William H. Rehnquist: We'll hear argument now on Number 87-470 Fort Wayne Books, Inc. versus Indiana, and Number 87-614, Sappenfield versus Indiana. Mr. Weston, you may proceed whenever you're ready.
John M Weston: Mr. Chief Justice, and may it please the court, recently in Hustler Magazine versus Falwell, this Court reaffirmed the need to give adequate breathing space to First Amendment freedoms in order to protect them. These cases before the Court this afternoon raise an essential element of that protection, the right to be wrong. Today's cases involve book stores, but this Court's decision will unquestionably touch and affect newspapers, publishers, the motion picture industry, television and radio broadcasters and religious and political organizations. In short, anyone or anything who or which engages in conduct presumptively protected by the First Amendment. Ultimately, its greatest impact will be on the American public's right to receive vast quantities of protected expression. If these statutes are sustained, the protective bulwarks surrounding First Amendment freedom so painstakingly crafted by this Court will crumble. Affirming the judgments below would eviscerate the longstanding prior restraint and chilling effect doctrines--
William H. Rehnquist: Mr. Weston, in Sappenfield there wasn't any seizure, was there?
John M Weston: --That's correct, your Honor.
William H. Rehnquist: So, what is going to chill people about simply upholding the possibility of prosecuting under the statute?
John M Weston: But in Sappenfield, your Honor, although it was brought pursuant to the Indiana criminal RICO statute, the civil RICO statute is a direct adjunct of that and given the collateral estoppel provisions of civil procedure, forfeiture and subsequent restraint and so forth are automatic upon conviction. The chilling effect regarding the Sappenfield statute which has been discussed and which we will discuss, involves the facial presence of the potential enormously high jail sentence in connection with engaging in conduct, a presumptively protected by the First Amendment--
William H. Rehnquist: But, peddling obscenity is not presumptively protected by the First Amendment.
John M Weston: --No. Of course, your Honor. Obscenity is not protected by the First Amendment. But speech, up until the moment it is determined to be obscene, is surely protected by--
William H. Rehnquist: Nothing happens to these people in Sappenfield until there is a determination.
John M Weston: --That's correct, your Honor, except to the extent that someone like Sappenfield, a book seller, or someone in another endeavor subject to the possible application of obscenity law faced with the draconian potential sanction of eight years in a criminal jail sentence for violation of the statute, which at best is inelastic with a limited scienter standard, will certainly think more than twice before electing to deal with sexually oriented material.
Speaker: Well, what if an ordinary obscenity statute simply provided for an eight-year term?
John M Weston: That question, of course, your Honor, is not specifically before the Court, but certainly raises in--
Speaker: Well, you would be making the same argument.
John M Weston: --A similar one. Although, quite frankly, under the Indiana RICO statute, particularly in light of the semantical complication of the traditional RICO language and some greater elastic language under the scope provisions of the statute, there is probably a broader reach and a greater vagueness problem that might attend the usual Miller standard. But, to deal with the Court's question, Justice White, you're quite correct. That the argument that we make with respect to the potential chilling effect of high penalties is one which would be equally applicable to a general obscenity statute.
Harry A. Blackmun: Do we have a final judgment here?
John M Weston: We have final judgments, your Honor, with respect... Justice Blackmun, to the issues raised in the courts below. That is to say, that the Indiana Supreme Court considered and approved in a final judgment all of the pretrial sanctions which were utilized and available, all of the post-trial sanctions which were the basis anticipatorily for the pretrial sanctions, and also the principle that conduct at one bookstore in a chain may be visited in terms of effect on other bookstores in the chain. With respect to Sappenfield in the court of appeals, the challenges to the facial constitutionality of the criminal RICO statute had been made in the trial court and in the appellate courts and they were rejected by the court of appeals in a rather brief opinion based on the Fort Wayne decision in the Indiana Supreme Court. So, under this court's decisions, the matters were certainly rendered to the highest courts in the state to consider them, were decided by those courts, and in terms of the overriding federal interest at stake here, would not be aided by remanding the causes to trial where further proceedings might occur which would prevent those issues from--
Sandra Day O'Connor: Mr. Weston, did any of the respondents or the defendants in the Sappenfield case even indicate with us an interest in pursuing the case here?
John M Weston: --I beg your pardon, Justice O'Connor. I'm sorry, I'm missing your point.
Sandra Day O'Connor: Well, none of the parties in the Sappenfield case, 4447 is it? Corporation?
John M Weston: Oh, I beg your pardon--
Sandra Day O'Connor: Had indicated any interest in pursuing their matter?
John M Weston: --Not in Sappenfield, Justice O'Connor. There are theoretically three cases before the court.
Sandra Day O'Connor: In the 4447 case--
John M Weston: That is correct, your Honor.
Sandra Day O'Connor: --is anyone here at all on that case?
John M Weston: That is correct, your Honor. No defendant below in the 4447 has filed a direct appearance in this court. An individual who was named as a defendant, Burk Mendenhall did file an amicus brief in this Court in this cause but is not a direct party.
Sandra Day O'Connor: Okay. Mr. Weston, I understand you can make facial challenges, but don't your facial challenges have to pertain to a portion of the statute that's been applied against you? As I understand it, some elements of the scheme here have not yet been applied against anybody, in particular the prohibition against an individual's engaging in the same business again.
John M Weston: That is correct.
Antonin Scalia: Nobody has been subjected to that. Isn't that right?
John M Weston: No one has been subjected to it except the complaint which remains in the Fort Wayne case retains that prayer. The Indiana Supreme Court specifically held that all of the available sanctions under the statute were constitutional, raising no First Amendment questions in specific rejection of the opinion which invalidated the entire statute on its face with specific focus on those remedies rendered by the court of appeals. As well, in the original 4447 case, which as Justice O'Connor points out, is not really before the court, the original complaint sought the general injunctive remedies. Although there was an amended complaint filed four or five weeks later which abandoned that request. But the Indiana Supreme Court, your Honor, Justice Scalia, has clearly upheld the full panoply of remedies as against specific lower court judges.
Antonin Scalia: I understand that. I just want to know whether that was before the Indiana court.
John M Weston: Absolutely. Without question.
Antonin Scalia: In both of these cases that are up here there was a prayer to enjoin the parties from engaging in the business in the future?
John M Weston: Not in Sappenfield, which was exclusively a criminal prosecution with none of the injunctive or civil type remedial provisions available. However, in Fort Wayne, unquestionably the complaint sought such a remedy. It is live. It is part of the complaint. The original 4447 complaint, subsequently amended to omit it, did include that, and the Indiana Supreme Court specifically approved all of the panoply of remedies available under the statute. Again, if I just may finish the point, in Sappenfield it is automatic that following conviction, should one occur, there will be a civil forfeiture and the entire... and under collateral estoppel principles, nothing can be raised by the defendant and there will automatically be full forfeiture with the full panoply of the remedies, at least if nothing is disturbed in light of the--
Sandra Day O'Connor: But we wouldn't know what remedies in fact would be selected or used by the court. Is that right?
John M Weston: --I suppose that's true, except to the extent that under the Indiana court... under the Indiana statute forfeiture is mandatory subsequent to in essence a conviction or--
Sandra Day O'Connor: If the items forfeited were the product of illegal activity.
John M Weston: --Oh, no, Justice O'Connor. Quite much more broadly so. One would have hoped that that would have been the ruling. But it's very, very clear. And I might add that of course the court of appeals in Arizona, in Arizona versus Feld, so construed and limited its RICO obscenity predicated statute to limit only specific proceeds attributable to materials found to be obscene in appropriate litigation. It's very clear, both in--
Sandra Day O'Connor: No. What if... What if under the state RICO law, let's say, the predicate offenses are dealing in narcotics and the products are funnelled into a bookstore?
John M Weston: --Oh, well, there's certainly no question about that.
Sandra Day O'Connor: The contents of the bookstore--
John M Weston: Of course, Justice O'Connor.
Speaker: --can be forfeited.
John M Weston: And really that's like... that's the Arcara type situation in a way because there there would have been no speech conduct, no expressive conduct at all as the predicate offense. Whatever proceeds flowed from that would certainly be subject to scrutiny under legislation which already exists.
Sandra Day O'Connor: And what difference does it make if the predicate offenses are obscenity convictions instead of drug, narcotics convictions?
John M Weston: Well, as I thought your concurring opinion made clear in Arcara, Justice O'Connor, that where the predicate conduct was expressive, then, of course, a full First Amendment standard of review would be required in order, aside from all the obvious reasons, to make sure that there was no interference with speech based on a desire to thwart the speech.
Sandra Day O'Connor: Well, required for what? For the initial pretrial seizure?
John M Weston: No. One would think not only for the initial pretrial seizure, but for an examination of what the available post-trial remedies might be. For example, by the time Arcara reached this court, it was certainly in the position of a post-trial situation after the full order had been issued with the court examining the question. So, if the First Amendment concepts have any meaning whatsoever, if the principle of Near versus Minnesota and Citizens for a Better Austin versus Keefe have any meaning what those unbroken... what that unbroken line of cases tells us... and, of course, there are almost no examples challenging it.
William J. Brennan, Jr.: I'm sorry to interrupt you.
John M Weston: No, not at all, Justice.
William J. Brennan, Jr.: But, what is the status of 1447 Corporation, ISSI Theater Corporation, Plaza Entertainment Center and Burton Gorlick? Are they before us at all?
John M Weston: They are not, your Honor. As a matter of formal notice, when Fort Wayne Books filed its petition for certiorari, it was required to give notice to those individuals, which we did. There has been no response... in individuals and corporations... there has been no response with respect to those individuals asking to be litigants before this honorable court.
William J. Brennan, Jr.: So all that we have, in your view, in any event, is Fort Wayne Books and Sappenfield?
John M Weston: That is the position that... certainly with respect to my representation, your Honor.
William J. Brennan, Jr.: Thank you.
John M Weston: If the principles of prior restraint, if the principles of Near and Austin have any significance, they represent a basic governing concept which has ennobled this country's history almost from the beginning. And that is that one may not lose one's right to speak by virtue of speaking. That if books or magazines or films, or any other... or newspapers, or any other expressive entity or matter is going to be suppressed, it must be so only by virtue of its own validity or invalidity.
Antonin Scalia: You can't use that... you can't lose that right even by virtue of something other than speaking. I mean, I supposed you can't make it a penalty for a narcotics trafficking that you can't make speeches anymore.
John M Weston: I would agree, Justice Scalia.
Antonin Scalia: Right? So what the problem is is the remedy and not the crime that invokes the remedy.
John M Weston: Certainly at a major level, absolutely. The remedy, of course, in these situations, as was first articulated in Near is absolutely inappropriate regardless of whatever the determination may be with respect to the predicate offense. The question with respect to whether obscenity may still be criminalized or rendered illegal is not necessarily before this court in terms of the questions we raised. The court is quite correct. Certainly with respect to the civil RICO statute, the biggest concern expressed is indeed with the remedy. But, nonetheless... or, to follow along with the same concept, these cases present what must be the most egregious violations of prior restraint. And when I say these cases, particularly with respect to Fort Wayne Books and the facts which I guess are not formally before the court in the--
William H. Rehnquist: Including Sappenfield within the term of "these cases" presenting egregious violations?
John M Weston: --No, your Honor, that was the point I was trying to cut back from to make--
William H. Rehnquist: Well, perhaps you shouldn't use the term "these cases". Maybe you should say "this case".
John M Weston: --That would be a better approach, Mr. Chief Justice. Yes. Thank you. With respect to the forfeiture provisions, the cases which raised the forfeiture provisions, they appear to present the most egregious violations of the Near principles and the prior restraint principles based on expressive conduct challenged by the state, vis-a-vis virtually unlimited examples of unlitigated, unchallenged other books, magazines, films, and the opportunity to express other sorts of--
Anthony M. Kennedy: Well, Counsel, of course, if you sentence someone to jail for ten years, his or her speech is chilled during that time. It's more difficult to speak when you're in jail.
John M Weston: --Yes, Justice Kennedy. No question.
Anthony M. Kennedy: And in this case, focusing just on the pre... on the post-adjudication seizure for the moment, suppose that a bookstore is engaged in selling other items too and just those other items are seized. Or a grocery store is selling a few books and all the grocery assets are seized. Is that a prior restraint after an adjudication of obscenity?
John M Weston: It would depend, it seems to me, on what funds were utilized in order to justify the seizure.
Anthony M. Kennedy: Well, suppose they're within the statute. Their proceeds did derive from the operation, and you seized all of the operation other than the books.
John M Weston: Would the funds, however, that were utilized--
Speaker: Yes.
John M Weston: --Is this in terms of a proceeds tracing statute or some sort of contagion?
Anthony M. Kennedy: This is under this statute after an adjudication of sales of obscenity.
John M Weston: It would appear--
Anthony M. Kennedy: And you show that the proceeds are derived from the operation.
John M Weston: --If there were six books, six books alleged to be obscene, found to be obscene, generated a certain sum of money, that money, under procedural safeguards, could be traced and utilized to forfeit either that sum or that which they had acquired.
Anthony M. Kennedy: And is that consistent with the First Amendment?
John M Weston: It would appear to be, under appropriate procedural safeguards such that only proceeds from materials specifically found, specifically delineated, challenged, and judicially determined to be obscene--
Anthony M. Kennedy: All right. Now, suppose, to take it the next step, the purchase is for more books. Could the books be seized?
John M Weston: --Again, under appropriate procedural safeguards there is no necessary First Amendment barrier to tracing funds from specifically delineated materials found to be obscene which generated those proceeds. The problem with the hypothetical which your Honor proposed is that if there were a hundred books in the store, six were alleged to be obscene, six were found to be obscene, and the proceeds from those six books resulted in $15.00, it would be a First Amendment violation to attempt to interdict or forfeit, or do to anything with the proceeds from materials not found to be obscene. And that was why I asked--
Anthony M. Kennedy: It's a First Amendment violation only? So that if it's a drug case, I assume you can seize all the assets?
John M Weston: --Your former brother on the Ninth Circuit, Judge Kozinski, of course, in Busher has raised a proportionality question in terms of other circumstances. But I would like to direct our own focus this afternoon to the First Amendment consideration.
Anthony M. Kennedy: But you have to explain why the First Amendment is the limiting principle. If this statute is permissible as to contraband other than speech or alleged speech, why can't it be applied to obscenity after an adjudication? Because obscenity, as we know, is not protected speech.
John M Weston: That is correct, your Honor. And with respect to obscenity we are... and perhaps I did not make myself clear, but we're not questioning under appropriate procedural safeguards the ability to track proceeds from material specifically determined to be obscene. What we object to and what it appears that the court's decisions have prohibited, is the use of funds from materials not determined to be obscene to be forfeited because other materials have been determined to be obscene and their proceeds may be subject to forfeit.
Antonin Scalia: Why is that? I don't understand. Let's assume that all of these proceeds from the sale of non-obscene materials add up to a million dollars. You're saying you can't do that because that million dollars didn't come from the obscene sales. But you acknowledge that you can impose a fine of a million dollars.
John M Weston: Well, we acknowledge--
Antonin Scalia: What's the difference whether you call it one or call it the other?
John M Weston: --We acknowledge that a fine may statutorily be authorized. We certainly do not acquiesce in the notion and light of the potential First Amendment challenge to such high fines on the same basis that the chilling effect would arguably invalidate the potential for a high jail sentence under the present state of the Miller test and the limited scienter standard. With respect, also, Justice Scalia, to the possibility of a high fine, at least it's subject to analysis. In other words, that the high fine will not necessarily be applied, it may be examined. And to the extent, even under traditional sentencing criteria, that it may have the impact of closing down a business, it in itself is subject to reduction or First Amendment scrutiny. Not terribly different from the notion that some courts have begun to apply in terms of punitive damages in defamation cases, for example, or invasion of privacy cases where to do so would tend to close the business. But there is another limited--
Antonin Scalia: Well, let me ask one other question before you go on.
John M Weston: --Sure.
Antonin Scalia: This line between proceeds and non-proceeds. That isn't a line that's adopted in the Federal RICO statute either, is it?
John M Weston: Not at all.
Antonin Scalia: The Federal RICO statute does not require that it be derived from proceeds of the unlawful--
John M Weston: It's unclear. In the one case... the one Federal case which discussed this issue, United States versus Priva, the prejudgment opinion of the court appears to limit the reach of the forfeiture to proceeds from materials determined to be obscene. Subsequently, at the time of forfeiture, however, it became very clear that the court's interpretation had changed and the statute was applied to reach the entire panoply... or, the entirety of the assets. But, really, not so much on a proceed tracking theory as much as an equally impermissible contagion theory. Somehow that a book on a shelf presumptively protected, never alleged to be obscene, somehow acquires an obscene character by virtue of the fact that it's neighbor was alleged to be obscene and determined to be obscene.
Antonin Scalia: --It doesn't have to have an obscene character. We're punishing you by taking away from you. Just as we're punishing you by making you pay a million dollars. It's not that the million dollars is obscene or that there is anything evil about the million dollars. But that's just the punishment we've selected.
John M Weston: Well, let me suggest, with respect to that possibility. Certainly in Times versus Sullivan this Court considered a relatively similar potential application of the same doctrine. A very large series of state judgments for expression deemed to be unprotected. The Court viewed the potential possibility and concluded clearly that in terms of the potential for chilling effect and the harm to publication and to First Amendment Interest, the unrestricted potential for imposing that kind of damage award required a higher scienter standard. And such was imposed, and that was the way the chill was dissipated. The circumstance that we face here, obviously with an equally low scienter standard, or perhaps even a lower one and a more difficult to apply definition for the alleged wrongdoing may also require a heightened standard. My point being not that that necessarily answers the question of why a fine is okay and something else is not, but simply that the court will not cast a blind eye to what the realities are of the circumstance. I would also point out with respect to what the social interests are involved that it is not only the interests of the book seller that is being protected, but what is protected in this circumstance is the reciprocal right of the public to be able to receive presumptively protected material. And the notion of simply forfeiting unlitigated material removes such material from the public. On the one hand, it might be an acceptable slap at the... when I say acceptable, from the point of, say, law enforcement... an acceptable slap at the individual who is the seller, but it would be inevitably the public that would be the loser.
William H. Rehnquist: Well, Mr. Weston, supposing a drug kingpin were laundering his money in a chain of bookstores, would that mean that those bookstores and the proceeds were not subject to forfeiture the same as if he were laundering his money in a bunch of grocery stores?
John M Weston: No. Absolutely not, your Honor, as I thought I had explained to Justice O'Connor. The predicate conduct is what makes the significant difference. If the predicate conduct is not expressive, is not speech, then what is generated from that conduct may be, under appropriate procedural safeguards, tracked and dealt with as appropriate.
William H. Rehnquist: And what if predicate conduct is obscenity?
John M Weston: And we have indicated that to the extent that the predicate conduct is obscenity, that with, again, appropriate protections, the material may be prosecuted, the material may be subject to scrutiny, and proceeds from the specific materials are subject to tracing and ultimate forfeiture. What has been done in these cases is simply to deal with it as if it were contagious. And to forfeit unlitigated materials and assets from presumptively protected unchallenged materials and simply forfeit them by virtue of their being on the same premises.
John Paul Stevens: But, Mr. Weston, is it clear that that remedy would be entered at the end of a proceeding? I didn't read the Indiana Supreme Court necessarily going that far. It speaks in terms of disgorging assets acquired through racketeering activity. And if you have, say, ten percent of the bookstore's inventory is obscene and 90 percent is non-obscene, and, say, they could prove that 90 percent of the assets were perfectly lawful and not the proceeds of the sale of the ten percent, are you sure they could forfeit the whole bookstore?
John M Weston: Under the Indiana Supreme Court opinion, it appears, your Honor, very clear that they could do so. And one of the judges--
John Paul Stevens: Well, it appears they could ask for a remedy. I'm not so sure. This, perhaps, goes to the question of finality too. You think it's perfectly clear that under the statute if they prevail and prove that anything in the store is obscene that the remedy automatically will follow and that they can seize the entire inventory?
John M Weston: --Yes, Justice Stevens. Unquestionably because that issue was before the Indiana Supreme Court and when I argued the cause before the Indiana Supreme Court I made that point. That in the Indiana situation there were eight items alleged to be obscene with a possible value of something like $200. I'm just guessing. The material that was sequestered and held in the closed bookstore in Indianapolis exceeded that sum by exponential figures. It was very clear what the theory of the state was in an oral argument and in every position in the course of the argument, that it didn't matter what was in the bookstore, it didn't matter what was present or what proportion, if there was any proof exclusively of this racketeering concept being defined specifically as two examples of inappropriate conduct, that would answer the question. That everything was then subject to forfeiture.
John Paul Stevens: But the court says, "It cannot be presumed that prosecutorial discretion will be abused to the extent of threatening the continued existence of bookstores and theaters. " I thought they weren't necessarily meaning that one misstep in a bookstore and the whole store is automatically closed. Do you read it that way?
John M Weston: Two missteps.
John Paul Stevens: Two missteps. Right.
John M Weston: And that is exactly what happened both in Indianapolis and Fort Wayne. In Indianapolis there had been no prior convictions. There were allegations at each of two stores that there had been four materials offered for sale which were alleged to be obscene. On the basis of that, a third store about to be opened... never opened, never sold an item... was closed by virtue of its alleged involvement with the other two. In Fort Wayne, on the basis of 39 alleged examples of obscenity, three stores were closed. And I simply suggest that this is not speculative. Those stores were closed for 13 months.
Sandra Day O'Connor: Well, don't we reach those issues in connection with the pretrial seizure question?
John M Weston: Well, the pretrial seizure, Justice--
Sandra Day O'Connor: It would just seem to me that what we ought to address is what happened on the pretrial seizure and possibly the question of the predicate offenses. But perhaps the full range of penalties after a conviction just isn't a final judgment and properly before us. Now, is that a possibility to you?
John M Weston: --I don't think so, Justice O'Connor, although I understand in terms of certain principles of jurisprudence of course why the question would be asked. But the issue was clearly before the Indiana Supreme Court. The court of appeals went through the potential parade or horrors and struck down the statute or its face, in its entirety, for just those reasons. And the Indiana Supreme Court rejected it and in essence rejected your concurring opinion in Arcara saying that there was absolutely no necessity of applying any First Amendment analysis here and end of the question. And simply said that the full range of RICO penalties is perfectly appropriate here, no different whether these materials are books or groceries or widgets. So, I would suggest that at this juncture, given the final judgment of the Indiana Supreme Court, there is no appropriate basis for maintaining the... for staying this Court's scrutiny and hopefully its hand. I would suggest, in concluding, with respect to the parallel to the Near versus Minnesota situation and the inapplicability of RICO because it's very clear that this court has maintained that in prior restraint cases the operation and effect of the legislation and of the procedures would be looked at. And the Indiana Supreme Court was very clear, as was Mr. Goldsmith in his brief, that the basic purpose of RICO was remedial in order to deal with a perceived evil, in order to stop a particular kind of conduct. And the remedy sought under the RICO statute is clearly not simply punishment for subsequent activities, but, instead, broadly remedial to eliminate a particular kind of undefined conduct prospectively. And I think--
Byron R. White: I thought one of your basic positions here and in the state courts was that if books are involved, you just can't close down a bookstore.
John M Weston: --That is correct, your Honor. And, certainly, our constitutional position, although the Indiana Supreme Court rejected its--
Byron R. White: But aren't you claiming that even if you could... if the obscenity convictions are the predicate crimes, aren't you claiming that even if you trace the proceeds of the sales from obscenity... if you can trace those to buying more books, you can't seize them?
John M Weston: --No. No, your Honor. Under--
Byron R. White: Do you concede that they can?
John M Weston: --Yes, your Honor. Under appropriate procedural-- --Well, that isn't what you... I don't... I thought you were arguing... or, some people in this case are arguing that you cannot seize a bookstore even if you can trace it. Not seize a bookstore, your Honor, but seize the particular books. If... I thought... when Justice Rehnquist Inquired... Chief Justice Rehnquist inquired if, say, there were drug sales--
Speaker: Yes.
John M Weston: --proceeds from drugs, that sales from the drugs had bought the New York Times, could the New York Times be forfeited with appropriate procedural safeguards?
Speaker: Yes.
John M Weston: Of course. And I think we're not disputing that possibility, if there are specifically identified obscene books. If those books are properly, under appropriate standards, tried, found to be obscene, the $97.00 that flow from those books may be traced. If they bought $97.00 worth of books, it may be suppressed or forfeited. If they bought some drapes or a videotape on how to play golf, that may be suppressed. But what may not be done is that because $97.00 worth of books were sold, the entire bookstore closed.
William H. Rehnquist: I think you have answered the question, Mr. Weston. Your time has expired. We will hear now from Mr. Goldsmith.
John M Weston: Thank you, Mr. Chief Justice.
Stephen Goldsmith: Mr. Chief Justice, may it please the Court, let me just... Yes, sir.
William J. Brennan, Jr.: xxx 47, whatever that number is, out of this case?
Stephen Goldsmith: We think we're here, your Honor. The Indiana Supreme Court consolidated Fort Wayne and Indianapolis, which is called 4447, and then this Court consolidated, when it accepted the petition for certiorari, the Indianapolis and Fort Wayne cases with the Kokomo case, which is called Sappenfield--
William J. Brennan, Jr.: Well, now, you we're the prosecuting attorney--
Stephen Goldsmith: --Yes, sir.
William J. Brennan, Jr.: --in 4447?
Stephen Goldsmith: Right.
William J. Brennan, Jr.: Well, how is that case here? All we've got is Fort Wayne and Sappenfield.
Stephen Goldsmith: Well, it's a procedural question, your Honor. The Indiana Supreme Court consolidated under the 4447 court cause number, 4444 and Fort Wayne. This Court then accepted certiorari on that cause number in both of those cases. We are listed as--
William J. Brennan, Jr.: We accepted the--
Stephen Goldsmith: --Yes, sir.
William J. Brennan, Jr.: --In 4447?
Stephen Goldsmith: Yes. Except none of the--
William J. Brennan, Jr.: Well, why doesn't--
Stephen Goldsmith: --Well, because... I'm sorry.
William J. Brennan, Jr.: --Go ahead.
Stephen Goldsmith: The confusion, your Honor, is that the defendants in that case did not become petitioners in this case. The 4447 defendants didn't elect to participate in the argument today.
Antonin Scalia: The case just got here on its own? No-- [Laughter]
Stephen Goldsmith: Well, your Honor, this Court accepted certiorari for... under a petition that came from a cause number that included 4447 and included Fort Wayne. The defendants in 4447 elected not to participate, but the Court granted certiorari. The petitioners listed the state as a respondent and myself... I'm listed as a respondent.
Antonin Scalia: Maybe we granted it improvidently then.
Stephen Goldsmith: Very well--
Antonin Scalia: I don't recall that we've ever let one side beat up on another who is not even here.
Stephen Goldsmith: --Justice Scalia, I think if I could address my remarks to the overall issue of the RICO laws and the only reason that the Indianapolis--
Thurgood Marshall: Don't you sign with the clerk's office who represents who?
Stephen Goldsmith: --Yes, sir. I represent--
Thurgood Marshall: Well, did you sign that? Is that filed in our clerk's office?
Stephen Goldsmith: --Yes, sir.
Thurgood Marshall: You're sure?
Stephen Goldsmith: Yes, sir.
William J. Brennan, Jr.: ISSI and Plaza Entertainment and Burton Gorlick.
Stephen Goldsmith: Those were all of the defendants who were rearranged--
William J. Brennan, Jr.: Well, what you're submitting, does that go also for them? Are you telling us they are here too?
Stephen Goldsmith: --Well, they are here as not... pursuant to this Court's rules, they are here as nominal respondents because they did not elect to come forward as petitioners. But, nevertheless, may it please the Court--
William J. Brennan, Jr.: Well, how come you're representing them?
Stephen Goldsmith: --I represent Sappenfield, Fort Wayne and if 4447 is here, I represent them as well. I represent the State of Indiana in the consolidated RICO cases that are before this court. The only significance to 4447 other than a fact that it continues as a case when this Court is finished with it, is that it is a civil RICO case without pretrial seizures, Sappenfield is a criminal case that's been stopped midstream without any pretrial seizures, and Fort Wayne is a case with 39 prior convictions and pretrial seizures. They represent a range of what can happen underneath the RICO laws. In terms of directing attention to the issues, though, I would suggest to the Court that the most important issue in terms of law enforcement in the long run is whether in enforcing a RICO law after judgment, and after conviction, the state may impose sanctions that affect First Amendment materials. It's the post-trial, post-judgment, post-conviction remedies that can be applied to assets, regardless of whether those assets expressive materials, as alluded to in the Arcara case, that are of critical importance in this case and in the future RICO enforcement.
John Paul Stevens: Mr. Goldsmith, will you help me with the issues a little bit. Your opponent agrees they can be applied... the sanctions can be applied to First Amendment materials if they are traced to show they are proceeds of the violations. So, we don't... everybody agrees they can be applied to First Amendment issues. That much is clear, is it not? I just heard him say that a few minutes ago.
Stephen Goldsmith: Yes, your Honor. But he tried to limit that at tracing. Our position is that it would not stop there.
John Paul Stevens: Well, that's right. Your position is... and is he correct? Do you agree with his statement of your position, that you're saying that if in a bookstore two obscene books are sold, automatically you can seize the entire inventory? Yes or no?
Stephen Goldsmith: I don't agree that that could necessarily happen.
John Paul Stevens: Can it happen under your statute? Well, it did.
Stephen Goldsmith: Justice White, I think in terms of post-trial sanctions, it has not happened in any one of these cases.
Byron R. White: I know. But you could answer Justice Stevens what your position is.
Stephen Goldsmith: My position, Justice Stevens, is post-trial that becomes an Eighth Amendment question, which could or could not occur, depending on the proportionality of the response.
John Paul Stevens: Oh, I'm not asking you about its constitutionality. I'm asking you about the meaning of the statute. If the statute is applied as it's been construed by the Indiana Supreme Court, could you, as the prosecutor, say to the judge, "We have proved that three books were obscene in this store. " "Kindly enter an order closing the entire store and forfeiting the entire inventory? "
Stephen Goldsmith: I could--
John Paul Stevens: If that's all you've proved?
Stephen Goldsmith: --I could ask for that remedy and--
John Paul Stevens: And would you be entitled to it under the statute?
Stephen Goldsmith: --It would be a proportionality question. I would be... officially I would be entitled to it under the statute. Yes, sir.
John Paul Stevens: So, the only objections to that relief would be constitutional objections?
Stephen Goldsmith: If I convince the judge and the jury and then the outside--
John Paul Stevens: That the three books were obscene and they were sold in a particular store and the rest of the store was filled with nothing but Charles Dickens and William Shakespeare?
Stephen Goldsmith: --Yes, sir.
Byron R. White: Well, didn't... wasn't there a seizure of the entire store before trial?
Stephen Goldsmith: There was a--
Byron R. White: Based on just probable cause to believe that obscenity was being sold there?
Stephen Goldsmith: --In the Fort Wayne case, that's true.
Byron R. White: A few items of obscenity being sold there?
Stephen Goldsmith: Well, it was based on the allegation that there had been 39 prior convictions at those three stores.
Byron R. White: Yes. But that doesn't necessarily indicate that even a major share of the merchandise in the store were obscene.
Stephen Goldsmith: Nor, Justice White, no one of these cases takes the position that whether or not the materials seized are obscene is significant. It's as to whether they are the proceeds of a prior existing crime to wit an obscenity.
Byron R. White: Yes.
Stephen Goldsmith: And in this particular case, the state maintains that once there is an adjudication of obscenity, then it becomes a proportionality question because of 39 prior convictions, each conviction carries a year sentence. So, the prosecutor had his choice between putting the owner in prison for 39 years or confiscating $25,000, $50,000 or $100,000 worth of books. That's a relationship--
Byron R. White: Yes, but I thought... I thought the remedy was seizure of the proceeds of the violation.
Stephen Goldsmith: --The Indiana and Federal Racketeering laws, it's the position of the respondents, allow seizure of proceeds and also seizure of other assets if they are derived from a criminal activity to wit--
Byron R. White: Yes, if they are derived from a criminal activity. Now, suppose there is only one book that's been proved obscene and sold. Now, it's awfully hard to conclude that the whole store full of books and the real estate itself is derived from the sale of one book.
Stephen Goldsmith: --Yes, Justice White. We agree with that.
Byron R. White: So, that's a state statutory construction problem in the first instance, I suppose.
Stephen Goldsmith: In the trial court, just because there is a sanction allowed statutorily for a crime doesn't mean that the maximum is automatically going to be imposed.
William H. Rehnquist: I agree with that. I thought you had answered Justice Stevens earlier... that it is a matter of statutory construction. If there were a conviction on the predicate offense, this sort of forfeiture would automatically follow. Are you now saying... or, at least, are you saying, whether you said something different before or not, that the trial court has discretion to determine what sort of a penalty along those lines will be imposed?
Stephen Goldsmith: Mr. Chief Justice, that's correct. I meant to answer Justice Stevens, his direct question. We would be allowed to ask that under the statute. It wouldn't in any way be mandatory. The trial judge would have discretion to fashion the penalty in the same way he would fashion the penalty in years, fashion the penalty in terms of fine, and fashion the penalty in terms of confiscation and forfeiture of assets. They all are ways to enforce a law. RICO, as this Court has ruled is--
Antonin Scalia: You're getting me confused now. I thought you said before that it doesn't have to be... I thought you said earlier it doesn't have to be proceeds derived from the obscenity.
Stephen Goldsmith: --That's the state's position.
Antonin Scalia: You said that. But just now you've said it has to be derived from. What are we talking about? How does the Indiana statute work? Is it necessary that there be a derivation from... derived from the proceeds of the unlawful activity or not?
Stephen Goldsmith: There has to be a nexus between what you're trying to forfeit--
Antonin Scalia: Oh, of course.
Stephen Goldsmith: --and what you have previously convicted for or judged. What we disagree with the petitioners on is the need to trace the assets from book up to organized crime back to another bookstore. We don't believe that that--
Antonin Scalia: What is the nexus? It's enough that you sold it in the same business? Is that enough?
Stephen Goldsmith: --The people would need to be same. You would have to show that they invested money from the first criminal proceeds into the second criminal proceeds. You'd have to show relationship in terms of enterprise between those two.
John Paul Stevens: Yes. But, Mr. Goldsmith, if I'm not mistaken, you have two ways of describing the term criminal activity. The two obscene sales are one form of criminal activity. But they also, if I understand you correctly, make the entire enterprise in which those books were sold a criminal enterprise and an unlawful activity, under your RICO statute. So, if the bookstore has sold two or three obscene books, it becomes, in its entirety, a criminal activity. Isn't that the way it works?
Stephen Goldsmith: Yes.
John Paul Stevens: And, therefore, everything in the store is automatically subject to forfeiture because the whole store is a criminal activity by reason of the fact that the two obscene books were sold there. Isn't that the way it works?
Stephen Goldsmith: It does. But just so I... it's automatically is subject to forfeiture. That doesn't automatically mean that a court would exercise its discretion if there were a proportionality problem. The same is true... this case is no different than the--
John Paul Stevens: But how can there be a proportionality problem if under the RICO statute the pattern of activity is satisfied by the sales of two or three items which are part of the ongoing business? Then the whole business is a criminal enterprise. Isn't that... that's the way RICO works I thought.
Stephen Goldsmith: --It does.
Speaker: Yes.
Stephen Goldsmith: The court, it's the state's position, would fashion the remedy at the extent and scope that it wished. The same as the 39 prior convictions, it could put the person who owned it in jail for 39 years or one year. Similarly, we view this case as an Arcara case and that simply says that this is no different than if there was narcotics sold at store one and the person sold the cocaine three times and two times, took the money and went into business in a toy store or bookstore or any other sort of store. That would be subject to the confiscation of the state. And to rule that this case is anything else, would reduce the sanctions of racketeering laws. It would provide a safe haven behind expressive materials for organized crime. That's why we believe this case is an Arcara case. And if it's not an Arcara case, it's an Eighth Amendment case. But it's surely not a First Amendment issue.
Sandra Day O'Connor: Mr. Goldsmith, do you also defend the right of the state to get a pretrial seizure without any hearing pre or post-seizure and based on a conclusory affidavit of the police officer?
Stephen Goldsmith: Justice O'Connor, this is the most difficult position for the state to maintain in this case.
Sandra Day O'Connor: No. I just asked if that's the position you take.
Stephen Goldsmith: It is the position of the state--
Sandra Day O'Connor: That's perfectly okay?
Stephen Goldsmith: --that if in the Fort Wayne case with 39 prior convictions beyond a reasonable doubt, an allegation of identity of parties that that was permissible conduct, but we admit, your Honor, that that is the most difficult position for the state to maintain in this case.
Sandra Day O'Connor: Well, you concede that the seizure of Fort Wayne Books and the stores was not to preserve evidence for trial?
Stephen Goldsmith: Yes, we concede that.
Speaker: Okay.
Stephen Goldsmith: And that's one reason that it's come back--
Sandra Day O'Connor: Then how do you avoid the Marcus rule, do you think? Why doesn't that apply?
Stephen Goldsmith: --Well, I think that if it doesn't apply... we may--
Sandra Day O'Connor: Why doesn't it apply?
Stephen Goldsmith: --It would not apply, your Honor, because of the 39 prior convictions. But I would suggest to the court... because this is really just a continuation of the first action. Federal RICO is all in one action and Indiana RICO collateral estoppel from the criminal cases. I would also acknowledge, your Honor, this is a very difficult position for the state and it may be that the RICO laws pretrial ex parte we have a Brockett severance issue that ought to occur here as it relates to the pretrial ex parte seizures. I'm going to be very careful, though, to separate that in terms of my argument from the sanctions post-trial which we believe present an Arcara issue. But I do acknowledge that the pretrial seizures, without a hearing, present a very difficult position for the case, for the state and it's based on, however, the prior 39 convictions. That's the way we distinguish the case.
William H. Rehnquist: Does this statute provide for fines?
Stephen Goldsmith: Yes, sir.
William H. Rehnquist: What's the maximum fine?
Stephen Goldsmith: The maximum criminal fine, I believe is $10,000, Mr. Chief Justice.
William H. Rehnquist: Well, now, is it your position that the non-obscene portion of the books sold could be forfeited even though, say, they were of a value of $40,000 or $50,000 as a result of a successful criminal prosecution?
Stephen Goldsmith: The legislative procedure in Indiana is that the state could bring a civil action based on the criminal conviction and ask for remedy in excess of the $10,000. That, your Honor, we think is reasonable given the fact that the court had an option between $10,000 and eight years, and what this court would be doing if it were to suggest that the forfeiture is unconstitutional under the Eighth Amendment is to say that a seizure of $50,000 or $100,000 is a more severe penalty than the eight years. And we think it would not restrict expressive material to take a million dollar operation... we haven't even had a chance to go to trial to show the factual worth of the defendant... and take a $50,000 or $100,000 penalty, we may have a much less restrictive effect on expressive rights than putting the owner in jail for eight years.
William H. Rehnquist: Yes, but then this is something quite different, really, from saying that you're fined $10,000 and these books are attached to make sure that you pay the fine.
Stephen Goldsmith: It's different in that under a fine the defendant has the option from where he should get the money. Yes, sir.
William H. Rehnquist: And it's also different in that there is no particular monetary limit on it.
Stephen Goldsmith: There is no limit in terms of obscenity or narcotics or anything else to RICO enforcement nationally or at the state level. That's correct. That's why, Mr. Chief Justice, we believe this is an Eighth Amendment proportionality issue and not a First Amendment expressive material question. If this does... the state's position is that we need to begin first with Arcara post-trial. After look at Arcara and satisfy ourselves that this does not relate... this is content-neutral, does not relate to expressive materials... the obscenity is a predicate. Once it's found to be obscene, it's the same as drugs. Then you move... that's the issue one. There's an expressive issue on the front side. On the back side are the sanctions. The sanctions, it is our position, make no difference whether they are books that are involved, or any other material where enforcing is sanctioned. And in that regard, it's either Arcara, or it is an O'Brien test, as modified by Albertini. Albertini clearly said that an incidental burden on speech is no greater than is essential and, therefore, it's permissible under O'Brien so long as neutral regulation promotes a substantial government interest. This promotes a substantial government interest. Finally, the discussion of Near we believe also is misdirected. In that case, the Court exactly said they were not looking at the permissible scope of subsequent punishment. This is a subsequent punishment case and not a prior restraint case. Once there is a conviction for obscenity, it is a subsequent punishment and not a prior restraint. And if it has incidental effect, it has incidental effect under the O'Brien test as modified by Albertini.
Byron R. White: Are you just going to leave it up in the air on the pretrial seizures or are you just going to say that that's a difficult question? Are you conceding error? In the Fort Wayne case you say there are 39 priors that had already been adjudicated and you save the pretrial procedures on that basis. But how about this other case that you say is here?
Stephen Goldsmith: There are--
Byron R. White: Which I'm not sure it is, but if it is, there weren't 39 priors in those cases.
Stephen Goldsmith: --That's right. And in that case, your Honor, there were three bookstores. Two which were open--
Byron R. White: Right.
Stephen Goldsmith: --and the court explicitly allowed them to stay open and sell their books and didn't interfere at all because they were ongoing businesses. The third store was not open yet and the 72-hour order was that they come into court before they opened up. The object of the Indianapolis pretrial orders was to maintain the status quo until a full adversarial hearing 72-hours later. I would submit and I would concede that RICO cannot and should not allow ex parte closure of bookstores absent prior convictions. That clearly would be unconstitutional.
Byron R. White: Absent prior convictions?
Stephen Goldsmith: Yes, sir. And with prior convictions, we would acknowledge that there is no authority from this Court directly on point either way.
Byron R. White: Well, you know, in a RICO case like this were you allege but haven't yet proved three obscenity violations, you would say that until the actual case is tried out you cannot seize or close down the business?
Stephen Goldsmith: Absolutely not. It would clearly be a violation of their First Amendment rights.
Antonin Scalia: But you would allow an order preventing the wasting of assets?
Stephen Goldsmith: Clearly, Justice Scalia, the same as a narcotics case, an order not to dissipate assets would be appropriate. And I would suggest, in modification to my prior answer, if there were some allegation that the assets were being moved to Europe, that it might be proper to seize them. But absent a suggestion that the assets are to flee, an order not to dissipate, which was the Indianapolis order not to dissipate... the reason that I'm so intent on that, Justice Scalia, is because the important tool here is the post-trial sanction which looks just like any other penalty after trial because obscenity does not have any First Amendment expression. And this remedy is content neutral. In this particular case it's applied to a bookstore. But if it were applied to any other set of assets, it would be the exact same discussion.
Byron R. White: Don't you think that your state supreme court held that you could have a pretrial seizure of the bookstore just based on probable cause?
Stephen Goldsmith: I think that the Indiana Supreme Court held... three justices held that in the Fort Wayne case with prior convictions there could be a pretrial seizure. Yes, sir. One of the chief justices dissented on the Fort Wayne case.
Byron R. White: But there is no holding that... there is no holding that just on probable cause you could have a pretrial seizure?
Stephen Goldsmith: That's correct. There is no holding. And I think that what we're facing here is if the Court is troubled by the facial ex parte ability of the Indiana law, that we have a Brockett analysis that ought to be made, and that part ought to be severed out. But it should not affect the remedial opportunities of federal or state RICO. And the best way to look at that is the Sappenfield case. It's a traditional criminal case that wants to go to trial based on obscenities as the predicate and enforce a sanction at the other end. That is a typical RICO case and the issue of ex parte seizure at the front end shouldn't affect the court's sanctions on the back end of the case. It's particularly important that we consider this case... this Court has accepted any number of remedies that affect expressive materials so long as they are not aimed at the content of those materials.
Anthony M. Kennedy: If we sustain the statute, it has a strong deterrent effect on your state, does it not?
Stephen Goldsmith: Absolutely. Yes, sir.
Anthony M. Kennedy: Don't you think in candor that some businesses which sell books as just part of their inventory might give up that line of inventory just to keep well clear of the statute?
Stephen Goldsmith: Justice Kennedy, I acknowledge that this has a powerful deterrent effect. I'm not particularly embarrassed about that. I don't think it would cause people to stop selling books. I think that it might cause persons to conform their sale of obscene books more on the side of indecent books. But, of course, that's the purpose of criminal obscenity laws. It is to deter conduct. And I think that what we have before the Court today is an acknowledgement that obscenity is a powerful source of funds for criminal activities and that we have a sanction that is equally powerful. And if the state--
Anthony M. Kennedy: But are you completely confident that the deterrent is not so strong that indecent but non-obscene expression is not going to be affected?
Stephen Goldsmith: --Your Honor, it's the state's position that obscenity law in the United States today has developed to such a hard-core standard and is so clearly understood to have such a hard-core standard that I would anticipate that it would have a deterrent effect on legitimate sale and expression of ideas. And that would not be the case because, even here, there has to be a conviction for the obscenity predicate. And we don't believe that it would have a chilling effect, but rather a deterrent effect, on people who are involved in the expression of ideas.
William J. Brennan, Jr.: --Smith in California was decided, wasn't it?
Stephen Goldsmith: Well, this case relates not to the content of the materials. But this case does not come into being until there is a finding of obscenity. And then the sanctions are in place. And we believe that that differentiates it from the prior rulings of this court. That's why we think it's an O'Brien/Albertini case if it's a First Amendment case at all.
William J. Brennan, Jr.: Incidently, Mr. Goldsmith, you must be tired of my pressing 1447, or whatever it is. Is there a separate judgment in that case?
Stephen Goldsmith: There is no judgment in any case before this Court today. There is a ratification by the Indiana Supreme Court of the facial constitutionality of the RICO laws which would allow the enforcement of sanctions by the court.
William J. Brennan, Jr.: Well, did the Indiana Supreme Court enter a judgment in 4447?
Stephen Goldsmith: The Indiana Supreme Court's opinion applies to 4447. The court case hasn't yet been tried because it's--
William J. Brennan, Jr.: Well, I know. But the Indiana Supreme Court entered some kind of judgment, did it not?
Stephen Goldsmith: --The judgment of the Court was to reverse the court of appeals and remand the case back for trial. One of the three... just to give you an idea of the import of the sanctions here, one of the three stores was burned down. There was an arson conviction in federal court. And under federal racketeering law, the interests of that person in these other stores were forfeited. So, we have a closure from an arson as a predicate that really parallels what we would see from obscenity as a predicate.
Byron R. White: It's a small point. There's been a final judgment that pending trial in the Fort Wayne case that the stores may be closed.
Stephen Goldsmith: Yes, sir, that's correct.
Byron R. White: And you say that's permissible because there were 39 prior convictions?
Stephen Goldsmith: That's correct.
John Paul Stevens: I just want to get one small point on the meaning of the statute. The predicate of... you have to have... what is it, two or three?
Stephen Goldsmith: Two.
John Paul Stevens: And is it two sales of the same book or does it have to be two different books?
Stephen Goldsmith: This is a basic racketeering law. It requires two predicate offenses. The predicate offenses have to be obscenity. It could be one book. I suppose it could be two books at two separate times that were sold.
John Paul Stevens: But it could be the same book on Monday and then another copy of that book on Tuesday?
Stephen Goldsmith: Or it could be two murders or it could be two heroin--
John Paul Stevens: Yes. But I'm just asking you a question about this.
Stephen Goldsmith: --That's right. So, the conviction or judgment for those offenses would throw the case back into the RICO analysis if there was a common enterprise. And what we really have here is not a draconian response. I prefer to use the Russello analysis that we have new weapons of unprecedented scope and we're dealing with an organization with lots of money and so they're financial remedies, instead of the traditional criminal remedies, which put the store clerk in jail for a number of years. And we believe that these remedies post-trial, at least, fall within traditional First Amendment and Eighth Amendment literature. And if they have an incidental effect under O'Brien and Albertini, that that effect is constitutional. And deprive the right of the state to use its sanctions in a racketeering law essentially and when it involves bookstores, provides a safe haven behind which narcotics dealers can buy a few books and provide a facade of respectability. We believe the state's sanctions should not be limited. This is really what this is; it's an Arcara case and it's not a First Amendment case. That the sanctions which ultimately come before this Court, need to be judged in terms of Eighth Amendment, a proportionality law as applies to all the RICO laws. Thank you very much.
William H. Rehnquist: Thank you, Mr. Goldsmith. The case is submitted. Your time had expired, Mr. Weston.
John M Weston: Thank you, Mr. Chief Justice.