Earl Warren: Number 258, Morris H. Kramer versus Union Free School District No. 15, et al. Mr. Fraenkel.
Osmond K. Fraenkel: May it please the Court. This is an appeal from the decision of a three-judge court in the Eastern District of New York rejecting an attack on the constitutionality of Section 2012 of the New York Education Law brought by this plaintiff representing himself and others in the same class. It deals with the qualifications for elections in local school districts and this particular statute restricts the voting to roughly two groups of persons. The owners or renters of taxable real estate and their spouses. Although at the time the suit was brought, the spouse of a tenant wasn't qualified but has become so since and parents of children attending the local schools. First, excluding persons like the particular plaintiff who is a bachelor living -- an adult of course living with his parents excluding also older people living with their children, excluding lodgers and boarders and excluding residents of property which happens to be non-taxable. The majority of the Court below upheld the law on the ground that the interest of the taxpayers and parents was more direct than the interests of the other residents of the community and that the state therefore had the right to make that distinction. Judge Weinstein wrote a long and, to our view of course, a most persuasive dissent. Now, the election system in New York with respect to schools is most bizarre. In a large city like New York, the school board is appointed, although the project for decentralization of which the members of the court may have read and the new proposal by the Board of Education which had been much publicized would give all the residents of local districts the right to elect their local school boards. In some of the other cities in New York, school boards are elected at large cities. In all cities in New York having population of 125,000 or less, school boards are elected by the entire electorate. It's only in the so-called country and suburban areas such as the one here involved down on Long Island that there is this distinction and restriction to taxpayers and parents. Other state doesn't really support that distinction by anything which in our view conforms to this Court's most recent discussion of the question of equal protection. In Williams against Rhodes where the Court noted that we have to balance the interest of the state in the exclusion which it proposed against the interest of the person excluded. Now, here the interest of the person excluded is quite obvious be as a resident of the community and particularly in modern times where the growing interest in education, the growing ferment, not only among the community people but among the students themselves is to how their education should be handled. It would seem a priori that everyone in the community should have a right to participate in the election of the school officials provided there be an election at all. This Court having previously of course has determined that a state would have such local officials appointed. Now, what does the state --
Potter Stewart: Mr. Fraenkel, the statute provides that only people with these qualifications shall be entitled to vote at any school meeting. Are these actual -- actually meetings or are these --
Osmond K. Fraenkel: Yes.
Potter Stewart: Are these ballots, secret ballots --
Osmond K. Fraenkel: No, there are meetings.
Potter Stewart: And ballot box voting?
Osmond K. Fraenkel: There are meetings.
Potter Stewart: We're just talking about meetings.
Osmond K. Fraenkel: There are meetings at which the members of the school board are elected at the denominations made by a certain number of qualified electors. They make denominations. And then there are also other matters which can be disposed of at these meetings, certain tax matters, certain matters relating --
Potter Stewart: Having to do with schools?
Osmond K. Fraenkel: Out of state, out of the district and things of that sort.
Potter Stewart: And so these are actually meetings and what we're -- are they public meetings? Can anybody come to the meeting?
Osmond K. Fraenkel: So far as I know, yes.
Potter Stewart: And only these people can vote.
Osmond K. Fraenkel: Only these people can vote.
Potter Stewart: And how often do these meetings held?
Osmond K. Fraenkel: That I don't know. I don't know. I would suppose at least once a year perhaps often.
Potter Stewart: So we're -- so this statute --
Osmond K. Fraenkel: Actually being a resident of the City of New York and I'm not too familiar with what goes on in the suburbs.
Potter Stewart: And this does not involve ballot box voting?
Osmond K. Fraenkel: No.
Potter Stewart: It involves voting in an open meeting.
Osmond K. Fraenkel: That's right.
Hugo L. Black: Which people did you say up a minute ago?
Osmond K. Fraenkel: Roughly taxpayers and parents. In other words, the owners or renter -- owners or renters of taxable real property and their respective spouses.
Hugo L. Black: What about people under 21?
Osmond K. Fraenkel: And to parents of children attending school. No, they have to be qualified otherwise to vote in the state and they have to be over 21. They have to be --
Hugo L. Black: Children under 21?
Osmond K. Fraenkel: Citizens and so on.
Hugo L. Black: People under 21 vote?
Osmond K. Fraenkel: No, not in New York.
Hugo L. Black: I mean in these elections.
Osmond K. Fraenkel: No, no. In addition to these restrictions under electorate, the elector has to be a qualified voter in the state. Now, as I was saying, I would suppose that the interest of every resident of the community is clear. What interest is it that the state is supposed to reserve by this restriction? It's rather difficult from the papers to determine what that is? In one place, it is stated that this is essential -- an essential restriction in order to prevent political maneuvering but why or how this is so is difficult to understand. Why in the districts in the country, political maneuvering is more a suspect than in cities having under a 125,000 persons. Is it made clear anywhere and in those cities everybody who otherwise qualified can vote?
Byron R. White: But we're not talking about a right to vote -- it's provided by a federal law, are we?
Osmond K. Fraenkel: No, we're dealing here only with the question of equal protection, whether this is an improper discrimination by the state. We're not dealing of course with voting in federal for federal officials.
Byron R. White: Or any constitutional --
Osmond K. Fraenkel: Or any constitutional issue. We're dealing with a matter that is local in the sense that school elections are not -- don't deal with all the subjects which a community is interested in. But nevertheless in my view, the matter of education is of such paramount importance that all members of the community have an interest in and should be allowed to vote borrowing some specific reason.
Byron R. White: You assume the burden here I take it, of approving an invidious discrimination of the plaintiff.
Osmond K. Fraenkel: Yes and no. Of course, always, the person who raises an equal protection point assumes that burden. On the other hand, once he has shown that there is a discrimination and that he has a strong interest, then I submit, it is the burden of the state to come forward to show a justification for that discrimination.
Byron R. White: Do you have any cases for that except in areas where a certain particular interests are involved?
Osmond K. Fraenkel: Well, of course, the most recent application of it was in the Williams-Rhodes case. Well, I think it's true that that dealt with federal electors --
Byron R. White: That's right.
Osmond K. Fraenkel: And for that reason, this Court may have -- I may be permitted to say so stretch a little. Nevertheless, it seems to me that the basic principle enunciated that where a discrimination has been shown there is --
Byron R. White: That is a normal equal protection law, is it?
Osmond K. Fraenkel: Well, the normal equal protection law deals mostly with taxation and routine things of that sort. I submit that when it deals with so fundamentally thing as voting as the poll tax case of course is another illustration. Now, it's --
Speaker: How long has this law been on the books Mr. Fraenekel?
Osmond K. Fraenkel: Oh, generations! It's been changed from time to time by some amelioration and it may be of interest that when the Constitution was proposed in New York in 1967, that Constitution would have expressly forbidden any such restriction in local elections. That Constitution for many reasons was not adopted by the people as Your Honor knows. Now, one of the arguments made here is that the state was justified in making this discrimination because those two groups are likely to be most interested and best informed. It seems to me, the short answer to that is that anybody who wants to vote lives in the community shows an interest and shouldn't be deprived of that right. It is also suggested in one of the briefs that there is a political process available to amend the law and that the law from time to time has been amended. That may be true. Lord knows, how long it might take. But that isn't I suggest no answer at all to any constitutional argument in every case where a statute is challenged as denying the Equal Protection Clause, it was of course possible to have the statute amended whether it was a tax case or a -- any other kind of a case. It also suggested in some of the briefs or I put it this way, horrible examples are produced at least in one of the briefs about what would happen if this restriction were removed. It is said a child of eight from California would come and show an interest. Well that's of course is non-sense because the basic requirement for voting in New York is a certain amount of residence in the state and in the district. And that provision is not being attacked in this lawsuit. All that we are saying is that that provision is to the general voting qualification of New York should be applicable here. It is also suggested that if this law is stricken down, there'll be no law for school elections and that would produce chaos. Now, of course that is not true because all we are asking this Court to do is to strike down the discrimination of the law and it is very easily accomplished because after the pre am -- first portion of the law which says persons are qualified to vote in school elections who are qualified under the general law of the state and possess certain additional qualifications. All we're asking is that the “and posses these additional qualifications be stricken.” For that would leave the law in full force applicable to school elections in these districts but giving the right to vote in those districts to persons otherwise qualified to vote in New York. So in sum, our position is that this plaintiff and other similarly situated have a vital interest in the subject matter of being members of the community who want to vote and participate in the election of the school officials and that the mere fact that taxpayers and parents might have what might be called a more direct interest is no justification. Indeed, one of the briefs go so far as to suggest that if it were otherwise a theoretical delegate ballots between the normal desire of taxpayers to keep school budgets down and the hopeful desire of parents to have better education and better facilities and therefore increase the school budgets that that nice ballots which might be preserved by the existing system would be thrown out if outsiders came in who were in need of financially prejudiced group. Whereas on the contrary, it would seem to be in the general public interest that this possible theoretical deadline would be resolved by persons having a general public interest in the education of the children and in all of the other aspects that arise in connection with local school elections because there are various collateral and what might be called fringe aspects to those situations. The local school board has great power in connection with first, the recreation facilities, libraries and things of that sort, so we say here that the state has not shown anything to justify this discrimination and that the restrictive provisions of other law should be stricken by --
Abe Fortas: Mr. Fraenkel. Mr. Fraenkel, in the papers before us, is there any place where I can look to discover what the powers of the school meeting are? In other words, on what subjects the vote would be cast? Is any comprehensive listing anywhere here in these papers?
Osmond K. Fraenkel: The papers -- the record is of course a very meager record.
Abe Fortas: Yes.
Osmond K. Fraenkel: It consists only of a bad complaint and a motion to dismiss for reasons best known to itself the state did not take of an advantage of an opportunity afforded by a motion for summary judgment to bring in background material. On the other hand of course, the Education Law of the state is a matter of which this Court takes judicial notice and it has the provisions which deal with these matters and some of those provisions are referred to in some detail in various of the briefs. In my own brief, I preferred to four or five sections of the New York Education Law which indicate the powers of the local boards.
Abe Fortas: Do you have conveniently append in reference to the sections of the Education Law that set out the powers of the local school meetings. When you say the local board, do you mean the school meeting?
Osmond K. Fraenkel: The local school board which is elected.
Abe Fortas: I notice that Section 2012 which was involved here refers to voting at the school meeting and whatever.
Osmond K. Fraenkel: Yes but the school meeting --
Abe Fortas: I really don't --
Osmond K. Fraenkel: The school meeting does various things. It can as I indicate in my brief the meeting under Education Law 2021 and 2022 as it designates school sites, 2040 deals with the education of students outside the district, 2040 (a) with migrant laborer's children and so on and some extent this has been covered also in the opinion of the three-judge court at page 34 of the opinion -- page 34 of the appendix I should say. In any event, the various provisions of the Education Law beginning with 2012 deal with these subjects. I call those that I thought were the most significant but it may well be that some other significant ones escape by notice. They are all there. They are the only thing, there is no background material. The -- some of the briefs go at great length into the situation and other parts of the state. But again, drawing from state legislation although I must say regretfully. I say regretfully, I have nothing to do with those briefs and they do not always cite the relevant statute which deals with the problems.
Hugo L. Black: Does this case involve anything except the challenges to the right to vote for boards?
Osmond K. Fraenkel: Well, it involves the right to vote at a school meeting. The school meeting does a number of things. It can of course elect a local school board. It also has the power as I pointed out in my brief and just now in answer to Mr. Justice Fortas' question, the school meeting also has the right to deal with certain financial matters, school houses, education of children outside the district and education of migrant laborer's children inside the district. In other words, there are various things which a school board -- school meeting deals with at which these people would then have the right to vote, not merely the selection of the members of the board. Now, it is pointed out in one of the briefs that if this Court should agree with us, perhaps some of the powers of these meetings might be curtailed and that legislature of course would have the right to do that but that is not anything with which I suggest this Court need concern itself, either --
Hugo L. Black: But then that's on disciplinary rules and --
Osmond K. Fraenkel: No, no, no. The Board of Education presumably would deal with all such matters but of course the qualified elector does not only vote for members of the board but participate in the nomination of the members of the board. That's the way the nominations come up is by petition of qualified voters.
Hugo L. Black: And the qualification for the members of the board.
Osmond K. Fraenkel: There are none set forth that I've been able to find as to qualifications of the members of the board. In any case we're not concerned with that in this appeal.
Osmond K. Fraenkel: Do these meeting have something to do with adult education? Well, the board, I don't think the meetings as such. The board had something to do with determining the stand of adult education.
Earl Warren: That -- and libraries?
Osmond K. Fraenkel: And libraries. Those are within -- after all, certain basic things can be voted on. The rest is left through the discretion of the board which is elected by the voters.
Earl Warren: At these meetings?
Osmond K. Fraenkel: At these meetings.
Abe Fortas: Mr. Fraenkel, I see on page on the opinion below, on page 34 of the appendix --
Osmond K. Fraenkel: Yes, sir.
Abe Fortas: Statements that at this meeting, which is the meeting we're talking about, school meeting, the voters approved the school budget --
Osmond K. Fraenkel: That's right.
Abe Fortas: And they vote to levy taxes on taxable real properties.
Osmond K. Fraenkel: Those are the sections that I referred to 2021.
Abe Fortas: Yes, and that they also -- the voters in each school district and I suppose it's at this meeting, elect from their number three to nine trustees, elect as the Board of Education for that district?
Osmond K. Fraenkel: That's right.
Abe Fortas: Well, is that Board of Education subject to a statewide Board of Education?
Osmond K. Fraenkel: No, but in New York, the supervisory authority over the whole educational system is the Board of Regents and the Commissioner of Education, and Your Honors may remember in the recent New York City school crisis, Mr. Allen commissioner -- the state Commissioner of Education intervened, appointed the trustee for the controversial Ocean Hill Brownsville School and so on. They are the supervisory authority over the entire educational system of the state.
Abe Fortas: Well now, the opinion below says that the Board of Education prescribes the course of study to be followed in the district schools. Do they have authority to do that or is that determined by the statewide Board of Regents?
Osmond K. Fraenkel: Well, there are certain state policies which the Board of Regents lays down. Certain guide rules as I understand it. And within those guide rules, each local board has considerable amount of discretion.
Abe Fortas: So that --
Osmond K. Fraenkel: In fact that's one of the problems which we're being confronted with in the City of New York now to what extent shall the newly proposed local boards have these powers such as to what extent shall they be promulgated from above.
Abe Fortas: So that really I'm reading that part of the opinion of the Court below relating to the Board of Education of the particular district, we should read that the Board of Education of that district subject to the Board of Regents of the state?
Osmond K. Fraenkel: Subject to the general supervisory power of the Board of Regents and the Commissioner of Education.
Abe Fortas: Describes the Courts in study and builds schools and so on.
Osmond K. Fraenkel: First, a specific question arises about the propriety of the action of the Board of Education by the -- in a matter of educational policy that can be taken on appeal to the Commissioner of Education or if a constitutional principle is involved, can be taken directly to the courts of the state.
Hugo L. Black: Who appoints the Board of Education or the State Superintendent of Education?
Osmond K. Fraenkel: The commissioner is appointed by the governor.
Hugo L. Black: What about the regents.
Osmond K. Fraenkel: Sorry. The commissioner is appointed by the regents, and the regents are appointed by the legislature.
Hugo L. Black: Regents --
Osmond K. Fraenkel: The regents are appointed by the legislature and they -- the regents appoint then the Commissioner of Education.
Hugo L. Black: As I recall, from looking into it several years ago, that is the most powerful agency in New York.
Osmond K. Fraenkel: Well, it's certainly is the most powerful educational agency.
Hugo L. Black: I'm not talking about education.
Osmond K. Fraenkel: Well, it has powers.
Hugo L. Black: Control of the medical fraternity.
Osmond K. Fraenkel: Well, yes but that --
Hugo L. Black: Legal fraternity.
Osmond K. Fraenkel: Yes well no. It has -- I don't think that that has anything to do with the legal fraternity but it has to do with doctors and many other agencies that --
Hugo L. Black: What about the librarians, the druggists?
Osmond K. Fraenkel: I think that -- I think they have great powers in all those areas.
Hugo L. Black: And they have people employed to see whether or not they're guilty of any offense, send them around over the state, don't they?
Osmond K. Fraenkel: That I wouldn't know. Mr. Jehu can answer that because he's right from the department.
Hugo L. Black: Well, I had occasionally looked into it several years ago and wrote about it in the case and of course, it's pretty broad.
Osmond K. Fraenkel: Oh! Yes, they have very broad powers. Of course those powers are not involved in this litigation.
Hugo L. Black: Well, it seems to me like it's all subject to board like that the people have nothing in the world to do with its election. It might have something to do with the question you're raising. Maybe I'm wrong.
Osmond K. Fraenkel: Well, the people who are qualified voters, including my plaintiff if this Court agrees with me, can elect the members of their local board. Now, the fact that that local board may be subject to supervision no more affects the situation than the fact that in New York where the Supreme Court justices which is the Court of first instance are elected by the people. An appeal can be taken to the appellate division or the Court of Appeals affects the importance of the election process of the judges so that he had a fact that the Board of Regents can in some situations review actions by the local boards does not at all in my judgment affect the importance of the electorate which can --
Hugo L. Black: I think it comes to mind because it sounds to me like what I read about that regent -- Board of Regents, your words subject to supervision by the Board of Regents is a rather euphemistic term.
Osmond K. Fraenkel: No, I think the board can only -- anyway, I submit that that is really not an issue in this case. Once the right -- once the legislature has said that a particular local body can be elected then it seems that where that local body deals with a fundamental subject such as education, there should be no restrictions on the body of electors other than the general qualification to vote in the state. Thank you.
Earl Warren: Mr. Jehu.
John P. Jehu: Mr. Chief Justice and may it please the Court. This is a very important case I believe and it also I believe were one of the first impressions. It involves such matters as the relationship between the State and the Federal government and also between the Judiciary and Legislative branches. Now, perhaps in answer to some of the questions, the questions I asked of Mr. Fraenkel, I should say this that Boards of Education and School Districts in the State of New York are autonomous units. The statute sets for instance the requirements as to required subjects in the curriculum. Beyond that, the local board of education can determine to have other subject in their choice and the Board of Regents under Commission of Education of course have supervisory powers. The Commissioner of Education has particularly the judicial powers over the school system where regular pleadings and oral arguments and briefs are filed and so forth and then the local, the statutes in New York says, his decisions are final and not subject to review. Now, the Courts of the state however have happily reviewed them all along. But in any event, the districts are very autonomous. There is over 800 school districts in the state and the statute here 2012 and I might add to that also requires three general qualifications together with one of three specials. The three generals are residence, citizenship and majority. In addition to that, one of three qualifications have to bring a qualified vote to be qualified into the community of interest in the school system which is a special purpose administrative not legislative units only it does administer to schools. Under the jurisdiction, general jurisdiction of the education department because under the State Constitution and the law in New York, education is a state function as it is under the Tenth Amendment is a state function. Now, to go into the problem of this particular case, this is a matter as I said under the Tenth Amendment of state concern only. There is nothing in the United States Constitution or in any Act of Congress that guarantees to anybody in this country the right to vote in school district meetings or elections. And an answer incidentally to Mr. Justice Stewart's question before, the voting takes place either at meetings, town meeting types or at election types which is up to the local board as which as they are the one going to handle it. They can put up a ballot box --
Potter Stewart: A statute seems to refer only to meetings.
John P. Jehu: Well, it says --
Potter Stewart: Does it or am I mistaken?
John P. Jehu: It may well be so Your Honor. I'm not sure about that. We have always read about that in meetings or elections --
Potter Stewart: Because it will be entitled of other school meeting. Well, that's the appellant's brief and I suppose those are his words, not the statutory words. I can't find the --
John P. Jehu: The statute itself I think is set forth in the opinion of the Court below. It's in the appendix I do believe. Yes. Well, in any event Your Honor --
Byron R. White: I'd be quite interested in seeing the statutes or having a reference to him.
John P. Jehu: Page 2 of the appellant's brief. The statute is quoted. The person shall be entitled to vote at any school meeting for the election of school district officer who might also in other matters which may be brought before such meetings then it goes on to a (Inaudible). We have it in here. It's on page 4 of the appendix Your Honor. It says, a person shall be entitled to vote at any school meeting for the election of school district officers and that all other matters which may be brought before such meeting and so forth. But other section of the Education Law parenthesis 2035 authorizes them to use voting machines if that's all see fit and if they can rent them from the counter village of county and they often times do especially in the larger districts to say it then.
Potter Stewart: Well, at least, you say this statute which seems to refer only to school meetings would mean applicable to voting by voting machine?
John P. Jehu: It is modified for other sections of the Education Law, Your Honor, yes.
Potter Stewart: I understand this law doesn't -- is not applicable at all to two-thirds of the people in the state.
John P. Jehu: That's correct Your Honor and in the so-called --
Potter Stewart: It's not applicable in the big cities and it's not applicable to the smallest.
John P. Jehu: The smaller cities, that's correct and between the two groups of city school districts as more than two-thirds of the population of the states, some 11 million people by the 1960 census. So that this is a fairly limited group on law, there are number of districts involved. Some are very small. Some of these geographical units are very tiny. This is one of our problems to try to get them together but this is not the problem here. Now, I'm trying to say is this --
Abe Fortas: Could you, forgive me sir, but would you be so kind as to tell us as specifically and precisely as possible just what are the matters brought before the school meetings on which these qualified people vote.
John P. Jehu: Yes, Your Honor. The first thing that -- they will have to have an annual meeting. This is a requirement of law. Every one of these districts involved here has to have an annual meeting. This takes place either on May or in June or July by local action. First thing they'll do is they elect a Board of Education or there's a member each year or two members or whatever the rotation happens to be. Secondly, they must adopt a budget for the operating expenses of the district for the ensuing year. In addition to that, they can have any number of other resolutions such as purchase of a school bus or the building of some extra classrooms as they may be required or the putting up of a brand new building. They're all matters of the administration of the school system, of the local school system for the students that are residing in the district and to take care of their particular problems. Now, the Board of Education which is elected there has certain powers and the powers of the Board of Education are set forth in 1709 of the Education Law the powers of the voters on 2021 basically but there's various provisions all over the Education Law some 2000 sections altogether and it's a very complicated statute which right now, we have joint legislative committee to try and revise and simplify but -- does that answer your question, Your Honor?
Abe Fortas: No, not -- I'm sorry but it doesn't quite because it is a complicated Education Law and I'm interested in finding out just as precisely as I can and with as little possibility of error as can be managed just what this voting right is often concerning? I know that it is a voting right that relates to the election of members, the Board of Education for the district. I know it is a voting right that is -- that has to do with the approval or disapproval of budget presumably proposed by the Board of Education.
John P. Jehu: Correct, Your Honor.
Abe Fortas: And what I would like to know is whether they're -- just what the specific subjects are as to which Mr. Fraenkel's client claims, he should be entitled to vote and I haven't found that in any of the papers before us. There is a general description in the opinion of the lower Court and that's all.
John P. Jehu: Well, Section 2021 Your Honor consists of some 20 or 30 subdivisions which indicate the powers of the voters. First, they have the power to regulate the affairs of the meeting itself. They have a power to vote taxes for various things. There's another Section 416 of the Education Law which says that the voters have a power to levy taxes, for teacher salaries, for the building of school buildings, for the buying of school buses, for the buying of school property, for playing fields and whatever the multi-various purposes of a school system are. They have to hire janitors which is done by the Board of Education but the money therefore is a appropriated by the voters. And to some extent, teachers' salaries and the group of items known as ordinary contention expenses which is light, heat, water, telephone, that sort of thing, the Board of Education has the power to do that without reference to the voters and if the voters vote it down, the board still does it because it has to -- the schools have to be kept running. Now, this is a constitutional requirement under Section 1 of Article 11 of the State Constitution but in other words, all these voters do really, this is the gist of it. There are many, many details is that they must prepare, authorize appropriate money so that the schools can be kept running. There's any number of things now of course with machine being used for various data processing and all kinds of things whatever it takes to run the schools and that's all. They have no power beyond that.
Abe Fortas: There's a text to which the -- which may be levied by the school district, solely a tax upon real property.
John P. Jehu: That's correct, Your Honor. It's the real property taxes --
Abe Fortas: Where does that appear in the statute?
John P. Jehu: Excuse me sir?
Abe Fortas: I've just gotten a copy of a statute brought to me and the statute does not indicate that it has to be a real property tax, does it?
John P. Jehu: Well, the tax provisions were taken out of the state Education Law many years ago and put into the Real Property Tax Law and they would be in Article 13 of the Real Property Tax Law has all the different provisions but all they have is a power to levy a tax on real property. Certain city school districts have the right to levy a utility tax of up 3%.
Abe Fortas: you can't tell me anything in this law that --
John P. Jehu: In the Education Law, Your Honor?
Abe Fortas: Anything in the law that confirms the tax power of the school meetings that we're talking about to the levying of real estate taxes.
John P. Jehu: Well, as I indicate Your Honor, this is no longer in the education law. It's in the Real Property Tax Law which is a different volume of the consolidated law.
Abe Fortas: I'm looking Section 2021. I'm still trying to find out what the powers of this meeting are.
John P. Jehu: Well, the powers of the meeting basically --
Abe Fortas: That's what I'm trying to find out.
John P. Jehu: Are to --
Abe Fortas: When it comes to the power to tax --
John P. Jehu: Yes.
Abe Fortas: I want to know specifically in terms of the statute whether the taxing power is limited to the levying of tax on real property. Obviously, the reason and I'm interested in that is that the section at issue here which is 2012 confines a power to vote to persons who own etcetera, real property.
John P. Jehu: Right. Well, the power to tax is limited in answer to Your Honor's question absolutely and definitely to the real property taxes. Now, but that is not in the Education Law but it's in another statute that the matter was transferred to starting in Section 13 under the Real Property Tax Law. I don't know -- the moment they remember which one of the three or four sections following 1300 of these.
Earl Warren: Does the state have had any of its tax receipts to school districts for their operation?
John P. Jehu: The operations of the school districts of the state are financed basically from the school tax which is a real property tax. In addition to that, they get a great amount of state aid, and that state aid and this will be part of my argument about some of the claims made here, that state aid is derived from a number of sources, the state income tax, various cooperation taxes and as a whole flock of sources that budget is made up.
Earl Warren: I suppose, do you have a sales tax?
John P. Jehu: There are --
Earl Warren: Do you have a sales tax?
John P. Jehu: We have a state sales tax now, that's correct which is also is part of that and they have local sales tax just like in New York City and some of the counties have sales taxes.
Earl Warren: Yes.
John P. Jehu: But all these things go into the state budget and before that budget is made up, a new formula is made up, state aid formula is made up almost every year, and that formula determines how much the taxes will have to be brought into the State Conference in order to cover the various expenses including education.
Earl Warren: Well, do these people who are deprived of voting under this law have to pay those state taxes?
John P. Jehu: Oh! Indeed they do, Your Honor but that is the main part --
Earl Warren: Then they do -- then they do contribute with their tax moneys to the support of these schools, do they not?
John P. Jehu: And the main part if it please Chief Justice, my argument is this --
Earl Warren: No, I'm not interested in your argument. Well I just --
John P. Jehu: No, on this point is what I mean.
Earl Warren: I just like to ask you if they are obliged to pay state taxes that are used to operate the schools.
John P. Jehu: That's absolutely correct and some of their federal taxes go into that picture but what I'm getting at is that he has never lost and does not now lose his franchise on state legislation which determines how much of his tax money goes into the education system and he has not lost his franchise to elect a senator of the United States or congressman who would in turn determine how much federal money goes back to the states for schools. This he can vote and this I think is a vital distinction of this case from some other cases the Court has recently decided.
Earl Warren: Well, it might determine how much he would be willing to put in to the local budget and wouldn't it depending on how much he used to get from the state?
John P. Jehu: No.
Earl Warren: Why?
John P. Jehu: As I say the --
Earl Warren: Why?
John P. Jehu: This -- the whole state aide formula is the most complicated kind of a machinery and what the voters do, they merely authorize that district to spend, shall we say, $5 million for their schools.
Earl Warren: Yes.
John P. Jehu: And that that authorization to spend then has to be covered by an estimate of how much state aid will they get, how much federal aid will they get, how much will they get from other various source of income such tuition and so forth. And then they deduct that and the difference, the Board of Education levies some taxes on the real property in the district.
Earl Warren: Yes. Well, might not a person whose voting at this meeting say, “Well, in view of the fact that the state gives this much money to the schools for this purpose. We don't need much. We only need a very little bit so we're only -- we'll only vote to have to spend so much in the district.”
John P. Jehu: Well, the vote Your Honor is not on the total amount. The vote is on the authorization of specific items for certain purposes.
Earl Warren: I know but he might say in view of the subventions from a state, we don't need these things.
John P. Jehu: Oh! There's no question Your Honor that this whole system has caused difficulties in the state.
Earl Warren: Alright, well then, doesn't the person who pays the state taxes also have an interest in how much he will provide for the district, for school purposes?
John P. Jehu: I don't think Your Honor. I don't think that's all because he has to pay the state on federal taxes regardless of whether it will spend on this district or whether it will go to Oklahoma or California. If that district doesn't spend it, somebody will and the total amount is the same either way.
Thurgood Marshall: Well why do you give the right to vote to the taxpayers who are owners of property?
John P. Jehu: Well, may I explain --
Thurgood Marshall: What is the reason for that?
John P. Jehu: May I explain this.
Thurgood Marshall: Would I assume it's because they're interested in how their money is spent? Could it be one of the reasons?
John P. Jehu: This may well be one of the reasons.
Thurgood Marshall: Well why exclude the bachelor who might be the highest taxpayer in the country?
John P. Jehu: Because he is not a member of the community of interest.
Thurgood Marshall: And because he's not interested what happens to his tax money?
John P. Jehu: No. May I state that --
Thurgood Marshall: Suppose the law said only republicans can vote.
John P. Jehu: No, that would be an invidious discrimination.
Thurgood Marshall: Why?
John P. Jehu: Because there is no relation between the purpose of the statutory objective of the legislature and the way they're doing it. In other words, the democrat is --
Thurgood Marshall: Then what is the relationship for excluding a bachelor?
John P. Jehu: Well, he's not being excluded because he's a bachelor He is excluded because he has absolutely no --
Thurgood Marshall: He's excluded because he's not married.
John P. Jehu: No, he is excluded because he has absolutely no interest in the operations of the school system.
Thurgood Marshall: Why not?
John P. Jehu: His children are not affected because he has no children, whatever --
Thurgood Marshall: His money is.
John P. Jehu: Just a moment, if I may Your Honor. The first part is the fact he has no children. In other words, whether he votes for or against something, if he could it wouldn't affect him since he has none. Now, the other thing is, it doesn't cost him a penny from the real property tax which is the only thing -- the direct taxation that he can vote on. He can vote on how much the district gets or how much federal aid. That is taken care of by his use of the ballot, by electing state and federal legislators who will determine that for him. There, he has a full ballot.
Thurgood Marshall: But if he was a bachelor and a pauper but a tenant he could vote?
John P. Jehu: He could vote, absolutely.
Thurgood Marshall: Now, what interest does that in anyone?
John P. Jehu: Well, they --
Thurgood Marshall: This bachelor who's broke and just happened to be a tenant --
John P. Jehu: Right.
Thurgood Marshall: Now, what interest does he have?
John P. Jehu: Well, the question really Your Honor is this. In the first place, do we have to meet a test such as we had in the Cardona case? Now, in Cardona, we have this Mrs. Cardona who was disfranchised by the statute and she could not in any way do anything about it because being disfranchised you have no access to the franchise to change that statute. Here on the other hand, we have a person who is not disfranchised on state legislation. If he wants to change that 2012, he can go and vote for people who will go and change it. And I might say in this connection, while this lawsuit was going on, as a matter of fact, some of the things that were criticized below have been amended. The spouse of the tenant which Judge Weinstein said should not be excluded and I think Judge Hayes have long since been put in by the legislature and that the statement was made, there are so few of these people that the legislative processes will not be adequate. And at the same time, it was done and we have, as I point out on our supplemental brief there is now a constitutional amendment again before the state legislature to eliminate all these special things but the purpose of it and this is to answer your question Mr. Justice Marshall. In order for the legislature to make sure that this extremely important business of elementary and secondary education is properly determined under local basis where it has to be determined under state law. He must make sure that those people who get the franchise on that are those people who can reasonably be expected to be interested enough in it, to spend the considerable amount of time necessary to really inform yourself on these very complicated questions.
Earl Warren: Let me ask you this question. Let me ask you this question, suppose the appellant in this case was a school teacher instead of a stock broker and he was boarding in a home, would you presume to say that he had no interest in the public school's sufficient to enable him to be a voter?
John P. Jehu: May I make two answers to that Your Honor. One is the mere fact that he's interested and knowledgeable for all know, he may have written all the books in education but the legislature cannot anticipate when they make this rule that those persons who are not in the category, that were the two categories we're talking about, will have naturally and foreseeably the kind of interest which will guarantee a reasonable decision on school matters.
Earl Warren: Well, let me ask you just one more question along that line. A school teacher or any other person not being a real property taxpayer who is retired and living with one of his children, maybe he's had a large family and has reared them and put them through the public schools, paid all their expenses and they now have grandchildren and he is living with one of those children. Do you say that that person would not have sufficient interest in the public school system of his district to vote?
John P. Jehu: I would say Your Honor that they're properly excluded here because the parents themselves is the -- if they have the children, the people you're talking about whose grandchildren do have the franchise but the interest of these other people is purely theoretical just like I have a tremendous interest in good education in Mississippi right now.
Earl Warren: No, I'm talking about this specific case. You say that he had insufficient interest to vote.
John P. Jehu: Unless he is assessed for a school tax. If he rents a garage for instance or if he owns a home then obviously he has the kind of interest that the legislature reasonably can be expected to base a decision on as to who should vote and who should not.
Earl Warren: Well, that perhaps, I would ask just one more question. You say, because he pays no taxes could you now, if we sustain this, could you also say that unless he paid the $10,000.00 in taxes a year that they wouldn't be eligible to vote?
John P. Jehu: Your Honor, isn't it the question of payment of taxes. All he has to be is assessed. Now, if he for instance refused to pay taxes, being assessed, he may not lose his property for two years. He still votes all this time.
Earl Warren: Well, let's say assessed unless he assessed for that much, you could put a limit on the amount of taxes he pays.
John P. Jehu: If that did that Your Honor we will run into harbor and properly so that would be impermissible because wealth as you had pointed out in harbor has no relation to the use of the franchise. This is put in merely to make sure that we have those people, those groups, who can reasonably be expected to have a serious interest, serious enough to give it a great deal of thought. And may I add one more item before the time is up. Now, this is -- we are not dealing here with a question of state or federal or even municipal ballots, franchise and representation and consequently, when the Chief Justice in Reynolds said clearly irrational state policy insufficient because of the central importance of general elections, I emphasize general. This is not applicable, so consequently, the only test we do not need that the far sterner test of Justices Douglas and Fortas are mentioned in their dissent in Cardona. The only test we have is there are some reasonable relations between what the state is trying to do and what the statute does and --
Potter Stewart: In connection, I would be very interested in having a citation of authority for your submission that the power to tax is only the power to impose taxes on real property. Could you submit that in writing?
John P. Jehu: I would indeed sir.
Earl Warren: We'll recess now.
John P. Jehu: I will supply the Court with copies or texts of the relevant sections of the education and other laws dealing with various questions which have been raised during the argument.
Earl Warren: That would be very helpful.
John P. Jehu: I would like to do that sometime next week.
Earl Warren: That would be very helpful.


William H. Rehnquist: We will hear argument first today in Number 86-1520, Ann McLaughlin, Secretary of Labor, versus the Richland Shoe Company. Mr. Ayer, you may proceed whenever you are ready.
Donald B. Ayer: Thank you, Your Honor. Mr. Chief Justice and may it please the Court, this case presents the question of the meaning of the term 29 USC Section 255(a). That section provides that an action may be brought "within two years after the cause of action has accrued except that a cause of action arising out of a wilfull violation may be commenced within three years. " This action was brought in 1984 by the Secretary of Labor to enjoin further overtime pay violations and to compel payment of overtime accrued during the prior two and a half years. It was brought under Section 217 of the Act authorizing equitable relief, so there is in this case no question of the availability of liquidated damages. We are simply talking here about compensatory relief and injunctive relief. In that action the Secretary moved for summary judgment based primarily on the records of the employer, and that motion was granted by the District Court. The court first rejected the defense of the employer that his behavior his conduct was justified under the so-called Belo plan exception of the Fair Labor Standards Act, Section 207(f), and went on to address the question of the statute of limitations provision. The court rejected the contention that the three-year statute of limitations was inapplicable here on the ground that the conduct was not wilfull, and in doing so it applied what was at that time the uniform view of the Courts of Appeals, the so-called appreciable possibility test first adopted by the Fifth Circuit in the Jiffy June Farms case. The court said that that test requires only an awareness of the possible application of the Fair Labor Standards Act and found on those facts that the vice president and general manager had made clear that he was indeed aware of the Fair Labor Standards Act, and that that Act does govern over time systems of compensation. The Third Circuit Court of Appeals affirmed with regard to the issue of a violation and, however, reversed with regard to the statute of limitations question. It found that the appreciable possibility test was inappropriate, stating primarily the reason that it has the tendency to collapse the two tiers that are plainly contemplated on the face of the statutory provision, the two tiers of liability, two years versus three years, because in virtually every case, although I think not in every case, an employer is going to be found to be aware of an appreciable possibility that the Fair Labor Standards Act will cover. Instead of the at that point established appreciable possibility test, the court applied the test enunciated by this Court in the Thurston case, where it dealt not with this statute, but rather dealt in the context of the Age Discrimination Employment Act's section dealing with liquidated damages, and that test is generally articulated as requiring a knowledge of the violation or reckless disregard for the matter of whether or not the conduct is in fact in violation of the law.
Sandra Day O'Connor: Mr. Ayer, do you think that the government's proof could have met that reckless disregard standard in this case?
Donald B. Ayer: I think that there... the answer to that question turns upon the precise application given, the precise interpretation given to the reckless disregard test, and our concern with the reckless disregard test is essentially... it is not with the part that talks about disregard. It's the part that talks about reckless. And we feel that the term "reckless disregard" as it is used generally throughout the law carries with it a connotation of outrageous conduct, a connotation of highly unreasonable conduct, and that if you read that connotation into the Thurston test, I think it is arguable at least... I think it is unclear. I think you would have to remand to get the determination whether we meet that test or not.
Sandra Day O'Connor: Well, in your position is the evidence sufficient to meet that standard?
Donald B. Ayer: I think our... the answer to that, I think, is yes, in two aspects. Number One, with regard to overtime that everyone agreed had to be paid quite apart from the Belo plan issue, payments were not made anywhere close to the statutory one and a half times rate. And secondly, there are four requirements for this Belo plan requirement. It was our position below and it continues to be that none of the four were met, and we believe that in those two respects the plan is indeed outrageous and is indeed--
Sandra Day O'Connor: Now, under the Federal Fair Labor Standards Act, liquidated damages can be sought for a violation, can't they?
Donald B. Ayer: --Yes, they can. They can be sought under Section 216.
Sandra Day O'Connor: And could they have been sought here?
Donald B. Ayer: They could have been sought had the action been brought under 216 rather than 217.
Sandra Day O'Connor: And what standard should be applied for a violation if liquidated damages are sought under this Act?
Donald B. Ayer: Well, we think that in the context of the Fair Labor Standards Act, there is strong authority that liquidated damages are themselves not punitive, as this Court found in Thurston in the Age Discrimination Act, but rather are compensatory. The Court's reasoning in the Thurston case finding that the liquidated damages were punitive looked to the legislative history, where Congress had substituted in essence for the criminal provision, criminal enforcement provision of the FLSA a liquidated damages penalty and had specifically not applied the liquidated damages provisions of the FLSA. In the FLSA, the authority of this Court, the Overnight Transport case and other cases have explicitly said that liquidated damages are compensatory, and I think that is not an implausible conclusion when you consider the various things they can be compensating for: number one, delay, interest that accrues on something that is unpaid for a period of years; number two, the emotional strain, the humiliation, as has been said by some courts that results in the context of a denial of pay to which you are legally entitled; and number three, consequential damages of whatever sort that may result when you are paid as your salary less than you are entitled to and perhaps at a rate that makes it difficult to live in the way that you are accustomed to or would like to.
Sandra Day O'Connor: Well, I wonder if there aren't some advantages to having a more uniform test of what is meant by wilfull, whether it appears in this statute or another one.
Donald B. Ayer: Well, I think there are indeed some advantages, but I think the approach that needs to be taken is not one that simply says there are some advantages, therefore the language must mean the same thing, but is rather an approach much like the one this Court took in Thurston of looking at the particular statute, looking at the particular context in which the words appear, and deciding whether or not... what the precise meaning should be. In this situation we think that the proper standard is one that is really a refinement of what the Court said in Thurston, a refinement in the sense that it indeed does pay attention and adopt the notion of disregard, but the question is, disregard of what? We think really what the Court ought to do in the context of the statute of limitations provision is start with the question of whether the employer was aware of an appreciable possibility that his conduct might not... might be governed by the statute, that is, start with the old Jiffy June appreciable possibility test, but go on beyond that test and ask the question, what does the employer do in light of that knowledge, in light of that uncertainty, and does he act in a way that is reasonable in light of that. We think what the employer should be required to do is, when he has that uncertainty, seek and get reliable assurances that his conduct is in fact in compliance with the law, and if he doesn't do that and he rather proceeds to act aware that he may be violating someone's rights to minimum wage or to overtime compensation, then he should be made to bear the risk of that--
Byron R. White: Well, with that word "reliable advice" in there, how can he ever win if it turns out the Court decides the advice was not reliable, was just wrong?
Donald B. Ayer: --Well, reliable in the sense that when he got it it was reasonable to rely on it. That is what we mean by reliable.
Byron R. White: Even though it is wrong.
Donald B. Ayer: Well, he can't... no, if he goes to a lawyer and the lawyer gives an opinion which on its face appears to be a reasonably reliable statement of what the law is and gives him basis on which he can fairly conclude that he is--
Byron R. White: And yet you say you can't always rely on a lawyer's advice.
Donald B. Ayer: --I think you can't always rely on it. For example, in a situation where the lawyer--
Byron R. White: I mean, the client is supposed to second guess the lawyer?
Donald B. Ayer: --Well, if the lawyer, for example, assumes hypothetical facts that are incorrect, and he sends you a letter that says, assuming Situation X, then the law, I believe, is as follows. In that situation, for example--
Byron R. White: Well, he hasn't got any advice at all about his case, then.
Donald B. Ayer: --Well, that's right. He has tried. He has gone to a lawyer. But he hasn't gotten advice.
William H. Rehnquist: He has got a poor opinion. He might have asked a lawyer about a tort case, and you say he can't rely on that advice in this case. I go with that. That is very reasonable.
Donald B. Ayer: Okay, well, I think there is a question as to how far... as to how reliable it has to be, but I think considering this you have got to bear in mind what is at stake. We are not talking here about punishing somebody. We are only talking about the third year of liability.
Antonin Scalia: No, but you are saving that the word "wilfull" in the statute means unreasonable, right?
Donald B. Ayer: I am saying... No.
Byron R. White: Sort of a negligence standard. Right.
Donald B. Ayer: No, we are not. We are saying that the word "wilfull" means wilfully going forward knowing of a significant risk that you are not complying with the statute, and that is a reasonable approach.
William H. Rehnquist: You can always phrase the wilfull, wilfully going forward and doing a negligent act. I mean, you can always end up with kind of a negligence standard even though you start out with the word "wilfull", because some part of your act is always volitional. You will to do something.
Donald B. Ayer: Well, the "wilfull" here I think focuses on proceeding aware of the risk, and the reason--
William H. Rehnquist: That is just an ordinary negligence standard, being aware of the risk, isn't it? A reasonable man knows that there is a risk.
Donald B. Ayer: --Well, I think it is a reasonable approach to take here, because you have to look at the consequence. The consequence is not the assessment of some punitive measure. It is certainly not the assessment of a criminal sanction. It is rather the compulsion to pay what you are legally required to pay at the time that you didn't pay it, that is, during the third year.
William H. Rehnquist: Yes, but Congress obviously wanted to distinguish in some way between the duty to pay for two years and the duty to add on a third year. It wanted a heightened level there.
Donald B. Ayer: I think it did, and I think it is useful to look at the context in which it put those words into the statute in 1966 and to compare it to the context in which the Congress acted in 1967 in the Age Act, as this Court found in the Age Act, it was a substitution for the criminal provision of the FLSA of a liquidated damages provision which was to be punitive. In the context of this Act, which was amended in 1966, we were dealing with two competing policies. The purpose of the FSLA amendments in 1966 was essentially to expand coverage. They expanded coverage to seven million additional employees and to 700,000 additional employers, and they increased the minimum wage, and did a number of other things. There were concerns raised at that time about the effect that that would have, these new and suddenly arising obligations, on particularly small businesses, and some restaurant people came in and testified, and what was done following the expression of those concerns, those concerns of unanticipated new liabilities on small entities relatively poorly suited to deal with those new and unanticipated liabilities, was to put this provision into the statute, modify it from a two-year statute of to a two-year provision with a three-year provision for wilfull violations, and that is why, that precise legislative history is why I, think our view makes sense. When an employer goes forward aware of a substantial or a significant risk, that what he is doing is in violation of the law, you can't say that that risk is unanticipated. It is fair to treat his conduct as wilfull in the sense that he is going forward wilfully aware of the risk that is being incurred.
Antonin Scalia: Mr. Ayer, it is not at all unusual that Congress, although it has a particular problem in mind, adopts language that entirely solves that problem but also solves some other problems as well or extends to some situations other than that problem. What you are urging upon us is a very strange interpretation of the word "wilfull" based upon the principle that we should scrutinize legislative history and be sure that the only thing the statute covers is what you find in the legislative history as the primary, and as far as we know the exclusive concern of the Congress. That is a very strange principle of statutory construction.
Donald B. Ayer: Well, we don't think that this is at all a strange concept of the word "wilfull" in the context of this Court's interpretation of the word "wilfull".
Antonin Scalia: It took you a long time to come up with it. Below you were just going with Jiffy June in its original version, weren't you?
Donald B. Ayer: The government's position has been up until the filing of this petition that the Jiffy June so-called appreciable possibility test is the law.
Antonin Scalia: Has anybody ever thought of this meaning of wilfull before?
Donald B. Ayer: Well, yes, I think so. I think--
Antonin Scalia: Where does it exist, and what is--
Donald B. Ayer: --Well, I think the D.C. Circuit decision in the Laffey case in 1976 enunciated something very close to it, talking about where an employer cognizant of an appreciable possibility that he may be subject to the statutory requirements fails to take steps reasonably calculated to resolve the doubt.
Harry A. Blackmun: --Isn't your position here essentially that of the D.C. Circuit?
Donald B. Ayer: It is very close. We think it is essentially identical to the D.C. Circuit. And I would like to go back to the question of--
Byron R. White: Well, of course, the Jiffy June standard is even an odder interpretation of the word "wilfull".
Donald B. Ayer: --Well, we agree with that. Our position is that the Jiffy June standard has significant problems, and I cannot account for or justify the course of development under which the Fifth Circuit initiated it and other courts followed it.
Byron R. White: And the Secretary.
Donald B. Ayer: Well, it has two problems.
Byron R. White: Suppose the Secretary was responsible for urging it on the Fifth Circuit.
Donald B. Ayer: That's correct, Your Honor. The problems that we have with it, just so we are clear as to why we are departing with it, are, Number One, it tends to collapse the two parts of the statute, the two parts of the statute of limitations, and Number Two, maybe even more seriously, it creates a disincentive for employers to go out and get good advice because the figure, well, I am going to be wilfully liable no matter what I do, so why don't I just go ahead and not worry about it? What we want to put in place, what we want to adopt is the Laffey standard, which puts an incentive on the employer to get good advice. It tries to make the statute work. It tries to get the employer to get good advice, to comply with the statute, and when he takes those reasonable steps and he gets reliable assurances, he is not liable for that--
Byron R. White: Well, he is. He is liable... he takes the risk that his lawyer is wrong for two years.
Donald B. Ayer: --That is true in any event.
Byron R. White: Well, all right.
Donald B. Ayer: That is true in any event.
Byron R. White: He is not off the hook just because he gets advice. He is just off the hook if he gets good advice for the third year, for the third year of liability.
Donald B. Ayer: That's right, but that is an incentive to... that is some incentive, depending on how much money is at stake, to get him to comply with the law, and that is good.
Antonin Scalia: And so long as he is not neligent in accepting the advice, in which case if he is negligent he is wilfull.
Donald B. Ayer: Well, I would... we think that the concept of negligence is really a concept that is inappropriately applied here. We think that it is possible that an employer acts non-negligently in getting advice that says, on balance we think your conduct is probably legal, but there are these risks and this possibility that you may not be acting legally. It is conceivable, at least, that that is not negligent conduct on the part of the employer to go ahead in the face of that advice. We would say that nonetheless under this wilfull violation standard the employer should be treated as wilfully violating because he went forward knowing that there was a significant risk that he was going to be violating the law, and we are not talking... again, I want to emphasize we are not talking about throwing the man in jail. We are not talking about assessing a punitive sanction. We are talking about whether the Secretary or individual employees can go into court to collect what they were legally entitled to at the time it wasn't paid.
William H. Rehnquist: Isn't that essentially a question for Congress? I mean, this would have been a very good argument to make to Congress when it was drafting this section, saying we are not talking about... don't put the word "wilfull" in. But to say, now that Congress has put the word "wilfull" in, that this really isn't all that bad so we should disregard the word "wilfull"--
Donald B. Ayer: We are not at all advocating disregarding the word "wilfull", nor are we advocating disregarding much of what is in the Thurston test. We are talking about a test that says when an employer goes forward with conduct in disregard of his knowledge that it may violate the law, then he is liable for the--
William H. Rehnquist: --You are not going to punish him?
Donald B. Ayer: --No, we are not going to punish him. We are going to make him pay what he was legally obligated to pay before. All we are going to do--
Sandra Day O'Connor: Plus maybe double damages or whatever it is.
Donald B. Ayer: --Plus maybe double damages, but double damages in the context of this Act are not punitive, they are compensatory, and this Court's number of cases, the Overnight Transport case, other cases have said specifically that, that they are not punitive.
John Paul Stevens: Mr. Ayer, under your test of a significant risk of a violation when you take action, I suppose everybody who files an income tax return is at significant risk that he has made an error.
Donald B. Ayer: I think that is right, and so to follow--
John Paul Stevens: And so is every error a wilfull failure to pay?
Donald B. Ayer: --Well, but there you are mixing two different statutory schemes. In the context of the tax situation it is obviously true that when a taxpayer doesn't pay the tax, and he has some thought that he may be making a mistake or he may be doing something wrong, he has to pay the tax. All we are saying is--
John Paul Stevens: Yes, but if he does... if he files an incorrect return wilfully, he has a more serious consequence.
Donald B. Ayer: --This Court has addressed that in a number of cases as to what wilfull means in the context of the tax laws, criminal sections, the ones I am thinking of, and that is a different context than the notion that the word "wilfull" has to mean the same thing throughout federal law is one that is contradicted in almost every single case this Court has written dealing with that word.
John Paul Stevens: Isn't it true that even under the wage and hour laws there are some rather complicated regulatory provisions where a person can take a significant risk even, you know, unless he gets a pretty skilled lawyer on the proposition? There have been all sorts of significant risks of violation in the federal--
Donald B. Ayer: Well, that's true. Under the wage and hour laws there is a specific provision of Section 259 where you can go to the Labor Department and you can get advice, and if you get a definitive ruling, you not only are not wilfull but you are not liable for the unpaid overtime or minimum wage at all.
John Paul Stevens: --This man paid a weekly wage based on 48 hours of work, didn't he, and then he paid time and a half, he averaged that out and paid time and a half on the--
Donald B. Ayer: He was supposed to. In fact, Footnote A of our brief indicates clearly that he did not pay anything close to time and a half for the overtime over 48 hours.
John Paul Stevens: --But if the average wages for the 48 hours had been the proper regular wage, then it was time and a half over that, wasn't it?
Donald B. Ayer: That he should have paid. He in fact did not pay. If you read that Footnote A it talks about several... they were only talking about seven mechanics here.
John Paul Stevens: Right.
Donald B. Ayer: And as to a number of them we discuss there the fact that the employer was paying an hourly rate as you calculate it that was not only not time and a half, it was not even the minimum wage of $3.35. So that there is no question, I think, but that with regard to the overtime that everyone agrees had to be paid, quite apart from this Belo plan, if we approve the Belo plan, they still had to pay overtime above the 48-hour regular week, and as to several of these employees, they were not paying anything that resembled not only overtime, it didn't even resemble their base regular wage. It was way below it. So that in that sense I think the answer to Justice O'Connor's question is that this is indeed something that would meet, should meet on a full assessment of the facts by the District Court the conclusion that they were in disregard of the law.
Byron R. White: If we agree with you on this standard that you propose, what do we do, send it all the way back to the District Court?
Donald B. Ayer: I think you remand to the District Court. The Court of Appeals, of course, had remanded to the District Court for application of its standard, of the Thurston standard, and the reason that we brought this case to you now is that we have this sharp split in the circuits. We have four circuits that have adopted the Thurston test under 255(a) under the statute of limitations. We have five since Thurston that have applied the Jiffy June test, and so you have the sharpest of splits in the circuits, plus you have three other circuits that apply different standards.
Byron R. White: And all those cases are wrong?
Donald B. Ayer: Well, we think that the first nine, that the four that have applied Thurston and the five that have applied Jiffy June are poles, and we are in the middle.
Byron R. White: But nevertheless all wrong?
Donald B. Ayer: They are incorrect. We think they are not the most appropriate reading of this statute.
Byron R. White: Are there a lot of cases out there that will have to be done over, that are not final?
Donald B. Ayer: There are, I think, a fairly large number of enforcement actions at various stages along the way, and I think a change in the law would allow them to be corrected at various stages. We are only talking about an assessment... we are not talking about the basic assessment of liability. We are talking about a judgment as to whether the violation itself is wilfull or not as to the third year. Now, one thing I would like to say in answer to that is that the reason we are here is also because this really matters. There are, for a variety of reasons, an enormous number of cases brought under this statute. It takes a significant time in order to, Number One, get a report of a possible violation, Number Two, to investigate the violation, Number Three, if you find a violation that you want to enforce to try to settle the violation. If you can't settle the violation, you then refer it to the U.S. Attorney's office or to a lawyer to prosecute. All of that takes time, so that these cases are being brought at a time when not infrequently in fact quite commonly there is liability that is more than two years old, and so we are talking about impairing the enforcement scheme of this Act.
Byron R. White: How long had the Secretary been applying the Jiffy standard?
Donald B. Ayer: Well, it was, I think, in 1973 is when Jiffy June was decided.
Byron R. White: That was the case.
Donald B. Ayer: That was the case.
Byron R. White: Yes, but he must have been--
Donald B. Ayer: I don't know the answer to that.
Byron R. White: --Of course, it was a construction by the agency charged with enforcing this statute. It was a construction of the statute.
Donald B. Ayer: I don't know precisely what the Secretary was urging between 1966, when this was enacted, and 1973, when Jiffy June was decided. I do know, I think, that when Jiffy June was decided, and up until Thurston, it was the uniform position of all the Courts of Appeals that decided it that the appreciable possibility test was the law, and what we are asking the Court to do is to apply a rule that is more liberal for employers than that test, which was the uniform interpretation for a period of, what, 12 years.
Byron R. White: So I suppose you have to say, though, there just isn't any... if you are going to differ with the Sectetary's or reject the Secretary's original position, you are really having to say there is just no room for the Jiffy June standard under the words of this Act.
Donald B. Ayer: Well, that's correct. I would say it a different way. I would say that both it and the reckless disregard Thurston test need refinement to be appropriate in this context. We are borrowing the Jiffy June test as the first step of our test. We think you first ask, does the employer have an appreciable knowledge of an appreciable possibility?
Antonin Scalia: Mr. Ayer, I understand that wilfull leaves some problems, and that the cases you cite on Page 16 of your brief, but those problems always relate to what has to be willed. Is it just the act that has to be conscious and wilfull, or need the defendant in the case have to will the violation of the law? That is an understandable ambiguity. I don't see how your interpretation of the word has anything to do with that kind of an ambiguity. How is yours based on what it is that must be willed? I mean, the fact that a word is ambiguous in some respects doesn't mean that it is just an empty bottle and you can give it any meaning you want.
Donald B. Ayer: Well, we certainly don't mean to suggest that.
Antonin Scalia: What is it that must be willed--
Donald B. Ayer: What must be willed--
Antonin Scalia: --and therefore must be wilfull, in a sense?
Donald B. Ayer: --What must be willed is conduct in the face of a known risk. That is what must be willed. And we think that that is a reasonable reading of the statute, given its history, because the concern at the time it was enacted was for unanticipated economic burdens on small business. They are not unanticipated. They are known. The risks are known at the time the action is taken. And that is why--
Antonin Scalia: I don't see how you get there. The conduct must be willed or the violation of the law must be willed, and then you are just adding from nowhere an additional requirement, in face of a known risk. I don't see how you get that out of the word "wilfull". That is all I am saying.
Donald B. Ayer: --Well, we get it out of the word "wilfull", and the only thing I would like to add before I sit down and try to reserve the rest of my time is, our reading of the word "wilfull" is well within the mainstream of words... of readings of that word as this Court has used it. Indeed, in the Illinois Central case, which this Court cited approvingly in Thurston, you are dealing there with a concept of disregard. There it was an instance of failing to unload a cattle car within 36 hours because some employee forgot to unload the car, and that conduct was found wilfull, and this Court said in Thurston, that's a reasonable reading of the word "wilfull".
Sandra Day O'Connor: Mr. Ayer, I take it no Court of Appeals has applied the Laffey standard since the Thurston case came down.
Donald B. Ayer: Well, it is hard to say, I think, precisely whether that is right or not. We think that the Nolting case in the Eighth Circuit, which we have cited, and the Donovan case in the Sixth Circuit, they are not identical to the Laffey case, but they are certainly somewhere between Thurston and Jiffy June, appreciable possibility, and we think they give some support to the position that we are advocating. If the Court has no further questions, I would like to reserve the remainder of my time.
William H. Rehnquist: Thank you, Mr. Ayer. We will hear now from you, Mr. Ehrlich.
Leon Ehrlich: Mr. Chief Justice, and may it please the Court, I believe that the petitioner has stated something that is not entirely correct when he stated that the Jiffy June case was uniform. I refer the Court respectfully to the footnote, Footnote 9 at Page 16 of the amicus brief, in which that same issue was addressed, and amicus states in its brief at Page 38 the government erroneously called the Jiffy June standard a majority rule. In fact, only the First, Fourth, and Tenth Circuits have adopted the rule. Four other circuits, however, have clearly rejected the Jiffy June standard. I believe that the crux--
Byron R. White: Those cases that rejected it were after Thurston?
Leon Ehrlich: --After Jiffy June? Or after the Thurston?
Byron R. White: When were the Court of Appeals opinions that rejected the Jiffy standard?
Leon Ehrlich: The Peters Shreveport case, 1987. The Brock case, of course. Walton versus Consumers Union, 1986.
Byron R. White: Okay.
Leon Ehrlich: I believe that the petitioner's case rests upon the allegation that the conduct would be wilfull if done in the face of a known risk. I think that is a fairly close summary of what was stated. However, one thread through the petitioner's brief and reply brief is the reference, and reference was made here, to the employer's uncertainties. At Page 30 of the brief, they state "Employers should bear the burden of a third year of liability when they engage in pay practices without resolving legal uncertainties. " And in the reply brief at Page 7, "Only where an employer faces uncertainty about compliance with the FLSA need reasonable inquiry or other steps be taken to avoid a wilfullness finding. " If any part of this case can be stated with absolute certainty, it is that the respondent never experienced uncertainty about its pay practices. The respondent believed that it was dealing fairly, generously, and in compliance with the law in its salary arrangement with the mechanics, so if for no other reason we respectfully submit to this Court that no wilfullness on the part of the respondent can be found, and the respondent should be relieved of any further obligation. I think it would be a travesty were this case to be sent back to the District Court in the light of the testimony that has been adduced. It was the respondent that submitted to the petitioner all the information that was requested. The petitioner limited its inquiry based on the Jiffy June doctrine. Once they found out from the general manager that he was aware of the existence of the Act, they said, fine, we have got you, and now have us go back, I think it would be a travesty considering the total amount of money involved.
Sandra Day O'Connor: Mr. Ehrlich--
Leon Ehrlich: Approximately $4,000.
Sandra Day O'Connor: --Mr. Ehrlich, I thought the Court of Appeals decision below has remanded it to the District Court to apply its standard. Is that not correct?
Leon Ehrlich: That is a correct statement, Your Honor.
Sandra Day O'Connor: And you think that shouldn't be done?
Leon Ehrlich: I think that that should not be done.
Sandra Day O'Connor: So you are not here supporting the judgment of the court below?
Leon Ehrlich: I am here supporting the judgment of the court below insofar as it rejects the contention of liability. I am contending--
Sandra Day O'Connor: Well, did you cross--
Leon Ehrlich: --that it should not go back.
Sandra Day O'Connor: --Did you cross petition to this Court?
Leon Ehrlich: May it please the Court, considering the amount of money involved in this case, we felt that it just didn't justify additional costs, and we felt that if we came--
Sandra Day O'Connor: Well, if you didn't cross petition I don't know how you can argue what you are arguing, if I may say so. You either have to argue in support of the judgment below or--
Leon Ehrlich: --I believe that I can rightly argue it for the same reason that the petitioner is arguing a theory not advanced in either the District Court nor in the Circuit Court of Appeals. I believe that this case should not have been granted certiorari because the issue here is one that is really seeking an advisory opinion. The petitioner is interested in resolving what it concedes to be a conflict, and so they drag us into this Court, but the case that was presented in both courts below had nothing to do with the issue being argued here. And we feel that if we are here, we might as well let the Court know our entire feelings. Petitioner asserts at Page 44 of its brief that it is hard to imagine how the plan could have been the product of good faith reliance on sound assurances of the plan's legality. We suggest that it is not hard and that no imagination is required to establish good faith on the part of the respondent. The records of the respondent show that the total compensation received by these mechanics, the initial compensation was almost double the minimum wage, and though not required to do so, the respondent paid these mechanics for vacation, though not required to pay it. They paid for holidays. They paid insurance. And they paid a bonus. When all those figures are added up, they are greatly in excess of what a technical Belo contract would have required. As a matter of fact, in the appendix, there is a reference in the deposition that one mechanic while receiving disability pay for which the employer had paid was also paid his full salary for 14 weeks. Now, if that is the kind of conduct that shows wilfullness, then there is a total distortion of that term.
Thurgood Marshall: --Would you say that if a corporation paid three mechanics excess of what they were expected to pay and paid all the rest of them less, then that wouldn't be wilfull?
Leon Ehrlich: It would be wilfull--
Thurgood Marshall: Well, what good is it to show that one or two got the just amount?
Leon Ehrlich: --Beg pardon?
Thurgood Marshall: What good does it do in this case to show that one or two were paid what they were entitled to receive?
Leon Ehrlich: May it please Your Honor, we are dealing with all the mechanics. All the people that are involved in this case, seven, are all mechanics. We are not dealing with anyone else. They were all treated the same way.
Thurgood Marshall: Were they all given this extra money you were just talking about?
Leon Ehrlich: Oh, all of them were. All of them were given bonuses, holiday pay, vacation pay.
Thurgood Marshall: All of them?
Leon Ehrlich: All of them. And as to intention, the depositions make it clear that the respondent was using the Department of Labor coefficient table, albeit incorrectly, it turns out, but they were using that coefficient table showing that they were intending to comply with the law.
William H. Rehnquist: Mr. Ehrlich, we don't ordinarily decide evidentiary questions here. The Third Circuit, which ruled in your favor on the standard, sent the case back to the District Court for further hearings, and as Justice O'Connor pointed out, you didn't cross petition for certiorari. So the best result you are going to get here is an affirmance of the Court of Appeals, which means the case goes back. All we are interested here is the proper standard which the District Court should apply when the case does go back.
Leon Ehrlich: Can I not argue, then, that this case still resolves a request for an advisory opinion and then as a matter of law determined that under these facts there is nothing to go back?
William H. Rehnquist: Well, I can only speak for myself. I think there is very little to be said for that argument.
Leon Ehrlich: Okay. We propose, however, that the Third Circuit Court of Appeals decision is an appropriate one as to the application of the law. But I think if it goes back and is remanded it should go back and we respectfully submit and suggest that it go back with instructions as to what should be looked for. First, we think that the term "wilfull" should be taken in its ordinary sense, as the Circuit Court held, meaning a deliberate, intentional act. With some variations, the petitioner has advanced a test for determining wilfullness set out in its brief at Page 13 as follows: "We think an employer's unlawful pay practices should be found wilfull for purposes of the FLSA's limitation provision when the employer is aware of the potential application of the FLSA but pursued the pay practices without reliable assurances of their legality, and then in the same vein in the reply brief that a wilfull violation would exist where an employer is aware of the FLSA applicability and fails to take steps to determine the statute's demands, or having taken such steps do not secure a reasonable basis for eliminating uncertainties about their compliance. " As I believe was evident from some of the questions the petitioner offers amnesty only to those who sought reliable or reasonable advice on their legal obligation, and there is no definition of what the petitioner conceives to be reliable or reasonable. It could very likely be only that which or who agree with petitioner's views. Would the petitioner, for example, find that this respondent, relying on my advice, would not have acted properly because my advice might not have been considered reliable since I had disagreed with the Jiffy June decision? Isn't that what an employee would be faced with? Or, is the reliability of advice to be determined by a Martindale Hubbell listing? It just boggles the mind that this is what the government conceives to be an appropriate substitute for the Jiffy June standard. And what comfort or security can the respondent and others derive as to what would be the definition considering again that the Jiffy June argument was espoused in both the District Court and the Circuit Court of Appeals? Meeting those tests, the three criteria, we admit the respondent knew that the Act applied. As to the second, we submit, as I stated before, that they used the coefficient table, albeit improperly, and we further say that the final criteria called for by petitioner of reliability and reasonableness is unrealistic and onerous. It would mean that every employer before doing anything would have to seek a legal opinion on any action he took. We have got to remember that my client is a small business. They don't have house counsel. They can't afford to have everything run through attorneys. But more unsettling is the fact that after that legal opinion would have been secured there is no assurance that the government would still say, you done a reasonable thing, what you are doing is not wilfull. They would sit in judgment on the advice given the client. That is an horrendous suggestion. If we are talking about reasonableness and since the petitioner now espouses that theory, let us look at what the conduct of the petitioner has been. How reasonable has its conduct been? First, and it was mentioned in the argument, wilfullness requirement of the FLSA statute of limitations provision the petitioner states is designed to protect certain employers from unanticipated liability rather than to punish. Nothing in the record indicates that my client anticipated this liability, and nothing in the record shows any recklessness. So if we use that test, my client is home free. They never anticipated this liability. Is it reasonable to believe that my client established some contingent fund to take care of this? If they did that would be an act evidencing wilfullness. I believe mention was made of uniformity of construction. And the Second Circuit Court in the case of Rousseau versus Trafari pointed out, "We believe that wilfull should have but a single meaning within the ADA, and that therefore the Thurston definition applies. " "Construing identical language in a single statute in pari materia is both traditional and logical. " "Moreover, a single meaning avoids potential jury confusion resulting from different instructions. " And concerning the same word, the petitioner argued in support of that theory in the Thurston case, and yet in the brief here it would appear that the petitioner denies any need for uniformity. I on that subject point out to one other fact, that in its petition for certiorari there was an admission that the federal government itself has taken different positions on the proper interpretation of wilfull violation as used in the FLSA statute of limitations. That certainly doesn't give anyone assurance. The reference to that is in its petition at Page 11. The allegation then is made that the history of the Act suggests that the standard of wilfullness was to allow employees and the Department of Labor needed additional time to challenge unlawful pay practices, and the Circuit Court discussing the issue of punitiveness rejects the petitioner's position and states that more time is needed, that more time is needed by saying it is neither more difficult to detect nor more severe than it would be were the violations not wilfull. And today again the petitioner acknowledges, as it did in its brief, that the In re Picture standard threatens to collapse the two-tiered scheme envisaged by Congress into a one-tiered scheme. When did they first became aware of that obvious fact, and why did they subject us to this litigation? I think the most bizarre of the petitioner's case rests in its proposal in its brief at Page 45, when the petitioner states, "Respondent should be afforded an opportunity to present new evidence, including evidence of any efforts it undertook to secure reliable assurances that its pay practices complied with the FLSA. " "If respondent acknowledges in this Court that there is no such evidence, this Court should order affirmance of the District Court judgment. " "Otherwise, the case should be returned to the District Court for further proceedings on the third year of back pay liability. " Is that considered a reasonable approach? If this were an appropriate choice, and we dispute it, why wasn't it advanced previously? Why wasn't that alternative given to the respondent? We submit that the alternatives offered the respondent are not properly stated. If I may paraphrase, I would say it would be more reasonable for me since the petitioner does have the burden of proving wilfullness to state to the petitioner, if petitioner acknowledges in this Court that it has no further evidence of wilfullness than it has to date, despite what was said in answer to a question, this Court should order affirmance of the Circuit Court judgment and further hold that as a matter of law based on the evidence already in the picture respondent has no liability for the third year. And then what was said here, the observation that the petitioner's standard be viewed at most as a variation on Thurston's standard, and that Thurston need not be read as substantially different from the petitioner's prose standard, I would suggest smacks more of salesmanship than accurate observation. The standard now proposed, asserts the petitioner, was always a possible resolution as this case progressed. If that were really the case, I would submit respectfully that it was the most carefully hidden secret in Washington. And then, in the reply brief, the petitioner attempts to allay the fear of the respondent that there is no significant danger that wilfullness disputes will center on whether an attorney's advice if relied upon is reasonable. The requirement, continues the petitioner, means only that a court must examine the advice as one factor in determining the issue. Won't the petitioner examine that advice initially, at the outset, before it becomes a court case? And what does one factor mean, 25 percent, 50 percent, 75 percent? We have no assurance on what a person in the position of the respondent can expect? We submit that this Court in Thurston has already determined the meaning of wilfull, that it is a knowing or a reckless disregard, and contrariwise the petitioner can point to no decision of this Court to support the definition now urged, nor can it point to any evidence in the record that would show a reckless disregard. The petitioner seeks to distinguish the standard in this case and Thurston on the ground that Thurston dealt with liquidated damages rather than the statute of limitations. We submit that the reasoning in Thurston is equally applicable here. The end result of what is urged if a third year of liability is found to exist is added money paid out for a violation of a statute. That is punitive. The fact that it is called something else doesn't mean any less as far as the employer, the respondent is concerned. It means paying out money for having done something conceived subsequently to be wrong. We submit that on the record as it stands now, there is absolutely nothing to suggest that the respondent did anything improper, anything wilfull, anything other than a reasonable and responsible business would do. We ask that this Court reject the contention of the petitioner. Thank you.
William H. Rehnquist: Thank you, Mr. Ehrlich. Mr. Ayer, you have two minutes remaining.
Donald B. Ayer: Thank you, Your Honor. I would just like to make one point about the extent to which the statute of limitations provision in fact governs the recoverability of liquidated damages in answer to Justice O'Connor's earlier question. I have already said that it is our view and I think it is the Court's historical view that liquidated damages under the FLSA are compensatory, not punitive. The other point I want to make is that only in a very partial and somewhat peculiar sense does the statute of limitations control the recoverability of liquidated damages, and I say that because of the Section 260 provision that essentially governs whether or not an employer is going to be able to avoid the payment of liquidated damages. That provision says that the employer can come in and show a reasonable basis for... a good faith reasonable basis for believing his action was legal, and then within the Court's discretion the court may decide to award no liquidated damages if it doesn't want to, so that it is only in the sense of avoiding considering that Section 260 that the statute of limitations controls the availability of liquidated damages. If there are no further questions, I have nothing further.
William H. Rehnquist: Thank you, Mr. Ayer. The case is submitted.