked on a prearranged design and plan to do precisely what they did here. They testified that it was their objective to seize evidence of assets so that forfeiture proceedings could be brought. There was nothing in the four corners of the warrant to authorize them to do that. So indifferent were they to the ambit of the warrant that they seized lock boxes where they didn't even bother to distinguish what was or what was not sizeable. Now, may it please the Court, it does not good to excite passions, but it's hard not to be offended by what was done here. So long as there is a Fourth Amendment and a Fifth Amendment, there must be a point at which this Court will say enough is enough. May I respectfully reserve the rest of my time for rebuttal. Warren E. Burger: Very well. Ms. Westmoreland. Mary Beth Westmoreland: Mr. Chief Justice, may it please the Court: As counsel for the Petitioners has pointed out, there are two separate issues presented to the Court, and I will address them in the order that the Petitioner, Mr. Shafer, has presented them to the Court this morning. I would first like to address the issue of the closure of the hearing on the motion to suppress and the circumstances surrounding that closure and the state's justification for the closure of that hearing. The state sought to close the hearing on the motion to suppress pursuant to a Georgia statute requiring that there be no unnecessary publication of electronic surveillance evidence, similar to such concerns that had been expressed under Title 3 of the Omnibus Crime Control and Safe Streets Act. So that the purpose of the closure was the protection of the privacy of other individuals. At the time the motion was made at the hearing on the motion to suppress, a colloquy took place between the court and counsel for all of the Petitioners present. Counsel for Mr. Cole, who is one of the Petitioners present in this case, concurred with the request and agreed to the closure of the hearing on the motion to suppress. As such, we would submit he simply has no cause to challenge the issue before this Court. Mr. Shafer objected on behalf of his clients and urged that his clients did have a right to a public trial. Once the court determined that closure would be effected, Mr. Shafer then requested that certain specified individuals be allowed to remain in the courtroom. At the insistence of counsel for Petitioner Cole, all of the individuals were excluded from the courtroom except for necessary court personnel, counsel, and the respective Petitioners in the case. Lewis F. Powell, Jr.: Ms. Westmoreland, would you refresh my recollection. How long was the trial... was the suppression hearing closed? Mary Beth Westmoreland: The suppression hearing was closed for the entire hearing, Your Honor. Lewis F. Powell, Jr.: How long was that? Mary Beth Westmoreland: About seven days, Your Honor. Lewis F. Powell, Jr.: Seven days. Does the record show how much of the suppression hearing actually related to the confidential information that prompted the closing? Mary Beth Westmoreland: Your Honor, what the record reflects... and I don't believe it's broken down precisely in time increments. We have a portion of the record, which admittedly is not in relation to the entire length of the suppression hearing, a portion of the record which is devoted to the playing of certain specific tapes of wiretaps which had been made. And I don't know that the record actually reflects precisely how long that is. I believe it is less than a full day period. Certain other parts-- Lewis F. Powell, Jr.: Would it be hours or days? Mary Beth Westmoreland: --It would be hours, Your Honor. Lewis F. Powell, Jr.: Hours? Mary Beth Westmoreland: Yes, Your Honor. I don't know precisely how long. I believe Petitioners have asserted two and a half. Lewis F. Powell, Jr.: Does the state contend it should have remained closed during periods when that type of evidence was not being introduced? Mary Beth Westmoreland: Your Honor, what we submit is that the initial basis for the request for the motion was justified based on the fact that not only were the tapes being played, but other evidence was being presented throughout the entire hearing. The main thrust of the hearing on the motion to suppress was electronic surveillance. That was... the majority of the motion to suppress was devoted to the electronic surveillance, the manner in which it was conducted, the persons who were surveilled, and various other things of this aspect. During the motion to suppress hearing there were references to individuals' phone numbers, other individuals who may have had their telephones tapped during this proceeding. At the beginning of the motion to suppress, I don't know that the trial court knew precisely to what limits the evidence would go during the hearing on the motion to suppress, but we would submit that there was a justification at the outset of that hearing for closing the entire hearing. And we would also note that there is no attempt made at a later portion to request that the hearing be made open at any part, even after the tapes were played. Lewis F. Powell, Jr.: There was no renewal of the request? Mary Beth Westmoreland: Not that I recall on the record, Your Honor. Lewis F. Powell, Jr.: At the end of the seven days, the judge did release some of it, didn't he? Mary Beth Westmoreland: Your Honor, there was a discussion conducted as to the transcript at that point I believe it was made available to counsel, and I think the transcript has been made available at this time. It was public once it was submitted to the Georgia Supreme Court. Lewis F. Powell, Jr.: By the time it reached the Georgia Supreme Court it was public? Mary Beth Westmoreland: Yes, Your Honor. I know it was open in the Supreme Court of Georgia. I don't know the status, at what point in time. Lewis F. Powell, Jr.: Open for the court or for the public generally? Mary Beth Westmoreland: For the public, Your Honor, to my knowledge. Byron R. White: Well, the tapes were played at the trial, weren't they? Mary Beth Westmoreland: Yes, Your Honor, the tapes were played at the trial. Byron R. White: So it's all going to be made public there, regardless of their impact on other people. Mary Beth Westmoreland: That's correct, Your Honor. And this is where we would submit that the trial court did conduct a balancing of the interests. Petitioners have asserted that the trial court balanced nothing. A reading of the transcript, of the particular portion on the motion to suppress dealing with this issue, shows that the trial court recognized the fact that if this motion were made in relation to the trial itself, then the public trial right would have to supersede any concerns of privacy or other individuals in regard to-- Byron R. White: Well, the state's interest in closing it, it sounds to me like it would only be to protect privacy in the event you lost your motion. If the motion to suppress were granted, you would have lost and what would have been your interest then? Certainly if you win and you plan to introduce the tapes at the trial-- Mary Beth Westmoreland: --Yes, sir. Byron R. White: --so you don't plan to protect anybody's privacy. Mary Beth Westmoreland: Your Honor, I think the state's interest-- Byron R. White: Well, what's the state's interest in closing the suppression hearing? Mary Beth Westmoreland: --The state's interest focuses on not only the fact... there are persons who were not being tried at that point, who were not indicted, who subsequently I think were tried or were considered for trial, and the state was seeking to protect their rights, at least to the fullest extent possible, recognizing they could not-- Warren E. Burger: We'll resume there at 1:00 o'clock. Ms. Westmoreland, you may continue. Mary Beth Westmoreland: Mr. Chief Justice, may it please the Court: The argument that I was making before we adjourned for lunch was dealing with closure of the trial. At this point I would like to move into some of the factors that were considered by the trial court and what was the basis for the closure. The trial court, as I have noted previously, did balance interests prior to the closure. He recognized that there was a public trial right and specifically acknowledged that that right would have to take precedence if this were addressed to the trial itself rather than the hearing on the motion to suppress. The trial court was also aware of the fact that there were other persons potentially involved. Shortly prior to this hearing, continuances had been granted for any number of defendants, and the trial court was aware of the fact that these defendants were also involved and could have been involved in some of the evidence that was to be presented at the hearing. Harry A. Blackmun: Is it your position that if anyone else is involved or affected, that that is sufficient in itself to close the hearing? Mary Beth Westmoreland: Yes, Your Honor, we would submit that... not just necessarily one individual, but in this circumstance we have the potential of so many individuals being affected and so many individuals' privacy rights being affected by the very nature of the crime that was involved, by the very scope of the gambling operation that took place, and I think that was one of the factors that was-- Harry A. Blackmun: So it isn't enough if just one person's rights are affected? Mary Beth Westmoreland: --That could be enough in a given case, Your Honor. And we would submit that what has to be considered in evaluating the public trial guarantee is the totality of the circumstances in any given case, to determine whether that public trial right must take precedence over other privacy rights of individuals in the case. William J. Brennan, Jr.: Well, Ms. Westmoreland, was there any reason that the proceeding could not have been open after the tapes were played? Mary Beth Westmoreland: Your Honor, the obvious response is that there was still the potential for other evidence coming out, as I have noted previously. William J. Brennan, Jr.: What kind of evidence? Mary Beth Westmoreland: For instance, other individuals' telephone numbers, names, and that type of information, which, while not necessarily within the restrictions of the statute providing for the publication, referring to the publication of wiretap evidence, still affects privacy rights of these individuals. William J. Brennan, Jr.: Was any suggestion made during the proceeding that it should be opened at some later stage? Mary Beth Westmoreland: Not to my recollect, Your Honor. There was no suggestion made by any counsel at a later stage that the proceedings at that time be opened. The suggestions were all made at the beginning of the hearing and I don't recall seeing one at any stage later in the proceedings. Byron R. White: Well, isn't this mostly speculation, though, about what invasions of privacy might occur? Were there any findings by the trial judge? Mary Beth Westmoreland: There were no factual findings made on the record at the time of the closure. Byron R. White: Well, or off the record, based on an off the record hearing? Mary Beth Westmoreland: No, Your Honor, although I think there was the opportunity there for a hearing should anyone wished to present any additional evidence. The court was, as I noted, faced with a situation in which obviously a great number of people were involved. Byron R. White: Well, I take it part of your submission, then, is that these kinds of findings are not essential to close? Mary Beth Westmoreland: A specific factual finding on the record we would submit is not essential to the closure of the hearing under the circumstances in this case, when it is important... when it is obvious from the record that the trial court did balance the rights. Byron R. White: Well, what would you say if at any suppression hearing the prosecution just got up and said, Your Honor, we'd like to close this hearing, and he said fine? Mary Beth Westmoreland: I would submit that in that circumstance the prosecution would have to go further than just merely requesting closure. Byron R. White: Well, why? What right is involved? Mary Beth Westmoreland: In the instance that Your Honor suggests, the court has no way of knowing what right is available which should take precedence. Byron R. White: Well, I know, but you mean there would be some federal constitutional obligation to keep the hearing open? Mary Beth Westmoreland: Your Honor, well, it would depend on what type of proceeding we're referring to. Byron R. White: Well, this is just a suppression hearing, and the prosecution says: Your Honor, we think it'd be better to close this hearing. Mary Beth Westmoreland: Your Honor, under those circumstances that-- Byron R. White: That infringes the defendant's right to a public trial, doesn't it? Mary Beth Westmoreland: --That's not necessarily the circumstance in which we would-- Byron R. White: Well, I know, but would that violate the defendant's rights, without some kind of findings? Mary Beth Westmoreland: --We would submit that a suppression hearing is not such a proceeding to which a public trial guarantee necessarily attaches. Byron R. White: Well, why don't you just take that position, then, and forget this privacy business? Mary Beth Westmoreland: That is one of the positions that we would take in this Court, Your Honor, and also obviously noting that the privacy right is-- Byron R. White: Well, suppose you lost on that, though. Suppose the issue was, suppose it was clear that in my example the defendant's right to a public trial would be infringed absent... without more. How much more would there have to be? Just some inference of third party interests, or wouldn't he have to make some findings? Mary Beth Westmoreland: --Your Honor-- Byron R. White: Wouldn't the prosecution have to... perhaps you could have an in camera hearing and the judge could be told what was really involved in this suppression hearing. Mary Beth Westmoreland: --There's a possibility-- Byron R. White: You didn't have that here, did you? Mary Beth Westmoreland: --No, Your Honor, there was no such hearing conducted. But we would submit that the assertions that were made on the record in this case were sufficient to allow the judge to conclude that there was a privacy right at stake and to allow the judge to balance that privacy right. Byron R. White: Although you don't think even that kind of a consideration was necessary? Mary Beth Westmoreland: No, Your Honor, we do not. We simply do not think that the public trial right need attach to a suppression hearing, particularly not under the facts of the instant case. We submit that under the circumstances of this case the Sixth Amendment right to a public trial did not attach and was simply not violated. The fact that it was a suppression hearing is a fact that should be considered by the Court in making its determination as to whether a public trial right was violated. Sandra Day O'Connor: Of course, here the jury had been impaneled and perhaps it was a part of the trial. Mary Beth Westmoreland: The jury had been impaneled, Your Honor, but we would submit that that is simply a procedural technicality that had taken place and does not necessarily make the suppression hearing any more a part of the trial than it would have if the suppression hearing had taken place two months prior to the actual trial itself. It was a procedural matter and nothing more, and under those circumstances we would submit that to apply a public trial guarantee to a suppression hearing would in a sense defeat the entire purpose behind the suppression hearing and the exclusionary rule itself. John Paul Stevens: Does that follow? Supposing you did what I think perhaps was behind some of Justice Powell's questioning this morning, supposing you closed everything except the... I mean, suppose you did not permit the wiretaps themselves to become public, but just all the evidence about how they were taken and all the rest of it. Why wouldn't that be adequate for the state's interest? Mary Beth Westmoreland: Your Honor, as noted previously, under some circumstances that could be sufficient, it might be. In this case we would submit that at the time this decision was made that was not... that was something that would have been purely speculative on the part of the trial judge. John Paul Stevens: Is the transcript available of what actually happened at this hearing? Do we have it in the papers before us? Mary Beth Westmoreland: Yes, Your Honor, there is a transcript of the motion to suppress hearing and what took place regarding the closure is transcribed. John Paul Stevens: The entire transcript of the suppression hearing is before us? Mary Beth Westmoreland: Yes, Your Honor, it is. Warren E. Burger: How soon after the close of the suppression hearing was that transcript available to the public, to the press, for example? Mary Beth Westmoreland: Your Honor, I am not certain as to how soon afterwards it was actually made available to the public. I simply don't know that. Warren E. Burger: It became available at some point, did it not? Mary Beth Westmoreland: Yes, Your Honor, I believe it did. I just simply-- Byron R. White: Well, why did it ever become available before you actually but the evidence, played the tapes at the trial? Did the prosecution just revoke its objections to making this matter public? Mary Beth Westmoreland: --No, Your Honor. I think if my recollection is correct, the transcript I believe was initially sealed in the Superior Court of Fulton County. Byron R. White: Well, who opened it? Mary Beth Westmoreland: And I don't know at what stage it became opened. Like I said, I do know that it was opened in the Supreme Court of Georgia on direct appeal, and at that time the evidence had already been played during the trial of the case. So it was opened. Byron R. White: Well, you mean... I thought it was opened before trial, wasn't it? It wasn't? Mary Beth Westmoreland: It was made available to counsel, I believe, at some point, Your Honor. I am simply not certain as to exactly at what stage. Byron R. White: But you don't think it was made public before the actual playing of the tapes at trial? Mary Beth Westmoreland: Your Honor, I simply don't know. I would doubt it, because the trial did begin almost immediately after the suppression hearing was concluded. Warren E. Burger: Once the tapes were available and played in the courtroom, there'd be certainly no reason to withhold the transcript, would there? Mary Beth Westmoreland: I can perceive none, Your Honor. The evidence was available. Warren E. Burger: The cat was out of the bag by that time. Mary Beth Westmoreland: Whether through the suppression hearing transcripts or through the trial itself, the evidence was available, yes, Your Honor. Byron R. White: Well, if the jury had been impaneled and this trial was going to go on just instantaneously after the suppression hearing, and you knew you were going to play the tapes, I don't know what interest the prosecution really had in closing the hearing. The cat's going to be out of the bag in a few days anyway. Mary Beth Westmoreland: Assuming that the prosecution prevailed at the hearing on the motion to suppress, that's a definite consideration. The consideration is always present in a hearing on a motion to suppress that you may not prevail, and in order to protect privacy rights of individuals at that point that consideration has to come into play, that this evidence may be suppressed. And once again, we come to one of the underlying purposes of the exclusionary rule itself. We would submit that this simply furthers that purpose. Sandra Day O'Connor: Suppose you lose on this argument. What's the remedy in your view? Mary Beth Westmoreland: Your Honor-- Sandra Day O'Connor: Can we just have... can the state just conduct a new suppression hearing and open it up? Mary Beth Westmoreland: --Your Honor, we would submit that the only remedy that would be appropriate or necessary assuming that we were to lose on this argument would be a new suppression hearing. That would be sufficient at least until such time as that suppression hearing was conducted. William H. Rehnquist: But that's really ludicrous in a way, to say that you conduct a new suppression hearing where there's no suggestion that the absence of the public influenced a decision, which is purely a question of law, as to whether evidence should be suppressed or not. I realize it's not you that say that there has to be some remedy, but to have a new suppression hearing just seems like giving someone a wooden arm when they don't need it. Mary Beth Westmoreland: Well, Your Honor, that would be true and would fall in line with our argument that there is simply no need for any such remedy in this case. But we would submit that that is the most that is required in the fashion of a remedy at this stage. To require an entire new trial-- Harry A. Blackmun: Well, would we have to determine what the remedy is? Isn't that a matter for the Georgia courts if you should not prevail here? Mary Beth Westmoreland: --Your Honor, we would submit that perhaps the Court would probably give direction to the Georgia court as to what their remedy would be in this case. Harry A. Blackmun: I'm still a little troubled. I take it your basic argument is that the theoretical privacy rights of third parties prevail over a constitutional right of a defendant who is accused and being tried to a public trial? Mary Beth Westmoreland: That they can prevail under certain circumstances. That is the main thrust of our argument, Your Honor, aside from also the point that the Sixth Amendment public trial guarantee should not be held to apply to a motion to suppress, at least under the circumstances of this case. Byron R. White: Well, I thought one of the interests you were asserting was the interest of the state, wholly aside from third parties, to protect your law enforcement function, other prosecutions and things like that, isn't it? Mary Beth Westmoreland: That's correct, Your Honor. And in conjunction with protecting the prosecutions, you once again necessarily bring in the privacy rights, because that is the fundamental purpose behind the statute prohibiting publication. Byron R. White: You might want to protect some informers who might be revealed or surfaced in these things. Mary Beth Westmoreland: That is also a compelling interest the state may have. Byron R. White: In which event I doubt that you would play the tapes at the trial. Mary Beth Westmoreland: That's probably correct, Your Honor. Thurgood Marshall: But I still don't understand how you have a hearing, a suppression hearing, and reveal what has already been revealed. I assume you put in the same testimony that is not only in the record, but it's all the way up here now. So it's rather public. Mary Beth Westmoreland: Yes, Your Honor, at this point it is. At the time of the suppression hearing it was not. Thurgood Marshall: But I still, like Justice Rehnquist, I don't see actually what anybody gets out of this. Mary Beth Westmoreland: Your Honor, that would be our submission as well, is that either a new suppression hearing would serve no purpose and a new trial is simply not warranted under the facts of the case. There is simply no showing that an open suppression hearing would have affected the trial one way or the other. We have the record, we have the evidence presented at the trial. Virtually all of the witnesses who testified at the suppression hearing, with the exception of perhaps-- Thurgood Marshall: Well, what effect does that... was it Jackson or something against New York, where this Court said you should hold a confession hearing, Jackson against Denno? Yes. Does that have any effect on this? Mary Beth Westmoreland: --Your Honor, I'm not sure I understand the question. Thurgood Marshall: Jackson and Denno says, where there was a charge that the confession was illegally admitted into evidence... despite the conviction, this Court sent it back to have a hearing on it-- Mary Beth Westmoreland: Yes, Your Honor. Thurgood Marshall: --as to whether the confession was admissible or not. Mary Beth Westmoreland: Yes, Your Honor. Thurgood Marshall: Well, on the basis of that could you send this case hack for a hearing as to whether the suppressed evidence should not have been suppressed? Mary Beth Westmoreland: A new suppression hearing could be a potential remedy, and we would again submit that it's simply not a necessity, but that would be the most extreme remedy that would be warranted under the facts of this case. Byron R. White: Of course, there's a lot of thought behind the public trial. I'm sure that it may actually have some impact on the outcome. Witnesses sometimes testify differently in a closed hearing than they would in public. As a matter of fact, some of them may not testify at all if it's an open hearing. So it may be that the result would be different in an open hearing. Mary Beth Westmoreland: Your Honor, there is a speculation that it might very well be true. In the instant case, however, we have an open trial in which virtually all witnesses did testify before the trial court at that time. They testified in public, with the exception of, I believe I noted, I think four or five witnesses who did not, but who could readily have been called to testify at the trial and present their testimony in public. Byron R. White: Public trials, also sometimes people read about them, see about them; all of a sudden somebody shows up, I'm the unknown, as a witness, that completely refutes the state's case. Mary Beth Westmoreland: That's correct, Your Honor. We would submit that, once again, the fact that the trial itself was open serves that purpose of a public trial guarantee. William J. Brennan, Jr.: Ms. Westmoreland, I gather that before the closure was ordered there was no proceeding to identify any state interest, compelling or otherwise, and any weighing proceeding of any kind by the judge. He just ordered the closure, didn't he? Mary Beth Westmoreland: There was a... if you wish to categorize it, it was not really a hearing. There was a discussion that took place between the trial court and defense counsel and the district attorney prior to the closure. There was no actual evidence taken. William J. Brennan, Jr.: Is that consistent with what we said, at least in the context of that case, in Globe Newspaper about the necessity before closure of a proceeding of this kind, in which the state interest is identified and the judge can weigh it and all that? Mary Beth Westmoreland: It seems to me that this circumstance is somewhat different from that. William J. Brennan, Jr.: Because it's a pre-trial question or what? No, this was suppression during the trial, wasn't it? Mary Beth Westmoreland: Your Honor, we would submit that it is actually, although the jury was impaneled, it still is actually a pre-trial type of proceeding. The mere fact that the jury may or may not have been selected prior to the suppression hearing is not sufficient to actually incorporate it into the trial. William J. Brennan, Jr.: I know this is primarily a Sixth Amendment case. Mary Beth Westmoreland: Yes, Your Honor. William J. Brennan, Jr.: But there's also a First Amendment argument here, I think, isn't it? Mary Beth Westmoreland: There is a First Amendment argument, I think, that has been somewhat asserted by the Petitioners. But we would submit the First Amendment question is simply not brought before this Court in this case, that the issue presented to this Court is a Sixth Amendment public trial question, and that the First Amendment-- William J. Brennan, Jr.: Well, if it had been phrased, framed as a First Amendment issue, would you have a different position than the one you are advocating today? Mary Beth Westmoreland: --No, Your Honor, we would not. William J. Brennan, Jr.: That's my point. And Globe was a First Amendment case. Mary Beth Westmoreland: Yes, Your Honor. William J. Brennan, Jr.: A true First Amendment case. Mary Beth Westmoreland: Yes, Your Honor, it was. William J. Brennan, Jr.: And why shouldn't what we said there apply equally here? Mary Beth Westmoreland: I think the circumstances are somewhat different, Your Honor, in the instant case. William J. Brennan, Jr.: Well, they are different in the sense that this is a motion to suppress and that was the testimony of the witness. Mary Beth Westmoreland: Yes, Your Honor. That is one of the fundamental differences that we have between the two cases. William J. Brennan, Jr.: But the underlying reasons for requiring access and open trials, don't they apply to both, both to the context of the witness that we had in Globe and the suppression hearing? What's the difference? Mary Beth Westmoreland: They apply, but not to the same extent, Your Honor, in this case. We would submit that the public trial right would not apply to this type of hearing in the same light the same type of restrictions might be placed upon a First Amendment type of right. In the time that I have remaining, I would like to move on to the search and seizure issue that has been presented to the Court. In beginning, I would note that, as pointed out previously by Justice O'Connor, the issue of the validity of the statute is simply not a question that is properly presented to the Court. There has been no showing that any evidence that was admitted at the trial was not seized pursuant to the search warrants themselves. Evidence was suppressed which was allegedly seized outside the scope of the search warrant. The Petitioners have pointed to no evidence that was presented at trial which was seized outside of the scope of those warrants. So we would urge the Court to simply decline to reach the challenge to the facial validity of the RICO forfeiture statute. If the Court were to reach the facial validity of that statute, we would submit that it is clearly valid on its face. It sets forth specific requirements which clearly comply with the Fourth Amendment. It specifically codifies various provisions of the Fourth Amendment requiring that the law enforcement officers be authorized to enforce the laws of the state, that they make a seizure pursuant to a lawful arrest, a search or inspection, that they have probable cause to believe the property is subject to forfeiture, and that they have probable cause to believe that the property will be lost or destroyed if not seized. These four requirement clearly fall within the purview of the Fourth Amendment and, as a matter of fact, essentially codify Fourth Amendment principles in themselves. The statute does not give officers authority to extend the bounds of the search itself. The officers must be conducting a lawful search. It merely authorizes warrantless seizures under certain specified, precise conditions. We submit that this is no different from a plain view type of seizure, which has been allowed on prior occasions. In the same context, the plain view seizure does not enlarge on the right to actually search the area, but simply recognizes the fact that once an officer is in a position to observe the evidence, to observe documents, then to require that he obtain a warrant at that point could in some circumstances endanger the public, endanger the police, or could simply result in the evidence being destroyed or lost before a warrant could be obtained, and to require a warrant under those circumstances would be an inconvenience that is simply not required under Fourth Amendment principles. Petitioners have also made a comment concerning a lack of notice and hearing provided in the statute, and we would submit that the statute itself, while not providing for prior notice and hearing, that under the circumstances that a seizure would be taking place that such notice and hearing prior to seizure is simply not required. This is similar to the circumstances found in the Calero-Toledo versus Pearson Yacht Leasing Company case, in which the circumstances in the case justified the seizure of property without prior notice and hearing. The state's interest in obtaining in rem jurisdiction over the property and in enforcing criminal sanctions and preventing the loss or destruction of property, which quite obviously would be destroyed under those circumstances, justifies the statutory provisions which do not provide for the notice and hearing. The statute does provide for a hearing within a very short time period thereafter, and we would submit that that is clearly sufficient to meet the Fourth Amendment requirements. Finally, Petitioners assert that the search in question was a general search and that all evidence seized should have been excluded. We would submit that there is no justification presented in this record for extending the exclusionary rule to such unreasonable bounds as to exclude every piece of evidence seized in this case. The evidence would not support a conclusion that the officers acted in flagrant disregard of the search warrant. The warrants were valid on the face of those warrants, and there is no reason existing on this record to exclude evidence which was clearly lawfully seized pursuant to the warrant. To do so would be to defeat the entire purpose behind the exclusionary rule and would serve no deterrent effect on the actions of police officers. Therefore, we would submit that the Court should not find a general search under the facts of this case, as they simply do not warrant such a conclusion. In conclusion, Your Honors, we would simply urge that the Court conclude that there was no public trial right that attached, and even if the public trial right did attach at a suppression hearing it was not violated under the facts of the instant case. We would also urge the Court to conclude that the statute providing for the RICO forfeitures was not presented to this Court, as all evidence submitted at trial was seized pursuant to a valid search warrant. Even so, the statute is clearly valid on its face and the facts of this case do not justify a finding that there was a general search. Thank you, Your Honors. Warren E. Burger: Do you have anything further, Mr. Shafer? Herbert Shafer: If the Court please. First of all, I want to clear up one problem. I didn't mean to intimate to the Court that remand for a fresh suppression hearing would be unacceptable. On the contrary. It isn't an all or nothing proposition for Guy Waller and the codefendants. We'd rather have an incomplete remedy than no remedy at all, obviously. Warren E. Burger: What would you do after your new hearing on suppression? Go to another trial then? Herbert Shafer: We would hope to. But realistically speaking, Mr. Chief Justice, the trial judge hearing the motion to suppress would be hard put to change his mind, and that is why we're asking this Court and the Constitution to make up his mind for him by ordering a new trial. Byron R. White: Well, it might be the hearing might be before another judge. Herbert Shafer: That is not before another jury, though, which would be insulated as-- Byron R. White: Well, the suppression hearing isn't going to be before a jury. It's going to be before a judge. Herbert Shafer: --But the analogy I'm trying to draw, Justice White, is Jackson v. Denno was sent back for a new hearing on the question of the voluntariness of the confession, but that was a jury that was completely insulated from the events that had happened previously. That would not be the case with a new judge. Byron R. White: In Jackson against Denno the hearing that was going to take place on remand wasn't before a jury. It was before a judge. It had nothing to do with a jury. The only question on that remand was whether it would ever get to the jury. And if it was found to be voluntary, it was properly put before the jury. Herbert Shafer: I'm confused on that. Justice O'Connor suggested that the statute could not be properly addressed because everything that was illegally seized was suppressed. Well, we really don't know what was suppressed, and we really... or rather, we really don't know that what was suppressed was all that should have been suppressed, because the trial court studiously refused to consider the validity of the warrant, and refused to consider the manner in which the warrant was executed. The trial court simply said, I ain't going to sit here for no nine hours and listen to a bunch of police officers come in and say how they executed the warrant. So whether they in fact executed a general warrant, which would require suppression of everything, we don't know. We do know this, though: Some of the police officers who testified acknowledged that they conducted the searches and seizures under the authority of the warrant. We do know that the Supreme Court of Georgia said that it was properly before the court. And we did everything in our power to make an evidentiary showing... we were frustrated by the trial court... in order to expand the record. So minimally, if the Court has some doubts on the subject, we respectfully suggest that we ought to have a new hearing on remand on that question. Finally, the suppression order entered by the court, the trial court, was not sufficient because this kind of indiscriminate search and seizure, a general search and seizure, requires suppression of everything. The failure to suppress everything, but allowing them to return those things that they have no use for, is an insufficient remedy under the circumstances. And finally, if the Court please, Calero-Toledo had exigent circumstances. We don't have any exigent circumstances here. Thank you. Warren E. Burger: Thank you, counsel. The case is submitted.

John G. Roberts, Jr.: We'll hear argument next in Case 18-1048, GE Energy Power Conversion France versus Outokumpu. Mr. Dvoretzky. Shay Dvoretzky: Mr. Chief Justice, and may it please the Court: If this case involved a domestic arbitration agreement, GE Energy could enforce it as long as it could satisfy domestic non-signatory enforcement doctrines like equitable estoppel. The question here is whether the New York Convention prohibits that same result for international arbitration agreements. It does not. The Convention is simply silent about enforcement by non-signatories. That silence is consistent with the Convention's design, which sets a floor, not a ceiling, for enforcing arbitration agreements and awards. The Convention says that states must do certain things to promote arbitration. It doesn't say they can't to do more than the Convention requires. Moreover, Article II, the principal provision about arbitration agreements, is especially short. It is not a comprehensive scheme that displaces all sovereign authority to enforce domestic laws about arbitration agreements. All relevant sources of meaning understand the Convention this same way. Other contracting states are close to unanimous that the Convention does not preempt domestic law allowing non-signatory enforcement. The United States, the Restatement, UNCITRAL, and leading commentators agree. In allowing doctrines like equitable estoppel serves the Convention's overriding purpose, to overcome widespread resistance to arbitration. The Eleventh Circuit nevertheless interpreted the definition of "agreement in writing" to preclude non-signatory enforcement. This Court should not make the United States an outlier by adopting that position. Article II(2) just specifies the kinds of agreements that states at a minimum must recognize. It doesn't limit who can enforce them. Respondents themselves don't defend the Eleventh Circuit's signature-based rule. They concede that all kinds of non-signatory enforcement doctrines, including even some kinds of equitable estoppel, are okay. Just not the particular type of equitable estoppel here. That incoherent project of parsing some non-signatory enforcement doctrines from others has no basis in any of the tools of treaty interpretation. John G. Roberts, Jr.: Mr. Dvoretzky, if -- if you and I have an agreement to arbitrate, and even if you tell me, you know, I -- I might have Mr. Hacker do most of the work under it, and I just want to make that clear to you, and then you do hire Mr. Hacker to do all the work in it. He can't be compelled to arbitrate with me if I don't like the quality of his work, right? He's not a signatory to our arbitration agreement. Maybe he doesn't even know about it. But the fact that you and I think -- no, you're going to get him to do it, and we think we're going to arbitrate all our disputes, he's not bound to arbitrate? Shay Dvoretzky: I think whether he could arbitrate would depend on the domestic doctrine about non-signatory enforcement. And on the facts that you've posited, I think on an equitable estoppel theory, if you were to sue him, rather than me, for -- for claims that are intertwined with our contract, the contract that you and I have, under an equitable estoppel theory, he could be compelled to arbitrate. That was the same sort of factor -- John G. Roberts, Jr.: I thought it was one of the central propositions of our arbitration precedents that arbitration is based on agreement. And here somebody who did -- never agreed to arbitration is being forced into arbitration, even though he has a clear right to take his dispute to court. Shay Dvoretzky: Arbitration is, of course, a matter of consent. But as long as you and I have a valid arbitration agreement, that -- that's the key, consent. Then the scope of that arbitration agreement is another question, and that's determined in the Chapter 1 context by domestic law. That was the situation the Court faced in Arthur Andersen, and the Court saw no inconsistency between Chapter 1 and an equitable estoppel theory. There was no consent problem with what -- with remanding for the lower court in Arthur Andersen to consider whether the requirements of equitable estoppel were satisfied to allow a non-signatory to compel arbitration in a domestic context. Samuel A. Alito, Jr.: Well, what if the -- Shay Dvoretzky: The question -- Samuel A. Alito, Jr.: What if the law of the jurisdiction whose law would be chosen permits arbitration without any consent whatsoever? I guess you'd have to say that that's -- that's okay, right? Shay Dvoretzky: That -- the Convention doesn't prevent that. That's simply not the problem that the Convention was trying on solve. The purpose of the Convention was to address the problem of under-enforcement of arbitration agreements. If there is some country out there or some state that is compelling arbitration in the way that you're describing, the Convention doesn't directly deal with that, except perhaps in Article V, which would provide a public policy backstop for the country in which enforcement of an award is sought to say we're not enforcing that award because it contravenes our public policy. Elena Kagan: So you're saying that when the United States entered into the Convention and when it then implemented the Convention through the FAA, Congress didn't understand arbitration to mean voluntary arbitration? The, you know -- my -- my question I guess is the same as Justice Alito's. It seems odd that Congress would have passed the implementing legislation on the view that another contracting state could compel arbitration without any consent whatsoever. Shay Dvoretzky: Justice Kagan, I think this goes to the core question of what the Convention is trying to do. The Convention is trying to set forth minimum standards by which other countries will recognize and enforce arbitration agreements. And to be sure, the Convention does not require any country to recognize forced arbitration, so to speak. The -- the premise of the Convention is that the floor, the minimum, that other countries are agreeing to do, is to recognize valid arbitration agreements. By the same token, it doesn't preempt all domestic laws, including theoretically -- although there's no evidence that this is a real problem -- the kind of forced arbitration that you're positing. In the situation that we have here and in the Chief Justice's hypothetical, there's no question of forced arbitration. There is indisputably a valid arbitration agreement. The only question is can domestic law supply non-signatory enforcement doctrines in order to allow, again, a non-signatory -- Elena Kagan: But you don't -- Stephen G. Breyer: The fact is, you started out very broadly, and suddenly I get worried, are some people who -- the seller agrees that I'll go to arbitration, I agree with you, okay? Now, I don't want to go. And it's not against you; it's against him. I didn't agree to that or did I? Now, I thought this is quite narrow or could be. What actually either seller did is I agreed, I signed a party and said I'll go to arbitration. And -- but the -- when you use the word "seller," which I think maybe was me; is that right, your opponent, that includes subcontractors in this contract. And, by the way, you're a subcontractor. And you were listed. So it isn't exactly involuntary. Or you and I agree and I say: Our contract, including arbitration, is for the benefit of Mr. Johnson, who is a third-party beneficiary for everything including arbitration. And then the question is: Can Mr. Johnson bring me in? He didn't sign it. You signed it. Now, can't we decide it on a narrow ground like that by indeed leading up to the lower court all those questions about whether it's really true, whether it really isn't true that a third-party beneficiary can or the person listed in the seller's side can, and just say it doesn't limit it to where you're the one who wants to bring me into arbitration. They're well established legal doctrines. I don't want to make my argument for you. I want you to tell me quite straightforward -- and I'll -- in a few seconds, is that a possible argument in this case? We just send it back. Shay Dvoretzky: Yes, Your Honor. The -- the Eleventh Circuit held -- the Eleventh Circuit held that only the signatories to the arbitration agreement could enforce it. Stephen G. Breyer: And -- John G. Roberts, Jr.: Which is a fairly basic proposition of law. So if we're going to send it back to say why don't you see if you can enforce arbitration against somebody who didn't sign the agreement, or who wasn't -- it's one thing to say, okay, your parent company or your subsidiary or whatever, and the fact that you might say or subcontractors, doesn't mean that any particular subcontractor wants to arbitrate. So you're going to send it back for -- I mean, if someone is going to adopt such a radical proposition it probably should be us, rather than send it back to the Eleventh Circuit and say, well, if you want to go against all -- all of our precedents in arbitration, fine, but we're not going to do it. Shay Dvoretzky: So, Mr. Chief Justice -- John G. Roberts, Jr.: Not to suggest I have a view either way. (Laughter.) Shay Dvoretzky: I -- I don't think this is contrary to all of this Court's precedents on arbitration. Just the opposite. In Arthur Andersen the Court remanded for the lower court to consider whether an equitable estoppel theory would allow a non-signatory to compel arbitration. So that's -- Ruth Bader Ginsburg: Can you -- Shay Dvoretzky: -- precisely -- Ruth Bader Ginsburg: Can you -- can we -- can we understand why Respondent should be equitably estopped? This case is going in the brief, and so far in the oral argument on a level once -- once removed from the basic facts on the ground. So what is it in this case that makes the doctrine of equitable estoppel appropriate? Shay Dvoretzky: Let me make two points on that. One is the point that I think Justice Breyer was making. On these particular facts, GE energy is defined under the contract as a party. The term "parties" is defined to include buyer and seller, "seller" is defined to include subcontractor, and GE is listed in the contract as one of the subcontractors that the parties contemplated using. And so we are actually a party to the contract, even though we didn't put -- even though we didn't ink the contract with our signature. In addition -- Ruth Bader Ginsburg: And -- and -- even though at the time the contract was made, the subcontractors hadn't been picked, so there were -- GE was on a list of potential subcontractors, but was not, in fact, a subcontractor at the time of the arbitration agreement? Shay Dvoretzky: I don't believe that it had been picked, but there were active and extensive discussions, including with the Respondents, about using GE as a subcontractor, so it was certainly contemplated. And if you -- if you follow the definitions of seller and -- and -- buyer and seller and parties in the contract that GE is actually a party to the agreement. As a -- on a more doctrinal level in terms of equitable estoppel, equitable estoppel is a way of inferring consent from conduct. And if the Respondents sue us, as they did in this case, on a theory that depends on the duty of care arising out of the contract, they are in essence suing us on the contracts. They can't cherry-pick to invoke the duty of care from the contract but to avoid their agreement to arbitrate disputes under that contract. That -- that would be the doctrinal basis for an equitable estoppel theory. Neil Gorsuch: Counsel -- Shay Dvoretzky: And this -- Neil Gorsuch: -- we're going well down this rabbit hole on whether equitable estoppel applies in this case. But I -- I had -- I had proceeded on maybe on the mistaken assumption that the question whether equitable estoppel is recognized as a viable theory under the Federal Arbitration Act isn't before us. The only question before us is whether anything in the convention precludes an argument like that to be made under the Federal Arbitration Act, whether or not it might succeed. Am I -- but I -- am I mistaken? Shay Dvoretzky: No, that -- that's correct, Justice Gorsuch. And I think that goes to Justice Breyer's point as well. The actual question presented here is quite narrow. And that is whether there is anything in the New York Convention that prohibits the application of equitable estoppel. Neil Gorsuch: If it exists, without prejudging whether it exists. Shay Dvoretzky: Correct. Neil Gorsuch: Okay. Shay Dvoretzky: And that -- much the same as the posture in Arthur Andersen where the Court sent the case back for the lower courts to determine whether equitable estoppel exists under the applicable law and, if so, whether it could be satisfied. Elena Kagan: But Mr. Dvoretzky, that -- that is the question. So let's take a look at Article II, and specifically the third sentence because the third sentence says, "The court of a contracting state" -- and then I'm going to skip some words -- "shall, at the request of one of the parties, refer the parties to arbitration." And I have to tell you, I think that the best understanding of the term "parties" looking at the three sentences of Article II, let's just assume that the best understanding is the parties to the agreement. So this says the parties to the agreement are requesting the arbitration. And that's when the court should refer the arbitration. Now, that raises the question who's the party? I -- I'm with the Chief Justice. If you're talking about an alter ego or something like that, or a successor-in-interest, maybe that person counts as a party, even though it is not the signatory but there is some limit, isn't there, that is imposed by that language of "the parties"? Shay Dvoretzky: Justice Kagan, I think the key point is that Article III does not say "only the parties." In other words, the bear minimum the contracting states agree to do is to refer a case to arbitration if the parties -- whether you think that's to be -- Elena Kagan: Well, let me read you a few sentences, Mr. Dvoretzky and you tell me whether you always have to say "shall only" if you say "shall." If I say federal courts shall have jurisdiction over federal questions, would this statute also permits those courts to exercise jurisdiction over state questions? Shay Dvoretzky: No, and Justice Kagan, I -- I -- Elena Kagan: I'm going to give you one more just to prove the point. (Laughter.) Elena Kagan: Shareholders shall appoint two directors to the board. Does that mean shareholders can appoint 20 directors to the board? Shay Dvoretzky: No. Elena Kagan: Because "shall" means "shall only" in many circumstances, right? Shay Dvoretzky: It -- it depends on context. Elena Kagan: It does. Shay Dvoretzky: And the context here based on the purpose of the Convention, based on how this Convention has been nearly universally understood by contracting states, which is a key factor in this Court's treaty interpretation jurisprudence, is that this -- this provision, Article II(3), like the rest of the Convention, is just setting a floor on what contracting states agree to do. So at a minimum, they agree that they shall -- the courts shall refer cases to arbitration when requested by the parties, but not that they shall only do so. You can of course come up with examples where "shall" does mean "shall only," but it does -- it doesn't mean that here. And -- Elena Kagan: Right. So I guess that brings us back to the question that Justice Alito started us off with, because I think that that's relevant to the context in which we're viewing this Convention, which is the assumption on the part of the United States Congress when it passed the FAA and surely the -- those who entered into the Convention, the Convention was a matter of -- excuse me -- that arbitration was a matter of voluntary consent. I mean, so if it's a matter of voluntary consent, and everybody thinks that that's what arbitration is, shouldn't we read "the parties" to be, you know, the parties? Nobody else. Shay Dvoretzky: And again I would take you back to Arthur Andersen. Certainly under domestic law it is understood to be a matter of voluntary consent but the Court saw no issue with the possibility of an equitable estoppel theory that would allow a non-party to enforce. The Convention does not contain an independent consent requirement. It just doesn't -- it just doesn't say that. And it would be inconsistent with its purpose to have that because, again, the backdrop to the Convention was there was widespread mistrust of arbitration agreements. Agreements were not being enforced. The Convention set out to remedy that problem and to provide for more enforcement of arbitration, not less than that. Neil Gorsuch: Counsel, we often -- Shay Dvoretzky: But, moreover -- Neil Gorsuch: -- we often -- I'm sorry. Samuel A. Alito, Jr.: Is it -- is it necessary to go so far as to say that the Convention says nothing about what the relevant law of a particular jurisdiction says about who can enforce an arbitration agreement or could it say -- could it perhaps go beyond strictly the signatories to the agreement and encompass some other non-parties that have a sufficient -- that have a close connection, as would be the case with somebody who was equitably estopped? Shay Dvoretzky: If I may answer? John G. Roberts, Jr.: Sure. Sure. Shay Dvoretzky: I think that's right and it's not just equitable estoppel. There are a number of non-signatory doctrines including alter ego and veil piercing, for example, that the other side points to as valid under the Convention, even though those can't be thought of as consensual; just the opposite, an alter-ego theory and the veil-piercing theory are disregarding the consent of the parties and holding them to the agreement any way. John G. Roberts, Jr.: Thank you, counsel. Mr. Ellis. Jonathan Y. Ellis: Mr. Chief Justice and may it please the Court: The New York Convention place an important but limited role in the recognition of international arbitration agreements. It requires contracting states to recognize and enforce those agreements in certain circumstances, but it does not, as my friend says, establish a comprehensive set of rules for arbitration. For two fundamental reasons, the Eleventh Circuit has wrong to read into the writing requirement of Article II a categorical prohibition on compelling international arbitration on the basis of estoppel principles. First, the Convention as a whole only ever requires contracting states to enforce arbitration agreements; it never prohibits them -- them from doing so. And, second, Article II, section 2, is a rule of presumptive validity. It speaks to when a court must recognize an arbitration agreement as valid. It does not speak to the scope of valid agreements, including who may be bound or who may invoke those agreements. Now, Respondents provide a series of alternative grounds for refusing to compel arbitration in this case, but there's no reason for this Court to pass on those grounds in the first instance. Just as the Court did in -- in Arthur Andersen for the FAA, the Court should make clear that the Convention does not categorically prohibit enforced -- Sonia Sotomayor: Excuse me -- Jonathan Y. Ellis: -- compelling arbitration on estoppel grounds. Sonia Sotomayor: -- there are two ways to reach your result. One is to read Article II and say what you seem to be saying, which is that it only requires or compels arbitration in one circumstance but a contracting state can compel arbitration in any way that it wants, even without a written agreement. That seems to be the essence of your argument, correct? Jonathan Y. Ellis: Yes. Sonia Sotomayor: That's odd, indeed, because as Justice -- as the Chief Justice noted and Justice Kagan noted, it seems always that a signed written agreement respecting consent is a minimum requirement. Or another way to get to where you want to go, another reading, is that Article II does not allow contracting states to compel arbitration whenever it wants, even without a written agreement but that they can compel it if someone is a party, that that's undefined. And that seems to be how most other contracting states have read this, which is that there's a lot of leeway for states to determine who's a party to that written agreement. And they can do that through normal principles of privity or normal principles of contract interpretation, including alter ego and veil piercing and all the other things that your adversary accepts can be done. You don't need, as I think the circuit below wrongly required -- it seemed to say you need that party's signature on the agreement. Jonathan Y. Ellis: That's right. Sonia Sotomayor: So there's common ground, but I do think within that common ground, there has to be a limiting principle established somewhere. And I don't think it can be that you can have an oral agreement or a state could say, with respect, no essence of consent whatsoever, that we're just going to let anybody -- if you signed an arbitration agreement about the manufacturer of this thing, equitable principles are always going to let anybody come in and sue -- and let -- Jonathan Y. Ellis: Sure. Sonia Sotomayor: -- let them be sued. Jonathan Y. Ellis: Sure. Sonia Sotomayor: So assuming we're on common ground or I am, that we have some, some basis to say that contracting states can pick who parties are, what's the limiting principle after that? What's the limiting principle of equitable estoppel? It can't be every single type of equitable estoppel is okay. Jonathan Y. Ellis: Sure. So -- so a couple points, Your Honor. And I'm happy to -- Sonia Sotomayor: And, by the way, on this case, it's easy to win. Jonathan Y. Ellis: Right. And we're happy to win on -- on either ground. Sonia Sotomayor: And very -- on this case, no matter what the theory of equitable estoppel is, a seller who's defined within the contract to include suppliers that include GE, that seems like a fairly straightforward case to me. Jonathan Y. Ellis: So -- so we haven't taken a position on -- on the ultimate resolution, but we agree -- and it sounds like you agree -- that the Eleventh Circuit's rule is just wrong, that it's not categorically limited to signatories. That's enough to resolve this case. Now, as for limiting principles, I think there are limiting principles. I think there are two types to be -- to consider. The first limiting principle is to consider when -- what's the limit on when a contracting state is required to compel arbitration? And I think there certainly are limits. I think section -- Article II, section 3, is the relevant provision, not Article II, section 2. And the question there says that the parties before the -- have to have made an agreement. So I think the question, can you -- does the domestic law consider the parties to have made an agreement to this written agreement? Now, the -- the other limiting principle is -- is -- is whether states are then prohibited from, under their own -- under the domestic law, to recognize other types of arbitration agreements. I -- I -- I just don't think the contract -- the Convention can be read to impose those limits. That doesn't mean that you can then say -- enforce an -- require another state to enforce an oral arbitration agreement under the Convention. It would not be clearly, not be under the Convention, but a -- but a -- a contracting state -- Sonia Sotomayor: But that's going -- Jonathan Y. Ellis: -- has not given up its right to enforce the -- Sonia Sotomayor: -- much further afield than I think other contracting states have and it's reading Article VII into Article II, which to me is illogical. Jonathan Y. Ellis: We don't think you have to read Article VII on its text to do that. I will say that it's fairly uniform that -- that Article VII at least should inform the scope of Article II, the same sort of most favorable rules should apply to -- to enforcing arbitration agreements as a -- Sonia Sotomayor: That -- that seems contrary to the very strict requirements that you need a written agreement between the parties. Jonathan Y. Ellis: Absolutely, Your Honor. Sonia Sotomayor: I think that's a very different argument than saying you have some play in the joints with respect to who parties are and that domestic law can inform that. Jonathan Y. Ellis: I -- I -- and -- and I want to be clear. The Convention does not apply to -- to arbitration agreements that are not written or that don't meet the presumptive -- the validity requirements in Article II at -- at least insofar as -- as -- there's this debate between whether Article II, Section 2, was exhaustive or non-exhaustive. But either way, the Convention isn't going to apply and, therefore, isn't going to require the enforcement of agreement that doesn't meet the requirements of the Convention. But the Convention doesn't further then say that a -- a contracting state cannot enforce beyond that. And -- and that's what you have -- Neil Gorsuch: Counsel -- Jonathan Y. Ellis: -- to conclude -- Ruth Bader Ginsburg: Can -- can we go -- Jonathan Y. Ellis: -- to support the Eleventh Circuit's rule. Ruth Bader Ginsburg: -- back to -- to a question Justice Kagan raised? There are these privity-like people and then there's this doctrine of equitable estoppel, which we're told that many of our treaty partners do not recognize. So what you're suggesting is that we should recognize this equitable estoppel, even though our treaty partners would not, which could yield divergent results and give you a real problem at the enforcement end because a country that doesn't recognize equitable estoppel will hesitate to enforce an award that was based on that theory. So you -- you can distinguish these successors in interest, maybe assignors, privity-like people from this equitable estoppel, which is not universally embraced by our treaty partners. Jonathan Y. Ellis: Yes, Your Honor. That -- I mean, the Respondent has argued that estoppel, equitable estoppel, is an outlier. I think that's a bit of an overstatement. I think that there are very comparable doctrines around the world that look a lot like U.S. equitable estoppel principles. The Titan Unity decision from Singapore adopts U.S. estoppel principles by name, by citing to U.S. courts. And then there is the venire contra factum proprium in civil law countries that look a lot like equitable estoppel. Ruth Bader Ginsburg: But that has been described as the -- the Latin phrase you just used, as akin to traditional estoppel as opposed to this equitable estoppel. Jonathan Y. Ellis: Sure, that's fair enough. I guess the -- the overarching point is that nothing in the Convention draws the sort of line that Respondent is trying to do. It can't be the party line that they've pointed to. I -- I don't know why traditional estoppel or venire contra factum proprium would more akin to a party than not. It can't be the consent principle that they point to, for the reasons that my friend says. Piercing the corporate veil is -- is -- is at least based on equity and fairness and then contrary to sort of formal express consent, as any equitable estoppel principle is. And so at the bottom, what you -- our view is that the -- the Convention simply doesn't speak to those principles and what other domestic law principles that apply. Neil Gorsuch: Counsel -- Ruth Bader Ginsburg: Before your time runs out, I'd like you to answer specifically, in the Public Citizens' brief, they cite a case called Todd v. Steamship Mutual Underwriting Association. They say a U.S. worker who was injured by his employer in Louisiana sued that insolvent insurer's -- employer's insurer under Louisiana's Direct Action Statute, and was required to arbitrate his personal injury claim before an arbitration panel in London. That sounds like a real horrible -- is -- is that the result of the position that you are pressing? Jonathan Y. Ellis: So I -- I apologize. I'm not familiar with the facts of that particular case and exactly how they got to that result. I -- I -- I will say that there are, I think the Convention itself does not limit contracting states from enforcing arbitration. There may be other limits. There may be other limits in the FAA itself that don't need to -- the court below didn't reach and this Court doesn't need to get into. John G. Roberts, Jr.: Justice Gorsuch has a question. Neil Gorsuch: Counsel, I'm -- I understand that different countries may have different views about equitable estoppel or other kinds of non-signatory, non-strict consent arbitrations. Is there any disagreement among countries about how to read the Convention itself with respect to whether it creates a floor or a ceiling? Jonathan Y. Ellis: Not that I'm aware of. The only -- at least not of any -- any significance. The only one that I'm aware of is this Javor decision from the British Columbia courts that reads Article II, Section 2 in the way the Eleventh Circuit does, but we have cited cases from Germany, France, and Switzerland on 26 to 28 of our brief. The Bremen brief has collected cases from 21 to 30 of their brief. The UNCITRAL recommendation is -- is inconsistent with Eleventh Circuit's decision. That represents the views of about 60 different countries. The model -- the implementing legislation from Peru, from Singapore, from Australia, are -- are contrary to the Eleventh Circuit's view of the Convention, and even the Javor case from British Columbia has not been followed by subsequent British Columbia courts and it has been criticized. John G. Roberts, Jr.: Thank you, counsel. Mr. Hacker. Jonathan D. Hacker: Mr. Chief Justice and may it please the Court: GE cannot compel Outokumpu to arbitrate its tort claim with GE because there is no written arbitration agreement between them. I agree that would generally not be an obstacle in a domestic arbitration case because, as this Court held in Arthur Andersen, Chapter 1's agreement enforcement provision, FAA Section 3, does not limit enforcement to "parties to a written agreement." But the lack of a written agreement is decisive here because the Convention's enforcement provision, Article II, Section 3, is limited to the parties to a written arbitration agreement. Because that provision controls over Chapter 1's conflicting enforcement provision, non-parties cannot enforce agreements in cases under the Convention. That rule is subject to two important corollaries that have already been discussed this morning. First, the Convention does not prohibit contracting states from enacting other domestic laws that can mandate international arbitration on other terms, including oral agreements or absent consent. But as the commentators agree, and as the United States agreed this morning, arbitrations under such statutes do not proceed under the Convention, meaning that the resulting awards will not receive the benefit of the Convention and its near automatic enforcement provisions, as Justice Ginsburg warned. That kind of distinct extra Convention statute is not at issue in this case, because the United States has not enacted one. Chapter 2 instead makes the Convention itself controlling in all international arbitration cases. Chapter 1 applies only where the Convention does not supply a different rule, such as FAA Section 6 and 7 which govern motions and witnesses. The Convention, however, does provide its own rule for enforcing arbitration agreements and, therefore, that rule controls. The second corollary also discussed is that enforcement by a party under the Convention includes its privities, under principles well-known to and even discussed by the Convention drafters. Those principles differ categorically from the broad modern estoppel doctrines that GE is trying to invoke here. Neil Gorsuch: Mr. Hacker, I'm sorry to interrupt you, but I did want to spin back a little bit. Did I understand you to say as a matter of domestic law you would agree that -- that this contract could be enforced by GE under equitable estoppel or did I mishear you? Jonathan D. Hacker: I -- I hope you misheard me. Neil Gorsuch: Okay. Jonathan D. Hacker: I definitely did not -- did not believe this contract can be enforced by GE. The arbitration clause cannot be enforced by GE because GE is not a party to the contract and is not a party to the arbitration clause. And this goes to Justice Breyer's question, I think, about the sort of more narrow ground. Neil Gorsuch: I thought you said at the first part Arthur Andersen and, yes, there would be a real question here but it's -- there's no real question here because of the Convention. Jonathan D. Hacker: That's -- in a domestic arbitration case Arthur Andersen would -- would control and you'd ask whether the controlling state law allowed for equitable estoppel. Neil Gorsuch: Okay. Jonathan D. Hacker: This is not a domestic arbitration. Neil Gorsuch: Okay. So under domestic arbitration rules, there would be a real live question here? Jonathan D. Hacker: You'd look to do -- applicable state law, there's no applicable state law here, it's German law and you would have to determine whether or not equitable estoppel applied here. This case is governed by the Convention which it supplies its own rule -- Neil Gorsuch: But -- but for the Convention, despite the international character of this agreement, we would have a choice of law problem undoubtedly but we'd find some choice of law, look and see whether equitable estoppel is a permissible argument to be made in an arbitration case like this? Jonathan D. Hacker: In a domestic case, that's correct. This is a Convention case -- Neil Gorsuch: If it weren't governed by the Convention, but for the Convention -- Jonathan D. Hacker: Right. Neil Gorsuch: -- it would be a choice of law problem? Jonathan D. Hacker: Yes. Neil Gorsuch: Okay. Jonathan D. Hacker: That would be the first question, choice of law. The second question would be whether the law authorizes. This is a Convention case -- Sonia Sotomayor: Would this be a question under regular estoppel rules? Forget about equitable estoppel. Would they have a potential claim under estoppel rules? Jonathan D. Hacker: No. Sonia Sotomayor: Why not? Jonathan D. Hacker: Because traditional -- Sonia Sotomayor: They are defined as sellers in the contract. Why wouldn't estoppel rules, not equitable rules, but mere estoppel rules make them a seller? Jonathan D. Hacker: All right. So -- Sonia Sotomayor: You signed a contract. You agreed to arbitrate with the sellers. Sellers were defined as a list of sub -- subcontractors or sub-suppliers. They -- they were among those. Why wouldn't estoppel stop you, normal estoppel rules? Jonathan D. Hacker: If I can separate that out. Two questions. First of all, they are not a party to that arbitration clause. And when I show you why they're not a party to the arbitration clause, that's going to answer the question why -- Sonia Sotomayor: Why? Jonathan D. Hacker: -- they're not a party to the arbitration clause, because as we know, under international law, arbitration clauses are separable from the rest of the contract. You don't look to the contract generally to determine who is a party to the arbitration clause; you have to look to the clause itself. Look at -- start with common sense about what's going on in that contract. If subcontractors are defined for all purposes and defined for purposes of the arbitration clause, as parties to the arbitration clause, it's a bilateral agreement. Right? You've got a thousand subcontractors on site including local dry-wallers, paint suppliers, maintenance guys. If all of them are agreeing implicitly -- Sonia Sotomayor: When seller -- I'm reading the contract. When "seller" is mentioned, it shall be understood as subcontractors, and a million or not, included, except if expressly stated otherwise. Where in the arbitration clause are they expressly stated otherwise? Jonathan D. Hacker: They're not stated otherwise in the arbitration clause, except that the arbitration clause is separable. And remember, Your Honor, remember, this is so important, Your Honor -- Sonia Sotomayor: So what? Jonathan D. Hacker: Because -- Sonia Sotomayor: Who are the parties -- where does it say that subcontractors are not sellers for purposes of the arbitration clause? Jonathan D. Hacker: It doesn't say it in the arbitration clause but we know, we know, Your Honor, that "seller" doesn't actually mean subcontractor everywhere in the contract. The next paragraph, literally after the one you're quoting, says that the seller has to construct the whole mill. That can't be all the subcontractors. Article 6 of the agreement says that the seller receives all kinds of payments from Outokumpu. We know that not all the -- Neil Gorsuch: I know -- Jonathan Y. Ellis: -- subcontractors receive -- Neil Gorsuch: I understand -- Jonathan Y. Ellis: -- all the payments. Neil Gorsuch: -- these are good arguments, but it -- it seems to me that it's one thing to say we're going to force all these suppliers into arbitration, compel them without their consent. That -- that would be -- that would be one -- one thing. But it's quite another to say that you -- you agree -- you agreed to this contract, where they can -- they can bring arbitration against you. And there's no consent problem there, it seems to me. You've -- you've consented -- this is the scope of your consent, we have to address, but the idea that you consented to something seems hard to dispute, isn't it, as a matter of domestic law? Jonathan D. Hacker: I -- Well, I -- Neil Gorsuch: I think that's Justice Sotomayor's point. Jonathan D. Hacker: -- let me -- first of all, domestic law -- domestic law is not at issue here. It's the Convention which requires a written agreement between the parties to arbitrate. So the question is where is the written agreement between us and GE and the local paint guy to arbitrate claims between us? Stephen G. Breyer: Here is where. And I -- to do this, I want your reaction. Stephen G. Breyer: A. James Casner, who was my property professor, and a great man would also often use the word -- if we look at the sentence 3 of Article II, of course that word "parties" does not mean the parties in court. It means the parties who sign the agreement. And what the third says is that the court shall, at the request of one of the parties, emphasize, refer the matter to arbitration. But you, yourself, say sometimes a person who is not a party can force you to go to arbitration. That person you call a privity, a word full of obscurity. (Laughter.) Stephen G. Breyer: So the words that he used are not privity. He would say in a thing like this, it's one of the parties or someone who stands in the shoes of a regular party, of -- of an ordinary party. Now most of what you say is consistent with that. And if you use those vaguer words, you pick up what we said in Andersen because sometimes such a person who is a non-signatory would stand in the shoes because of assumption of a contract, because it went through bankruptcy, because we pierced the corporate veil, because there's theory of alter ego, because there's an incorporation by reference, third-party beneficiary theories, waiver, and, he says, estoppel. So it sounds what we're really arguing about is this the kind of estoppel and are these the circumstances of estoppel that will put your adversary in the shoes of a party? If I am right -- and you're nodding your head, which is a good sign -- Jonathan D. Hacker: Nodding only that I understand your question. Stephen G. Breyer: Oh, okay. (Laughter.) Jonathan D. Hacker: I don't think I'm going to agree with where you're heading. Stephen G. Breyer: Then you can say -- all right. Then you can say it's not right. But I -- I -- I thought that that's a question which I don't know the answer to and that, really, the Eleventh Circuit didn't use this wonderful expression, "stand in the shoes of" and thereby pick up the Arthur Andersen or at least some of them. Since they didn't, we could send it back and say the district court seemed to think they should, but here they're making an excellent argument on both sides. Now, now you've got my question. It's what to do with this case, depends on an assumption. What do you think? Jonathan D. Hacker: So the answer is I don't think "stand in the shoes" is any more clear than -- Stephen G. Breyer: Oh, no, it isn't but it doesn't purport to be. (Laughter.) Jonathan D. Hacker: Right. Privity -- privity explains all -- almost all of the situations in you -- which you need to be concerned about whether or not a non-party, non-signatory, by which I mean somebody who's not literally named, actually is standing in the shoes of a signatory. That explains almost all of the international cases that don't involve traditional estoppel. Samuel A. Alito, Jr.: What do we -- Jonathan D. Hacker: And that is a very easy and clear line. Samuel A. Alito, Jr.: What do we have to decide? The -- the Eleventh Circuit said a non-signatory can never enforce, right? Jonathan D. Hacker: Not quite, no. Samuel A. Alito, Jr.: It said a non-signatory cannot enforce. Jonathan D. Hacker: It -- it said non-signatories include their privities. It said it twice, and so we know from the Eleventh Circuit's rule that that includes privities. And so this Court could be clearer about that, but the Eleventh Circuit was absolutely correct. It also emphasized the importance of a signature, which may look like an overstatement because we know Article II includes documents exchanged, letters, and telegrams. But, of course, the Eleventh Circuit was only talking about a signature because GE was not pointing to any sort of separate document exchanged in a letter or telegram. The question was whether there was a written agreement or they were -- they should have been whether they were privity with a -- Samuel A. Alito, Jr.: Well, How does this -- Jonathan D. Hacker: -- party to the agreement. Samuel A. Alito, Jr.: How does this concept of privity, which is, as far as I'm -- as far as I'm aware, is a feature of Anglo-American law, become the -- become the controlling standard under this international agreement? Jonathan D. Hacker: Well, I -- it's not limited to Anglo-American law. There are different types of privity doctrines recognized throughout the world. Samuel A. Alito, Jr.: Okay, well, what's the doctrine of privity under German law? Jonathan D. Hacker: I -- I don't know what the German word is, but I'm sure it's extremely long. (Laughter.) Jonathan D. Hacker: But it's going to mean some version of the same thing. Samuel A. Alito, Jr.: What is it under Japanese law? Jonathan D. Hacker: The question -- the question being asked under whatever, you know, privity rules you're invoking are, is this party the same party for some reason as a signatory? That's not the question that is raised by the equitable estoppel claim that GE is raising. It's a fundamentally different question about -- I agree, I am not a signatory, I am not in privity with a signatory; I just want to make them enforce -- make them arbitrate with me because... because it's more convenient to, it seems efficient, it seems fair, whatever rules, you know, the local jurisdiction might invoke. They want to say those local rules, the equitable, fairness, justice principles of a given state, can trump what the Convention says, at least in a Convention-governed arbitration, the Convention says it's supposed to be a written agreement between the parties. Neil Gorsuch: I think -- I think the argument on the other side would be that -- that equitable estoppel or estoppel, whatever you want to -- however you want to describe it here, is -- is -- is that your client effectively did consent. That's the way in which it would be rephrased to -- Jonathan D. Hacker: I -- I understand. Neil Gorsuch: So -- so what do you do about -- do about that, Number 1? And Number 2, in a completely different line -- and take them as you choose, okay -- normally when we interpret treaties to bind domestic law, we require a pretty clear statement when -- when we're staying Congress's hand in an area. And if the FAA, hypothetically -- and I'm not passing on it; we don't need to -- were to allow equitable estoppel doctrine and the Convention didn't allow domestic law to do that, wouldn't we require a clearer statement than what we have here? Jonathan D. Hacker: Let me answer the first question, which I think I'll actually answer by the Convention. The Convention rule is not effectively consent. That's not the principle of -- the Convention adopts and requires for Convention-governed agreements. It requires a written agreement between the parties who are -- and it requires a court to enforce an agreement between the parties. It has to be the -- the -- the parties to the agreement are the only parties that could obtain enforcement under the Convention. So I think that's the clear answer. Neil Gorsuch: Except for the fact -- except for -- I'm sorry to interrupt. Except for the fact that you've admitted that there are other doctrines that allow third parties to be brought in as privities -- Jonathan D. Hacker: Because they're -- Neil Gorsuch: -- who may not have strictly consented. Alter-ego theory, veil-piercing theory. It's -- it's a fiction to call that consent. Jonathan D. Hacker: I disagree, Your Honor, because what -- what you have is a consent -- a written agreement between parties. And the counterparty in that situation is agreeing to arbitrate with, you know, Fives. Whoever Fives is defined as, they're arbitrating with Fives and whoever stands in Fives' shoes. That is a fundamentally -- there's consent there, there's a written agreement there, and the doctrines that international law recognizes for determining who properly stands in Fives' shoes. There is no universally recognized doctrine of international law that allows somebody who is not Fives in any sense to come in and say: Even though you never agreed to arbitrate with me, you're suing me -- and let's be clear about this -- you're suing me in tort outside the contract. These are not claims that are based on a -- the contractual duty between Outokumpu and Fives. These are tort claims governed by Alabama tort standards, and you never agreed with me in a written agreement to arbitrate those kinds of claims. Nevertheless, I'm going so say that, you know, I -- I think it's fairer for me to do that. I want to invoke your agreement. Elena Kagan: Mr. Hacker, sorry -- Jonathan D. Hacker: Please. Elena Kagan: Did you -- Jonathan D. Hacker: No, go ahead. Elena Kagan: Your argument here does rest on reading Article II and especially sentence 3 as not just a floor; as a -- as a -- as a ceiling -- as a floor and a ceiling, both. Jonathan D. Hacker: That's correct. Elena Kagan: So where do you get that understanding from? Because Mr. Dvoretzky, the solicitor general, says the parties to the Convention were just concerned about people not enforcing arbitration agreements. They didn't have it in mind to draw up a whole set of rules about when to and when not to. That's left up to the states. What -- what -- what's your best argument to the contrary? Jonathan D. Hacker: So a couple points. Let me start with the text in where I think the United States agrees with us, which is the Convention does make it a ceiling that you have to have a written agreement. That's required. You can't proceed under the Convention absent a written agreement. That comes out of Article II(1), which says the contracting states shall recognize a written agreement. It's the same language then in Article II(3). "The court seized of an action shall" -- "shall, at request of one of the parties, refer the parties to arbitration." It all fits together with Article II. Those are all mandatory requirements in order to trigger the protections of the Convention. Elena Kagan: What -- why is it so clear that the first one is a mandatory requirement? Jonathan D. Hacker: Well, the United States concedes it. And it -- they're right to do that for the reason you say, Your Honor, "shall" sometimes is a -- a mandatory requirement. The examples you gave are good ones. The United States Constitution says the -- the legislative power shall be vested in a Congress. Nobody thinks that means it could be elsewhere. Elena Kagan: Right. So I think everybody agrees the question is context. Jonathan D. Hacker: Correct. Elena Kagan: And what in the context do you think indicates that this is a ceiling? Jonathan D. Hacker: Because it's what's required to trigger the protections of -- the requirements of Article IV and Article V for enforcement. Neil Gorsuch: But counsel -- Jonathan D. Hacker: You have to have an agreement under Article -- Neil Gorsuch: -- that -- that -- that's a non sequitur. I think what Justice Kagan is trying to get at, and what I would like to get at, is, fine, that may be what's required to trigger the Convention, but that may just be the floor of -- of what's available to states domestically, and domestically they may choose to enforce more than that. Jonathan D. Hacker: Yes. I -- I agree with that. Neil Gorsuch: I think that's the question Justice Kagan is asking, and if you could address that. Jonathan D. Hacker: I -- I meant to be answering within the confines of the Convention, because that's all it takes here. Neil Gorsuch: Forget about within the context of the Convention. Jonathan D. Hacker: Right. Neil Gorsuch: Is there a universe of arbitration agreements that a domestic law might enforce that might not be enforceable under the Convention? Jonathan D. Hacker: Yes. Yes, that's Arthur Andersen. Those -- that definitely says that -- Stephen G. Breyer: Here -- Neil Gorsuch: I'm sorry, I'm -- I'm sorry, and I apologize. Isn't that the end of the case? If there are some universe of agreements that could be only domestically enforceable but are not enforceable under the Convention, then what? Jonathan D. Hacker: Because they can't proceed under the Convention -- under domestic law under U.S. law. Chapter 2 makes international arbitration -- the Convention the sole source of law governing international arbitration agreements. You cannot proceed under Chapter 1, for example, and get enforcement of an arbitration agreement overseas. Chapter 2 is the only place you can go. And Chapter 2 says the Convention proscribes the controlling law, you know, unless Chapter 1 -- so long as it is conflicting. And we know that the Convention is conflicting with Chapter 1 because the Convention proscribes, requires for Convention-governed agreements, a written agreement, that can be enforced only by the parties to the written agreement. It differs from Chapter 1 in that respect. Ruth Bader Ginsburg: Can you tell us what is -- Jonathan D. Hacker: There is no Chapter 1 here that -- Ruth Bader Ginsburg: Can you tell us what is going on in this -- in this very case? The party that you call Fives has to arbitrate, there is a written agreement, and there is an arbitration in Berlin; is that right, going on? Jonathan D. Hacker: Dusseldorf. Ruth Bader Ginsburg: I see. But then there is also this proceeding in the Alabama Supreme -- in Alabama state trial court. And is that proceeding going forward? Jonathan D. Hacker: Yes. Ruth Bader Ginsburg: So you have two cases, which in the best of all possible worlds because they're linked would be heard in the same forum, one going to an arbitration panel in Berlin and the other going to the state court in Alabama, but that's the result of your view of what the Convention requires? Jonathan D. Hacker: Well, if -- if -- if we had prevailed and didn't get before this Court, we would just be proceeding in Alabama as we should be. There is jurisdiction -- I mean, this Court has jurisdiction to resolve the certiorari question before it. But in our view, this case should be in Alabama state court on the tort claims that we have asserted. Ruth Bader Ginsburg: What I mean is that the relationship between the subcontractor and the contractor, vis-a-vis the buyer, that -- that litigation ideally would be all one case; instead we have this split. Jonathan D. Hacker: Well, again, it might be. We had an action against Fives, decided not to pursue it because Fives from the very outset said it's not our problem, they supplied the motors, they were the problem, GE screwed up. GE will take care of it, don't talk to us, we pursued it for a while with Fives. GE did begin working with us to fix the motors and provide housing for the motors. We basically had an ongoing working relationship with GE after a time, and it turned out not to be satisfactory. The problems were not solved. And their defective motors caused additional damage to our facility which under Alabama law and, by the way, U.S. federal common law in the maritime context allows a party to assert a tort claim outside the contractual relationship. Stephen G. Breyer: I'm interested in -- you want to read that sentence 3 as the ceiling. You know what I am talking about? Jonathan D. Hacker: The Article II -- Stephen G. Breyer: Yeah, Article II -- Jonathan D. Hacker: -- paragraph 3. Stephen G. Breyer: -- sentence 3 as a ceiling. All right. Jonathan D. Hacker: Well -- the whole -- Stephen G. Breyer: Yeah, but then the word "privity" doesn't appear there, you know, so you say almost a ceiling. No. Almost a party. No. Party plus privity. And I say: Well, now, I'm sitting here, can I think of some cases that are hard to squeeze into the term "privity" but it sounds as if they should be able to stand in the shoes of the party? Smith makes a contract with Jones. He says: You know, Jones, this is for the benefit of my daughter when she's 35. This will help her a lot. And I want her to be able to enforce it. And I want her to be able to go to arbitration. I love arbitration. Jones writes back to the letter: I agree with you, of course you can enforce it in arbitration. I love arbitration too. (Laughter.) Stephen G. Breyer: Don't worry. Go ahead and sign. So he signs. And now the daughter wants to go to arbitration after she's 35. Well, that's a pretty strong case for estoppel. And it's very hard to call the daughter a privity. So I've tried to think of a case where, does that sentence forbid that? No. Because you can't either call the daughter a privity, which sounds like a stretch, or you could say that is not a ceiling but it does pick up domestic law on this matter. And, by and large, when the domestic law allows a non-signatory to enforce an arbitration clause against a signatory, this doesn't forbid it. Now, what about that approach? Jonathan D. Hacker: I think the problem is what you -- what was described earlier as a choice-of-law problem, which I think your international commentators recognize that the law has to be governed by universally recognized international law principles because if you open up the door to domestic law on what seems like a, gee, that seems an eminently fair situation and say domestic law gets to decide who gets to enforce, that creates a huge problem under the Convention because then states can begin subjecting parties to arbitration, absent their consent, unwilling parties when the Convention clearly intends to be -- Stephen G. Breyer: All right. Jonathan D. Hacker: -- required to -- Stephen G. Breyer: He had a list about a thousand miles long, it seemed to me, of authorities, cases, professors, and others who say all these other people have enforced that particular sentence in a way that it allows at least some, perhaps not all, of those who are hard to call privities to enforce under certain circumstances and this is one. What do you say? Jonathan D. Hacker: The circumstance in which it is widely and I would say essentially universally recognized is only one. It's not the one Your Honor describes. It is the situation where a party begins or has even completed arbitration and then -- or an entity begins or completes arbitration and then later says I wasn't a party, I don't want to be subject to the results of this arbitration. That's a situation where courts, international decisions have recognized they can be held to it but it is not really an estoppel/contract doctrine. What Justice Alito's opinion in the case in Minmetals described it as is really a waiver doctrine or forfeiture doctrine. That's how the English Court in Peterson Farms described it, that's how the UK High Court in Dallah described it. It's really forfeiture or waiver. It's not some opening the door to all kinds of situations when it sort of seems fair to let an unwilling party to force an unwilling party to arbitrate. And think about the consequences of doing that. The Todd case that I believe Justice Ginsburg raised exemplifies the problems that you have if you just say -- if -- if it's connected to the contract in some way. Remember we had the earlier discussion from the earlier argument, the word "involves" can, you know, extend to the -- the limits of the universe. Well, so can something that's related to the -- you know, to a contract can extend to no limit. And that's what happened in the Todd case where a sailor was injured while working on a ship, couldn't recover against his immediate employer because the employer went bankrupt or in some way couldn't -- wouldn't pay the employer for his personal injuries. And so he went against the employer's principal, the guarantor, and the guarantor said: Well, your claim for injury on a ship is connected to this contract I have with the -- the -- the ship owner. And that contract has an arbitration agreement. And so you have to arbitrate with me overseas over your personal injury. That's exactly the problem with opening the door to U.S. modern equitable estoppel that is divorced from the contract terms and divorced from a situation when you're really talking about a waiver where somebody has engaged in arbitration. That's the limited circumstance. It's not any kind of gerrymander. It's simply adhering to the same text of the Convention, which for Convention-governed cases requires a written agreement and limits enforcement of the written agreement to the parties to the agreement. Let me make one other point about the language of Article II, paragraph 3. Justice Kagan's absolutely correct that "parties," the second use of "parties," pretty clearly is referring to the parties to the agreement. If there is any doubt about that, look at the Spanish versions of the Convention, look at the French versions of the Convention, which you'll find at paragraphs or pages 11A and 20A of our brief. It actually says "of them." It doesn't say "of the parties." It says "of them," immediately referring back to the parties to the written agreement. So there is really no ambiguity whatsoever there. This, unlike FAA Section 3 addressed in Andersen limits enforcement to the parties to the written agreement. That's only in Convention-governing cases, Justice Gorsuch. The point is it's possible for a state to adopt a separate law, like Peru did, and subject parties to arbitration, unwilling parties to arbitration on whatever terms a state feels like. That's not what the United States has done. And the consequence of doing that is that you lose the automatic enforcement benefits, virtually automatic enforcement benefits promised by Article V. The last two points that I would make are recall that extension to non-parties, all the commentators, I think the United States too, says the extension of an arbitration agreement to non-parties is supposed to be rare. It's supposed to be the exception that you almost never see. Under the doctrine GE wants you to adopt under U.S. law or under international law, essentially all subcontractors would suddenly be able to arbitrate, even absent a written agreement with the subcontractor because basically a claim between the subcontractor and the principle is in some way going to be connected to -- to involve the contract. So you completely erase the idea that this kind of enforcement is supposed to be rare, supposed to be -- be the exception, essentially be the rule in all construction cases. The other point I would remind the Court about its own decision in the Scherk case. It says the purpose of the Convention is to "unify the standards" for recognizing agreements and enforcing awards. I submit, Your Honors, there is only one way to make the standards uniform and that is to respect, adhere to, and enforce the uniform textual words of the Convention. Thank you. John G. Roberts, Jr.: Thank you, counsel. Two minutes, Mr. Dvoretzky. Shay Dvoretzky: Thank you. If I could, let me make three points and then suggest possible ways to resolve this case. First, there's an international consensus in favor of non-signatory enforcement generally. And there are numerous international cases that allow non-signatory enforcement on facts like these. The Titan Unity case from Singapore, there are cases from France and Switzerland, all of these are very similar. You have a situation where A contracts with B and C actually performs the contract. And in those situations because C is involved in performing A and B's contract, C can enforce the arbitration agreement if sued by one of the parties to the contract. So Singapore, France, Switzerland and other case -- cases cited in the briefs. Justice Sotomayor, you were looking for a limiting principle. I think there are limiting principles to equitable estoppel under domestic law but the Convention just doesn't speak to them. Third, Mr. Hacker argues that Congress in effect adopts -- I'm sorry? Sonia Sotomayor: What are they? Shay Dvoretzky: It would depend on the contours of state law, but presumably state law would not allow you to tag a random person on the street with no connection to the contract and say you're equitably estopped. There has to be a factual basis for the estoppel. And here there is for the reasons that we have been discussing. Mr. Hacker argues that Congress adopted the Convention as both a floor and a ceiling for U.S. law. That's simply not what Congress did in Chapter 2. It created federal jurisdiction where the agreement falls under the Convention, and then under 9 U.S.C. 206, if you have an agreement that falls under the Convention, a federal court exercising its jurisdiction can compel arbitration. It would do so by looking to domestic principles about when enforcement is proper. So in terms of how this case can be resolved, there's -- the narrowest possible way, is to simply hold that the Eleventh Circuit was wrong to -- to apply a signatory requirement, at Petition Appendix 15A to 16A, the Eleventh Circuit recounts the district court's finding that we were parties but says the reason we can't enforce is that we didn't actually sign. I think that's demonstrably wrong and the narrowest possible way is to send it back for that reason. If the Court wants to provide additional guidance, there are two ways to do that, I think. One is to hold that the Convention provides a floor, not a ceiling. I think that that follows from the text of the Convention, and also from international understanding. John G. Roberts, Jr.: The second? Shay Dvoretzky: The second way to resolve it, as Justice Sotomayor was suggesting, the term parties in Article II(3) is undefined. Domestic law fills that gap, as it does for many other things under the Convention, terms like "null and void," "incapable of being performed." Those are not defined by the Convention but the Convention looks to domestic law, as it does for parties. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

Earl Warren: Number 16, Banco Nacional De Cuba versus Peter L. F. Sabbatino. Mr. Rabinowitz. Victor Rabinowitz: May it please the Court. I notice that, although the Court does supply quill pens to counsel, it does not supply inkwells as well. This case is here on a writ of certiorari -- William J. Brennan, Jr.: Does that bear on this issue? Victor Rabinowitz: No sir. It's just a reference to the last case. This case is here on a writ of certiorari to the Court of Appeals for the Second Circuit to review that court's affirmance of a judgment of the District Court for the Southern District of New York. The District Court had entered an order dismissing the complaint on a motion by plaintiff for summary judgment. We think both of the courts below were in error and that summary judgment should have been entered in favor of plaintiff against the defendant, Farr Whitlock. The facts are somewhat complex, but I shall take the liberty of sketching them in rather quickly and only in broad outline because the details are really not necessary for a full understanding of the critical issue that confronts the Court on this record. Some time prior to 19-- to July of 1960 and about April or May, a sugar brokerage firm in New York by the name of Farr Whitlock entered into two contracts with a wholly owned subsidiary of a Cuban corporation, Compania Azucarera Vertientes-Ca Aguey, which is referred to in this proceeding by the initials C.A.V. Although Farr Whitlock was a sugar broker, it was buying this sugar on its own account. Under the terms of the contract, the sugar was to be shipped to Morocco, but payment was to be made in New York upon presentation of the bill of ladings and other shipping documents accompanied by a sight draft for the purchase price of the sugar in accordance with normal commercial practice. The price of the sugar was approximately $175,000. The record shows that C.A.V. was incorporated in Cuba and that about 90% or in excess of 90% of its stockholders are said to be residents of the United States. There is nothing into the -- in the record as to the nationality of those stockholders. On July 6, the Republic of Cuba adopted a decree authorizing the nationalization of property owned by nationals of the United States or properties in which the United States nationals had an interest. Under the terms of the decree, compensation was to be paid by the issuance of 20-year-bonds and the funds behind the bonds were to come from the proceeds of sales of sugar to the United States. On that very same day, the President of the United States signed the Sugar Act of 1960, which sharply curtailed the purchases of sugar by the United States from Cuba, although the Act, of course, had been passed by Congress a few days previously. One month later, on August 6, by a resolution made pursuant to the decree that I have mentioned, the property of C.A.V. and 25 other corporations were nationalized. This was one of a long series of decrees, which are -- some of which are referred to in a footnote at page 39 of petitioner's brief, which began in May of 1959 and which, in the end, transformed Cuba from a capitalist to a socialist economy. On the day of the decree, the sugar was being loaded on a freighter which was anchored in territorial waters of Cuba. Actually, the loading was not completed until August 9. The ship remained in territorial waters until August 11 and, on that day, new contracts were signed by Farr Whitlock with a Cuban governmental bank. These contracts were identical in terms, even as to the date, with the original contract signed between Farr Whitlock and C.A.V. and we contend that this contract recognized the ownership of the Cuban government in this sugar. A day or two later, the sugar went off to Morocco. The bills of lading were assigned to the petitioner which is the National Bank of Cuba and they were sent to Societe General, a French bank which acted as the New York agent of the petitioner, together with a sight draft in the sum of $175,000. While the bills of lading were in transit and, on August 16, 1960, in a proceeding commenced in the New York State Supreme Court, a receiver was appointed over the New York assets of C.A.V. pursuant to Section 977 (b) of the Civil Practice Act. As a result of subsequent proceedings, that receivership was set aside and vacated. That happened after the Court of Appeals decision on this case, the court-- Supreme Court in Kings County New York holding that the receivership was improper in the first place. On August 26, Farr Whitlock and C.A.V. entered into a contract. By the terms of which, Farr Whitlock agreed that if it could get possession of the sugar or of the proceeds, it would hold those proceeds for C.A.V., instead of turning them over to Societe General. In return, C.A.V. agreed to hold Farr Whitlock harmless for any loss it might suffer as a result of this transaction and also agreed to pay it 10% of the proceeds so that, although Farr Whitlock has been referred to in this proceeding on a number of occasions as only as stakeholder, actually, it stands to gain some of the sum of $17,500 if it should prevail in this lawsuit. On August 29, by means of a trick which we think equaled fraud, it certainly resembles fraud, Farr Whitlock managed to get possession of the bills of lading without actually honoring the sight draft. Using the bills of lading, it negotiated them, sold the sugar, and received $175,000 for it. It refused to pay that $175,000 over to Societe General and this lawsuit, which alleges a conversion of the bills of lading and the sugar that they represented, was commenced. A day or two later, the money was turned over to the receiver and, upon determination of the receivership, the money which, together with interest in course, now amounts to something over $200,000 was turned up to a-- over to an escrow agent who now holds those funds awaiting the decision of this Court. Potter Stewart: Societe General, if I got it right, is the instrument of the Government of Cuba? Victor Rabinowitz: No, it's a French bank. It's a private bank which is owned by French Interest. It has an agency in New York and it engages in normal commercial business and it was acting as an agent here, not an agency of, but a commercial agent for the Government of Cuba in the transaction of these businesses. Potter Stewart: Then, how did Banco Nacional De Cuba come into the picture? Victor Rabinowitz: Well, Banco Nacional was the assignee-- Potter Stewart: Of Societe? Victor Rabinowitz: Of the Cuban Government or the Cuban bank which entered into the contract in the first place. Societe Generale was merely an agent of the petitioner and the petitioner sued here. Societe Generale was perhaps liable to Banco Nacional for negligence in handing over the bills of lading without getting the draft, but Banco Nacional chose not to sue Societe Generale, its agent, but rather sue directly for its-- Speaker: Is Banco an instrumentality of the Cuban Government? Victor Rabinowitz: Yes. Potter Stewart: It is? Victor Rabinowitz: Yes. There's no question about that. Byron R. White: Is there a (Inaudible) obligation (Inaudible)? Victor Rabinowitz: No, there was no negotiation-- Byron R. White: A collection agent -- Victor Rabinowitz: It was purely a collection agent. There seem to be no question of fact in this case and, accordingly, petitioner moved for summary judgment. Farr Whitlock defended on two grounds. First, it claimed that the federal court did not have jurisdiction because of the pendency of the New York State receivership and, second, it raised the series of issues of fact. Neither of those grounds is raised in this Court and we assume that they have been abandoned. The district court first considered the question of jurisdiction and decided in favor of the petitioner. It then considered the factual questions and decided those in favor of petitioner, holding that there were no triable issues of fact. We would have thought that, under these circumstances, summary judgment would have resulted in favor of the petitioner that the Court then went on to decide the case on a ground that had not been urged before it, that had not been argued before it, that had not been briefed before it, and that I don't think that any counsel had even thought about it because, to us at least, the law seemed so clear that there was no point in arguing the matter. Despite a long line of cases of this Court and the federal courts known generally as the act of state cases, and I shall of course refer to them again later in my argument, it held that there was an exception to the act of state case, namely that they did not apply where the decree of a foreign government violated international law. It then examined the decree of the Cuban Government in this case and it found that violation of international law had indeed existed in three respects. First, that the Cuban decree was discriminatory against citizens of the United States; second, that it was retaliatory and third, that it confiscated a property without adequate compensation. The Court of Appeals affirmed on somewhat different ground. It held that the Act of State Doctrine was subject to another exception. This was the exception which it, the same court, had found, in about 1947 I think, in the second Bernstein case, and that's reported in 210 F.2d 375. I shall refer to that again later, although I think that the major burden of the argument, at least the major burden of the brief on this subject, will probably be carried by the Solicitor General. In any event, the court found that the Bernstein exception was present here, relying on fragments of correspondents which were submitted to it, not by us of course and not by Farr Whitlock, but by an amicus which had sought and received leave to file an amicus brief. And, these fragments of correspondents were handed up to the court and the court relied on these to hold that the Bernstein exception applied in this case. It then went on to decide that the Cuban decree had violated international law and, while it didn't find the same three violations of international law that the district court had find, it sort of grouped all of them together and, to use its language, it held that there was a violation of international law for a company to fail to pay adequate compensation for the property it seizes from a particular class of aliens when the purpose for the seizure of the property is to retaliate against the homeland of those aliens and when the result of such seizure is to discriminate against them only. In another words, it took the three grounds that the Court of Appeals said had found and locked them all together to make one single ground. In our opinion, the basic question before the Court here is the Act of State Doctrine. Both our brief and, to an even greater extent, the brief of the Solicitor General enters into a rather extensive consideration of the history of the Act of State Doctrine. Both of us say that this doctrine really dates from 1674 in an English case. But, in modern times, it may be said to date from Underhill against Hernandez, although there's some language in the Schooner Exchange which does seem to foreshadow this same doctrine. Now, there are many, many formulations of the Act of State Doctrine in the decision for this Court. In Oetjen against Central Leather Company, for example, this Court said the conduct of one independent government cannot be successfully questioned in the course of another. Mr. Justice Holmes earlier, in the American Banana Company case, had said “the general and almost universal rule is that the character of an act as lawful or unlawful must be determined wholly by the law of the country in which the act is done. ”There is similar language in Shapleigh against Mier, in the Belmont case, in the Pink case, all of them in this Court and, most recently, in the case of Pons against the Republic of Cuba which was decided by the Court of Appeals for the District of Columbia and certiorari was denied by this Court, I believe, in 1961 and it presents a Cuba situation. The others, of course, represented either Latin American nationalizations or Russian nationalizations. The New York courts hold to the same effect, and this is of some significance because there are some suggestion both in the Court of Appeals and in the decisions of the -- in the briefs of -- the many briefs that have been submitted in opposition to the petitioner, that perhaps, under the Erie against Tompkins case, the New York law applies, but it really doesn't matter because the New York cases are in complete agreement. Salimoff against Standard Oil, in 1933, is perhaps typical. It says “the courts of one independent government will not sit in judgment upon the validity of the acts of another done within its own territory, even when such government seizes and sells the property of an American citizen within its boundaries and, to the same effect, the Dougherty case and Holzer against Deutsche Reichsbahn, the last one being a case involving actions by the Nazi Government of Germany. Arthur J. Goldberg: There's a bit of (Inaudible) it appears the law of (Inaudible). At some point, the objection is (Inaudible) and they appear to have reached to define, regardless of how this case goes, (Inaudible) of our Act as it appear here. This is on the (Inaudible) giving him advice when you're treating it as an act of state. Victor Rabinowitz: I'll be glad to come to that, Your Honor. I hope I remember it, and if I don't-- Arthur J. Goldberg: I hope (Inaudible) Victor Rabinowitz: Mr. Boudin will remind me if I forget. I certainly shall. We, and the Solicitor General, say that this doctrine, the Act of States Doctrine is generally accepted throughout the world by the courts of most other countries. There's no doubt that it's accepted it in England in Luther against Sagor. C.A.V. disagrees and so do some of the other amicus briefs. And, frankly, I see no particular point in spending the time of this Court in discussing decisions in Bremen, Turin, Singapore, Nuremberg, Venice, Aden, and many other cases throu-- many other similar points throughout the world. All of them are discussed in the brief and to be honest, I really don't see why they make very much difference because the law in the United States and England is identical and I have just stated it, and I don't know why it should make very much difference what the Court of Venice thinks about this question. Potter Stewart: Now, in the ultimate effect, it doesn't really make much difference what the courts of England think about it. This is a-- Victor Rabinowitz: Exactly. Potter Stewart: Question of what -- Victor Rabinowitz: Exactly. Potter Stewart: The law is -- Victor Rabinowitz: Except -- Potter Stewart: In the United States. Victor Rabinowitz: Except that we are in what is sometimes referred to as Anglo-American -- Potter Stewart: Well, I understand that. Victor Rabinowitz: System of law and I just want to get the Anglo in. Potter Stewart: It's the United States court -- Victor Rabinowitz: I think -- Potter Stewart: The United States court -- Victor Rabinowitz: That's so, Your Honor. The -- Potter Stewart: Now -- well, I've -- since I've interrupted you, may I ask you whether the -- or not this doctrine applies in case the foreign government has not been recognized diplomatically by our nation? Victor Rabinowitz: Well, there is some suggestion that the doctrine does apply even where the foreign government has not been recognized but that, of course, is not before us because the foreign government has been recognized in this case. There are no diplomatic relations, but the foreign government has been recognized and there is material, I think it's in this record, but certainly in Ricoeur and many other cases in the United States in which the Secretary of State has written letters to various courts throughout the country saying “the Cuba -- the Cuban Government has been recognized by the United States.” Potter Stewart: Throughout the -- Victor Rabinowitz: And still is. Potter Stewart: Series of transactions involved. Victor Rabinowitz: Yes, throughout the period of transactions -- Potter Stewart: And now. Victor Rabinowitz: And including today. The C.A.V. brief says that the Court of Appeals' decision is supported by commentators and decisions of courts in other countries and that may be true, but I don't consider it to be decisive. Not only is there no legal authority to support the respondent here, but I submit that there are no policy considerations either. Now, I'm not going to argue that extensively because I think that the brief of the Solicitor General handles this matter rather fully and is -- I'm sure, plans to consider these policy considerations. I would like just to mention two points, however, which are relevant. C.A.V. and many of the amicus briefs make quite a point of an argument which we don't make. They make quite a point in answering an argument that we don't make and that, I believe, the Solicitor General makes either and they say that this Court has the power to decide cases even though they affect foreign relations and it quotes cases like the Familiar Ground against Canal and other similar cases. Now, I certainly would not argue that this Court doesn't have any power to decide cases which involve foreign relations. The Court has done so many times, and I would not argue for any such broad proposition. For example, there is a citation -- there is a reference to Mr. Justice Brennan's decision in Baker against Carr in which the opinion makes some reference to the language in the Ricoeur case, I believe, and says that this language is too broad that the court frequently does handle problems involving foreign relations. Now, I'm not arguing that question. I don't think it has anything to do with this case. All we are saying, so far as this case in concerned, that our court should recognize the validity of the Acts of other states disposing of title to property within their territorial jurisdiction. That's all I have to say in this case and that's all that I am asking the Court to rule on. If we have other problems in other cases, we will consider them in due course. To hold otherwise is to challenge or to question the sovereignty of other nations, as Mr. Justice Holmes said “what is sovereignty, but the right to make decisions as to property within your own territory.” Arthur J. Goldberg: Do you decide to argue that as it leaves international law if the Court holds that? Victor Rabinowitz: I think it's a rule of international law, Mr. Justice Goldberg, but whether it is or not. I think it's a rule of this Court and I'm willing to rely on this Court. I think that most courts hold that way. You see, the difficulty with the whole feel of international law, and we'll come to this a little later, is that there is a general tendency on the part of our courts, and it's natural enough, under the circumstances, to regard international law as being something that the courts of the United States and Western Europe hold. Now, the fact is that most of the people in the world don't live in United States or Western Europe. They live in Africa and they live in Asia and they live in Latin America and we do not have from those courts a body of opinion of judicial decisions which enable us to tell at this time what Indonesia or Pakistan or India or China think about these issues. Most of the people in the world live in those countries, not in the United States and Great Britain and Germany and so the whole question of international law on issues like this is really a matter which is of very, very great value. So, I can't say “the court say international law is the practice of most civilized nations. ”I don't know and I don't believe that anybody knows what international law is in this rapidly expanding world of today with so many new nations being created almost everyday. So, it's a pretty hard thing to tell. Arthur J. Goldberg: (Inaudible) I hope it's in the record that you're taking (Inaudible) and the Court ask you not to stay and (Inaudible) Victor Rabinowitz: I have never considered this to be a rule of abstention, Your Honor. I have always considered this to be a rule of positive law. Arthur J. Goldberg: And, therefore, a rule of positive law and call it the National Law of Parliament. Victor Rabinowitz: It's our law. Arthur J. Goldberg: Would you, therefore, argue the law using your rule? Do you have to take the rule? In our point, (Inaudible) is the nationalization of property (Inaudible) consider your example (Inaudible) Victor Rabinowitz: I would say that with one qualification. I am now talking about nationalization of property within the territorial limits of the nationalizing country. Now, there are other cases where property in New York is nationalized, and there are other Cuban cases raising tat issue, but we haven't reached those yet. We may someday, but I am not -- I am not extending myself to that question at the moment because this property was in Cuba. William J. Brennan, Jr.: Well, may I ask Mr. Rabinowitz. You're not arguing either, are you that this is the kind of subject matter which the Constitution commits to the Executive and, in that sense, is nonjusticiable? In other words, you're not arguing that this is a matter of lack of power in the judiciary. Victor Rabinowitz: I should think not, Your Honor. I don't know what the Solicitor General says about that, but I don't think I am arguing that this is not justiciable in that sense. I think it's not justiciable for other reasons, but not in that sense. Byron R. White: Then you must -- you would probably also argue the Executive then has no business questioning the act of a foreign sovereignty. Victor Rabinowitz: Whether the Executive may do it is a diplomatic matter. The Executive frequently questions the validity of acts of foreign countries. This is the -- Byron R. White: We may need to break international law. Victor Rabinowitz: This is -- well, I don't know whether it's a question of breaking international law. The Executive frequently -- Byron R. White: Well, they recognized them. Victor Rabinowitz: Signs a note saying that this is a violation of international law. This is all on the give and take of diplomacy and speeches are made and arguments are made and, in diplomatic negotiations. I think the Executive is entitled to a freehand in this and I certainly would not limit the or -- seek to limit the Executive, even if I could, in any question as to what kind of position the Executive is going to take in the give and take of the politics of the modern world. I think this is for the Executive to determine and I think that the Executive has a freehand, but I don't believe that it has any role in determining what this Court will decide. The second point I would like to make in connection with this problem of the policy behind the Act of State Doctrine is an illustration that I would like to present to Your Honors which is not a hypothetical illustration, but is an actual one and which I think is an excellent illustration of why the Court ought to stay out of this area and why the Act of State Doctrine is a sound one and it arose under these circumstances. On July 24, 1961, an Eastern Airline plane was hijacked by an armed passenger who took the plane from Miami to Havana together with all of the passengers. The passengers came back the next day but, on August 16th, the plane was returned by the Cuban Government after a great deal of diplomatic negotiation between the Swiss and Czech as these things are handled now. On the very next day, August 17th, a Cuban freighter was hijacked and was brought into Norfolk harbor. This presented a political situation of, I think, considerable importance and it was made even more critical by the fact that, on board that freighter, there was a cargo of sugar and it was owned by United Fruit Company or at least United Fruit Company claimed to own it. It was a cargo of sugar that had been nationalized by the very same decree that we are here considering, and United Fruit came in and said “we don't care about the freighter, but the sugar belongs to us. ” Now, the case of United Fruit was just as strong and just as weak as the case of C.A.V. in this re -- in this circumstance. Every single word of the C.A. brief -- C.A.V. brief, between page 12 and page 58, could have been written by United Fruit merely with a substitution of the name United Fruit for C.A.V. Earl Warren: We'll recess now. Victor Rabinowitz: Thank you.

Earl Warren: Number 33, Charles Dowd Box Company, Incorporated, Petitioner, versus John F. Courtney et al. Mr. Mason. George H. Mason: May it please the Court. The federal law here involved is Section 301 of the Taft-Hartley Act with the subject of consideration by this Court in Lincoln Mills in 1957. The principal issue presented here is whether Section 301 preempted to the exclusive jurisdiction of the federal courts, that field of litigation involving collective bargaining contracts where interstate commerce would be effective. The case comes here in the following manner. I shall refer to the petitioner here, the defendant in the lower court action of the company and the respondent here is the union for convenience. The union brought a suit to the Massachusetts Court to enforce an alleged collective bargaining agreement essentially claiming a refusal by the company to comply with the terms of an executed agreement, allegedly executed agreement, an improper termination of that contract by the company and sought as relief an injunction against the termination of the contract by the company, specific performance of the entire agreement, a declaratory judgment and damages for the violation of the contract. The action was brought by the union -- International Union, United Steelworkers of America through a representative of the international by the local charted by the international. On behalf of the organizations themselves and of the individual members of those organizations -- for the action can only be instituted as a class suit in Massachusetts, so which does not recognize at the end of the theory with reference to unincorporated organization such as labor unions. The company filed a demurrer in the action setting up specifically that Section 301 of the Taft-Hartley Act deprived the state court of jurisdiction in a suit between a labor organization and an employer for violation of a collective contract. The company incidentally denied the validity of the agreement that was in issue and determined adversely to the company. William O. Douglas: The validity of what? George H. Mason: Of the collective agreement -- William O. Douglas: Of the whole agreement. George H. Mason: Of the whole agreement. William O. Douglas: That is it was signed by agents not authorized to act -- George H. Mason: That was one of the defenses raised by the company as to the invalidity of the -- with reference to the validity of the collective agreement. The company also filed a motion at some stage in the proceedings to dismiss the action for want of jurisdiction alleging the same ground as it did in the demurrer. The demurrer and the motion was -- the demurrer was overruled and motion was denied by the lower court. A filed decree was entered in the lower court declaring the agreement valid and binding on the parties and directing payment of specific amounts to individual members of the union in the form of wages alleged to be due under this contract. Now, I might point out here that the original action sought specific performance of the entire contracts which had many clauses in it -- with reference to union rights qua union such as recognition of the union, union shop, check off, as well as claiming violation of rights which would result in money damages to the individual members for wages alleged to be due. But the -- by the time the filed decree was entered in 1960, the original contract had expired, so that the question of specific performance of the expired contracts had become moot and the only relief therefore which the Court afforded to the union was to grant the money damages which was alleged to be due under that expired contract or the duration of that contract. The company appealed from the interlocutory decrees -- decree overruling the demurrer of the company in which it alleged no jurisdiction of the state court and from the lower court's motion to -- denial of the motion to dismiss for want of jurisdiction and from the final decree, the Supreme Judicial Court affirmed the rulings of the lower court in essence holding that the state court did have jurisdiction, not withstanding Section 301 of the Taft-Hartley Act that the Taft-Hartley -- the three -- Section 301 did not establish any exclusive jurisdiction in the federal courts. Now, it may be of interest on the -- as the case arises here that in the findings of fact which are undisputed now in this case, there was a finding in the lower court that the company sells a substantial part of its product and purchases a substantial part of its supplies in interstate commerce. So I don't think there's any question here of whether the case involves one affecting the interstate commerce. I think that would be considered by both parties. It found that the company refused to comply with the contract and terminated it before its expiration date, and that the collective agreement for which specific performance was requested, was valid and contained the usual clauses which are incorporated in a collective agreement so that the case is one to which Section 301 obviously applies. It was brought by a labor organization against an employer for a violation of a contract between these parties expressly. The company was engaged in interstate commerce and I think that's undisputed so that this would affect interstate commerce suit conceivably and the suit sought specific performance of the entire contract so that it could not be said that this was a suit to maintain or prosecute uniquely personal rights as distinguished from rights of the union as a union, so that the Westinghouse problem is not yet present. I think it was not specifically that will force money judgments for individual members of the union although that was the final decree entered because the other issues had become moot in the process of the litigation. Now, the Section 301 and the inquiry I should say here presented follows in somewhat natural sequence from the Court's -- this Court's decision in the Lincoln Mills case, in Mills' case in 1957 where at least these phases of Section 301 were determined namely that Section 301 was not a procedural statute, but created substantive rights and established substantive law, and the Court went on to say that it did -- created a direction to the federal courts to fashion a body of federal law under Section 301. And the case further, I think for our purposes in this situation established that there were no constitutional difficulties involved in the enactment of Section 301 granting remedies or establishing a procedure for remedies for violation of collective agreements which were consummated between labor organizations and employers. Now I think that being in the sense behind this as far as the issues in this case are concerned we come then to the question -- the next question in sort of a logical sequence, if Section 301 established the substantive law beyond a mere procedural enactment, permitting a forum for enforcement of collective contracts in the federal courts and if this was constitutionally within the province of Congress to so enact in establishing a national labor policy, then I think it must be assumed that there – if there is no constitutional impediment to the interpretation and application of Section 301 as set forth in the Lincoln Mills case, then it must be assumed, I submit, that it was within the constitutional power of Congress to have granted exclusive jurisdiction for the enforcement of these rights to the federal courts if it so fit which would then bring us to the customary but often difficult question of proving the legislative intent in this respect. Then it becomes in this case a matter of interpretation of Section 301 as to whether Congress intended or the general pattern of this legislation and the general purpose of it would require an interpretation fairly that exclusive jurisdiction was vested in the federal courts when Section 301 was enacted. It might be helpful to orient ourselves to read the specific provision of 301 to the effect that Section (a), that suits for violation of contracts between an employer and labor organization representing employees in an industry affecting commerce as defined in this Act or between any such labor organizations may be brought in any District Court of the United States having jurisdiction of the parties without respect for the amount of controversy or without regard to the citizenship of the parties. And it would seem that the specific statutory language and the general pattern of the legislation would in the first instance be the primary source to inquiring the legislative intent. And one of the arguments that has been made with reference to this question of whether there is exclusive jurisdiction of the federal courts or concurrent jurisdiction in both the federal and state courts as a result of Section 301 is that the word “may” is used that suits may be brought in any District Court which is not the language of a mandatory exclusive jurisdiction normally perhaps. But I submit that dramatically the “may” in this statute or in this clause is permissive to the federal courts without regard to the amount of controversy or the citizenship of the parties. In other words, it's permissive to the federal courts to act regardless of these restrictions which would otherwise apply. It is not permissive necessarily with respect to federal jurisdiction vis-à-vis state jurisdiction. I think this would be a fair use of the -- or analysis of the word “may” grammatically in this particular statute. But going beyond that language analysis, if we look at the pattern of the legislation itself, the Taft-Hartley Act, I think it becomes somewhat clear that where the Congress intended to permit state intervention in labor relations affecting commerce that in explicitly and expressly said so. For example, there is nothing presently in the Taft-Hartley Act which says that the Board has exclusive jurisdictional or unfair labor practices. However, it's now conceded without any possibility of controversy that -- and by interpretations of this Court that the power of the Board is exclusive even though that language is not used in the statute. Now, when the Court saw fit to grant exclusive or rather state power to act, it did so in express language, for example in Section 303 of the act which was enacted at the same time as 301, the language is that whoever shall be injured in his business or property by reason of any violation of subsection (a) which is the secondary boycott provision, may sue therefore in any District Court of the United States, subject to the limitation and provision of Section 301 without respect to the amount in controversy or in any other court having jurisdiction of the parties. So that when they wanted to grant and specifically say this Court -- state courts may intervene in that particular situation, enacted simultaneously with 301, they said or in any other court having jurisdiction of the parties. They did not use that language in Section 301, enacted at the same time. Felix Frankfurter: Mr. Mason, I take it that we start with the fact that Congress didn't solve this problem for us. We have to solve it for Congress. It doesn't say shall be exclusively nor does it say shall also be in any state or any court having jurisdiction. Is that right? George H. Mason: That's correct. Felix Frankfurter: And so we haven't got a federal employer's liability problem and we haven't -- Now, what I want to know is have you -- you just made a generalize statement. Your argument boils down to the fact that although it didn't say exclusively, it meant exclusively and the respondent's argument was on the fact because it didn't say exclusively, didn't mean exclusively, that's what the Congress is about. George H. Mason: Correct. Felix Frankfurter: Now, as bearing under -- on the resolution of those two contradicted provisions, I myself for instance would be interested to get light on various statutes, various statutes, not only labor statutes -- statutes under the -- it consists of act Taft-Hartley or the Wagner et cetera, the various statutes in which Congress has fermented litigation, not consciously, but inevitably and I wonder if either you have collected all the relevant statutes as guidelines as illumination in finding -- to extracting a purpose either of exclusion or inclusion from the structure of a statute. Have you done that? George H. Mason: I have not made that survey Your Honor. I am familiar with certain statutes where the problem has risen such as in the Sherman Act or Clayton Act, the patent statutes obviously, the employment liability -- Felix Frankfurter: We can toss up a coin. We can argue about consequences, pro and con and so on and then I hope there would be a very little talk about the intention of Congress which you evidently didn't have because it didn't express it. So where do we -- I would like to have some road map. That's what I'm looking for. George H. Mason: I think the fact that Congress had no -- gave no consideration of the problem as never deprive the Court's previous decisions from interpreting the statute -- Felix Frankfurter: No. I'm not saying I'm the duty. I'm saying that I've got a duty on which -- which is addressed in a dark room. George H. Mason: Correct and I believe that we have an imprecise statute on that particular question and now I'm looking first at the language of the statute itself, and if you see if that throws -- sheds any light upon the -- Felix Frankfurter: (Inaudible) a very part of it? George H. Mason: Well, it takes such a certain distance in this respect Your Honor that for example, I've pointed out Section 303 (b) which specifically says, “The courts may bring a suit in any other court.” Felix Frankfurter: At some other length, I mean the specific -- the specific statute you have to construe doesn't shed very much light, does it? George H. Mason: Well -- Felix Frankfurter: I don't mean the specific statute. I beg your pardon, specific provision. George H. Mason: Right. Felix Frankfurter: (Voice Overlap) George H. Mason: I think specific provision -- specific provision does not shed much light. Felix Frankfurter: All right and you move on -- George H. Mason: Then I move on to the general pattern of the act of which this particular clause is applied, which I think is a logical next step -- Felix Frankfurter: You have a right. George H. Mason: -- pursuing this inquiry and I find 303 (b) which specifically says, “State courts, action may be brought in the state court.” I find in Section 10 (a) which gives the Board the power to enforce violations of unfair labor practices, giving the Board the power to see enforcement to the state agencies in given situations, certain types of industries. There they specifically give this power in 10 (a), in 14 (b), where they want to preserve the rights of states to enforce right to work laws which could have been preempted by the federal statute if it saw fit to do so. It said no that state federal right to work law shall apply and here is another situation which happened recently perhaps in 1959 under the Landrum-Griffin, the Labor Reporting and Disclosure Act of 1959 when this Court had created a void, a no man's land in the -- as result of the Guss case where the state court couldn't act. The state court was barred from acting even though the National Board declined to act and this Court said, “Not withstanding the declamation of the State, or the National Board, the State Board could not act.” This was a preempted field. The Landrum-Griffin then corrected that situation in -- by adding Section (c), clause (c) to Section 14, giving the Board the right to cede its jurisdiction where it felt the impact on the -- when the interstate commerce was insubstantial to the state agency, a power which was not previously -- which did not exist previously so that we have here perhaps four different categories or portions of the act where the Congress did specifically and explicitly give power to the state to intervene. Now, I say this create somewhat of a pattern and not perhaps an overwhelming argument that where the Congress wanted the state to intervene, they said so specifically, even though they did not say in other situations, these powers are exclusive to the federal court, but looking at the pattern of the entire language of the statute, it seems to give some assistance, though not complete argument. Felix Frankfurter: Not only that, but the Guss case shows that this Court derived exclusion from policy considerations, consequences of not exclusive. George H. Mason: Right. Felix Frankfurter: Like in a different field in the interstate commerce field, but then it happened in all case, this Court construed or practically chloroformed the provision which said the common law rights survived because if it has to construe it -- if it had to give respect literally to that Section, it would've been notified the purpose of the rest of the act. George H. Mason: And I think it's a -- the next consideration that I would come to after analyzing the language of the statute, the clause, the entire statute then the policy behind the entire legislation of which this clause is applied. But before I leave the -- the language problem, I might -- I would like to call the Court's attention to the impact of Lincoln Mills' decision on the language of Section 301. Lincoln Mills' decision holds that 301 creates a substantive law and this being a federal law under Article VI of the Supreme Law Constitutional Provision, the states, if they had the concurrent jurisdiction would obviously be bound by this law. And then you find in Section 301 specifically that in suits brought in the District Court, specifically referring to suits brought in the District Court, the union shall be regarded as an entity, may be sued as an entity. At any money judgments rendered in the United States District Court shall be enforceable only against the labor organization and not against the individual members. There are other provisions dealing with the service or process in obtaining jurisdiction over the labor organization, again, in suits brought in the District Courts of the United States. Now, if we say there is concurrent jurisdiction and that this statute is now a substantive federal law which must be applied by the state courts, I find difficulty in maintaining a consistency between that view and applying the language of the statute which if we carried the -- onto the next step would require us to say that the state court then could not render a judgment which would be binding upon the individual members of the union if this is substantive law. But it's difficult to me that -- to see how you can fairly say that when the statute specifically says, “A money judgment rendered by United States District Court is now going to be interpreted to be a money judgment rendered by a state court.” The language is inconsistent it seems to me with that view. So that I -- let's say to maintain -- pardon. Felix Frankfurter: Well, that was (Inaudible) Mr. Mason is that -- although a substantive matter as we play with words, substantive procedure, these are essentially -- litigation is to be conducted against whom and Congress would hardly have provided a code of procedural -- a code of procedure for the conduct of litigation in all the 50 states and therefore, sub silencio left all those matters to local jurisdiction. I am not saying that's a full answer to you but it is -- that's what you'd had to come down to. George H. Mason: The interesting thing is that in 301 where they want to make a rule of law of general application without applicability only to District Courts in Section (e), they did talk about agency without reference to whether the problem or issue arose in the Federal Court or District Court. And this of course brings us to the next problem which this Court probably has already heard about, what about Norris-LaGuardia Act if there is concurrent jurisdiction. Are we going to say that notwithstanding that Section 301 talks about suits and the District Courts would want to say they apply to the state courts, I am personally fearful of the -- of the same interpretive procedure being applied to a determination that Norris-LaGuardia, which particularly and peculiarly and specially restricts United States District Courts in their preventive relief in these labor cases and doesn't make any reference to interstate commerce is now going to be said to apply in the state courts. Felix Frankfurter: I'm not sure I follow you Mr. Mason. Why -- why does the argument opposed -- the conclusion opposed to yours implicate the relevance of Norris-LaGuardia, the state courts never occurred to me that it was? George H. Mason: Well my -- Felix Frankfurter: I don't -- I mean never occurred to me that Norris-LaGuardia was applicable to courts. Indeed states have to pass separate Norris-LaGuardia Act as your state has. George H. Mason: That's true Your Honor. Earl Warren: You many answer that after lunch -- continue your argument. George H. Mason: At the recess, I think we were discussing the application of Norris-LaGuardia to the state courts and inquire was made as to what this has to do with the case at Bar. It is true that there are baby Norris-LaGuardia Acts in most of the industrial states, but I venture to say that there are many states which do not have a baby Norris-LaGuardia Act. Hugo L. Black: But do you think -- do you think our decision on this point here necessarily has anything to do with the Norris-LaGuardia Act? George H. Mason: I raise the question solely because of the difficulty I found in applying substantive law expressed in Section 301 specifically referable to United State District Courts and saying that would also apply in the state courts. I raise the Norris-LaGuardia Act for the same reason that if it were true that a statute was specifically restricted or created rights pursuable in United State District Courts could be said to also apply in state courts even though the language is restrictive to District Courts then the same reasoning certainly could be ruled in saying that the Norris-LaGuardia Act which restricts injunctions in the federal courts if it establishes a federal labor policy which is a federal law, and must be enforced by the state courts and apply it, should also apply in the state courts and peculiarly enough in this brief written by the union in this case, the union said that this Court holds for example as we believe it should that Norris-LaGuardia Act precludes the issuance of an injunction against the strike and an action brought in the federal court under Section 301, the same limitation would have to be applied that such an action were brought in the state court. William O. Douglas: That's contrary to what the California Court (Inaudible)? George H. Mason: That's contrary, yes. In McCarroll, the California Court said, the federal law 301 (Inaudible) to this strike or this suit, but we are not restricted in the relief, we can grant. Since there is concurrent jurisdiction, we can grant an injunction even though a federal court could not if the action were brought in a federal court. Hugo L. Black: Is that view point stated in another way mean that Taft-Hartley Act amended the Norris-LaGuardia Act? George H. Mason: I think there is a case that was brought up with this term of the Court if I am correct which involved the issue as to whether Norris-LaGuardia Act was effective in a 301 action. And I think that was -- should've been argued if it wasn't the -- it was on the list at least in this term. So the issue has already been raised as to one does the Norris-LaGuardia Act apply at all on the -- is Taft-Hartley's Section 301, did that supersede Norris-LaGuardia and I think the anomaly in this case is indicated and pointed up very specifically by what I just read from my brother's brief that I suspect that the United Steelworkers Union would prefer to be arguing my side of the case and not decide that the action of litigation places them on -- in this case. Hugo L. Black: How many cases have there been heretofore? This has nothing to do with this. How many cases have there been throughout the country up to date in which this question of exclusive jurisdiction is raised, do you know? George H. Mason: Well, there have been two adjudications I know by the federal courts in which this question has been raised. And as a matter of fact, I believe Your Honor in the Westinghouse case, in the Circuit Court, the Court in that case took the position that the jurisdiction was exclusive in the federal courts. And this was commented upon, I believe, by this Court's opinion and without any adverse comment at least, whatever that might signify. Hugo L. Black: Have there been enough to know whether the alignment has been the same in all the other cases I suppose. George H. Mason: No. Hugo L. Black: It has nothing to do with -- George H. Mason: No. I know there are two United States District Courts with decisions referred to in our brief which holds that the federal jurisdiction is exclusive. Felix Frankfurter: I like your -- I like your phrase Mr. Mason. The accident of litigation (Voice Overlap) George H. Mason: I stole it from Your Honor. Felix Frankfurter: You call the initiation of a litigation by a plaintiff an accident? George H. Mason: It's an accident as to the position your -- Felix Frankfurter: Accident for this Court. George H. Mason: It's an accident perhaps from the standpoint of your own philosophic the concepts as oppose to the interest of your client for which whom you're an advocate. That's what I meant really. Felix Frankfurter: Are clients in the habit of, I think they're a console between either a state or a federal court? I'm just asking that as a (Inaudible). George H. Mason: I don't believe, so I think they look to counsel for that advice Your Honor normally because we were an unwilling party in this case to litigation instituted in the state court. Felix Frankfurter: (Inaudible) George H. Mason: Yes, Your Honor. So that seems it seems to us that if the specific language of the statute leaves any ambiguity here an interpretation of Section 301 to the effect that federal court jurisdiction is exclusive, makes all the language of 301 consistent. But when you take the different position that the states have concurrent jurisdiction, then you will have difficulty it seems to me in applying language specifically referable to United States District Courts and I think the Court then must say that this substantive law will have to apply in the state courts and it almost involves, if that is a federal law required by the state courts -- requiring the state courts to comply with it that the federal law would be saying to a state court even though you do not recognize in your legal concepts a labor organization, the voluntary unincorporated association as an entity, we will require you in these suits to include in your concept of entity a labor organization as amended, which seems to be going pretty far for the federal law to tell the state court what concepts or legal entities that the law understands and recognizes is insufficient and they must move forward now to another concept. Felix Frankfurter: But Mr. Mason, I don't think this logical argument of yours will serve as an estoppel to Mr. Feller. If you sue him in the state court assuming this judgment was affirmed, that wouldn't have estop him not to raise the question that on the Massachusetts law he's not an entity. George H. Mason: It wouldn't have estopped him from raising the question. I wonder if the Court wouldn't be estopped from denying by virtue of 3 -- 301 that there was -- Felix Frankfurter: Take your comprehensive organic discussion and not -- they can choose it, but they didn't. In other word -- in other words, jurisdiction which doesn't recognize an unincorporated association as a suable entity might have to recognize it for purposes of 301 litigation but for nothing else that ever is litigated in the state. George H. Mason: Conceivably but this does not seem to satisfy my sense of judicial consistency. [Attempt to Laughter] Now, if the specific language of the state leaves any ambiguity as to the intent of Congress, I don't think there can be any serious controversy as to what the intent of the Congress was with reference to the entire piece of legislation of which 301 is applied, namely to enact a uniform and comprehensive code of regulation in this field of labor relations and it would seem to us that if we are to have a uniform national code of regulation or labor relations, that that purpose is best served if we vest in the federal courts exclusive jurisdiction to enforce violations of collective agreements. I think it is difficult and even though the legislature, the Congress in considering this question of 301, discarded a suggestion that a violation of the labor collective agreement be made an unfair labor of practice and they said, “We will leave that issue to the usual processes of the Court.” Even that position did not remove suits for violation of collective agreements from the general scope and purview of the Act and the purposes it was designed to attain namely to reduce or minimize industrial strike and promote the free flow of commerce. Now, it's difficult for me to see how you can separate the contract itself which is consummated through a collective bargaining process, from the collective bargaining process which is designed to achieve that contract. In other words, the Taft-Hartley Act itself was very far in inserting itself into this collective agreement. First it says, “Who will be recognized as the bargaining agent for the employees to negotiate this contract and consummate it.” It then goes on to say, “What will be considered proper collective bargaining and what will be considered a refusal to bargain in the process of trying to achieve this agreement” and they go further in Section 8 (d) (4) and say that a contract once consummated must -- cannot be terminated. Now this is certainly inserting itself right into the contractual obligations of the parties, it can't be terminated unless certain conditions are followed such as 60-day notice in notifying the federal mediation service and the state mediation service. And that the terms of that contract shall continue to enforce until the expiration of that 60-day notice period or the termination of the contract whichever is laid there. So they even add terms to this conditional -- to this contract which were not inserted by the parties, by legislation. Now, the step -- the next beyond that and the failure to comply with this provision constitutes refusal to bargain and unfair labor practice. It seems to me then that the enforcement of that contract which is almost the principal objective of the entire act in its control of collective bargaining must be said to be an integral and intimate part of this whole national policy to achieve a minimum of industrial strife and a minimum of interference with the free flow of commerce. Of course, this is based under the constitutional question which is already been decided, but it is our contention that if the purpose of the Taft-Hartley Act is considered with respect to the interpretation of Section 301 that that purpose can best be served, we submit, by holding that implicit in 301 was a design to vest jurisdiction over violations of collective agreements in the federal courts as distinguished in the state courts. The conclusion just suggested is almost confirmed not quite by the distance that this Court, it seems to me went in Garmon II, when it said that in the case involving what might -- which -- what was potentially or arguably a protected or prohibited activity under the Taft-Hartley Act. In that kind of a situation, the state courts were precluded from taking action from intervening because of the possible frustration of our national labor policy. In other words, there was a design to keep control and the regulation of these labor relations as it affects interstate commerce in the hands first of the board which was most expert. And I submit further that in the board which was most expert, I submit that in the federal courts we might well contend that they would be more experts than the state courts in serving this national policy. And I'd like to call to the Court's attention the language of Professor Archibald Cox of the Harvard Law School who has studied this subject quite intensely. And in 1958, in the American Bar Association Section of Labor and Relations proceedings in commenting on the decisions of this Court during the, I believe, the 1957 term, he had this to say in discussing the impact of Laburnum and Russell on the question of a state remedy for damages being made available where the federal law did not provide such a remedy and where the court held that in certain cases involving the public welfare's, the police power, the state could act. And Professor Cox said the state judges have little experience in cases under the National Labor Relations Act that the temptation would be to follow state law and let the Supreme Court -- and let the Supreme Court decide whether the field was not preempted, that every misinterpretation would involve a small impairment of the National Labor Policy and that permitting state jurisdictions award damages, absent such relief under federal law would make every state sued in industry affecting commerce potentially reviewable by the Supreme Court. Furthermore, the relative and expertness of the state tribunals in interpreting the National Labor Relations Act would seem to require added care in scrutinizing their decisions. And I believe this Court in Garner too, made reference to multiplicity of tribunals dealing with a particular subject, not being particularly designed to achieve a high degree of uniformity. This way, I think, I was paraphrasing the Court's opinion in the Garmon case, so that we submit that the interpretation of Section 301 as creating a substantive law to be enforceable exclusively in the federal courts would best serve the national policy of the act. Felix Frankfurter: Mr. Mason, may I ask this question? This is an equity suit. George H. Mason: Yes, Your Honor. Felix Frankfurter: And went to a master, but if this jurisdiction is sustained, you may have suits on the law side, I mean you're not -- but you're not under 301. George H. Mason: If this -- Felix Frankfurter: I mean if state courts have jurisdiction under 301, there maybe cases involving jury suit cases, are they not? George H. Mason: Conceivably. Felix Frankfurter: Alright. George H. Mason: Juries? Felix Frankfurter: Pardon me. George H. Mason: Did you say Your Honor that juries might be involved? Felix Frankfurter: No, no, no. You might have act, on the law side and therefore juries. George H. Mason: Yes. Felix Frankfurter: Or is that too fanciful as the -- George H. Mason: No, I think this is conceivable even under our equity jurisdiction. Felix Frankfurter: No, even -- I was going to say under your equity (Inaudible). Now nay there -- if this jurisdiction was sustained, I'm groping around because I told you before lunch I was getting a little out of the dark room but it seems (Inaudible), bow, assuming you've got jury trial, jury case, and submissions of questions from the jury and findings of verdicts by juries on the basis of finding -- it's open for them to make considering the limited nature of the review unless there are clear rulings on law but what I'm getting at is may there not be questions of law so entangled with finding the facts by the jury that's on review would be impossible to extract the entanglement of law in the jury's finding of fact. George H. Mason: Frankly Your Honor, I don't quite follow the point because if the suit is one cognizable only in the federal courts namely (Voice Overlap) Felix Frankfurter: No, no, no. George H. Mason: If it involves -- if it involves a question of (Voice Overlap). Felix Frankfurter: I'm assuming it's cognizable also in the state court. George H. Mason: State court. Felix Frankfurter: And what it is in my mind is the considerations that underlay the (Inaudible) cases if you'll probably permit it. Namely that if you allow common law action, the common law action that exists when the Interstate Commerce Act was passed namely that any unreasonable charge allows you to bring an action of individuated with the recovery of the excess. You get a verdict from a jury and it'll be hard to extract from that, what part of it was the reviewable question of law and what part of it was within the province of the jury. Now, what I want to know is that kind of a problem, that kind of a danger implicit in the line of state court jurisdiction concurrent with the federal court because if there's a limitation upon the reviewability because of the intervention of the jury, then you may have defeated the legal questions so non-reviewable, so non-reviewable. George H. Mason: I think this is a potential -- this is possible I think but perhaps not too likely in an offhand consideration of that question. Hugo L. Black: Why would not the same thing apply in the federal court? George H. Mason: I think so Your Honor. Felix Frankfurter: I think it would but there's all the difference in the world between a supervising -- Supreme Court of the United States over a federal court and non-supervising court for the United States for 50 state courts. George H. Mason: Although conceivably reviewable possibly by the Supreme Court even in the adjudication by the state court where it 0involves a federal question, it's conceivable. Following out Professor Cox's viewpoint as to the lack of expert knowledge on the part of the state courts, there is 50 state jurisdictions as opposed to the federal courts which is no reflection on the state courts except that these matters do not commonly come before them in the form in which they come before the federal courts, it is not simply and merely a matter involving an action for damages that's involved in a violation of a collective agreement. There are specialized types of problems that only one familiar with the day-to-day interpretations and the words of art that develop in the collective bargaining process, only those familiar with that situation could adequately, it seems to me, deal with them judicially. The term seniority has taken on in it -- the course of bargaining very distinct special implications quite far beyond whether a layman might first suspect when he saw the word. It enters into and pervades the entire contract in many, many concepts of the collective agreement. Union shop, this is a special kind of a thing that would require some expertise to understand and apply. The Act itself has direct bearing on many of these contract clauses such as check off of union dues which the act itself regulate specifically as to how -- what kind of an authorization can be given and how -- what the duration of that will be and grievance procedure and arbitration procedures in the labor field. All of these matters, it seems to me would require a special knowledge which could be best administered by a smaller group of federal courts dealing specifically with these problems as they do under unfair labor practice complaints which are exclusively within their jurisdiction. The point I make is that the problem of unfair labor practices which this Court has time and again said should be supervised and the Congress intended should be supervised by especially schooled and trained administrative agency. The same reasoning applies to some extent, but not entirely, to the actions for violation of the collective agreements which arise out of the collective bargaining process. And we can visualize the many conflicts that may arise with reference to a situation of concurrent jurisdiction between the federal and state courts. I mentioned in passing the possible argument that will be made at some point, I'm sure of the application of Norris-LaGuardia, but beyond that, take the Lincoln Mills decision, which established to tell that there was established state federal law to -- in this field of violation of collective agreements and directed the court to create that law. Now, I'm troubled with the situation where the jurisdiction is concurrent when the case arises in the state court and on an issue upon which the federal courts had never made any declaration or ruling. What is the state court to do? I interpreted Lincoln Mills, to mean, and unless I'm incorrect, that it is the federal courts who are to fashion of the federal law and not the state courts. If that would be so, what happens when the issue arises for the first time in the state court? No adjudication of this Court or any even other federal court on the question. Potter Stewart: You get the reverse side of this coin all the time in the diversity cases, don't you? George H. Mason: Yes Your Honor. Potter Stewart: I mean the federal courts are faced with that. George H. Mason: Correct. Potter Stewart: And they seemed to model through one way or another. George H. Mason: Well -- Felix Frankfurter: Not only that Mr. Mason, since we are told that this one is a great stimulus to juristic inventiveness, you'll have 50 energetic inventive jurisdictions instead of just one. George H. Mason: Correct and don't -- isn't it fair to assume that the state courts jealous of their legal body of law and their prerogatives? Well, in the absence of a federal statement from a federal court or decision of the federal court make the assumption that the state law is the law that the federal court ought to apply anyway -- Felix Frankfurter: Make an assumption for the state law or universal law. George H. Mason: Yes, even to that extent so that we can expect the state courts to perhaps pay little attention to federal law not deliberately, but subconsciously in interpreting problems coming up under 301 which were not passed upon by any federal court. Felix Frankfurter: But that's only a temporary even because you can always come up here (Voice Overlap) George H. Mason: Well, that -- that's not entirely a temporary matter Your Honor coming up here. Felix Frankfurter: It may not be (Inaudible), but I'm -- George H. Mason: No. Felix Frankfurter: -- in the interest of jurisprudence. George H. Mason: I -- Felix Frankfurter: I heard (Voice Overlap), doesn't it? George H. Mason: I would -- I would go further Your Honor and say that the importance of certainty in the law is really of extreme (Voice Overlap) Felix Frankfurter: Is that the requirement of the law? George H. Mason: Well, Mr. Justice Holmes, I believe he said it was the guess as to what the Supreme Court would do which could hardly -- would do in a given situation and that may not be as certain as you'd like. But certainly, in the law is of great importance in the practical application of the day-to-day administration of labor relations which I think this Court could acknowledge as a factor in this situation. And if we had tried to reduce industrial strife and minimize it and avoid the interferences with interstate commerce, the more certain the law is the less opportunity for confusion and complexities which plague the practitioners and the specialists and the more chance of industrial peace if at least the parties know what their legal rights and obligations are. But when that is in the state of flux and uncertainty, we create by that very uncertainty, more industrial strife then it would otherwise be the case from the practical standpoint. We make one other point in this case about the violation in constituting an unfair labor practice so that apart from the exclusiveness of jurisdiction on the Garmon II since this was a matter which was potentially within the purview of the Act, the state court would have no jurisdiction anyway, that is the secondary consideration. Thank you your Honor. Earl Warren: Mr. Feller. David E. Feller: Mr. Chief Justice, may it please the Court. I think it is perhaps better that I begin where Mr. Mason left off because I think the problems which he has envisaged as a potential possibility of sustaining what almost every court has assumed is the continued state court jurisdiction of these matters are much greater than he describes. I do not see those problems and in fact create for me a very little difficulty but I want to clear what we're talking about. We're talking about a suit brought by one party to a collective bargaining agreement against another party for breach of contract not bringing an unfair labor practice proceeding. That suit is brought in a state court. If we are correct that the jurisdiction of the state courts and the federal courts is concurrent to enforce the federal law governing these matters, the defendant, if he likes, has the right to remove it to the federal court so that the employer concerned with the desire or the union, defendant in such a case is concerned with the desire to get federal treatment or handling of this case procedurally has the right to do it. The only case which remains in the state court, as we see it, is a case where both parties would prefer to have this matter adjudicated by the state court. If the plaintiff wants it adjudicated in the federal court, he brings the suit in the federal court. If the defendant wants it adjudicated in the federal court, he removes it. Potter Stewart: I don't get the removal part if -- David E. Feller: Well -- Potter Stewart: -- concurrent jurisdiction then why doesn't the plaintiff have an absolute choice? David E. Feller: No, the plaintiff has the choice, but as I understand it, if it's a suit which could have been brought in a federal court, the removal statute gives the defendant the right to remove that case. Felix Frankfurter: We held the opposite, if it's the Federal Employer Liability Act. David E. Feller: Because that statute specifically so stated Your Honor. Felix Frankfurter: If it so specifically stated (Voice Overlap) David E. Feller: Well, this Court read the statute as I would say. Felix Frankfurter: It didn't show. Well, that's the point that Justice Stewart is making. David E. Feller: Well, I do not read this. I read the statute, I mean perhaps the easy way to say is not (Inaudible), our contention is that if the state courts have jurisdiction as we believe they do, the case is nevertheless removable and therefore the problems are not so great and that is accordance with what every court that has dealt with this matter has so far held. Felix Frankfurter: But Mr. Feller, your assurance on that subject doesn't bind that --- this Court. David E. Feller: Oh no. Felix Frankfurter: And we had -- the Court divided closely on the question whether the general removal statute does or doesn't apply in the Federal Employers Liability Act and the consideration that's prevailed now that there may be -- may not be removed where policy consideration is drawn out of the purposes of legislation and nothing that you now say can permanently or effectively or authoratively negated such consideration. David E. Feller: Obviously not, Your Honor. I'm simply stating what my contention is and that by argument develops, I think the argument, all of the arguments that my brother Mason has made, argue, I think for the proposition which has so far not been contested I may add in any court that I know because these suits are being removed to the federal court everyday, in practice today. And my brother in fact cites Fay against Cystoscope Makers in the Southern District of New York which was a removal case and there are several others. William J. Brennan, Jr.: And the dollar limitations do not apply Mr Feller? David E. Feller: Huh? William J. Brennan, Jr.: Dollar limitations do not apply? David E. Feller: Because the suit -- the original jurisdiction was under 301 and it's also a law regulating commerce which has no dollar limitation. Now, all of the arguments which my brother is making as to the compliments of the federal courts would argue certainly against any holding and we're not arguing that case here. I'm simply saying it is my view that if the state court has jurisdiction, it has jurisdiction only so long as both parties are willing to accept that jurisdiction. Potter Stewart: In this case there was no effort to remove. David E. Feller: There was no effort to remove. (Voice Overlap) The defendants simply took the position which he has the right to -- Potter Stewart: The state court had no jurisdiction. David E. Feller: That the state court had no jurisdiction. Indeed if he were right that the state court has no jurisdiction then the cause would not be removable. Felix Frankfurter: But the case -- the problem is abstractly either as you put it and may -- there are maybe today, 1961, lawyers like Mr. Louis D. Brandeis during his long years of practice in Massachusetts made is possible never to remove a removable case from the state court to the federal court for professional consideration in the wise conduct of a litigation. David E. Feller: I perfectly concede that there are many times when parties for many reasons decide not to exercise their right to remove. My only point was really delimiting the scope of our problem, was that the consequence of a decision here holding the state court has jurisdiction is simply that where parties choose that state courts will exercise that jurisdiction only where both parties are agreeable that they should, but whatever reasons they may decide, they would prefer to leave the case in the state court. Now, one other problem to delimit the scope of our case, we are dealing with breach of contract actions not with unfair labor practices. I think this is very important because most of the authorities quoted by my brother Mason deal with unfair labor practice questions and tort suits in the state courts. Laburnum, Russell, the cases mentioned, were tort suits, not breach of contract actions; Garner was a tort suit. Garmon was a tort suit. All of these cases were tort suits not suits for breach of contract. Felix Frankfurter: But 301 is preoccupied with the contract. David E. Feller: And 301 is a contract and that's why we're talking about 301. We're not talking about either torts or unfair labor practice proceeding. Now it's perfectly clear that the normal preemption rule which we can get sloppy and say applies to labor relations, but what this Court said in Garner was that in the unfair labor practice provisions of this statute and I'll quote the Garner case, "Congress did not merely lay down a substantive rule of law to be enforced by any tribunal competent to apply law generally to the parties. It went on to confide primary interpretation and application of its rules to a specific and especially constituted tribunal and prescribed a particular procedure for investigation, complaint and notice, and hearing and decision, including judicial relief pending a final administrative order.” They, indeed, provided a prosecuting agency and the general counsel for the labor board. For the this reason, the Court said that this kind of a matter not only the federal substantive law applied, but it was to be handled through the exclusive agency, which Congress had established for this purpose and which indeed Congress in the Wagner Act said was exclusive. My brother Mason said that there's no language of exclusivity in there because I'm sure this Court is aware. The exclusive language was taken out of Section 10 (a) of the Act solely because it was inconsistent with the provision providing for the session of jurisdiction of the states and the conference committee reports are clear that Congress still intended to make the jurisdiction of the labor board in unfair labor practice matters exclusive, but we are not talking about that kind of a matter here. Felix Frankfurter: Are you -- David E. Feller: The Congress made a specific decision to exclude breach of contract matters from that rule. Felix Frankfurter: Yes, but Mr. Feller, am I wrong in speaking that in construing such pervasive technical complicated provision as collective bargaining, the interpretation of what the collective bargaining mean does not exclude -- does not -- is not holding without life from what may or may not be unfair labor practice. David E. Feller: The two are unfortunately and separately intertwined I cannot -- I cannot -- Felix Frankfurter: I'm not talking about legal -- that they're in different legal cubbyholes. I'm saying something very different namely that when it comes to construing particularly by judged to what things mean, what is allowed, what is permitted, what is required by collective bargaining agreements, there is cross like problem, what may if so construed constitute on an unfair labor practice. David E. Feller: I have no doubt about that. Felix Frankfurter: Alright, that's all I'm saying. David E. Feller: That -- my own belief is that the bodies which are customarily endowed with the duty of dealing with collective bargaining make better judges in suits for breach of collective bargaining agreement than judges who don't do that. I would therefore have probably thought that Congress should have not done what it did do, that is reject the provision in the Senate Bill. The bill passed the Senate providing that a breach of contract should be an unfair labor practice, and therefore process through the board and the matter should be handled through the specialized agency. The House decided otherwise in conference, it was decided to accept the House decision rather than the Senate decision and that these matters be left to the usual processes of law. Now, the usual processes of law, and simply the expert body is the National Labor Relations Board and by and large, the Courts of Appeals. In talking about the federal courts, we forget that federal district courts are almost as foreign to unfair labor practice proceedings as state courts are except in the limited area of the so called mandatory injunction which they used very little in which the District Court practically has nothing to do but issue an injunction where the general counsel as a preliminary matter. It doesn't eventually decide the case. The case is decided by National Labor Relations Board and then reviewed in the Court of Appeals. Felix Frankfurter: But presumably, District Court or district judges agree with the opinion, the Courts of Appeals particularly their circuits, I should think. David E. Feller: Well if it relates to a field of litigation which is excluded from their jurisdiction, they may if they're intellectually curios, but I suggest the good state court judges read them too. Felix Frankfurter: But they sit in Courts of Appeals again and again district judges. David E. Feller: Some do, but again the Federal District Court as a class, are not people given a special place or any place really in the administration of the statute. Alright, now, we've delimited the problem. Now, in delimiting their problem, I want to make one thing clear. The fact, it can be in a given case and here I agree entirely with what Mr. Justice Frankfurter said that the same Act can constitute an unfair labor practice and a breach of contract. The two are not -- or they're in different legal cubbyholes actually they're sometimes very closely related and you can't link that fact. Contract may provide, there shall be no discrimination against union members. Suit is brought for breach of that contract. There is a contractural obligation and relief is sought for a breach of that, but in fact what the parties have agreed to do is to abide by the law and there is a procedure for dealing with the violation of the law and unfair labor practice procedure. The two are nevertheless distinct although they may involve the same thing and the fact that a breach of contract has occurred is of course remedy of both -- as a contract matter, not as a public matter but a public right as between the contract just if I make a contract with a man not to hit me in the face and he hits me in the face and I presume I can sue him for damages for having hit me in the face even though he can also be prosecuted by the District Attorney for assault because he has violated the contractual obligation to me. Now the question before us then is, only the breach of contract though it is a labor relations matter it is -- the question is whether a state court has cognizance of the breach of contract action. And that question is whether it has been deprived of its right to hear that question and decided in accordance with federal law. We have no argument about here that the substantive law is federal by the provisions of Section 301. Now, the first -- we start with the language of the statute that Section 301 doesn't say that. It says that the federal district courts may take jurisdiction. Mr. Justice Frankfurter indicated in the argument, the early argument that some interest in inquiry as to generally how statues of this nature are construed in other places where Congress has created willingly or unwillingly a right to litigate. Well, we make a brief effort to investigate that question. And the general view, which we have set forth in our brief is that Congress is almost never found when it creates a federal substantive right to have vested the exclusive jurisdiction in the federal courts to enforce that right, almost never found to do so where the -- it does not specifically say so that the right of enforcement is exclusive. The one exception is the Sherman and Clayton Act action for triple damages. A decision which has been much criticized, but which is there, which is saying that state courts do not have the right to enforce a cause of action for triple damages under the Clayton Act, despite the fact that Congress did not specifically say that the jurisdiction of the federal courts are -- is exclusive. Generally speaking, when Congress has created a federal substantive right; that right, if it not otherwise so specified, is enforceable in the federal courts or in the state courts indeed than any court of competent jurisdiction from the very nature of things, the law each court has jurisdiction over the parties who are before him. It enforces law whether derived from federal law or state law in all cases. Felix Frankfurter: Well that's -- you mean -- David E. Feller: That's -- Felix Frankfurter: -- that's vested with the opinion that Justice (Inaudible) that kind of thing going way back. David E. Feller: Well like, it goes way back to -- what's the -- Claflin against Houseman. Felix Frankfurter: (Inaudible) David E. Feller: -- with a preference in bankruptcy when Congress said that a certain transfer should constitute a preference in bankruptcy. This Court said that the -- as -- in bankruptcy could sue in the state court on that claim created by Congress. Felix Frankfurter: What -- but my interest derive from a desire for a closest scrutiny of whether in those cases you had policy consideration which -- whatever or whatsoever you may finally assess them are for me present in this case which are not present but there is one present in the -- in that -- David E. Feller: Well, I think the question of -- Felix Frankfurter: -- the bankruptcy (Voice Overlap) -- David E. Feller: -- (Voice Overlap) wasn't bankruptcy and there are very large policy questions. Felix Frankfurter: -- in the various other cases. David E. Feller: I think there are large policy questions for example in habeas corpus in one of the cases which we cite deals with the question of whether a state court has the right to enforce the writ of habeas corpus on a federal claim to adjudicate a claim of federal unconstitutionality or improper use of federal process in a state court. And as a matter of fact, in that case, I remember that the state agent was -- ended up in jail. The agent of the State of Oregon who came to arrest the man in California ended up in jail when the California Court said that he was -- his actions in arresting the prisoner violated the federal constitution and he said the state court can't say that. Of course, state courts can say that. Felix Frankfurter: Mr. Feller, if you say -- if you will tell us that our decisions, rarely do our decisions require me to reach the conclusion that state courts in subject to the Constitution of the laws of the United States must enforce federally created right unless Congress explicitly makes enforcing judiciary solely the federal judiciary unless you tell me that I'm -- that the requirement of my reading of the cases (Inaudible), if you don't say that then we are driven -- then I don't get much (Voice Overlap) David E. Feller: Well, I say almost that and I -- Felix Frankfurter: Almost. Well that's (Voice Overlap) -- David E. Feller: -- I don't say they must because I don't want to get to the test and the question of whether the state courts have to hear these cases, that's another question. I'd say the state courts may and with one exception, I have been able to find no case and that's the Sherman and Clayton Act where a federally created substantive right was not enforceable at the option of the parties in a state court where Congress did not say exclusively that jurisdiction shall be exclusively in the federal court. Now, again, I cannot say that it is so certain because I have one exception, the Sherman and Clayton Acts but this at least poses the general framework in which I think we looked at a given statute because this is the way Congress is used to having its words treated. So we have to look at the policy of this statute as well as the language. The language certainly doesn't say exclusive. Speaker: (Inaudible) David E. Feller: Yes, but on our Federal Employers Liability Act, I take it the defendant does not have the right to remove because that was a question which have been much litigated in this Court and I don't want to get involved in controversies which I think are at least now settled and which may involve -- Speaker: (Inaudible) David E. Feller: Yes, but by virtue of the specific statutory language in that case and the specific policy of those statutes, the Court said here that those cases were not removable, but the plaintiff could bring him in either case by specific language of Congress. Speaker: (Inaudible) David E. Feller: The Congress said so in words. In other words, it said, “If you could bring a suit in a state court” it said so. Felix Frankfurter: And it has said so in several other statutes? David E. Feller: It is said so in Section 303 of this statute. Felix Frankfurter: So therefore -- David E. Feller: We have to look at the statutes which don't say anything like the Civil Rights Act which simply says that wherever -- I think Section 47, it's now 1985, “Whoever shall go up on the highway and disguise in the conspiracy section, if anyone is injured in that way he shall have a right of action,” period. It doesn't say where. William J. Brennan, Jr.: Well, Mr. Feller you say 301 says nothing? David E. Feller: Well, it says district courts shall have jurisdiction. It does not say such jurisdiction shall be exclusive. William J. Brennan, Jr.: I don't know -- it doesn't say quite that way does it? I remember in the Clayton Act case, the statute said, shall be entitled to sue in any Court of the United States and this Court said in one sentence that that was the over term which show that the right was to be exercised quote, “only in the Court of United States.” David E. Feller: That's right. William J. Brennan, Jr.: Now this statute says, may be brought in any District Court of United States as if there is much of an inference there as there was in the Clayton Act? David E. Feller: Well I -- again, I don't want to get into the history of the Sherman and Clayton Act litigation but I think there was in that case developing from the amendment of the Sherman Act by the Clayton Act and the right to bring private action in addition of the public right, a background which led the Court to that conclusion. I personally -- I'm not prepared to justify a decision which is not my field (Voice Overlap) -- William J. Brennan, Jr.: (Voice Overlap) in that opinion. David E. Feller: In my field of competence. William J. Brennan, Jr.: The Court can say so in that opinion. David E. Feller: I think that is expressed in either in that decision or in a later decision. Again, I don't want to get into to the merits of the case. Let me get to the -- let's assume that the language is ambiguous and we can go either way here and let's look at the policy of the statute and what is accomplished by it. First of all, there is no reason to believe that, as I've already indicated. Congress made a specific decision that this matter should be handled in the usual processes of the law. There is nothing within the policy of this statute which indicates that the federal district courts would more affectively enforce the federal rights. Now remember we are not arguing what is the applicable law. We accept Lincoln Mills which says that the applicable law is federal. Now, what kind of cases do you have? Look at this case. This is a very simple case which all of this argument is about policy concern. Here, we have a case where an employer, a negotiating committee met with the union, maybe this is the wrong place to state the facts of this case, but I think they should be stated some time. A union and an employer had an agreement. The negotiating committees met. A vice-president, the brother of the president of the company, a member of board of directors was the chairman of negotiating committee, they met, they negotiated an agreement providing for a 13-cent an hour wage increase for one additional holiday, for elimination of rate ranges in pay and that vacation should be computed on in anniversary basis. They signed a memorandum to this effect and that this should be effective May 20, which was the date of the expiration of the old agreement. Then they had later meetings at which they negotiated the language implementing this. The company in the meantime, put the wage increase into effect which was contained in the memorandum, even though as it said in its notice, the final language hadn't been worked out. It was agreed that it would be retroactive and they put it in 13 cents an hour. The vice-president, member of the board of directors and head of the negotiating committee tendered a formally signed contract document to the union and then the union was informed that the people that they have been dealing with were not authorized to represent the company, but the contract was therefore nullity and that wages will be reduced hence for 13 cents an hour, the amount by which they were increased as a result of the agreement. Now, what are the difficult questions of law involved? The questions litigated before the master is, was there authority in this negotiating committee? Did the president of the company know about this? He found that she did that the responsible officials authorized the making of this agreement. He found that she did, was the agreement ratified by the company? The master found what it did and therefore was the agreement a valid contract, he found that it was. Now, almost every case, of course like every case, but most breach of contract cases involved this kind of a finding. This is the typical kind of finding which is made by courts which decide breach of contract cases. Now, there are other types of cases in which other concepts are involved, but we should not assume that every breach of contract matter. This maybe one of the reasons why Congress decided to put this into the courts rather than before the labor board. The arbitration decisions which Your Honors decided last year, involved a question of the substantive law -- kind of approach which should be taken by the courts in dealing with these matters. But once sent down as a rule, it has proved to be reasonably observable, reasonably understood by everyone and enforce I may say in state courts as well as in federal courts. The great problems that are foreseen by my brother in dealing with these contract actions simply exist if they exist only in a few cases which can be properly dealt with and do not require as a policy matter this Court to say that even though Congress hasn't said so in order to make a coherent hole of labor relations law, we must vest this jurisdiction in contract actions in the federal district courts exclusively. Now, this would create a problem indeed in relation to the Westinghouse case. I may say that this case was brought in the state court because there were some uncertainties as to whether it could even be brought in the federal court. In my statement of facts, I neglected to state that their only issue between the company and the union in this case, although the 13 cents was paid, the company was in fact abiding by the rest of the terms of the contract. What they didn't want to do is pay -- the company discovered that 13 cents was too much and they wanted to get out of it and I am told that really the only issue though the company said that the contract as a whole was void because it was not properly negotiated, the only changes in that contract from the one previous enforced were wage terms. Felix Frankfurter: I don't understand, correct me. You said you had doubt whether this could be brought in the federal court. David E. Feller: I didn't, the person who brought, filed the suit which I didn't (Voice Overlap) Felix Frankfurter: Whoever did it? There was doubt, if this arises on the contract and it doesn't fall under 301, it isn't -- that kind of -- does 301 deal with a particular kind of contract? David E. Feller: Well -- Felix Frankfurter: Because if that so then I got a new problem. David E. Feller: Well, you may have a new problem Your Honor, 301 deals with one kind of contract, collective bargaining agreements between unions and employers. This Court appeared to hold in Westinghouse or at least appeared to hold to some people, the people who filed the suit, that where money was involved for individual wage earners as it was here, the suit for a breach of that contract could not be brought in the federal court under 301. Felix Frankfurter: (Voice Overlap) 301 there's no problem. David E. Feller: There's no problem here. Felix Frankfurter: Alright. David E. Feller: I have not argued that because I think it does come within 301. Felix Frankfurter: Then they're very (Inaudible) David E. Feller: Well, because I think for the reason that my brother Mason has said the whole validity of the contract is actually at issue here though the only thing they were arguing about was money. In fact, the only way which the employer could get out to paying the money was to say that the whole contract was void. Felix Frankfurter: Or either that is an issue or it isn't? If it's an issue, it is issuable in the federal court and if it isn't issuable under 301 in the federal court, there's no problem for us. David E. Feller: Well, what I'm saying is that you put counsel in one very difficult situation when he has to look at each case and say, “Is this Westinghouse type of a case or is this -- maybe not?” If he asked for a declaratory judgment as to the meaning of a cause of the contract instead of asking for money, is this -- if you say it's either exclusively federal or exclusively state, the problems of determining each way. Now, my own view is that which I will say that there's -- I haven't have any authority for since the Westinghouse case was decided as it is -- was. My view which we express in our brief is that since Lincoln Mills, in fact, the Westinghouse case would be decided otherwise of this Court hasn't said so, but whether that be so or not -- Felix Frankfurter: As you stand there, do you say this litigation could have been brought under 301 in the federal court? David E. Feller: Yes, we do. Felix Frankfurter: Well then let's stick to that. David E. Feller: Alright. Well, I'm prepared to stick to it. Now, I think I'm just pointing out the difficulties which are occasioned if whether you hold that this suit can be brought or any suit for a breach of a collective bargaining agreement, quite different matters. Now, in my view, the suit can be brought in the federal court, it can be brought in the state court. If it is brought in the state court, it is removed. Now, the one question of policy and Your Honor raised the question, in the scheme of this Act, I think the expertise doesn't really matter because as I said, these are breach of contract actions, the Congress has decided not to give it to the Board with the agency with expertise argued the labor board, but the courts and the federal district courts are not the expert bodies. The one passed question of policy in determining, assuming you're predetermined, is the Norris-LaGuardia and that's a hard nut even though it's not directly involved in this. I think you have to -- have some idea of where this leads you and my brother Mason didn't make the best argument he could make on this thing which is in his brief. There is a District Court case in which a suit was brought for violation of contract and an injunction and damages were asked. It was sought to be removed to the federal court. The federal district court said we have no jurisdiction over the injunction part of this, therefore we'll send that back to the state court, to issue the injunction, but we'll keep the damage part because that we have jurisdiction of and this he argues is one of the problems of providing concurrent jurisdiction. We argue that in 301 cases, I'm not arguing about Norris-LaGuardia being applied broadly to the states certainly, but in 301 cases, that the federal law governing collective bargaining agreements which is the federal substantive law which this Court said is to be applied in Section 301 suits, the federal law includes as part of its policy, the prohibitions in section, embodied in Section 4 of the Norris-LaGuardia Act saying, “There shall be no injunctions against strikes” i.e. no injunction can be issued against the strike on the ground that it is in violation of contract. Now, this is not so difficult as it may appear. Certainly, this Court has treated the Norris-LaGuardia Act as part of federal substantive law. The Hutchinson case certainly has language to that effect. I'll indeed point out Mr. Justice Brennan's opinion in dealing with a case coming from the Supreme Court of Georgia, the Speck case decided this year, this Court said that it would be not proper to enjoin the enforcement of the union shop contract because of the Norris-LaGuardia Act, the policy of the Norris-LaGuardia Act. That was a case from the Supreme Court of Georgia. Let's go to the Steele case, Steele versus Louisville and National Railway where this Court enforced the duty to bargain under the Railway Labor Act. Potter Stewart: Of course Mr. Feller, I couldn't say they could -- that it might be an inappropriate remedy -- David E. Feller: Well, I'm not saying that the Act literally applies to the state courts, obviously it doesn't. I think it expresses a federal substantive policy and if there's a federal substantive law governing the collective bargaining agreement as this Court has said, it is in Lincoln Mills as this Court, I think without the dissent from any member applied in the arbitration cases last year. Nobody suggested that these matters were governed by state law there. I suggest that part of that substantive law is the proposition that you do not enjoin a strike on the allegation that it is in violation of contract. Felix Frankfurter: For me, Norris-LaGuardia or substantive law with reference to the jurisdiction of the federal court and not substantive industrial law. David E. Feller: Well, I did not read Your Honor's opinion, the Hutchinson case in that way but -- Felix Frankfurter: All I'm saying is that this -- it gets the difficulties that we have that you -- with at large on this invented motion and now we have indirectly to decide here or whether if we decide this Norris-LaGuardia to be part of substantive law in the 301. David E. Feller: Well I -- I -- Felix Frankfurter: I'm not saying you're wrong. David E. Feller: I'm not -- I will point out that this Court has made that assumption not only in the instance I referred to. In the Chicago River Case which this Court decided that Norris-LaGuardia was in the fact amended by the Railway Labor Act so that injunction could be issued. It referred to the Steele case as an example of the fact that despite Norris-LaGuardia, injunctions could be issued to enforce duties under the Railway Labor Act. The Steele case was a case which came here from the Supreme Court of Alabama. So this Court has accepted the proposition, implicitly without argument, obviously not so wholly, but it has looked to the Norris-LaGuardia Act to express a federal labor policy as I think it does and I think that -- Potter Stewart: Isn't this a matter that can be -- that even if you're right on the issues in this case, it can be left to another day? David E. Feller: I think it can be but again you have to decide a specific case and Mr. Justice Frankfurter said, you're in a room and you are looking to general policy consideration. Potter Stewart: (Voice Overlap) David E. Feller: But I will say that I would feel differently. Potter Stewart: That McCarroll case in California which -- David E. Feller: I don't -- I -- Potter Stewart: -- we denied certiorari where a very respectable arguments are marshaled on the other side of the issue to which you are now addressing yourself which is not before us in this case. David E. Feller: It is not before you. However, I think that the only reason I advert to it is that it does bear on the policy question if Your Honor's feel, as I think you have a right to feel that in determining whether this jurisdiction is exclusive, you have to decide how this fits into the scheme of the Labor Relations Policy set forth in the statute. Felix Frankfurter: How about the other -- you're coming together provisions of the statute, which deals explicitly, which is used from the 301. David E. Feller: I'm going to deal with this. This is my final point, if Your Honor please. Felix Frankfurter: I mean, we are in the less speculative area there because you got to use the expression of Congress. David E. Feller: Now in Section 301, this particular provision, which had been referred to, talks about 301 language, which simply says that suits maybe brought in the District Court. There is a difference between this language and the language in the section 303. So the only other language which I think is relevant by analogy and only by analogy. Section 303 also creates a federal substantive right in terms, it says it shall be unlawful for the purpose of the section to do certain things and says, “Whoever shall be injured by result of conduct in violation of the section that may sue in any District Court of the United States or in any other court having jurisdiction to the parties, an explicit grant of jurisdiction both to federal and to the state courts.” Now, it is argued and I think this is the only statutory language argument which can be made in this case that the fact that Congress so provided in Section 303, makes it clear that as I say it knew how to give jurisdiction of the state courts and in 301 it didn't. Felix Frankfurter: How about the procedural provision (Inaudible) in service? David E. Feller: I don't regard those as your argument -- Your Honor is asking as to whether the question as to service, I think those apply in the federal courts. I assume you will serve in the state court as you serve in the state court. Felix Frankfurter: Well, I'm not being decisive because we're picking pieces, putting the bits and pieces together. I'm just offering that you should base on (Inaudible) bits and pieces. David E. Feller: Alright Your Honor I'll address myself to those if I'm finished with 303. Now, the reason for 303 is different from 301 are two folds. Hugo L. Black: Why is 303 printed, is it printed in the (Inaudible) David E. Feller: Unfortunately, I think no one -- none of us -- Felix Frankfurter: It would be parsimonious in giving us the statutory effect. David E. Feller: Guilty as charged Your Honor. That's all I can say we were. Potter Stewart: But you have no monopoly over the supply of them? David E. Feller: No I have no monopoly and I will say since I'm answering an argument made by the petitioner, I think probably it is his first responsibility to refer to 303, but I concede we should have printed 303 in any case whether he did it or not. But the important thing in 303 is that it created a cause of action in the courts for what was otherwise created in the Act as an unfair labor practice. In other words, Congress created a brand new substantive law and said it shall be an unfair labor practice. The words in the 303 are exactly the same as 8 (b) (4) (a) and made -- this is the secondary boycott which was made on unfair labor practice and Congress in this case and in this case only said, “Even though we have made an unfair labor practice and it's the kind of thing where we have a confident, specialized tribunal which is supposed to have exclusive jurisdiction, we're also going to create a cause of action.” Now in that case, we have a very good argument where they said only the federal court, but that meant since it is in the unfair labor practice area that only the federal court could have jurisdiction. They have a wonderful argument for exclusive jurisdiction if they use ambiguous language there. The jurisdiction had to be given explicitly to the state court because you are creating -- you are giving a cause of action for an unfair labor practice. Felix Frankfurter: But if that same unfair labor practice is made part of the agreement, it becomes part of the contract and then you can sue it in the state court. David E. Feller: Yes, because we are not suing because it's an unfair labor practice. Felix Frankfurter: No. David E. Feller: You're not construing -- in that case, you are not construing the language of the statute as to what is a secondary boycott, a very difficult question. Felix Frankfurter: I understand that but your suggestion that if you make a contract that the fellow shouldn't hit you in the face -- if you put it in the contract then you sue his contract. What I'm suggesting is the very same fact, very same consideration, very same arguments pro and con can be brought and can be utilized and address to the state court if it's part of the collective agreement although it's part of an unfair labor practice must be brought in the federal court. David E. Feller: Well, but the difference is if Your Honor please that when you are suing under the unfair labor practice thing, the substantive law which has to be adjudicated and interpreted is the particular federal statute, the unfair labor practice, which Congress has said this is -- and this Court knows and -- on review of those things (8) (b) (4) and the secondary boycott provision or the one with the most mysterious set of words that were put in the statute. This is a very difficult thing and therefore the normal presumption is that you don't allow state courts to decide that kind of -- Felix Frankfurter: If you put it in -- If you put it in terms in a collective agreement then the mystery evaporates. David E. Feller: Well, the mystery doesn't evaporate, but what you decide, you decide what that collective bargaining agreement means, you don't decide what that statute means. Felix Frankfurter: I know, but those are words. David E. Feller: Well, that's correct. The different words as Your Honor knows can very often have a different meaning depending on whether they're in the statute or in a contract or somewhere else. Potter Stewart: Same words. David E. Feller: The same words, the same words that's right. Hugo L. Black: Depending on many other things -- and depending on many other things. David E. Feller: Depending on many other things, that's right. Felix Frankfurter: My point is that it wouldn't depend on any other thing in this case. In this case, it wouldn't depend on any other thing. If the same words are put in the collective agreement, it would depend on anything else except that the Superior Court judge in Massachusetts would be deciding it instead of Judge Ford in the federal district court. David E. Feller: Well Your Honor, if -- if the same words are put in to collectively bargaining agreement, let's take the simple case where it is said that there shall be no discrimination on account of union activity, a common provision in collective bargaining agreements, commonly arbitrated. Most of these collective bargaining agreements provide (Inaudible) provision. I do not know that a decision by an arbitrator, that a particular kind of conduct constitutes discrimination or non-discrimination under that collective bargaining thing is the same determination that the National Labor Relations Board makes in adjudicating a violation of Section 8 (a) (1) and 8 (a) (3) of the National Labor Relations Act. Felix Frankfurter: In the -- David E. Feller: Even though that the words maybe the same, I can come to an arbitrator and prevent -- present history, not of the legislative history, I don't go to senate committee reports when I'm arbitrating a case under a collective bargaining agreement, if I bring in any materials, I bring in materials as to what the company said and what the union said on how we got in to these words. I don't bring in Senate Conference Committee report as to what the words were used in the Congress -- in the Congress of the United States even though the words maybe the same. Felix Frankfurter: That isn't the problem. David E. Feller: We have different legislative enactment. Felix Frankfurter: That isn't the problem I'm putting to you. David E. Feller: I'm sorry. Felix Frankfurter: The problem I'm putting to you is that provision in a collective agreement therefore part of the contract, violation of which is suable in the federal court. I'm saying that in that kind of a thing you can sue either the federal court rather than the state court, although you've got the same 303 provision, namely written in a contract and the only difference is different between six or three or two or five, negligence suit arriving out of the same accident, taught before different juries. David E. Feller: I'm not sure I understand it. We have the 303 provisions against secondary boycotts into a contract. Felix Frankfurter: (Voice Overlap) put into the contract. You said that's a very common thing. David E. Feller: No, I didn't say that Section 303 provision, I've never seen such a thing and I don't know what union or what company would provide that. I said, what is the common thing is for a union to provide that there shall be no discrimination in its union members. 303 is a secondary boycott provision. Felix Frankfurter: I take your (Voice Overlap) you put it into a contract. You put an unfair labor practice, you put in a situation which may become an issue before the National Labor of Relations Board into a contract, breach of it as such is enforceable in a damage suit because it's about issue of a contract, is that right? David E. Feller: It's enforceable whether as a damage suit depends upon the nature of the contract. Felix Frankfurter: (Voice Overlap) David E. Feller: And the -- when I say the usual contract, the case I put is a case in which, let me put – there is the case pending on Your Honor's docket right now when certiorari was filed last spring. Union provides in a contract there shall be no discrimination against union members. This is the kind of provision which as I say is usual in most contracts, 95% of the contracts provide arbitration provisions and normally, these things are adjudicated. The man is discharged, supposedly for not showing up on time. The union says it wasn't for that reason. The real reason is because he was the chairman of the Grievance Committee, so you file a grievance. In the case which pending before Your Honors, the company says we won't arbitrate that. The reason we won't arbitrate is it's an unfair labor practice if what you say is true. And the Supreme Court of Michigan said, “That's right. This is preempted by the federal act.” Now I said that that isn't so, that even though it may be an unfair labor practice because the provision in the contract there shall be no discrimination against union members is identical with the statutory prohibition against discrimination against (Voice Overlap) union membership. Felix Frankfurter: And therefore remediable in the court, is that right? David E. Feller: That's right, remediable as provided in this case, remediable through arbitration. Felix Frankfurter: No, no, no, I'm talking where there's no arbitration agreement, just a contract without any arbitration procedure that can be enforceable as an ordinary contract. David E. Feller: I think that's the problem. Felix Frankfurter: Alright. Therefore, our problem is whether that contract is in enforceable for a federal court and a state court. I don't -- for me the National Labor Relations Board is already red herring in this business. David E. Feller: Well, the whole point I was trying to make Your Honor and I think the National Labor Relations Board is a red herring in this business and the whole discussion -- I was trying to say that even though in another aspect, the same conduct could come before the board. It is a red herring and if we're in agreement on that, I think (Voice Overlap) for all the examples. Felix Frankfurter: That doesn't take care of my problem namely that -- namely that something which although in one aspect is an administratively determinable thing may become part of the collective bargaining contract as such suable in the federal courts for breach and our problem is whether the federal court or the state court that the state court would be called upon to deal with matters which intrinsically also implicate unfair labor practices. David E. Feller: Well, I think -- Felix Frankfurter: Nothing as such -- not as such. David E. Feller: I suggest to Your Honors the answer to Your Honor's difficulty is that it is no more anomalous to allow the state court judge to decide that question that it is to allow the district court judge to decide that question. Felix Frankfurter: I have indicated why I don't think that's so because the conclusion that are embedded in the jury verdict from which it's very difficult so far as state courts are concerned to extract what is the non-reviewable as against the reviewable ingredient. David E. Feller: Well, my answer to that is I concede that the scope of reviewing this Court maybe somewhat different in a jury case from the federal courts and the state courts, but I confess that I could not for myself decide that Congress in this statute decided to exclude the state courts from jurisdiction, but to allow the federal district courts who have no unfair labor practice jurisdiction to decide them because of the difference of the scope of the review of a possible jury verdict. I just don't think that's a sufficient consideration to come to that conclusion and I don't know of any other consideration which is sufficient to argue that. The federal district courts are just as foreign to unfair labor practice matters except incidentally as are the state courts. They are given no jurisdiction under the National Labor Relations Act other than -- and I'm talking about the National Labor Relations Act not the Labor Management Relations Act, the part which deals with the labor board, other than to hear cases for temporary relief and really the treatment of Congress as dealing with those cases is illustrative because you go in and if you allege that there is sufficient cause to believe that there maybe an unfair labor practice, you go in and you ask the district judge for an injunction. Indeed, the General Counsel in the case where this is so provided in 10 (l) of the Act is required to go in and ask for an injunction. The injunction is issued but that District Court never decides the case. It goes to the Board, the Board decides it and very gratefully decides it differently than what the general counsel argues in the nature of things that he doesn't win all of these cases, and the Court of Appeals decides in a completely independent proceeding from the federal district court. So I suggest that all of the arguments for federal, exclusive federal jurisdiction here and there are some good ones are arguments which really go to the proposition that Congress should have really made this an unfair labor practice, but those arguments are not permissible here. Congress decided to put it in the courts. There are equally good arguments I think for saying that the kind of issue, there are enough cases involving the kind of issue that's involved in this case for simply authorization, ratification approval or the typical case which Congress was thinking about, which is a suit for damages for a breach of a collective bargaining agreement. Congress wasn't really thinking about -- too much about these or provided both way jurisdictions. It was thinking about a case where union as contacted that these will be the terms and conditions for two years and there shall be no strikes and the union says, “We didn't like it, we're going to go and strike.” And it wanted to provide a method by which unions could be sued for damages, for breach of that kind of thing. They are being sued today. I will say this case is unusual. I think the question was asked by you Mr. Justice Black as to what the usual course. All the decisions we've been able to find except one obscure dictum and the footnote in the Westinghouse case, all say that the state courts have jurisdiction. They are in fact exercising their jurisdiction without question enforcing federal law through -- over the country. Steelworkers, I know are now involved in two damage suits, one in the state court in Minnesota and one in the state court in California in which I will confess, I never thought to raise the question as to whether the jurisdiction was exclusive. Felix Frankfurter: How many suits have the Steelworkers initiated in the state courts for a breach of contract against (Voice Overlap)? David E. Feller: I can only say -- since I can only know the suits which I know about, I don't know about all of them. The only cases I know about is this case and the three cases which Your Honors decided June 1960 which were the arbitration cases, which were all Steelworkers cases and all started in federal district courts. Felix Frankfurter: How many -- have you in your responsibility initiated in the state court? David E. Feller: Have I initiated in the state courts how many, those three cases. One of them I did -- two of them I did, two, the American Manufacturing case and Warring Gulf case. The Enterprise case, I never heard of until the Court of Appeals -- it was in the Court of Appeals. This case, I didn't hear about until petition for cert was filed. Felix Frankfurter: When you say -- when you say there's a very good argument that can be made for exclusiveness in the federal court, did you say that? David E. Feller: No. What I meant to say is there are very good arguments why you should setup a scheme in which there is no court enforcement, but board enforcement of collective bargaining agreements. That's what I meant to say if I didn't say that. And if -- but those arguments were addressed to Congress and rejected by Congress when it decided that court enforcement was the way to handle this question. I think there are very good arguments the other way because many of these cases involved complex questions as to damages, really this is probably -- that -- in this case the damage question was easy, it was back pay. Employer lawsuits involved complex questions of damages and one damage suit which the Steelworkers are involved, we've had four months trial on the question of damages proving profits lost to profit's not lost so that these can be very difficult. It may be that Congress decided that this kind of a question was better left to the usual processes of law. The courts are used to deciding this question and when they made that decision and this is really our argument, I see no reason to assume that they said by the usual processes of law, they meant only the federal district courts and not the state courts which had been exercising that kind of jurisdiction all along. That -- 301 at -- with the gloss that has been put on it by this Court's interpretation contains the source of the substantive rules to govern these lawsuits in which I will say 90% of the law in most of the cases will be state anyway, but absorbed as federal law such as we have in this case. When you have authority -- who has authority, that law will be enforced through the state courts as it has been and it's now being done just as it can be in the federal courts and there's no basis for reading the jurisdiction in this case as -- granted this case as being exclusively federal and depriving the state courts of jurisdiction in the cases where both parties are -- will accept the state court jurisdiction. Potter Stewart: But again, we don't have to -- in this case decide whether you're right or wrong and in that last thought (Voice Overlap) David E. Feller: Now, the Norris-LaGuardia question I said was an arguable of question. I will say Your Honor that I was a bit surprised that the removal question raised in a contract. Potter Stewart: It was not here. David E. Feller: I assumed this is -- it is not here. Potter Stewart: It's not here. David E. Feller: But I assume that some things have to be assumed as given in terms of the policy of a given statute. I will say frankly, I have assumed it to be given and not subject to argument that a suit brought under a suit to vindicate a collective -- a substantive collective bargaining right granted by federal law if brought in the state court could be removed to the federal court. Potter Stewart: Well, it said right granted by the contract. David E. Feller: The right is granted by the contract whether it's enforceable pursuant to the sub -- federal substantive law governing collective bargaining agreements established by 301. Potter Stewart: But by its very terms, Section 301 applies the breach of contract -- to contract. David E. Feller: That's right. Potter Stewart: That's under the collective bargaining agreements. David E. Feller: That's correct and I have assumed and every court which has had opportunity to address itself to the subject has assumed without controversy so far and as I know that such a lawsuit is removable. Felix Frankfurter: Mr. Feller, you could -- couldn't have -- you couldn't make a bigger assumption to that effect that I made before the federal employer rather it's decided by (Inaudible), you couldn't be more -- you couldn't have been clearer that that's the answer. David E. Feller: Well, it maybe but I will say that Federal Employers Liability Act specifically provided for suits in the state courts and for suits in the federal courts and the question then was having specifically provided for both if -- Felix Frankfurter: I know what the question was. All I'm suggesting is fallibility maybe greater than yours. David E. Feller: Well, I may argue with you in that Your Honor. Earl Warren: Mr. Mason. George H. Mason: I should like to make, if Your Honor please, one comment about prior adjudications on this issue that's here involved. I would say that quantitatively, the decisions have been against the proposition for which I have been arguing. However, it should be said noted that most of those decisions are state court decisions in which the state being very zealous of its prerogatives would normally be expected to support its own jurisdiction. And it maybe of interest to the court that Mr. Chief Justice Wilkins in the decision in this case that went to the Supreme Judicial Court said, “In the absence of a clear holding by the Supreme Court of United States that federal jurisdiction has been made exclusive, we shall not make what would be tantamount to an abdication of the hitherto undoubted jurisdiction of our court. Even the Supreme Judicial Court of Massachusetts is looking forward to the decision of this Court in this case. Thank you Your Honor.