William H. Rehnquist: We'll hear argument first this afternoon on Number 87-283, Joseph Budinich v. Becton Dickinson and Company. Mr. Frank, you may proceed whenever you are ready.
Thomas Frank: Mr. Chief Justice, and may it please the Court: This case arises out of an employment contract case arising under Colorado law wherein the Plaintiff was a sales commissioned agent for the sale of the Appellant's products. The case was brought in 1982 when the course of the law was changing both with respect to employment law in Colorado and with respect to this Court's decisions on the issues of attorney's fees and the federal rules of civil procedure. The case was eventually removed to the Federal District Court in Colorado and tried on diversity jurisdiction basis. At the conclusion of that case, Colorado law was deemed applicable by the Federal District Court. A verdict was entered for monetary damages which, under Colorado law, included as part of the judgement, as part of the merits on the case, and a mandatory award of attorney's fees as part of the relief entitled under the public policy and the laws of Colorado.
Byron R. White: All the law said is that the attorney's fees are required in these cases.
Thomas Frank: The normal cases construing attorney's fees have dealt with taxing attorney's fees as cost, or as an ancillary or collateral matter, Mr. Justice. The actual statute in Colorado provided that whenever it is necessary for an employee to commence a civil action for the recovery or collection of wages under our Colorado Peace Act, the judgement in such actions shall include a reasonable attorney fee in favor of the winning party.
Byron R. White: So you say that's different from the normal award of attorney's fees?
Thomas Frank: In that there is no court determination mandated in that, for one thing. It is not left to the discretion of the court as--
Byron R. White: As to whether to grant attorney's fees?
Thomas Frank: --as to whether to grant the attorney's fees or not.
Byron R. White: Sort of like in the treble damage antitrust case?
Thomas Frank: It could be analogized to that. It could also be argued that this is part of the verdict function, for the finder of fact to try. It may be that it isn't even a court determination under that language. It's: part of the judgement shall include attorney's fees.
William J. Brennan, Jr.: You mean to be decided, as to amount, by the jury?
Thomas Frank: It could be.
Byron R. White: That isn't the way it works in Colorado, in the Colorado courts, is it?
Thomas Frank: It would be a case of first impression, Mr. Justice.
Byron R. White: You mean nobody's ever raised the point?
Thomas Frank: Nobody has ever raised it before.
Byron R. White: But the practice is that the judge decides the amount, in the Colorado courts?
Thomas Frank: The practice is the judge decides the amount and the fact of this case is that it was submitted to the judge for a determination and this case was tried to a jury. But in view of the Court's recent decisions in White and Marek <v@l> [= v.] Chesny, the distinction in the language here could be that this is not within the jurisdiction. That is the essence of the Plaintiff's case before the Court here today, that this is an Erie v. Tompkins. This is a 28 USC Section 1652 case. We're not here interpreting the federal rules or the federal statutes with respect to civil rights fees. We're here deciding whether or not the state of Colorado could, as a practical matter, under Erie, make attorney's fees part of the merits of the case, part of the substantive relief, part of the remedial relief, if you will, that is designed to compensate and redress the Plaintiff if he prevails, or perhaps the Defendant in an appropriate case, for the damages suffered, or to encourage some state public policy.
Anthony M. Kennedy: Counsel, what did the legislature have in mind when they added the final phrase to the statute: to be taxed as part of the cost of the action? You're correct. It says that the judgement in such action shall include a reasonable attorney fee. But then it says: to be taxed as part of the cost of the action-- What did the legislature have in mind, adding that?
Thomas Frank: We would submit that after the comma, and that the language that you are quoting, Mr. Justice, is the procedural part of how the attorney's fees are to be collected. That a taxing matter under Rule 54, which is the same in Colorado as it is under the federal rules, or an entry of judgement under Rule 58, is a mere procedural formality for the clerk to do. The clerk can do it in one day. There is no further adjudication necessary once the attorney's fees are apportioned or determined, perhaps by the finder of fact, or perhaps by the court. That it's merely a procedural device as to how the attorney's fees become a part of the judgement, that they would then be taxed.
William J. Brennan, Jr.: Well, is the entry of the judgement postponed until the amount of the attorney's fees is determined?
Thomas Frank: In Colorado it has been. Colorado cases not only dealing with the Labor Peace Act, of which this case arises, a Wage Act claim. All Colorado cases are unitary on the point that the judgement is not final. The issue of finality in Colorado is exactly the reverse of the issue of finality under the White case and under the Marek v. Chesny case, ruled on the Civil Rights Act cases. In Colorado we have no final judgement until the question of attorney's fees is decided, determined in substance, and that decision becomes part of the case.
William H. Rehnquist: Well, it does seem there is some sense to what the Tenth Circuit said that you are really inviting just a mass of confusion if in a case tried in the District Court in the federal system you have to examine each state statute to see whether attorney's fees are part of the recovery or separate. You have fifty states, of course, and you'll just have a proliferation of independent inquiries like that.
Thomas Frank: Mr. Justice, we would suggest that it is no more complicated or taxing than the substantive state law, come determinative cases, on the Erie line of cases. The Hanna v. Plumber test requires a statute of limitations of the state of Oklahoma, or the appellate procedure if it has substantive outcome of Oklahoma to be followed by the Tenth Circuit.
William H. Rehnquist: But this type of thing determines the timeliness of appeals in that sort of thing. So it has a little bit different effect than just a branch of substantive law.
Thomas Frank: That is correct but only in the sense that finality under 28 USC 1291 can be interpreted either way. It can be interpreted one way for the federal system, if in fact the collateral adjudication doctrine is followed for the civil rights cases. It can also be interpreted to allow a state under Erie to include a thing, be it a label called attorney's fees or be it a supplementary adjudication of incremental damages of some kind, as part of the substantive relief, as part of the finality issue under that state's law.
William H. Rehnquist: But if we interpret it the latter way, so that a state may vary in deciding whether attorney's fees are part of a judgement or something added after, so that it's different from our White doctrine in the federal attorney's fees statute, then every single federal court is faced with the statutes of several different states. And it may be that one state statute means one thing and one another. It's just a tremendous proliferation of diversity.
Thomas Frank: We would suggest, Mr. Justice, that if the outcome, if the remedy, is part of substance, that, under the state system level, then the Erie doctrine would prevent a simple procedural rule from applying in the so-called bright line manner in which the Tenth Circuit does follow. All attorney's fees, if they are denominated as attorney's fees, under the Tenth Circuit Cox v. Flood case, are severable and collateral issues and not part of the merits of the case. That bright line rule does, in fact, preclude a state from the option of including attorney's fees. It can be that you have a--
William H. Rehnquist: What's the practical difference, so far as Plaintiffs and Defendants suing each other in real courts are concerned, other than the fact that an appeal may be untimely if you follow one rule? What would be the practical difference in saying that in federal courts, even if Colorado might provide one way, in the federal court the attorney's fees are collateral?
Thomas Frank: --It could affect substance in the essence, in the simplest sense, that the trial court judge would retain jurisdiction over the attorney's fee issue and force a double appeal. In essence, that is what happens under the Tenth Circuit now.
William H. Rehnquist: And it happens in federal cases?
Thomas Frank: It happens in federal cases under the Collateral Rule doctrine perhaps because of the injunctive relief factor on the... the only federal cases that are well-hammered out are the civil rights cases, the 42 USC 1988 cases to implement 1981, 1982 and 1983.
William H. Rehnquist: And there, there is a double appeal, isn't there?
Thomas Frank: And there, in essence, there is a double appeal.
William H. Rehnquist: Does it make any difference in the amount you recover or anything like that?
Thomas Frank: It does if you exclude injunctive relief, Mr. Chief Justice. There is a very good reason under the federal system in the federal civil rights cases for bifurcating the issue of attorney's fees if, in fact, there's going to be a long mandatory injunctive review process where you really can't determine the efficacy or the complexity or the novelty of the issues argued and accomplished by the attorney. School bus injunction cases that go on, for the purpose of integration, for example, there there is no damage or there's relative little damage. All of the relief is declaratory and injunctive, and possibly mandatory and supervision. In that instance, the appeal of the initial determination of the need for the injunctive relief needs to go forward or it would never get tested if you had to await, in that instance, for an attorney's fee at the end of the case, you would effectively preclude review. That's not true in a labor and wage statute where there is no injunctive relief.
William H. Rehnquist: The reason you apply Erie in a federal court is so you'll get the same substantive result, substantive law result, in federal court as you do in state court. Now, would applying the federal rule as to attorney's fees in this federal court proceeding give you any different substantive outcome in your particular lawsuit?
Thomas Frank: It could.
William H. Rehnquist: How?
Thomas Frank: It could in the sense that the procedure--
William H. Rehnquist: But I'm talking about substance. The amount you can recover, that sort of thing.
Thomas Frank: --If the intention of the statute is to encourage or to make parties... in essence, all attorney's fees cases enacted by statute are compensatory. They are an attempt by a legislature to either encourage a private attorney general function or they are an attempt to bring the small wage claim case, where the dollars involved may not be sufficient to encourage deterrence of the conduct before the courts need it to be.
William H. Rehnquist: Yes, and how would that come out differently in federal court than in state court, if the White rule was followed across the board as the Tenth Circuit?
Thomas Frank: Because the substantive law of Colorado--
William H. Rehnquist: I mean, would you recover less attorney's fees?
Thomas Frank: --Perhaps.
William H. Rehnquist: How?
Thomas Frank: If, because attorney's fees can be part of the merits and part of the damages under Colorado's law. Under the latest enunciation of that, the Basset case which is attached... there was a slip decision that came out December 10th, 1987. There the Colorado court has said that the verdict itself remains modifiable until the issue... the very verdict on damages itself remains modifiable... until the issue of attorney's fees is determined. It can ebb or flow in relation to attorney's fees because attorney's fees are an essential amount of the damages.
William H. Rehnquist: But I still haven't heard you say anything as to how if you could recover $10,000 damages and $5,000 attorney's fees... say, if you're trying this case in the District Court of the City and County of Denver, you couldn't also recover $10,000 damages and $5,000 attorney's fees if you're trying it in the United States District or for the District of Colorado?
Thomas Frank: It would be you would lose the right. You would the lose the right to have the entire situation, both attorney's fees and damages, weighed as a total judgement on the merits in relation to the substantive purpose and intent of the statute. If, in fact, the public policy is to deter or to encourage the bringing of small wage claims, for example, then you preclude by a federal rule of civil procedure the timeliness of an appeal under Appellate Rule 4(a) implementing 28 USC 1291... you preclude that substantive modification process under the state law of Colorado, if you apply a bright line Appellate rule. That is as close as I can answer that question, Mr. Justice. The procedure laps over into substance. Under the Erie doctrine you will preclude that if you impose a Cox v. Flood Tenth Circuit absolute bright line rule.
John Paul Stevens: I must confess I don't really follow your argument. Why if, say, there's a delay... here there's a delay of a couple of months between May and August, between the judgement and the fees... why wouldn't you make all the same arguments at the fee hearing in August, even if you had already taken an appeal from the original judgement? And then appeal that and maybe get them up in the Appellate Court and have the Appellate Court consider them both together?
Thomas Frank: Mr. Justice, the essence of the response is that you're taking a portion... you don't have finality. This isn't an issue of whether attorney's fees are costs or not. The Appellant's argument here is that attorney's fees can be part of the substantive case in chief, the case on the merits itself.
John Paul Stevens: Are you talking about arguments made in the trial court or arguments made in the Court of Appeals?
Thomas Frank: I'm saying that, under Erie and under the unitary... there is not variation in Colorado... under the unitary treatment of cases in Colorado, a case is not final in the federal sense under 1291 until attorney's fees are part of that judgement.
John Paul Stevens: I understand the conceptual argument, but I think the Chief Justice was asking you as a practical matter, what difference does it make? You go to the judge and you say I am entitled to $5,000 fee for deterrent purposes and because of the work and so forth and so on. Can't you make the same arguments whenever you take your appeals?
Thomas Frank: You could make those same arguments. We admit that you could make those same arguments. The reason for those arguments, we respectfully suggest, would only be an administrative or an efficiency concept under the federal system. And we say that in a diversity case, you don't have the same... we submit that the court doesn't have the same... power to implement 1291 through 4(a), or any other rule, where it's going to be outcome determinative or change of procedure or preclude... more accurately... preclude a state from using attorney's fees not as cost but in any substantive manner within which they may choose. If they roll attorney's fees into the merits of the cause, then it shouldn't be rolled back out simply because it is going to be a bright line, collateral issue rule under the federal Rules of Civil Procedure.
Byron R. White: But there's nothing to be decided about attorney's fees except amount, in Colorado rule. There's nothing to litigate except amount.
Thomas Frank: It could be.
Byron R. White: Well, it is. Isn't that right?
Thomas Frank: If, in fact, it could be a source of who decides it, as suggested earlier.
Byron R. White: If a liability is appealed separately and it's reversed, there's not going to be any attorney's fees, I gather?
Thomas Frank: There would not be under the Peace Act. That's correct.
Byron R. White: If the Plaintiff wins and the Defendant appeals and wins on the merits, there's not going to be any attorney's fees?
Thomas Frank: That is correct.
Byron R. White: Under your view then, every single case you're going to have to litigate the amount of attorney's fees before you can ever appeal and you're going to have just a lot of useless... everytime there's a reversal, the litigation on attorney's fees will be useless.
Thomas Frank: The litigation on attorney's fees insofar as--
Byron R. White: It would just be a waste of time.
Thomas Frank: --It would be. It would be in the sense that attorney's fees become a collateral issue rule to be determined only after liability.
Byron R. White: Well, it's bad enough to have two pieces of litigation in every case: one on the merits and one on attorney's fees, but it's even worse to go through the procedure of litigating the attorney's fees when there may be no need for it.
Thomas Frank: If, in fact, a state chooses to put the attorney's fees issue into an element of the case on the merits it is implicit within that decision: a) that they have a right under Erie to do it and b) that it is going to increase the complexity of the litigation.
Antonin Scalia: Can't we decide how the matters will be appealed? What does the state care whether our courts, the federal courts, choose to take them one at a time and make sure that there's a need to reach the second one?
Thomas Frank: If, in fact, that decision is for a procedural rule efficiency or efficacy in the administration of the federal courts and if, in fact, it changes the substantive law of the state or changes the finality requirement under state law, which has substance implicit within it, then we respectfully submit you can't do it.
Antonin Scalia: Well, I agree. If there's some aspect of the finality requirement that could conceivably affect, let's say, res judicata or something like that, then I could see how you might have an argument that it has some substantive impact. But really all we're talking about here is not substantive impact but the process for getting the matter appealed. Why can't the federal courts, why shouldn't the federal courts, set their own ground rules? If Colorado wants to waste the time of its District courts figuring out what the correct amount of attorney's fees is when it may not be necessary that's up to Colorado, but why do we have to do that?
Thomas Frank: Because, Mr. Justice, you impose upon Colorado the federal civil rights developing bifurcation collateral issue label for attorney's fees. The issue would not arise if there was a compensatory provision within the statute or another condition within the statute that was not called an attorney's fee, or was not called a cost. But because attorney's fees are rolled into this language, arguably within this language, as part of the merits of the claim itself as opposed to a determination, post-determination, of the merits, if you rule that way on the federal level in effect you're going to bifurcate every case.
William H. Rehnquist: Mr. Frank, let me ask you a question about how Colorado judges deal with this type of wage statute which I see your opponent says really isn't, doesn't, treat it much different than the federal courts do. Does the judge charge the jury that they may return in their verdict along with lost wages and that sort of thing also attorney's fees?
Thomas Frank: There has not, to my knowledge, ever been a case that has done that.
William H. Rehnquist: Okay. So the verdict is just damages. It does not include attorney's fees. Is that right?
Thomas Frank: To my knowledge, the issue has not been determined whether it could go to a verdict or not. That's correct. Then the judge determines, much like Georgia v. Johnson on the federal level.
William H. Rehnquist: Well, my question was: a verdict just embraces damages and not attorney's fees. Is that correct or incorrect?
Thomas Frank: It just embraces damages. That is correct.
William H. Rehnquist: So then you apply later to the judge for attorney's fees?
Thomas Frank: So far that is correct.
William H. Rehnquist: And how does that differ from the federal system?
Thomas Frank: It differs from the federal system now in that the case is not final under Colorado's process, if you will... I won't go any further than to use the word process... until that determination becomes part of the record, howsoever it's done. And to my knowledge--
William H. Rehnquist: So it's a question about when the judgement becomes final?
Thomas Frank: --It's a question of finality, currently. If there are no further questions, I would like to reserve the remaining amount of my time.
William H. Rehnquist: Thank you, Mr. Frank. We'll hear now from you, Ms. Rushton.
Terre Lee Rushton: Mr. Chief Justice, and may it please the Court: The Respondent submits that the adoption by this Court of a rule which recognizes that attorney's fees are collateral to a judgement on the merits is the only rule which promotes uniformity, finality, judicial economy, and fairness to all the litigants in a federal court action. We believe that the adoption of a rule recognizing that attorney's fees are, in fact, collateral to a judgement on the merits promotes several important policies of this Court. It clarifies and eliminates guesswork over the timing of a federal court appeal. It makes uniform those procedures for appealing judgement and for making attorney's fees applications regardless of the source of the fees and avoids needless litigation over issues of finality and divergent interpretations of state law. Now, the Petitioner seeks to avoid the decision of the Tenth Circuit by claiming that because this is a diversity action and because he perceives a conflict between federal procedure and state law, that state law should govern. The first question, then, to be addressed by the Court is, in fact, whether the timeliness of the federal appeal is governed by federal law and we think that it is. The right to appeal, of course, is created by federal statute 28 U.S.C. 1291, which provides that final decisions of the District court may be entertained by the federal Appellate courts and it's implemented by the federal Rules of Civil and Appellate Procedure, specifically Rule 4(a)(1) which provides that the notice of appeal shall be filed with the Appellate Court thirty days after entry of a final judgement on the merits. An entry of judgement is defined in federal Rule of Appellate Procedure 4(a)(6) by reference to the federal Rules of Civil Procedure 58 and 79. Those rules set forth the entire mechanism for processing an appeal through the federal system. The purpose of the rule is to let all parties know when the judgement is ready for appeal. They encompass the procedure for a federal appeal, and we believe that those federal rules are intended to occupy the field, explicitly or implicitly. There is no room for the operation of a conflicting state court procedure. We also believe that the application of the federal Rules of Appellate and Civil Procedure in this case do not transgress either the Constitutional restrictions that this Court has recognized nor any statutory restrictions. The rules regulating the timing of an appeal in the federal court are indisputably procedural rules and, therefore, a priori, Constitutional. They do not enlarge. They do not embridge and they do not modify any state-created entitlement to damages in this action nor to fees. It merely regulates the procedure for enforcing that right in the federal system.
Antonin Scalia: Well, that's true but they don't give us limitless discretion as to how to regulate it. For example, you're right that it's more efficient not to make the District court resolve an issue that may be irrelevant. But we certainly cannot allow an initial appeal in, let's say in an ordinary misrepresentation case where the Plaintiff has to prove a falsehood and reliance on the falsehood. Now, we can't allow an appeal of the first part whether there was a falsity simply by saying, well, it will save our District courts time--
Terre Lee Rushton: No, Your Honor.
Antonin Scalia: --because they may never have to reach the... whether there was reliance on it... if there was no falsehood at all. Right?
Terre Lee Rushton: I'm sorry, Your Honor. That is, of course, correct. But this case presents an entirely different situation.
Antonin Scalia: Why? If your opponent is correct that it's one cause of action created by the state, why is that different from this?
Terre Lee Rushton: The Respondent believes that the Petitioner is not correct in his interpretation of Colorado law. We believe that Colorado law has not spoken to the issue, whether under the Wage Claim Act attorney's fees directed by the statute to be taxed as costs are, in fact, a part of the judgement.
Antonin Scalia: And you agree that if you're wrong about that, you lose?
Terre Lee Rushton: No.
Antonin Scalia: Well, then you want to answer my question, don't you?
Terre Lee Rushton: Yes. Sir, we simply don't believe that this is under the same stricture, that it doesn't create the same kind of problems that other cases coming before this Court under the Collateral Order doctrine create. This is a situation that's purely mechanical. It talks about the way to enforce rights and doesn't intend to bifurcate the entitlement to those rights. There's a decision on the merits that can be appealed and there's a right to attorney's fees which can also be appealed. But I think both the Colorado legislature and this Court have directed that they are to be appealed in a particular manner and a manner which we do not believe abridges any of those rights. Rule 54(d) and 58 have been amended to address what we believe is the conflict present herein. We believe that the federal rules govern that question by designating that where, as here, these attorney's fees are to be taxed as cost of the action there's a Congressional history that shows that they should be separated. The practical considerations also dictate that there's a uniform rule in the federal courts whether these matters arise under a federal claim or by diversity of jurisdiction. For example, under Rule 58 fees, we believe, are costs and it is clear that when Rule 58 was amended in 1946 costs were determined not to delay the entry of judgement. That distinction between the costs of an action and the merits of an action applies particularly to attorney's fees, which are both practically distinct from the merits of an action and philosophically distinct. They are practically distinct because as we've touched upon it depends on the determination of the prevailing, or winning, party, as the Colorado statute puts it and, also, that costs accrue throughout the litigation. And a final judgement on costs can't be made until, in fact, there is a final judgement on the merits of the case. They are philosophically distinct because attorney's fees are compensation for the costs of going through the litigation, not as compensation for the wrong that the Plaintiff alleges was done to him. We believe that the drafters of Rule 58 intended to include attorney's fees as costs and that this delay that would attend the Petitioner's interpretation of this problem is exactly the problem that Rule 58 was designed to avoid by separating determinations on costs from determinations on merits. However, if this Court would decline to find that attorney's fees are costs, we still believe that this fee determination should be found to be collateral to a judgement on the merits. This Court declined in the case--
Antonin Scalia: Are costs or are not costs?
Terre Lee Rushton: --I'm sorry. Attorney's fees... if this Court would find that attorney's fees are not costs--
Antonin Scalia: Are not costs.
Terre Lee Rushton: --we still believe they would be collateral to a decision on the merits. We believe that the reasoning of this Court in White v. New Hampshire would apply equally here. A decision as to the reasonableness of attorney's fees requires the kind of detailed inquiry that this Court went into in great detail in Hensley v. Eckerhart.
Byron R. White: Wouldn't you agree, though, that Colorado law is binding on the federal court as to the entitlement to attorney's fees?
Terre Lee Rushton: As to the entitlement to attorney's fees, yes, Justice White, but we do--
Byron R. White: So it is a substantive rule?
Terre Lee Rushton: --We're not talking about the entitlement, I don't believe, in this case. We're talking about the method of enforcing the entitlement to fees. And I think those are very different questions.
Byron R. White: So the federal court wouldn't be free to say, well, federal law determines whether attorney's fees are to be allowed?
Terre Lee Rushton: No, Your Honor. I don't believe so. But I think the federal court does have the right and, in fact, must exercise the right to protect the integrity of the federal court system in determining how these fees should be processed on appeal.
Byron R. White: Or, to put it another way, I suppose, without even mentioning attorney's fees yet, to say the federal law has a right to determine when the judgement is final?
Terre Lee Rushton: In the federal court system, yes, Your Honor. A recognition--
Byron R. White: And appealable?
Terre Lee Rushton: --I'm sorry, Your Honor.
Byron R. White: And appealable?
Terre Lee Rushton: And appealable. Because that's what we're talking about. The issue of finality that we're talking about here is final for purposes of appeal. A decision by this Court that attorney's fees are collateral we don't believe would affect the Petitioner's entitlement to fees in any aspect. I think it would leave the right to fees that's present in the Colorado Wage Claim Act intact, but it would allow all litigants who seek those fees to apply definitive, unambiguous rules to determine when the time for appeal begins to run. Now, following the White, the Circuit courts have taken two divergent approaches to attorney's fees. The one adopted by the Tenth Circuit and applied in Cox v. Flood is the collateral or bright line approach. And, again, we believe that approach has the advantage of doing away with any uncertainty regarding the time for appeal, allowing the prompt entry of judgement, the prompt execution of judgement, and the running of post-judgement interests. It also separates and recognizes what may be ethical problems in an unholy alliance of the merits decisions and the fee questions, involving as they do very different issues and very different considerations for the lawyer and the client. If this Court, however, is concerned with the idea of piecemeal litigation to independent appeals several of the circuits have postured that local rules and the adoption of local rules would solve those problems. Rules, for instance, that set deadlines for filing attorney's fees applications, that made prompt determination of attorney's fees easy, and perhaps expanded the rules on consolidation of a decision on the merits and appeal of the decision on the merits with the appeal of a decision on attorney's fees in the Circuit courts. On the other hand, the ad hoc approach that appears to be advocated by the Petitioner in this case creates a deal of uncertainty. As the Court's questions have indicated, there is a concern with further litigation over state law. Not only would each state have to come to a decision, but each statute in each state would have to be examined to determine whether the right to attorney's fees was integral or collateral and, therefore, when the Appellate time began to run. This would be a particular problem in those cases, such as Bilmar v. IGF Drilling which is a case cited in our brief, where the entitlement to fees arises both under a federal statute and under a state law claim and, therefore, may be subject to different Appellate times and to a very difficult determination, at the least, as to how the attorney's fees were awarded and how they should be appealed. I think that this case illustrates the problems in the ad hoc approach where we are here before this Court with still a divergent interpretation of what Colorado law says about the attorney's fees entitlement under the Colorado Wage Claim Act. Although the Petitioner has cited several cases to this Court, only that case decided in December of 1987 speaks at all to the issues of finality and appealability as they affect attorney's fees. The other cases cited reflect entirely different statutes and, perhaps, we would suggest, entirely different considerations about appealability. Those are the problems that the adoption of a collateral rule, a bright line rule, that says all attorney's fees are collateral would avoid. We believe, however, that regardless of the approach adopted by this Court these fees would be collateral under either of the approaches adopted by the federal court. These are statutory, as distinguished from contractual fees. They are found in a separate statutory provision from that which allows damages under the Colorado Wage Claim Act. They were never raised, the request for attorney's fees was never raised in the complaint nor in any part of the action on the merits. They are directed to be taxed as costs by the Colorado statute and they were, in fact, treated as costs by the court and by the parties to this case. They were first raised in Petitioner's bill of cost, subsequent to the entry of the judgement on the merits, and his right to those fees was supported in his memorandum supporting attorney's fees as costs. Finally, Your Honors, the Petitioner requests that if this Court finds that his attorney's fees request was, indeed, collateral and, therefore, his appeal of the judgement on the merits was untimely that any decision of this Court be applied perspectively only. First, we believe this Court has already spoken in the case of Firestone Tire and Rubber Company v. Risjord that because when a court lacks discretion to even hear the issue, as the Tenth Circuit did to hear the untimely appeal on the merits, that ruling can never be made perspective only. But if, in fact, this Court does consider the question of prospectivity, we believe that the equities justifying an exception to the rule on retroactivity are not present here. This is not a matter of first impression in this Court nor in the Tenth Circuit, being clearly foreshadowed by this Court's decision in White v. New Hampshire and the Tenth Circuit's determination in Cox v. Flood. The application of this rule to the Petitioner herein doesn't retard the purposes behind the rule and there clearly is no reliance by the Petitioner on this position, when throughout the course of the litigation he has treated these attorney's fees as costs. In conclusion, we would urge that this Court adopt a rule that finds that fees are collateral to a judgement on the merits and that the time for filing a notice of appeal is thirty days from the entry of the judgement on the merits regardless of the pendancy of an attorney's fees request. We believe that decision can be reached whether this Court decides that attorney's fees are costs pursuant to Rule 58 or whether they are collateral because of their separate and independent nature. We believe that that rule would promote the policies of this Court and establish uniform federal rules for processing appeals, and is the only rule that is truly fair to litigants in the federal court system.
William H. Rehnquist: Thank you, Ms. Rushton. Mr. Frank, you have seven minutes remaining.
Thomas Frank: Mr. Chief Justice and Members of the Court: I would just like to correct one statement made by Appellee's counsel. We finally taxed our attorney's fees as a bill of cost on Page 29 of the record of the Joint Appendix. We also filed a motion for attorney's fees directed to the court's attention because, quite frankly, at that point we didn't know whether attorney's fees were going to be costs or whether attorney's fees were part of the substantive merits of the case. So, we did both of that within the ten days required by Rule 59, under both the federal rules and Colorado state rules. In essence, this case boils down to the issue of whether the federal Appellate Rule 4(a) dominates the field, occupies the field, and precludes a state from having the ability to do the following, which is the Basset case in the Appendix of our reply brief: The jury returned its verdict on November 5th, 1982 but the court did not reduce Plaintiff's claim for attorney's fees to judgement until June 25th. Pursuant to the provisions of CRCP... those are our Rules of Procedure... 54(a) and 58(a), therefore the amounts awarded by the jury remained subject to revision. And until the court finally entered judgement on Plaintiff's request for attorney's fees, no judgement... underlined, the court's emphasis... can be considered to have been entered. In essence, Hanna v. Plumber, Erie, and most recently this Court in the Burlington Northern Railroad case, the initial step is to determine whether when fairly construed the scope of the federal rule is sufficiently broad to cause a direct collision with the state law or implicitly has to be interpreted to occupy the field. We submit that, in this case, it is not and that the Erie line of cases should be followed and that the Colorado procedure should be followed. If there are no further questions, thank you.
William H. Rehnquist: Thank you, Mr. Frank. The case is submitted.


Warren E. Burger: We will hear arguments next in the case of Belknap, Incorporated, versus Duwaine E. Hale, et al.. Mr. Forrester, you may proceed whenever you're ready.
Larry E. Forrester: Mr. Chief Justice and may it please the Court: In January of 1978 the Petitioner Belknap employed approximately 400 people in a bargaining unit represented by the Teamsters Union. On February 1st of 1978 the Teamsters called a strike of the bargaining unit because the parties were unable to agree upon the terms of a new collective bargaining agreement. On that same date Belknap advertised in the local newspaper for permanent replacements for these striking employees. Simultaneously, Belknap implemented an across the board wage increase for all employees in the bargaining unit. During the course of the strike there were unfair labor practice charges filed against Belknap and by Belknap against the union for conduct occurring on the picket line. In April of 1978 the National Labor Relations Board issued a complaint against Belknap, contending that their unilateral wage increase at the inception of the strike was an unfair labor practice and that it violated Belknap's duty to bargain with the union. In July of that year, before a hearing on these unfair labor practice matters before the Labor Board occurred, the regional director for the Labor Board in Cincinnati directed the parties to the labor dispute to attend a meeting at the regional's office in Cincinnati and encouraged the parties to resume negotiations to resolve the labor dispute. As a result of this meeting, concessions were made by both parties concerning the terms of their collective bargaining agreement. There were compromises made by the union and by the employer. The ultimate issue between the parties that separated them was the status of the strikers vis a vis the status of the strike replacements. It was Belknap's position that the strike replacements would be retained. The union, of course, contended that the strikers should be returned to work. The parties were unable to make an agreement on this issue. The regional director for the Labor Board suggested a compromise whereby Belknap would agree to recall 35 striking employees per month, even though this may require that the replacement employees be laid off. On the basis of this compromise, the parties reached a strike settlement agreement and settled the strike. Part and parcel of this settlement was the withdrawal of unfair labor practice charges by Belknap and by the Teamsters Union. Also, related state court litigation concerning strike violence during the course of the strike was dismissed. All pending litigation was dismissed in conjunction with the strike settlement agreement. After this settlement agreement was consummated, the replacements, represented by Respondents herein, sued in state court, contending that their layoff occasioned by the terms of the strike settlement agreement constituted breaches of state law concerning misrepresentation with regard to offering them permanent employment in the first place, and also breaches of contract with regard to terminating their employment after they had been offered permanent employment. The trial court dismissed these state claims upon the grounds that they were preempted by the National Labor Relations Act. The Court of Appeals of Kentucky reversed, contending that the subject matter concerned a matter of compelling state interest and was of only peripheral concern to the National Labor Relations Board. The Supreme Court of Kentucky ultimately denied discretionary review, and it raises the issue for this Court whether or not the state court claims are preempted under the National Labor Relations Act.
William J. Brennan, Jr.: Mr. Forrester, may I ask, do you know of any cases in which an action for failure properly to represent has been brought against a union by strike replacements?
Larry E. Forrester: I know of no such case, Justice Brennan.
William J. Brennan, Jr.: Neither Board nor state court or federal court?
Larry E. Forrester: I know of no such case.
Byron R. White: Yes. At that point the union... did it owe any duties to anybody in the bargaining unit at that point?
Larry E. Forrester: The union owed the duty of fair representation to all members of the bargaining unit. Strike replacements are of course members--
Byron R. White: But wasn't this in connection with negotiating a new agreement?
Larry E. Forrester: --Yes. Regardless of the existence of a collective bargaining agreement, the union owes duties to everybody in the bargaining unit.
Byron R. White: Well, even people who are hired as replacements?
Larry E. Forrester: Replacements have to be considered members of a bargaining unit if they are... they stand in the stead of the strikers. The union represents everyone in the bargaining unit.
William J. Brennan, Jr.: And yet, Mr. Forrester, how is this striking union ever going to meet that duty? If it exercises or discharges it in favor of the strike replacements, then isn't it denying fair representation to the strikers?
Larry E. Forrester: Well, there is certainly a conflict among the strikers and the replacement workers. But the--
William J. Brennan, Jr.: Well, that's why I wonder. I've just never heard of a suit by strike replacements. Well, this is... was there a suit against the union?
Larry E. Forrester: --There was no suit against the union by the strike replacements.
Byron R. White: Not here, though. Not here. I mean, this suit is against--
Larry E. Forrester: This suit is against Belknap.
Byron R. White: --Yes, against the company.
Larry E. Forrester: That's correct.
Warren E. Burger: Well, when these people were hired was there any kind of a contract that would preclude their being discharged, with or without cause?
Larry E. Forrester: There was no such contract. Belknap had to characterize their replacement status as permanent in order to comply with the requirements of federal law.
Byron R. White: Well, they did make the promise--
Larry E. Forrester: They did make the promise.
Byron R. White: --you're going to be a permanent employee. And they reiterated it.
Larry E. Forrester: They did reiterate it.
William H. Rehnquist: And they also alleged fraud.
Larry E. Forrester: They did allege fraud, but that was not the basis upon which the Court of Appeals determined that they could sue in state court. The Court of Appeals said, by merely saying that you promised them permanent replacement status and then entering in a strike settlement agreement permitting them to be discharged--
Byron R. White: You've broken your contract.
Larry E. Forrester: --they've stated a cause of action. Under federal law, however, if we do not characterize their status as permanent, then we may not assert their employment status against any striker who desires to return at any time, and for that reason we are--
Byron R. White: Well, but you don't... that doesn't... that's just a privilege. That isn't an obligation which you have to--
Larry E. Forrester: --Well, it's a substantial economic weapon.
Byron R. White: --Well, it may be, but you're not obliged to, in hiring replacements, to say they're going to be permanent.
Larry E. Forrester: Well, we are privileged to do so under Mackay Radio.
Byron R. White: All right, you're privileged, but you're not obligated to.
Larry E. Forrester: And if we do not so characterize it, we do not have that economic weapon.
William H. Rehnquist: Supposing, Mr. Forrester, that an employer in the midst of what he knows is an unfair labor practice strike wants to get replacement workers, and suppose he gives each of the replacement workers two-year contracts. That's what he tells them, anyway, although he may know in the back of his mind that he may have to reinstate the strikers by some sort of a compromise settlement such as worked out here. Does the enforcement in state court by the replacement workers of that two-year contract... how does that, arguably or otherwise, interfere with the National Labor Relations Act?
Larry E. Forrester: Well, I suggest that a state court's inquiry into the subjective motivation of an employer in those circumstances substantially interferes with the line of preemption cases that permit employers and labor unions to resort to economic weapons whenever there's a labor dispute.
William H. Rehnquist: Well, it doesn't permit employers to resort to fraud or breach of contract, though, in dealing with a group of employees.
Larry E. Forrester: I agree that it does not permit that, Justice Rehnquist. But... nor are states permitted to inquire about employer motivations or union motivations in exercising their economic weapons without the risk of damaging the worth of these economic weapons in a labor dispute.
William H. Rehnquist: You say, then, that a replacement worker who is hired by the employer, the employer in his own mind knows, I am probably going to have to let this guy go in about three months but I really need him, so I'm going to tell him he can have the job for two years because he's got a job now and he wouldn't leave it if I told him it was just for three months, you're saying that that employee has no cause of action, tort or contract, when he is discharged after three months, in state court?
Larry E. Forrester: Promises of that sort may conceivably be unfair labor practices, inasmuch as the employer continues to have the duty to bargain with the representative concerning--
William H. Rehnquist: Yes, but my question was, can this employee sue in state court for fraud or for breach of contract?
Larry E. Forrester: --It is our position that he cannot.
William H. Rehnquist: How does that interfere with the National Labor Relations Act?
Larry E. Forrester: Because whenever a state court is permitted to inquire into the subjective motivations of an employer for offering permanent replacement status, then the damage to that economic weapon is done.
Warren E. Burger: What is subjective about a contract of employment of two years?
Larry E. Forrester: It's the intention of the employer with regard to that contract. Justice Rehnquist was suggesting that--
Warren E. Burger: Under the hypothesis that Justice Rehnquist gave you, I thought he was just talking about a flat-out contract for two years.
Larry E. Forrester: --I thought Justice Rehnquist was suggesting that the employer knew that it was an unfair labor practice strike and he could not reasonably offer that employment contract.
Warren E. Burger: That might come into play, but he's made them a... there's nothing subjective or ambiguous about an employment contract for two years, is there?
Larry E. Forrester: There is not, Mr. Chief Justice.
Warren E. Burger: Then why can't that be enforced in state courts?
Larry E. Forrester: Because any such contract which would be in derogation of a collective bargaining agreement is not enforceable. It's the collective bargaining agreement that prevails over any individual contract.
Warren E. Burger: How is that in derogation of the collective bargaining agreement?
Larry E. Forrester: Well, the employer... let's assume the employer enters a contract for two years as you suggest, and subsequently negotiates the terms and conditions for that unit. Then the promise of a two-year contract goes by the wayside.
Byron R. White: Could I ask you, suppose there hadn't been a settlement, but the employer held out and the strike... he just broke the strike by hiring these replacements, all of whom he promised permanent jobs to, and so the strike was over. And then he started firing these people he had promised as permanent replacements.
Larry E. Forrester: Well, in the context of this case the Board would have pursued the unfair labor practice.
Byron R. White: No, but let's just assume no unfair labor practice. Nobody'd even filed one. It was just an economic strike and the employer won. He hired permanent replacements and then he decided that, now that he's hired them all, he'd like to take back some of the old workers because they were better. So he just fires the... do you think he could do that?
Larry E. Forrester: There may be a cause of action, depending on state law.
Byron R. White: What do you mean, may be? It's either yes or no. If it's preempted one way, it's preempted the other, it seems to me. What you're really saying is that giving them a remedy for breach of contract burdens the employer's right to hire replacements. If he knows he's going to have to pay for his promise, he won't be so free to make them, and that burdens his right to hire replacements. That has to be your argument, and it's also the Board's argument, I take it.
Larry E. Forrester: The argument is that he will be effectively deprived of the economic weapon of offering permanent employment status to strike replacements.
Byron R. White: You mean lying about it. Yes, he's going to be deprived of the right to break his contract.
Larry E. Forrester: I suggest that the likelihood of an employer--
Byron R. White: That is an interesting piece of a protected activity.
Larry E. Forrester: --I suggest that the likelihood of an employer being in a position to cynically predict down the road what is going to happen in a labor dispute is not great.
Byron R. White: It isn't cynically, but all he would have to do to protect himself, and he may not be able to hire replacements, but he would have to say: Look, this is certainly my promise to you: I'll keep you if I can, but if it turns out that I've got an unfair labor practice charge made out against me I'm going to have to can you. That maybe is a big burden, but I'm not sure how much it is. Apparently the Board thinks it's a big burden, and so do you.
Larry E. Forrester: I do, and the problem arises either in that context or another: Once an employer determines to hire permanent replacements, he continues to have the obligation to bargain with the union about the terms and conditions of employment for members of the bargaining unit. An employer would be substantially disinclined to make that--
Byron R. White: Well, he doesn't if he wins the strike and he's hired replacements who aren't a member of the union.
Larry E. Forrester: --If the strike is over and no bargaining obligation continues, he is relieved of that risk and that responsibility and the mandate under the Federal Labor Act.
William H. Rehnquist: It's your position that in order to really deal with the union and fight his battle during the strike, all bets are off so far as other areas of the law are concerned, really. The employer is free to defraud people or to breach contracts with third parties so far as the beginning of the strike is concerned, in order that he can concentrate his maximum effort with the least possible financial burden on the union, or on the employer?
Larry E. Forrester: Obviously, there is some sort of egregious conduct that should be subject to state law.
William H. Rehnquist: Well, how about fraud?
Larry E. Forrester: In the context of this case, I do not believe that was an element.
Byron R. White: Well, what about just straight contract? Sure, the employer is free to use economic weapons, but why shouldn't you say he is free to use those economic weapons that are within the law? And certainly promising somebody, somebody a two-year job, knowing that you're going to can him if you make a settlement, why shouldn't he have to pay for breaking his contract?
Larry E. Forrester: Well, in this case there were no two-year contracts.
Byron R. White: Well, it was even worse. There was the promise of permanent employment.
Larry E. Forrester: As is required in order for an employer to preserve that economic weapon.
Byron R. White: Not required. It's just your privilege. Has there been any judicial determination with respect to whether there was or was not a contract here?
Larry E. Forrester: There has not been.
Warren E. Burger: The case hasn't been tried yet on the state claim?
Larry E. Forrester: It has not been tried yet.
Byron R. White: Yes, but as the case comes to us, the case is presented to us, there was a promise of permanent employment.
Larry E. Forrester: There was a promise of--
Byron R. White: And reiterated.
Larry E. Forrester: --And reiterated.
Byron R. White: You concede that?
Larry E. Forrester: I do concede that, Justice White. If the employer had not done so, then he would not have been able to assert the rights of the permanent replacements against the striking employees.
Byron R. White: We all understand that. But the law didn't require him to make that promise.
Larry E. Forrester: No. It permitted him to do so.
Warren E. Burger: We have to proceed on the assumption that there is a probability or a possibility that a contract will be established in the proceedings in the future.
Larry E. Forrester: If there is a contract in the proceedings in the future, it is of course in contrast with a collective bargaining agreement that covers the same terms and conditions of employment.
Warren E. Burger: Well, anything to prevent a person from making inconsistent contracts with two different people at the same time?
Larry E. Forrester: No, Mr. Chief Justice, there is nothing to prohibit it.
Warren E. Burger: If he breaches one of them, then he's going to be liable on that one.
Larry E. Forrester: But a collective bargaining agreement always prevails over any individual employment understandings between an employee and his employer.
Byron R. White: You don't say that this is preempted because there's any... that the employer was doing something that was expressly prohibited or permitted, protected by the Act in the normal sense of the word? You're just saying this is an area in which Congress said the state law should stay out of because you ought to let these two people fight it out in the trenches just by any weapons they want, as Justice Rehnquist said? That's your position, isn't it?
Larry E. Forrester: Not entirely, Justice White.
Byron R. White: What is the unfair labor practice--
Larry E. Forrester: If as a matter of law, as the Labor Board contended, that the strike was converted to an unfair labor practice strike with the offer of the wage increase on the 1st of February, then the mere offering of permanent employment to replacement strikers according to the Labor Board is an unfair labor practice.
William J. Brennan, Jr.: --Had the unfair labor practice proceeding continued to attend, you're... and you'd been found guilty of an unfair labor practice, you may have been subject to an order of the Board to reinstate the strikers?
Larry E. Forrester: The Regional Director so advised Belknap in their conference where the issues were settled.
William J. Brennan, Jr.: Even after you had made the promises of permanent employment to the replacements?
Larry E. Forrester: That's correct.
Byron R. White: Let's assume that's... let's assume that's so. That still leaves the question of the people that the employer promised to hire permanently; and what has the Board got to do with that? Zero.
Larry E. Forrester: Well, it's unlikely that the Board has unfair labor practice jurisdiction to entertain claims of--
Byron R. White: They couldn't possibly give a remedy--
Larry E. Forrester: --Unless--
Byron R. White: --to the permanent employees, could they, to the permanent replacements? There's just no remedy they could give them.
Larry E. Forrester: --They certainly would not be entitled to remedies that would be a satisfactory state court claim.
Byron R. White: Well, that really doesn't... you're not suggesting that there's any... that the employer was even arguably committing an unfair labor practice with respect to the permanent employees that he said he was hiring, or the permanent replacements?
Larry E. Forrester: If in fact and in law it were an unfair labor practice at the time these offers were made, then the Board's position is that it's an unfair labor practice to offer permanent employment status to replacements.
Byron R. White: Well, it may be, it may be. But it's not... say one of the permanent replacements, so-called permanent replacements, came in and filed a charge with the Regional Director or the General Counsel that, this employer is committing an unfair labor practice against me. He'd be laughed out of the room, wouldn't he? Not laughed; he'd just say, sorry, take this down to the state court and file your suit down there.
Larry E. Forrester: I'm not sure the Labor Board would say that, but it's unlikely a replacement would file such a charge.
John Paul Stevens: Exactly, yes. Mr. Forrester, may I ask you a question. There's an issue, isn't there, as to whether it was an unfair labor practice strike or an economic strike at the time of the hiring of the permanent replacements?
Larry E. Forrester: The issue had been raised. I don't know at the time that the bulk of the replacements were hired that the charge had been filed on the unilateral increase.
John Paul Stevens: I'm just wondering if the character of the strike would have any impact on your preemption argument, because one kind of strike might give rise to an arguable violation and another kind of strike might not. And if that's true and if we don't yet know until the trial is had what kind of a strike it is, is it perfectly clear we have a final judgment?
Larry E. Forrester: Well, it is clear that the federal issue is decided.
John Paul Stevens: You don't think the federal issue could be affected by any of the proceedings that take place hereafter?
Larry E. Forrester: The only issue that would be subject to exploration with regard to these claims is any question of fraud underlying an employer's motivation in offering permanent employment. I suggest that once the state court is permitted to make that inquiry in the context of a labor dispute, then the harm is done, because any state in the... any court in this union whenever permanent replacements are hired may inquire as to what the employer intended and there is no longer any federal privilege as we understand it now to hire permanent replacements without risk of being sued in state court for fraud.
Warren E. Burger: Your time has expired.
Larry E. Forrester: Thank you, Mr. Chief Justice.
Warren E. Burger: Mr. Alito.
Samuel A. Alito, Jr.: Mr. Chief Justice and may it please the court: The National Labor Relations Board agrees that Respondents' state claims are preempted by federal law. We reach this conclusion primarily because those claims would frustrate the policy of federal labor law by interfering to an impermissible degree with one of the chief economic weapons granted to employers in labor disputes, that is, the right to hire permanent strike replacements--
Byron R. White: The right to be dishonest in the process or what?
Samuel A. Alito, Jr.: --No, Your Honor, I don't think this case involves any dishonesty on the part--
Byron R. White: The right to promise... the right to make a contractual promise that he knows he may not be able to keep?
Samuel A. Alito, Jr.: --An employer certainly does not have that right under federal law, but it may be that, and we contend that it is, it is the case--
Byron R. White: You say that he may be able to make this promise, which the federal law may prevent him from keeping, and yet he is not liable for his promise to somebody else, which is probably or perhaps has enticed somebody to leave another job?
Samuel A. Alito, Jr.: --Well, Your Honor, we maintain that suits like the present one are preempted. But I think it's misleading to suggest that employers can engage in fraudulent conduct towards strike replacements.
Byron R. White: Well, I don't... let's don't talk about fraud, then. Just talk about contractual promises. You say they are free to make a promise that the federal law may keep... prevent them from keeping. Of course, the federal law doesn't prevent them from keeping it. They can just pay up for their promise. They just stand like anybody else in life does; if he breaks his contract he pays damages. He can reinstate the workers like the federal law requires him to do. Why should he not make somebody whole that he has damaged?
Samuel A. Alito, Jr.: Well, Your Honor, let me make several points in response to that. First, it is not... it is not a false promise for an employer in this context to state to a strike replacement that he is going to be given the position of a so-called permanent replacement. That is--
Warren E. Burger: Well, let's say it wasn't false. It was certainly erroneous, was it not?
Samuel A. Alito, Jr.: --I don't believe it was erroneous, Your Honor. It is a term of art in federal labor law.
Byron R. White: Oh, so you're saying anybody who has had that promise shouldn't win his case because he hasn't been promised anything?
Samuel A. Alito, Jr.: Well, that might be the case. What we are... that might also be the case.
Byron R. White: Well, that's what you've just argued.
Samuel A. Alito, Jr.: Well, what I'm saying is that in this case there was no... there was no fraud on the strike replacements.
William H. Rehnquist: Mr. Alito, are you familiar with the opinion of the Kentucky Court of Appeals in this case?
Samuel A. Alito, Jr.: Yes, I am.
William H. Rehnquist: Well, in the second paragraph, which you will find, I believe, on page 1 of the appendices to the petition, after the beginning of the paragraph cites the names of the parties, it says, "The action alleged fraud, misrepresentation and breach of contract. " Was the Kentucky Court of Appeals wrong in describing the action that had been filed in the Kentucky trial court?
Samuel A. Alito, Jr.: Absolutely not, Your Honor. But if you look at the complaint and you see what the basis for the fraud claim was and the basis for the contractual claim, you will see that the basis for the fraud claim, and as far as we can determine the sole basis for the fraud claim, is the advertisement that Belknap placed in the newspaper. That is reproduced as an appendix to the brief we submitted at the petition stage.
William H. Rehnquist: Well, does Kentucky have the same sort of rules of procedure that the federal courts do, do you know?
Samuel A. Alito, Jr.: I don't know, Your Honor.
William H. Rehnquist: If it does, certainly any number of amounts of evidence or theories could be adduced in support of a pleading of fraud. You don't have to... you're not limited to a particular advertisement. Why shouldn't the state courts have the right to find out what the case is about? Apparently you concede that many kinds of fraud would be actionable in state court, don't you?
Samuel A. Alito, Jr.: Well, I don't want to belabor the characterization of the facts of the case. I simply wanted to point out that it is a bit misleading to suggest that this case, which we believe is typical, is an instance in which an employer is even alleged to have engaged in what is really fraudulent conduct.
William H. Rehnquist: Well, then you do say that the Kentucky Court of Appeals was wrong when it described this action as alleging fraud, misrepresentation and breach of contract.
Samuel A. Alito, Jr.: I don't disagree with their characterization of what was alleged. I think it is apparent, however, from the face of the complaint that what is really at issue is the right to offer "permanent placements to strike replacements". And that is precisely what this Court said an employer could do in an economic strike.
Byron R. White: Certainly he could do that. Of course he can do that. That doesn't mean he's not liable if he breaches-- --What remedy do the Respondents have under federal law if they have no remedy in state court?
Samuel A. Alito, Jr.: Your Honor, there is one possible remedy. It was touched on this morning. It's the filing of a claim against the union for breach of the duty of fair representation. I don't want to--
Sandra Day O'Connor: You don't seriously argue that the union has a duty to represent the replacements, do you, Mr. Alito?
Samuel A. Alito, Jr.: --We contend that they have a duty to represent them in certain respects. But the point that I really want to make in response to that question is that the filing of unfair labor practice charges by a union in any instance in which an employer promises more than federal law permits, and therefore more than he will be able to deliver, will probably prompt the union to file unfair labor practice charges and that will serve to police these offers by employers to permanent strike replacements.
Warren E. Burger: Well, your position must be that no suit in the state courts in these circumstances may be maintained, whether it's for fraud, misrepresentation, breach of contract or anything else.
Samuel A. Alito, Jr.: That is our position, Your Honor. It's been suggested that the employer has a duty to provide some sort of explanation to the strike replacements as to what their status is, to tell them something more than that they are being employed as so-called permanent strike replacements. And from our point of view that would be unworkable and really intolerable, if an employer were required to supply a prospective strike replacement with an accurate, comprehensive, understandable synopsis of the rights of strike replacements and strikers and employers in economic strikes and unfair labor practice strikes. The risk of misstatement, the risk that a state court would find that there had been misstatement, would be so great that the employers' use of this permitted economic weapon of hiring permanent strike replacements would be grievously impaired. And it is for that reason that we maintain that employers are permitted to offer strike replacements permanent employment, as this Court has held.
Byron R. White: What's your answer to my question I asked your colleague: If it's not an unfair labor practice strike, there's no charges filed like that, the strike is over, the employer has won it. He has promised permanent employment to replacements and then he cans then.
Samuel A. Alito, Jr.: I see that as a different question, Your Honor--
Byron R. White: Why?
Samuel A. Alito, Jr.: --because it does not interfere--
Byron R. White: Why?
Samuel A. Alito, Jr.: --Because the strike is over, for that very reason.
Byron R. White: Well, I know. But knowing that he can't fire them will dampen his ability to offer permanent replacement status to people during a strike.
Samuel A. Alito, Jr.: Well, Justice White, in answer to that question and another question that was asked when Mr. Forrester was speaking, we certainly don't maintain that employers are given carte blanche and are absolutely free from the constraints of state law to promise anything to anybody in the name of maintaining an economic weapon during a labor dispute. And I think that is analogous to a fraudulent promise to a third party.
Byron R. White: So suppose there are unfair labor practice charges filed by the union, who claim that he committed unfair labor practice and that he's offering permanent replacements to people that he has no business offering them to. And they litigate that and it's found that the employer's committed nothing, no unfair labor practice at all. He was quite permitted to offer these permanent replacements. And then he fires them.
Samuel A. Alito, Jr.: Your Honor, I think my answer to that question is that that is a different case, because when the strike is over there is not the same degree of interference with a permitted economic weapon.
Byron R. White: Well, the strike is over now. The strike is over now by a settlement, and he fires the replacements.
Samuel A. Alito, Jr.: Well, future strikes--
Byron R. White: It's all over.
Samuel A. Alito, Jr.: --Future strikes are not over, and if it is known that state actions like this one are permitted there will be an intolerable degree of interference with an employer's economic weapon.
Warren E. Burger: Let me test your position with a slight hypothetical change here. Suppose, since many people are reluctant to break a picket line, the employer had announced in that announcement that's in your appendix here a $500 premium, special payment, will be made for all replacements. And then when they get there they negotiate and agree that the $500 payment will be deferred, but they all go to work just as they did here. And then the employer doesn't pay the $500, independent of whether he's fired them or not. Could they sue for that $500 in state court?
Samuel A. Alito, Jr.: I believe that would be preempted on the same theory. I think that certainly involves conduct that is arguably prohibited by Section 8 and would be preempted under the Garmon rule.
Byron R. White: You don't know of any other cases like this, where you just say it's just one of those areas a state court should stay out of, it isn't specifically arguably prohibited or protected?
Samuel A. Alito, Jr.: Machinists is certainly comparable to this in many respects. That was the case where Congress' intent not to permit state regulation was inferred from the fact that burdening a particular economic weapon would frustrate the policies of the Act. And that we contend is what would happen here. Thank you.
Warren E. Burger: Mr. Davenport.
Cecil Davenport: Mr. Chief Justice, may it please the Court: Let me answer a couple of inquiries if I may. The rules of procedure in the State of Kentucky are paraphrased in 1954 from the Federal Rules and with very few exceptions are the same. And this was a motion for summary judgment, which is the same as it is under the Federal Rules, or the interpretation is the same in Kentucky. And this was therefore an appeal from that summary judgment of the Jefferson Circuit Court. This case was first removed to U.S. district court, then remanded back to state court, then upon a motion for summary judgment, before very little proof was taken... only one deposition had been taken... to test the pleadings and test the law, the motion for a summary judgment was made. It was sustained in the Jefferson Circuit Court and thereupon it was appealed to our Court of Appeals. Our Court of Appeals reversed the Jefferson Circuit Court and held in the opinion that has been referred to that it was only a peripheral concern to the national scene and the national Act. I believe the thing that bothered me concerning this case, and it's bothered me for some couple of years since we have been going through this process, and I think that was finally answered here today, and I feel more at ease. In our bowing down to the holy grail of National Labor Relations Board preemption and unusual policy of handling labor law, we have lost sight of the very most important thing, and that is the 400 replacements. What happens to them? Do they fall through the crack in philosophical theories of the best way for the best and largest good to handle the overall peace?
Byron R. White: Mr. Davenport, could I ask you, suppose the federal labor law said that in a strike, during a strike until it's... at least up until a certain point in a strike, an employer may hire replacements, but he may not hire anybody on a permanent basis. Just suppose the federal law said that. Then the employer nevertheless, in hiring replacements, promises a permanent job. Now, you wouldn't say that that contract would be enforceable if it's just... if it's an illegal contract, would you?
Cecil Davenport: No, because it would have been preempted by the federal Act.
Byron R. White: Well, it was just made an illegal contract.
Cecil Davenport: That is correct.
Byron R. White: Well, as I understand the submission on the other side here, that when an unfair labor practice charge is pending such as was pending in this case, it really was an unfair practice, namely, contrary to federal law to promise a permanent job, in which event if that... assume that it turned out that way, that, true, there was an unfair practice and the employer should not run around hiring permanent replacements. Now, it's tough on the 400 replacements, but nevertheless they made an illegal contract with the employer.
Cecil Davenport: Justice White, I could be wrong, but the statement was made earlier by my colleague that this was a violation. I submit that it is a violation to give a raise, but it is not... and I cannot recall any case that ever spoke of making promises to replacement employees being a violation and an unfair labor practice.
Byron R. White: As a matter of fact, the argument is that the right that's being protected here is the right to promise permanent--
Cecil Davenport: That is correct. And again, I'd like to reiterate, it is an unfair labor practice to give a blanket raise because that is inducement to the outside to come in and an unfair economic weapon, if you will. But I know of no case that ever spoke of the types of promises that can be made to replacement employees being an unfair labor practice.
Warren E. Burger: --How do you distinguish in terms of inducement the promise to give permanent employment and an offer to give an increased wage to the replacement people? What's the difference?
Cecil Davenport: Well, apparently under the overall policy and regulations laid down by the Board, the offer of a wage is an unfair inducement to entice off the picket line those back in. But the hiring of replacement employees per se would not likewise be an inducement. I mean, it might be a threat to them, but it is certainly not an inducement. What we have here is attempting to broaden the scope and the jurisdiction of the National Labor Relations Board under the guise of the broad terms "arguably protected" or under the broad terms of the necessity to give economic weapons and create a detente, so to speak, a philosophical theory of governing the labor peace. Now, this has been going on for a long time. But it is inconceivable to us that in this process, if the theory of the NLRB were taken and if it were sanctioned by this Court, it is inconceivable that there could be 400 people in these United States that would not be treated in the same substantial fashion as the rest of the population. How are these people, for instance, to know that they must govern themselves in dealing with an employer in an entirely different situation if he has a strike going than they would be correspondingly required to deal with that same employer when there is no strike in evidence?
Warren E. Burger: Well, it might be stretching it a little bit when it embraces all the policies of the Labor Board or any regulatory agency, but are they not obliged to know the law?
Cecil Davenport: Yes, they are. And I submit that it is their prerogative to assume that the law would be applied in the same fashion to that employer with regard to telling the truth and not telling the truth during a strike time as it would be applied to that same employer were it to be outside of that strike time. That's all we're saying.
Warren E. Burger: But that doesn't answer the question if the law is as the Labor Board contends now.
Cecil Davenport: Well, it is not as they contend, Mr. Chief Justice. And I presume that if this Court had laid down such a decision that an employer had the right to give out false information in order to induce hordes of people to come to work for him as replacements, then it would be incumbent upon the parties under that posture to know what that law was, yes, sir. I would conceivably hope that in my day that never comes about.
Byron R. White: So you say that even if a... even if an illegal contract isn't enforceable by the promisee, if the other side has also committed a tort against him he can sue him for a tort, which... this suit in here was a suit for fraud as well, wasn't it?
Cecil Davenport: That is correct, Justice White. This is a suit in tort, labeled and hopingly will be proved when the day comes of fraud in the inducement and breach of contract. What the National Labor Relations Board is attempting and the employer is attempting to do is to conclude and say that tort, the determination of tort by the several states involved... involving action during a time that a strike takes place has been preempted and taken from them for adjudication. That's what they're attempting to broaden the scope of the Act to include.
Warren E. Burger: Would your position on that, your position as distinguished from the Board, mean that an action for tort might be maintained but an action for contract could not? Could it not be reasonable that recovery or a suit for contract alone might be preempted, but a suit for tort for fraud would not be?
Cecil Davenport: I think not, Mr. Chief Justice, because the position of the Board is that arguably because this arose out of a time when a labor dispute was going on, then under the concept of Garmon and under the Act and the amendments that is preempted, simply because it arose. And may I point out where that is in error. We've relied greatly upon Linn versus United Plant Guard Workers of America, and let me quote from that, page 663 of that opinion: "Nor should the fact that defamation. " --this was a tort; this was a defamation action between a manager of a plant on the employer after the strike was over against the union for libel and slander with regard to leaflets, et cetera, and this Court says: "Nor should the fact that defamation arises during a labor dispute give the Board exclusive jurisdiction to remedy its consequences. " So just because... and that's what they're really saying, that tort actions, which the states have had original jurisdiction since the inception of the Constitution, has been diminished, or jurisdiction over those torts and/or contracts, has been diminished to the extent that it has been preempted by the provisions of the Act. And all we are saying is that this could never arguably be of any problem to the Board in extending its jurisdiction to mediate the peace of a labor industry as long as you require the employer simply to tell the truth and be honest about it. It doesn't afford any harm to the overall administration of the Act. And torts have been brought. I think we have to, if I may, analyze the cases that have been decided by this Court previously. The principal case is that of Linn versus United Plant Guard Workers of America, and this was a case in which the manager of the employer's plant after a strike brought suit for defamation of character, libel and slander against the union for the dissemination of leaflets and scandalous material in those leaflets concerning him during a strike. And the Court held that that tort could be litigated by state court under two or three different theories, number one being it was such a complete concern to the respective states that it was not arguably within the purview or would not disturb the overall policy of the labor movement by allowing the states, which had a greater concern than did the labor movement with regard to that particular type of action. Now, let's consider... and there are only two... there are only really four cases on which torts have been allowed. Two of those, they were allowed; two of those, they would have been allowed except the facts were not appropriate, the Linn being the principal case. Now, let's consider what the similarities are between the Linn case and this case. There were torts committed in both cases. There was misrepresentation in both cases. The injury... there was injury in both cases, except in our case it's a lot greater. It's 400 to one greater. There are 400 people here who were just summarily discharged. There were many of these workers who took, in pursuance to that advertisement, jobs at lesser pay because the current jobs they had were seasonal. There were people who left secure jobs to go because of the advantages advertised and guaranteed by that advertisement. And they have been work... some of them have been out of work ever since. The same... in the Linn case and in our case, in both cases the action was... the Defendant's action was not protected in either one of these cases by any constitutional provision, and in both of these cases the National Labor Relations Board, which so desperately wants jurisdiction of these particular items, can neither give any remedy or offer any relief to the parties that they ostensibly say they intend to protect. Now, there were some dissimilar factors between the Linn case and our case. One, in that, in the Linn case, the NLRB does take recognition of libel and slander, at least to a limited degree, because it will consider those items in election cases and set aside elections if there has been misrepresentation with regard to libel and slander. Never has the NLRB in any case awarded any damages, awarded any form of relief in any way, shape, or form in a tort action. Never. There's another dissimilar factor, in the Linn case, the action took place between two parties to a labor dispute. There was a manager of an employer's plant, suing the union. In our case, there are third parties, who had no part in the labor dispute whatsoever, except to go to work. So there is that dissimilarity, that dissimilarity is much in our favor. If I could comment about two other problems which have arisen, 1), most important, there have been some remarks made both in the briefs and today concerning "permanent" being a work of art. I know of no decision and I have never seen a comment that says that "permanent" is a work of art or is any different than that which I learned in school, and from Random House dictionary of the English language, it says: "intended to exist or function for a long, indefinite period without regard to unforseeable conditions. " and gives two examples, permanent construction and permanent employee.
Warren E. Burger: Well in this context, does anyone need to have any broader definition than that the replacement people would be just as permanent as the persons they replaced?
Cecil Davenport: I think that is a fair statement, yes.
Warren E. Burger: That doesn't mean a contract for life, like life tenure judges.
Cecil Davenport: No, so long as the jobs were available and those conditions existed which were appropriate for them to be employed.
Warren E. Burger: Why wouldn't you be fully protected, your clients be fully protected, if the case went to trial, and let's assume hypothetically that first the court, state court, decided that any claim under contract would be preempted, but that he went to try the case on a fraud theory, on tort, and gave a recovery. Your clients really don't care whether they recover on contract or tort, do they?
Cecil Davenport: I think that's a fair statement, yes, sir.
William H. Rehnquist: But I presume they would prefer having two bases for recovery rather than just one.
Cecil Davenport: Absolutely. I, as a practitioner, would, and certainly I would advise them to.
Byron R. White: Well, fraud claims are a little harder to prove.
Cecil Davenport: Yes, sir, it would be five elements.
Byron R. White: Reliance, and things like that.
Cecil Davenport: Fraud must be made with an intent to decieve, to someone knowing that, presuming that he is going to rely upon it, and that he must rely, and it must be false, and there must be detriment.
Warren E. Burger: And in some states, it requires clear and convincing evidence as against a preponderance.
Cecil Davenport: That is correct.
Warren E. Burger: Does that apply in your state?
Cecil Davenport: That applies in the fair state of Kentucky. There is one other item that I would like to reply to, and that is, this question about the union being the obligative representative of all of the employees. I would simply like to refer again to the contract, that the union, in secret, without the other employees, that theoretically, if that were true, they would be inclined to represent, sat down with the company, when the company had made a decision that it had made a bad choice, and made a contract which was detrimental to the 400 that it was in a fiduciary position and obligated to represent fairly. Now we contend that they are not, they are not the representatives, but that is fair statement of what position they were in, if that theory would be bought. They were not the representatives, if they were the representatives, they did everything in their power to enter into a written contract which on page 10 of the brief of Belknap Inc., says that: "The company and the union further agree that in the event it is necessary that the company terminate replacement employees, in order to comply with this recall schedule, such terminations shall not be subject to grievance and arbitration provisions of the contract. " So they wrote the 400 out of the contract, and that is fair representation? I would think not. There are four cases which predominantly deal with torts that have come before this court: Linn v. United Plant Guard, Machinists v. Gonzales, Motor Coach Employees v. Lockridge, San Diego Building Trades Council v. Garmon, and Farmer v. United Brotherhood of Carpenters. In the Linn case upon which we rely, state court was allowed in that case to take jurisdiction of and adjudicate differences of a plant manager of an employer who sued for libel against the union, a tort. In Machinists against Gonzales, Gonzales sued his own union, and the Court in that case said there was no infringement of any apparent wrong or any apparent deviation of the power of the National Labor Relations Board, because the state court had only to consider the elements of the union constitution and nothing to do with the strike, and he recovered in that case. In Motor Coach Employees versus Lockridge, a union member sued the union. Relief was denied and overturned by this Court, with fair comment that had the state court been able to consider only the constitution of the union that it would have been a matter which they had jurisdiction of; however, they had to consider a security clause of a contract and had to rely upon that for adjudication, and the Court felt that that was arguably within the purview of the NLRB. So Motor Coach Employees versus Lockridge favorably commented upon the right of Lockridge to sue, but denied his right to have it adjudicated by a state court, on the theory that in order to do so they would have to consider and comment and adjudicate a plant... a contract security clause. In San Diego Building Trades Council versus Garmon, the holding of that Court extensively argued the theory of state court adjudication and decided that the state court could not award damages for peaceful picketing, a matter which was arguably within the purview and preempted by the Act. In Farmer versus United Brotherhood of Carpenters, a union officer sued in tort for damages and the Court in that case favorably commented upon his right to sue in tort, however, reviewed the proof and decided that the proof called for the state court to rely upon apparent unemployment discrimination... I mean employment discrimination... and therefore, while the Court sanctioned the right of the state court to adjudicate pure tort, if in doing so the state court had to pass upon an employment discrimination matter they felt that that was arguably within the jurisdiction of and preempted by the NLRB. I'm citing these because I think that these five cases graphically set forth what the Court's progress up to this time has been, and that in two of these cases state courts were allowed to adjudicate tort; in two other of these cases the state court... the ability of state court to do so was approved, however, the case was overturned because there was reliance on matters which was arguably under the preemption doctrine of the NLRB. So I'm saying it is our position that tort has been allowed before, tort has been allowed under, for a better expression, thinner cases and circumstances than this; and that our only position is one which could probably be summed up by arguments that have been made by questions from this Court far better than I would ever have the ability to do so. But essentially we must, I feel, give some attention to simple propositions of law which I learned in law school, and that is, for every wrong there must be found a remedy. State courts have never been preempted from adjudicating tort. That is matters which were reserved to the state court by the Tenth Amendment. Now, to the extent that the National Labor Relations Act may have carved out areas of that--
Byron R. White: You don't really mean all that, do you?
Cecil Davenport: --Sir?
Byron R. White: You don't really mean that the state courts have been... can adjudicate any kind of a tort without preemption?
Cecil Davenport: Oh, no, no.
Byron R. White: Well, that's just what you said.
Cecil Davenport: I beg your pardon. I didn't mean to, sir. I meant that tort in general had not been preempted, that certain areas of tort adjudication have been preempted by the NLRB. And essentially all of the relief which these people are asking is, as simply put forth by the questions, it's no imposition upon a employer to go out and hire employees and tell them the reasonable, the satisfactory circumstances under which they will be employed, and that they may have to be terminated at such a time in the future, or to say nothing, for that matter; but not to overtly advertise something that it knows full well it cannot fulfil. The depositions in the record in this case show that on February the 1st, at the time the strike began, and prior to that time there had been meetings with their attorneys and the plan to hire replacement employees had already been put into effect. The employer was present and in meeting with their attorneys when the language of the advertisement was put into effect. So it cannot be said that the employer was saying something he didn't know the consequences of. The employer was well represented at that time, by one of the most prestigious law firms in the State of Kentucky. And that therefore, when you overtly go out of your way, when you also are planning to give a raise, when you most assuredly must have been advised that to do so is to create an unfair labor practice, and then to hire a complete set of employees knowing that you may not be able to fulfil those obligations, we submit is a matter which is not even arguably within the preemption area carved out by Congress. Thank you.
Warren E. Burger: Thank you, gentlemen. The case is submitted.