Warren E. Burger: At 1:00 pm, we will hear 74-1110. Ms. Rose, you may proceed whenever you are ready.
Marilyn G. Rose: Thank you, Mr. Chief Justice, and may it please the Court. I am Marilyn Rose. I represent the plaintiffs, petitioners in number 74-1110 and respondents in number 74-1124. This case involves the legality of a Revenue Ruling, issued by the Internal Revenue Service in 1969. This Revenue Ruling removed the long standing, decades old, free service requirement, which had always been required of charitable hospitals. There was no notice given to anyone when this Ruling issued. There was no opportunity given to anyone, to public at large or affected persons to comment upon it or to participate in its development. The Ruling on its face relied solely upon statements in treatise writer for the law of trust that health per se is charitable.
Potter Stewart: May I ask, Ms. Rose? Is it not what you have told us about no hearing and no notice always true about the rulings of this kind? Has it not historically always been true?
Marilyn G. Rose: Well, when the Internal Revenue Service issues Revenue Rulings, they give no notice and opportunity for comment. One of the issues is should this have been a Revenue Ruling?
Potter Stewart: Yes, and whether or not the other rulings were rulings of this kind, that is what the question is.
Marilyn G. Rose: Yes. There were three substantive violations which plaintiffs charge from defendants. First and foremost, plaintiffs charge that defendants exceeded their statutory authority and in affect amended the Internal Revenue Code when they permitted hospitals as charitable institutions to limit themselves to serving only the paying public. If the Court decides this issue against plaintiffs, then our second issue is that this indeed, though it was called a Revenue Ruling, which should not have been a Revenue Ruling, it was a substantive rule and defendants were required to proceed in accordance with Section 553 of the Administrative Procedure Act.
William H. Rehnquist: Ms. Rose, may I ask you a kind of a preliminary question as to how you plan to structure your argument? Are you going to discuss a standing at the Anti-Injunction Act and sovereign immunity at the latter part of your argument?
Marilyn G. Rose: Yes, Mr. Justice Rehnquist. The, a third violation, and this again is if the Court rejects both our Internal Revenue Code and 553 Arguments, is that nevertheless there was a violation of Section 706 of the APA that this Ruling was arbitrary and capricious because the defendants would have to have considered factors which they did not consider in the face of the ruling. And as Mr. Justice Rehnquist indicated, there are jurisdictional issues which the defendants have raised. We believe these jurisdictional issues can be best considered and understood in context of the substantive issues, and for that reason we will address the substantive issues first. Section 501 (c) (3) and 170 of the Internal Revenue Code has never accorded hospitals tax-exempt status or deduction to the donors to hospitals. Unlike educational and religious institutions which have their own independent basis, hospitals have had to qualify as charitable institutions. For decades, the IRS has required that these charitable hospitals provide either service exclusively to the poor or may provide service to all persons in the community, rich and poor alike, but they may not exclude the poor. This is the consistent position of every Tax Court and Federal Court that has considered the issue in the past thirty-three years. There is no case the defendants have cited where a hospital has been accorded 501 (c) (3) status, without there being a finding that a hospital gave free service. This indeed is a similar position that IRS takes for all other organizations, which are eligible for these statutory benefits, solely by virtue of being charitable. Every ruling which is cited in the defendant’s brief, every ruling which is cited in the amicus -- American Hospital Association’s brief, and every ruling which we have found and this goes to date till 1975, requires that Institutions which are solely charitable as distinct from being charitable and educational or religious or societies for the prevention of cruelty to children, also must serve all persons in the community rich and poor alike. This is also the position of all state charitable cases or virtually all state charitable cases. The defendants relied simply on a 30-year old statement from Scott on Trust. In 1939 as of 1967, the Scott Treatise states that health is charitable per se, but all the cases that professor Scott cites, the tax cases and charitable trust cases, also have this rich and poor alike requirement. Indeed the general law of charitable trust going back to England and more ancient times has always considered that there are four heads of the charity. Charity is either for the relief of the poor, educational, religious, or there is a fourth head, and this fourth head of things beneficial to the community, but things beneficial to the community must provide service to all persons of the community, again rich and poor alike. This beneficial to the community does not permit that the exclusion of the poor. The defendants argue that the Treasury Regulation, which issued in 1959, permitted them to make this change; that is absolutely untrue. The Treasury Regulation, which issued in 1959, is an expansion statement on what is the law on charitable, but it was brought in to include new purposes such as combating discrimination, juvenile delinquency. But there is nothing on the face of the Ruling of the 1959 Regulation nor is there anything in its published history to indicate that there was a change and charitable organizations may serve only the paying public. In 1969, the American Hospital Association appealed to Congress to make a change and give hospitals independent status. This change was rejected, it was in the House Bill. The Senate Finance Committee in October of 1969, considered the issue and the Senate Finance Committee deleted the House Amendment. The statement for deleting this House Amendment took into account the fact that three weeks earlier, the Internal Revenue Service had issued to Revenue Ruling that is issue in this case. But the Senate Finance Committee stated flatly that they were removing this provision, that the Revenue Ruling in issue in this case did not conform to the Internal Revenue Code, and they want to consider the proposal in context that is implications on health legislation. I think it is clear that the Congress need not conform the statute to an administrative action, but administrators are bound to conform their actions to a legislative enactment. The Court below recognized the judicial, administrative and legislative history are discussed, but they went further. They said that this need not always be the case, that defendants could take into account socio-economic changes. They also made a statement, that the so-called requirement of emergency service in the Revenue Ruling, maybe of greater beneficial value to the poor than general hospital services, including in-patient here. That -- those socio-economic findings are legally infirm. There is nothing on the face of the Revenue Ruling to indicate whatsoever that any of these matters were taken into account by defendants. The Appellate counsel in this case in the Court of Appeals below, and in the Supreme Court, is making this proffering, this argument, but that is -- should be rejected as the Court of Appeal’s decision should be rejected. I think there are many cases of this Court that have stated flatly, that the post-talk rationalization of Appellate counsel cannot substitute for the reason that the Administrative Agency used. And the Administrative Agency used solely Scott on Trust, and Scott in Trust has said the same thing, I had this one sentence upon which they rely since 1939. And in 1939 and through the 1940s, and through the 1950s, and through the 1960s, ye, in the summer of 1969 Internal Revenue Service was still going at the hospitals that refused to serve the poor and poor have to be served. It is also factually infirm because of the limitations of time, I will not go into all the details. Our brief in Chief, and the brief of the American Public Health Association extensively discussed as why it is factually infirm. In some, HEW, which is the health expert agency in this country finds there are over twenty-three million people in this country with incomes of below the poverty guidelines, and at that time the poverty guidelines was something like $4,400 a year for a family of four. That these upwards of twenty-three million people have neither private not public health insurance, and when we say that we are including Medicaid; Medicaid is a very limited program in terms of eligibility for income and services, it does not take care of the poor. The health policy of the United States has continued to require the free service be given. The Halliburton program of HEW requires a free service be given. Title XVI of the new Health Planning Act, December 1974, Congress specifically said that until there is -- there will be a national, or if there will be national health insurance program there is still a need to serve everyone of the community to serve the poor. The defendants have made a large argument that this Ruling does not deprive from the service to the poor that there is an emergency room requirement in the Ruling. We disagree in several respects. First, they argue as if the emergency room has now become like a private doctor’s office. General physician services do not exist in emergency room. The Ruling, secondly on its face talks not about general emergency room services, it talks about a dire emergency and that a hospital cannot turn away somebody in a dire emergency. And thirdly, there is no requirement that people not be charged. The most they can say for this Ruling is that people will not be required to put up money upfront to pay a pre-service admission if they come into an emergency room, they are in a dire emergency, maybe bleeding to death, there is no free service requirement. Turning now to our Section 553 of the APA argument, which this Court need not reach if they accept our primary argument. The Internal Revenue Service does not deny that it is an Agency subject to 553 and it cannot make such a denial. It says this Ruling was interpretive. We say that the Internal Revenue Service is mislabeling this Ruling. This Ruling on its face has to be substantive. In our principal brief, we have come up with what I would call a functional test, that the lower federal courts have increasing in recent areas looked behind the label and have said, is the rule a policy of an agency, general long standing, is it a revision of a long standing rule. Is there a need for an agency to expedite -- to educate itself? What is the impact upon an industry? What is the impact upon the public? In everyone of these cases, here is a major revision done without notice, without an opportunity for comment by an agency that knows virtually nothing about healthcare, ignoring what the healthcare agency of United States is doing, let alone what organizations like the American Public Health Association would do.
Warren E. Burger: Do they know of nothing about healthcare, now do we know more about it?
Marilyn G. Rose: Well I do not think, I would Mr. Chief Justice, that I do not know if this Court knows more about it but -- and I also do not know if the Court of Appeals might know more about it, but these on -- what the Court of Appeals did is they made findings, they made findings without a record. They have reached out and sustained this Ruling in the same way as if there was an attack on congressional statute for being unconstitutional. The fact is this the Court of Appeals should have looked simply as to what reason that was used by the Agency, Scott on Trust. If they did not looked at that, they have reached out and made socio-economic analysis, they were going beyond their power and or their -- so, with all this Court I think what this argument has to determine is that this is the kind of thing, there should have been hearing on. The alternatively if the Court finds -- feels a definitial test is the proper one, an interpretive rule is one that is limited to determination of congressional purpose. A substantive rule is one which augments congressional purpose and goes beyond the statute, it goes outside the statute. In this test too, this is a substantive rule. I will not go into our alternative Section 706 of the APA argument. I think it is clear that the only way the defendants feel that the Ruling could be sustained is they had to make the socio-economic argument. It is not on the rule -- it is not on the face of the rule. The Agency did not consider it, and therefore, all relevant were not conceded and as citizens to preserve over to the park all over again. I would like to turn to the jurisdictional arguments that defendants have proffered. Defendants have not come up with what is a variety of jurisdictional barriers to plaintiffs sustaining -- maintaining this cause. Their first argument is an attack upon the rules laid down by this court in Abbot Laboratories and all other cases like it. It is an attack upon the presumptive reviewability of agency action. I do not think that the IRS intended to attack that for any other agency of government, but itself. It says it is somehow different, but it has proffered no justification for making the Internal Revenue Service different from any other governmental agency.
William H. Rehnquist: Well, how about, you say very little in your reply brief about our decision last spring in Warth against Seldin. Now, do you not think that has some bearing on the case?
Marilyn G. Rose: Yes, and I will -- if you like I will turn to Warth v. Seldin now, Your Honor, Mr. Justice Rehnquist. Warth v. Seldin of course raises the question of standing to sue. Plaintiffs are poor people who were denied healthcare, denied admission to hospitals by hospitals, which have been given 501 (c) (3) status. And (Voice Overlap)
William H. Rehnquist: Yours is kind of a house-of-jack bill type of causation. The same is Warth as I see it, where it is not just a direct causation, but it is, if (a) had not done this, then (b) would have done this, then (c) would have done that and my people would have been okay. It is a fairly attenuated kind of standing, is it not?
Marilyn G. Rose: Mr. Justice Rehnquist, I disagree. In Warth v. Seldin, in this Court found that the defendants there were not responsible for the inability of those people to find housing in Penfield, it was the marketplace that was at fault. In this case, there is a federal statute, the charitable provision of the code, which is intended by Congress to meliorate the conditions of the marketplace, and what plaintiffs have said is, government you have aggravated our rights under that statute, it is very different.
William H. Rehnquist: Was that statute intended to confer any discreet rights on your clients?
Marilyn G. Rose: Oh! Yes, absolutely.
William H. Rehnquist: Well, what is your authority for that?
Marilyn G. Rose: I think the whole history of the reason for the charitable provision of the code, just as the charity in the charitable trust --
William H. Rehnquist: Has this -- go ahead.
Marilyn G. Rose: In fact, the defendants in their Treasury Regulation, when they start off to finding what is charitable, they say principally for the relief of the poor.
William H. Rehnquist: Has this Court ever entertained an action of this kind where is that the claimed beneficiaries of a tax deduction as attenuated in situation as yours? What is the closest case and point from this Court which you --
Marilyn G. Rose: From this Court, I do not know of any case from this Court, there are lower Courts --
William H. Rehnquist: I do not either.
Marilyn G. Rose: Yes, the whole -- in 1930s there is a House report on the reason for the charitable provisions of the code, it is to lessen the burdens of government. This is a classic statement. It goes back to the charitable law of charitable trust where the reason, it goes back 1601, that charitable trust started was to take care of certain things for that the government, otherwise it will be obligated to do and the hear of the poor was always the primary consideration. I think our plaintiffs are clearly within the zone of interest.
Byron R. White: Well, that -- would that be in existent or without the letter from the Revenue Service, would these hospitals have served the poor?
Marilyn G. Rose: Well, if, truly -- well, Your Honor, if the --
Byron R. White: Suppose a hospital’s exemption have been revoked for failing to serve the poor --
Marilyn G. Rose: Well, if a hospital --
Byron R. White: How would that have helped you?
Marilyn G. Rose: Well, well we are not seeking, this gets of course into the Americans, United and Bob Jones issues, we are not seeking whatsoever to have anything revoked with, except --
Byron R. White: I understand that, I understand that.
Marilyn G. Rose: If a hospital --
Byron R. White: But you are saying -- you are saying that the modification of the rule permits the exemption despite the failure to serve charities?
Marilyn G. Rose: Well, let me turn this around --
Byron R. White: And if these hospitals have not served charities, they are, under the prior rule, their letters would have been revoked?
Marilyn G. Rose: We presume that when the -- all through the years the Internal Revenue Service required service to the poor and hospitals would deem to be charitable, that they were obeying the law, the entire Internal Revenue Code --
Byron R. White: But they were not required to do it? They were not required under the law to do it? It is just if they wanted to be a tax exempt, they did it?
Marilyn G. Rose: If they wanted to be tax --
Byron R. White: They did not break any law if they did not serve the poor?
Marilyn G. Rose: If hospitals wanted to lose their tax exemption, but -- but that is mere -- that is a great degree of speculation. There were thirty -- there are thirty-five hundred hospitals --
Byron R. White: Upon whose side --?
Marilyn G. Rose: Mr. Justice White, hospitals are tax-exempt, they not --
Byron R. White: These days when the profit and loss statements of hospitals looks like different than they used to?
Marilyn G. Rose: Well, Your Honor, may I state several different responses to that. First, they would not only lose the power of how it be tax-exempt, but they would lose the contributions to them, and 60% of the construction money going into hospitals today is from charitable donations. The American Hospital Association goes up to the hill, they make the statement. It is in -- the appendix, the speech of the testimony of the American Hospital Association that charitable contributions to hospitals are what keeps hospitals going. It makes the marginal difference. Further, as amicus of Jackson County, Missouri, has pointed out in its brief that states follow what the federal government does. And if a hospital decided it would rather not serve the poor, it could not be -- it would lose its tax-exemption, it would be paying thousands -- hundreds of thousands of dollars of taxes every year on the property on which it sits.
Byron R. White: Well, I just thought you ought to be making the standing argument.
Marilyn G. Rose: Okay, okay. The standing and basically is -- the proposition is that poor, and I think in way, I have probably answered most of the standing argument. We think Warth v. Seldin is not pertinent. We think because this particular provision was designed to meliorate the conditions of the poor and it is the obligation of that statute that hospitals are not about to give up their tax-exempt status. And three, the other, the last argument the government raised, well, I think they raised at first is this is prosecutorial and this is not prosecutorial, we are not seeking the prosecution of anybody. We are seeking a revocation of a Ruling and the order of the District Court with which we would like reinstated is that this Ruling was invalid, hospitals have to give free service and that the notification be made to the public. The Internal Revenue Service publishes its cumulative bulletin, and if hospitals in the future did not want to give free service, they could elect to be pulled-off that list, but until they are pulled-off the list, the public relies --
William H. Rehnquist: How about immunity and the Anti-Injunction Act, you have come to those?
Marilyn G. Rose: We -- the Anti-Injunction Act and the declaratory judgment provision are not pertinent. This is not a case involving the assessment of collection of taxes of either the poor people themselves or of anybody else. There is no other alternative for these people. It is not a refund suit. This is not like Americans, United trying to protect their contributors. This has nothing to do whatsoever with the assessment. And sovereign immunity, we believe has long been overruled in most respects, the government is arguing it that under Larson, this case is one exceeding statutory authority and this is clearly what the case is about.
William H. Rehnquist: We do not rely on Scan, well, then you simply rely on Larson?
Marilyn G. Rose: No we have the alternatives, if you dwell on Larson, if you find for some reason that the Larson does not apply them we are relying on Scamwel (ph) --
William H. Rehnquist: Which is not a case in this Court.
Marilyn G. Rose: No, the, it is the Court below, but basically we are saying that for cases that are APA cases, sovereign immunity no longer exists. This does not mean there is not a sovereign immunity argument on property cases, damage cases, property held in the name of the United States, there is a still sovereign immunity argument, it just does not exist anymore, or Abbott Laboratories, Parlow (ph), Collins, and Data Processing are all overruled. I think will save, thank you.
Warren E. Burger: Mr. Smith.
Stuart A. Smith: Mr. Chief Justice and may it please the Court. The government’s position in this case simply is that published Revenue Rulings, such as the Revenue Ruling at issue here, do not present any issue for a Federal Court to review and in that holding to the contrary the decision of the Court of Appeals is erroneous. And before discussing in detail, the various jurisdictional barriers that we think exist in this suit, I think it would be important for the Court to have before it what the essential nature of a Revenue Ruling is. Because in our view that essential nature demonstrates that the jurisdictional holding of the District of Columbia Circuit in this case would require the Federal Courts to render judgments in the most abstract contexts. Now, each year the Internal Revenue Service, pursuant to its statutory authority under Section 7805 of the code, issues some forty-thousand advanced letter rulings. These advanced letter rulings set forth its opinion of the federal tax consequences of specific proposed transactions.
Potter Stewart: And those are private --
Stuart A. Smith: And those are private.
Potter Stewart: Sent to an individual, in response to an individual inquiry?
Stuart A. Smith: Exactly.
Potter Stewart: And few of those are later published?
Stuart A. Smith: A few of those are later published anonymously. And of those forty-thousand the service selects and edits several hundred for publication in its Internal Revenue Bulletin, in a more abstract and anonymous form. Now, the introduction to the Internal Revenue Bulletin on the first page has long stated that such Rulings do not have the force and effect of law, but are informational in character only and represent the conclusion of the service as the application of the tax law to what is often an abbreviated set of facts. Now, this Court in the Dixon case and many other cases has underscored and ratified that statement in a cumulative bulletin that these Rulings are simply guidelines for IRS personnel and to educate the public general, and it had --
Potter Stewart: How are these disseminated and published --
Stuart A. Smith: Well, Mr. Justice Stewart --
Potter Stewart: -- law officers have reached --
Stuart A. Smith: Every two weeks the Internal Revenue Service I think publishes a, something called the Internal Revenue Bulletin, and then every six months or so those are bound in what is known a cumulative bulletin, and those are distributed to people, officers of the Internal Revenue Service and people generally who are interested in the development of the tax law.
Potter Stewart: And private tax lawyers can subscribe to it --
Stuart A. Smith: Private tax lawyers can subscribe, exactly and indeed anyone can subscribe (Voice Overlap)
Potter Stewart: You pay a fee and you get it directly from the Internal Revenue Service?
Stuart A. Smith: Yes. Now, these Rulings contribute to have a salutary aim. They contribute to uniformity of interpretation because as I think the Court is well aware, it would be unfortunate of it two Revenue Agents in different districts were to apply the tax lax law according to their best likes but coming out with a different results on what is an identical set of facts. So --
Warren E. Burger: And they do that occasionally in spite of the bulletin --
Stuart A. Smith: Mr. Chief Justice, we try our best, the Internal Revenue Service tries its best, but often mistakes are made.
Warren E. Burger: Have a lot of them to deal with?
Stuart A. Smith: Yes, and that these Internal -- -this Revenue Rulings are an attempt to mitigate and minimize those unfortunate instances. In any event, these Revenue Rulings, these contribute to uniformity of interpretation and in our view contribute to the stability of the tax law by reducing controversies between the Internal Revenue Service and taxpayers because as I think the Court is well aware, taxpayers, many taxpayers do not like to litigate with the Internal Revenue Service. They would prefer to have an advance notice of what its position might be on a particular set of facts, and this educational program increases stability and reduces litigation and the intended burdens on the Federal Courts. Now, the format of the Ruling, of a Revenue Ruling is essentially a statement of facts and it is often abbreviated with a brief conclusion as to what the federal tax consequences of those facts are. And the important thing is that the Internal Revenue Service does abbreviate a Revenue -- the facts in publishing a Revenue Ruling, because when a taxpayer makes a submission to the Internal Revenue Service, he makes a submission with a voluminous statement of facts. But the Internal Revenue Service when it -- if it may select this particular letter ruling for publication, it will boil this down and essentially present the statement of facts which is designed to illustrate a particular legal principle that it feels as of general interest.
Harry A. Blackmun: Is it not the, is it still true today as I think it was a hundred years ago (Inaudible) a revenue rule is maybe with an exception or two about the lowest form of animal life in the formal weight of the rulings --
Stuart A. Smith: I think that so, Mr. Justice Blackmun. The Courts, of course this get into the argument about notice and hearing requirements, but they are not binding on the Courts. In fact there are scores of cases which hold that it is simply a statement of what the Internal Revenue Service thinks the law is.
Harry A. Blackmun: I know, we always hopefully look for a TD or something of a little --
Stuart A. Smith: Oh! Absolutely, that is a higher from of tax life, there is no doubt about that.
Potter Stewart: And the one we are talking about here appears begins on 6A of the appendix to your brief, is it not?
Stuart A. Smith: Exactly, that is Revenue Ruling 69-545. Now, this Ruling itself demonstrates the hypothetical quality of what the plaintiffs are seeking -- or hypothetical quality of the relief they are seeking, because as the Court can readily see in perusing this Revenue Ruling, it sets forth two polar situations, situation one and situation two dealing with two hospitals, hospital (a) and hospital (b). Hospital (a) there are variety of facts in connection with -- hospital (a) has an open Board of Trustees. It gives open staff privileges. It is involved in research and educational activities. It maintains a full-time emergency room and no one requiring emergency care is denied treatment. To the contrary, hospital (b) is almost proprietary in nature. It is owned by a small group of doctors. They limit the staff of privileges to people they know and they comprise the medical committee generally to keep out qualified physicians, so etcetera-etcetera and it does not have -- it maintains an emergency room, but basically to treat the patients of its own doctors. Now, these two polar examples were designed to educate the public generally and hospital administrators as to clear-cut situations. Hospital (a) is a situation, if you like hospital (a), you will be -- you will be fairly certain of exemption, but of course the Ruling does conclude that you cannot be certain of that itself. You have got to yourself submit an application for exemption to the Internal Revenue Service. If you like hospital (b), which is a polar example of hospital that does not seem to provide any community benefits. It seems to be run pretty much strictly for the private inurnment of its owner-doctors. In those situation -- in that situation you are not going to get a tax exempt status. Now, the important thing, which we emphasize, is that the Ruling does not even begin to attempt to deal with the hundreds of gradations in between hospital (a) and hospital (b). Hospital (a) assuming for a moment that -- that it does not treat people -- that does not give free care to the indigents on a broad scale, although let us say it dropped its emergency room requirement -- emergency room completely for let us say the particular example that it may be engaged in treating cancer patients or a particular kind of decease. Under those circumstances an emergency room would be relatively -- would be superfluous because such a hospital would rarely have need for an emergency room or for example a consortium of hospitals in a particularly community could get together and one could say, we will have the emergency room, you have the nursing school, and the third --
Byron R. White: Mr. Smith, you are not suggesting that the issuance of this Revenue Ruling, it was not a rather substantial event?
Stuart A. Smith: It was a substantial event, Mr. Justice White --
Byron R. White: I mean the day before the law was not that hospital like that. Hospital in type (a) would --
Stuart A. Smith: I do not -- I am not sure that is right, because although the plaintiffs cite many cases for the preposition that the pre-care requirement was an absolute requirement, there is no reported decision and I have found one and there is no instance that I know about the Internal Revenue Service --
Byron R. White: But I take it you are arguing the case is though, even assuming that that was the case?
Stuart A. Smith: Even assuming that was the case, that there was --
Byron R. White: That the Revenue Service at the moment it issued that ruling was then applying the Revenue laws completely different than it had before. Now, you are arguing the case on that basis, are you not?
Stuart A. Smith: That is right. Now, it seems --
Potter Stewart: And in fact that was the understanding of the tax bar pretty much, was it not?
Stuart A. Smith: It was the understanding of the -- it was the understanding (Voice Overlap)
Potter Stewart: (Voice Overlap)
Stuart A. Smith: Although quite frankly, I think if the decisions that the plaintiffs cite of the Court of Appeals indicate that there really is, there was no instance in which the Internal Revenue Service revoked the tax exemption of a hospital solely because they denied free care to the indigent.
Potter Stewart: May I ask, now that I have interrupted you, this involves the -- the tax benefit that a donor or a hospital as a donee or legatee as well as its hospitals own income, does it not --
Stuart A. Smith: That is right.
Potter Stewart: Both (Voice Overlap)
Stuart A. Smith: That is right, the deductibility of contributions, or the state tax --
Potter Stewart: They go together?
Stuart A. Smith: Yes, yes, they do.
Potter Stewart: Thank you.
Stuart A. Smith: Now, given the fact that this Ruling that is under challenge here just presents these two hypothetical polar examples, I think it is important to point that if a particular hospital decided that it did not need an emergency room for a particular -- for particular reason because of its own mode of operation, it would not necessarily have been denied of tax exemption by the Internal Revenue Service, and that to us demonstrates the hypothetical quality of this suit because this Ruling came up, or was published on an abbreviated set of facts. Hospital (a) indeed no other hospital is before this Court to present its own set of facts, and indeed each hospital continues to remain free to litigate its own right through exemption on its own facts.
William H. Rehnquist: No hospitals were parties to this action at all?
Stuart A. Smith: No hospitals were parties to this action at all, Mr. Justice Rehnquist, and to us this demonstrates an important point --
William H. Rehnquist: Well, do the government ever move to dismiss the action on the basis of failure to join indispensable party?
Stuart A. Smith: No we do not regard the hospital as an indispensable party within the technical meaning of the Federal Rules of Civil Procedure, but --
William H. Rehnquist: Well, why do you not?
Stuart A. Smith: Well, simply because -- well, I do not think -- I think that if a hospital had been joined as a party, then I think we would essentially be faced here with whether a particular -- that particular hospital’s exemption should be -- should continue to stand on. I think the important thing--
William H. Rehnquist: Well, but now that-that -- that is not --
Thurgood Marshall: (Voice Overlap) hurt is the hospital?
Stuart A. Smith: The only person that might get hurt -- the only entity that might get hurt is the hospital --
Thurgood Marshall: And that does not make them a indispensable party?
Stuart A. Smith: It makes them an indispensable -- it makes them an indispensable party, but the jointer of one, two, three or indeed a dozen hospitals would not -- would not solve the tag -- would not create a broad rule, which would be applicable to the hospitals generally because each hospital continues to remain free to litigate its own right to an exemption on its own particular facts. And to us that demonstrates that this suit really is tantamount to asking a Federal Court to render an advisory opinion, because if Federal Court says the emergency room requirement is no good, reinstate the old ruling, what would left -- what essentially you are left with is a pronouncement which has no pertinence to any particular hospital --
Byron R. White: What you are saying is it is not a case of controversy?
Stuart A. Smith: Essentially, it is not -- it is not a concrete case, which wants a decision by a Federal Court.
Potter Stewart: What motions did you file?
Stuart A. Smith: What did you say?
Potter Stewart: What motions did you file, did you --
Stuart A. Smith: We filed the motion, essentially the position that we advance here was advanced in the lower courts, we moved to dismiss for a lack of standing, for because --
Byron R. White: Because the state has cause of action --
Stuart A. Smith: -- state cause of action for that this suit comes within tax exemption of the Declaratory Judgment Act that is not appropriate for judicial resolution. Essentially --
Byron R. White: So you filed motions to dismiss, basically?
Stuart A. Smith: Yes and the District Court denied the motions to -- the motion to dismiss --
Byron R. White: Then you filed a motion for judgment on the --
Stuart A. Smith: Yes.
Byron R. White: -- for judgment?
Stuart A. Smith: Yes, and the District Court -- essentially the District Court decided that it had jurisdiction, held the Ruling invalid, and granted broad -- you know the broad declaratory relief that the plaintiffs seek. The Court of Appeals held that the Federal Court had jurisdiction, but held the Ruling to be valid.
William H. Rehnquist: Supposing the District Court had been affirmed by the Court of Appeals, would that have had financial consequences to hospitals?
Stuart A. Smith: It may had have financial consequences to some hospitals, but it is entirely unclear as to how many. If any hospitals would have -- would have had -- would have been -- would have suffered detriment. The point is that each hospital continues to remain free to litigate its own, its own right to a tax exemption. Indeed in hospital (a) in this case, as the ruling demonstrates, was involved in education and research activities. It may well be that if it decided to drop its emergency room, as I have said for one reason or another for because it was inappropriate to its activities, it still would have a right to an exemption and it could have pressed its case before the commissioner and before a federal court, either the tax court or a district court.
William H. Rehnquist: So from the indispensable parties’ point of view, the only answer that would have been to enjoin to every single hospital that pays taxes in the country?
Stuart A. Smith: Exactly, and that to us demonstrates, you know, the hypothetical and abstract quality of this suit. It does not attempt to solve anything of general import, and a revenue ruling does not attempt to solve anything of general import. It simply a published statement on abbreviated facts of the Internal Revenue Service, boiled down which attempts to educate the public about general Internal Revenue Service positions. Now, I think the point about joining every hospital in the country is important because essentially Congress has the determined that the tax jurisdiction of the Federal Courts is limited to deficiency suits and refund suits. And the reason for that essentially, is because the Court’s cannot decide cases, much less tax cases, on anything but a full presentation of all the facts. Here we have an abbreviated set of facts, and essentially for a court to render judgment about hospital (a) and other similarly situated hospitals may not in fact very many if any hospitals at all.
Thurgood Marshall: Mr. Smith, one thing that is not clear to me, if this letter is declared out, what does it change if anything?
Stuart A. Smith: If this letter is declared out, it change -- I do not -- it change, it seems --
Thurgood Marshall: What would it change, it would not change anything, would it?
Stuart A. Smith: It would not change a tax liability of any hospital.
Warren E. Burger: I suppose that is why you are saying it should have not -- no judgment would have entered in the first place?
Stuart A. Smith: Exactly, exactly, this is really an, you know, a request for an abstract decision on an abstract set of facts.
William H. Rehnquist: Well but if, if it turns on your answer to Mr. Justice Marshall’s question, then if the ruling would have changed the liability of some hospital, would your answer then be different?
Stuart A. Smith: No, my answer would not be different, simply because as we have point out at great length in our brief, we do not think that third parties -- we do not think that the Internal Revenue Code confers a private right of action on non-taxpayers to contest the tax liability of any particular -- of any particular person. And I think that is important here because I think essentially that is what -- that is what is lurking behind this suit. The plaintiffs have said that this suit essentially, simply involves the editing and the rewriting of a Revenue Ruling of general application and they trust the system to alter hospital conduct. Now, we -- taking that at face value I think that the simple answer to that is that really makes this an abstract case. Simple because of the internal -- if they are not interested in Internal Revenue enforcement, with respect to any particular hospital or group of hospitals, then essentially they are asking the federal courts to rewrite Revenue Rulings which are the province -- which is the province of the commissioner where there may be no effect at all, or they proffer interest in that effect.
Byron R. White: You would not let them into any suit at anything with respect to whether a hospital was exempt or not?
Stuart A. Smith: I would not let -- that is right, we do not think --
Byron R. White: So that this particular group or poor people generally who would like free service cannot litigate, as far as you are concerned, the exemption or non-exemption of hospitals?
Stuart A. Smith: Exactly, anymore than (a) cannot litigate the propriety of a ruling given to (b) if he does like (b) if he thinks (b) is a competitor of his, if he thinks that for one abstract reason or another that the Ruling was incorrect. The Internal Revenue simply does not confer private rights of action on citizens generally to challenge the packs consequences that the Internal Revenue Service conferred on a private party. I think that is -- I think that is absolutely well settled. I think that the Court if there is a decision, which is in point on this -- of this Court, it seems to us that it is Louisiana versus McAdoo, which the plaintiffs here had dismissed as overruled. That decision has not been overruled, there the State of Louisiana, which was itself engaged in the production of sugar, brought a suit against the -- filed a motion for leave to file a bill of complaint in this court in an original action to force the Secretary of the Treasury to increase the quotas, the duties on imported sugar. It as a producer of domestic sugar felt pampered and fina -- that -- that, those Rulings were operated to its financial determent, and the Court simply said that that kind of action, it dismissed it without considering the merits, would operate and disturb the whole revenue system of the government, and that the Court’s role in such a case would be to interfere with the very function of government. And if another decision which we think is virtually on point is the Dorsheimer case which was rendered by this Court over --
Byron R. White: Can anybody, can any person that you know of challenge the, an exemption letter? I am sure if you cancel one, the fellow who letter has canceled can litigate with you, but how about the other way?
Stuart A. Smith: No.
Byron R. White: So that if you want to grant an exemption letter, whether it conforms to the statute or not you are home free?
Stuart A. Smith: Well, Mr. Justice White --
Byron R. White: No, yes or no, is the (Voice Overlap)
Stuart A. Smith: The answer is yes, but the -- but that has been a decision of Congress to confer this, the power to administer the tax laws and the commissioner of Internal Revenue, and --
Warren E. Burger: Some Congressman becomes aware of this, gets exited or not he could embark on some kind of an investigation or inquiry, could he not?
Stuart A. Smith: Indeed, Mr. Chief Justice, a simple letter to the Internal Revenue Service, I have found by member of Congress elicited a very prompt response.
Warren E. Burger: And if it does not then they can go on with congressional inquiry?
Stuart A. Smith: Absolutely, and they can enact legislation. And if particular public officials have acted in a way that the Congress thinks is improper, the Congress can seek to call in before investigating committees, indeed you know recent --
Warren E. Burger: They do not sometimes, do they not?
Stuart A. Smith: They do that, in fact the present incumbent commissioner of Internal Revenue has been before Congress some twenty-nine times in the last year. Congress has exhibited a very detailed interest in both substantive tax law and in the administration of the revenue laws. It seems to us there was just some things that the Courts do not get into, and one of them is the administration of the tax laws as the commissioner sees fit. This to us dates back to the Second Congress when -- when in 1792, Congress enacted a provision saying that the Secretary of the Treasury shall enact, shall direct the collection of taxes, which were then internal taxes, as he shall judge best. And that the present code follows through on that, grants a number wide discretionary powers to the Secretary of the Treasury and his delegate, the Commissioner of Internal Revenue, to publish rules, make assessments, bring civil actions and those -- that authority is explicitly and solely conferred in these public officials. The Internal Revenue code does not confer any private rights of action in those -- in those cases. And indeed, as I was saying, the Dorsheimer case, it seems to us is another case, which a hundred years ago this Court was faced with a situation where a collector of the Internal Revenue and they -- and two informants brought a suit against the United States urging that the Secretary of the Treasury improperly waived the penalty in a particular liquor tax violation case. And they were indeed hurt because at that time, they had it then, they had an existing right to a -- to part of the -- part of the proceeds of the penalty. They felt that they should -- that penalty should have been enforced and they would have gotten more money and the --
Warren E. Burger: Would the Dorsheimer case would go of on standing or on --place of controversy?
Stuart A. Smith: Mr. Chief Justice, it is very hard to know how that case went off. The Court simply said with respect to the digression of the Commission -- of the Secretary of the Treasury it was the exercise of his discretion in matter and trusted to him alone, and from which there could be no appeal. I suppose the Court said that there really was not the case for the Court to consider. This was something that Congress had given this public official sole discretion to do and you cannot appeal from that sort of thing. And today and indeed the Internal Revenue Code provides for discretion of the Commissioner of Internal Revenue to settle cases. If a case is settled and some third party does not like the way it was settled, there is no course of action to come into the federal courts --
Byron R. White: Instead audit somebody and allow the depreciation deduction and nobody can really challenge it?
Stuart A. Smith: Exactly, exactly. And it seems to us that Congress has made a decision that these particular public officials, they may make mistakes from time to time, but the presumption is that they are upgrading sincerely in accordance with their best likes. The tax law is hard, but the Internal Revenue Service is staffed by people who have a good deal of expertise in this matter and the Courts are not going to second guess them in this context.
William J. Brennan, Jr.: Mr. Smith, these Rulings are subject, are they not at any time of revocation?
Stuart A. Smith: Of course.
William J. Brennan, Jr.: And even when revocation may affect a given taxpayer?
Stuart A. Smith: Indeed, the Internal Revenue Service reserves the right to revoke something retroactively and it generally only does it when there is an omission of the material fact, but he can do in this Court and Dixon and American Automobile Association has said that he can do it. And Mr. Justice Brennan, that brings up another point about --
Thurgood Marshall: That can be tested in the chartable case by the contributor, can he?
Stuart A. Smith: That can be tested in the charitable -- yes, as the Court have indicated in Bob Jones.
Thurgood Marshall: But in the other case where a guy is in some corporation or foundation has violated his exemption, nobody can do anything about that, but the Commissioner?
Stuart A. Smith: Exactly, of course the public has a right to bring the matter to the attention of the Commissioner.
Thurgood Marshall: But no legal action could reach it?
Stuart A. Smith: Absolutely, in the same way that as we point out in our brief. If somebody feels somebody is involved in an unfair labor practice and contacts the general counsel of the Labor Board and he disagrees, that is the end of the matter. You cannot sue to compel the general counsel of the Labor Board or the Federal Trade Commission or may other agencies and ask them to commence proceedings against private parties. Congress has vested discretion in these officials alone to enforce those statutes. I want to mention one other thing, and sort of as a concomitant to what my discussion with Mr. Justice Brennan, and that is these injunction -- the -- the difficulties engendered by this kind of injunctive actions could sue in this case are illustrated by what happened after the District Court’s judgment came down. The District Court voided the Revenue Ruling and enjoined the Commissioner from taking any action consistent with it then of course the government appealed. Of course, during that -- of course during that time, too many hospitals were anxious to have their tax status clarified. Contributors who are anxious to have their deductions clarified. Municipal bond issues were pending as to whether exempt -- hospitals were tax exempt. The government applied for a stay to the District Court of its decision in order to allow at least until the matter was resolved throughout the courts to have its policy continued to be extent. The District Court denied the stay, the Court of Appeals denied the stay. Essentially for six or eight months the matter was in complete limbo. The Commissioner had no idea how to enforce the law at all and it seems to us that really demonstrates how these injunctive actions undermine the whole very salutary nature of the Revenue -- published Revenue Ruling Program which is to educate the public and if the public is in disarray, does not know what the answer is going to be, and the Commissioner is time being by Court orders in a normal case where a ruling is once -- if let us say a ruling is approved by a District Court as it was ultimately by the Court of Appeals here and let us say for one reason or the another the Commissioner wants to modify it as he --
William H. Rehnquist: Mr. Smith, can the Commissioner or the secretary be sued in any one of the ninety-three judicial districts?
Stuart A. Smith: I think so simply because he has -- you know the Internal Revenue District office is there, so I would think that he could --
William H. Rehnquist: So you know, it is not just a question of litigation in the District of Columbia Circuit I think?
Stuart A. Smith: I think that is probably right --
William H. Rehnquist: Bob Jones came up out of the Fourth Circuit, did he not?
Stuart A. Smith: Right, yes, Bob Jones came up through the District Courts, yes. Right, the point I was -- the final point that I was going to make was essentially if a ruling were approved and the Commissioner wanted to modify it in some way, presumably would have to go back to the District Court that approved it by an injunctive order to get permission to modify it otherwise he would be in contempt to that court order. The tax law simply cannot be administered that way, we submit, and [Laughter]
Byron R. White: It did not came out of this?
Stuart A. Smith: The reasons we have set forth probably at two greater length than our brief --
Byron R. White: Can you say that again [Laughter]
Stuart A. Smith: We submit that the judgment of the Court of Appeals be reversed and remanded to the District Court for an entry of judgment dismissing the complaint for lack of jurisdiction.
Warren E. Burger: Thank your Mr. Smith, and Ms. Rose, your time is up Ms. Rose.
Marilyn G. Rose: My time is up?
Warren E. Burger: Do you have something factually to raise other than the argument, we will give you a moment.
Marilyn G. Rose: May I make one statement of fact. There are over twelve-thousand lawsuits that are brought every year involving Revenue Rulings by -- on refund and deficiency situations, and that is where uncertainty may lay if there is uncertainty. The half a dozen suits in five years do not brace uncertainty.
Warren E. Burger: Thank you Ms. Rose. The case is submitted.


William H. Rehnquist: We'll hear argument next in Number oh oh ten seventy-three, Jerry p- correction, Owasso Independent School District Number one eleven, also known as the Owasso Public Schools versus Kristja J. Falvo. Sounds like the school has an alias Mr. Richardson.
Jerry A. Richardson: Mr. Chief Justice, and may it please the Court. The issue presented by this case is whether Congress, in enacting the Family Educational Rights and Privacy Act, intended to prohibit the common and longstanding practice of peer grading of routine homework papers, quizzes, and tests. Congress did not intend FERPA to apply to such routine classroom activities, because Congress was concerned only with information that might have a long-term negative impact on a student's academic or career opportunities.
Sandra Day O'Connor: Mister... Did you take...
Anthony M. Kennedy: the position in the court of appeals that there is no private cause of action?
Speaker: We...
Jerry A. Richardson: We did not raise that issue in the court of appeals, Your Honor.
Sandra Day O'Connor: The court of appeals discussed it.
Jerry A. Richardson: The the court of appeals raised it sua sponte, and it has been raised in amicus briefs submitted, in fact, three amici...
Speaker: Why didn't you...
Sandra Day O'Connor: raise the issue? Why isn't that more important than what you did raise?
Jerry A. Richardson: Candidly, Your Honor, we didn't raise it for a number of reasons.
Speaker: Well, I I just...
Anthony M. Kennedy: don't know if if it's if it's a good practice for you to force us to reach an issue you think is important if there's no cause of action anyway.
Jerry A. Richardson: Well, in hi- i- i- in hindsight I would agree with the Court that we should have approached it a different way.
Speaker: focus on...
Jerry A. Richardson: the nineteen eighty-three...
Speaker: aspect of it.
William H. Rehnquist: certainly had some justification on the private cause of action.
Speaker: That That's very true, Your Honor.
William H. Rehnquist: sure that you're going to prevail on that.
Jerry A. Richardson: That That's very true, Your Honor.
Sandra Day O'Connor: They're hard for us, too.
Jerry A. Richardson: A- And the other factor I would say is that the two decisions that the Tenth Circuit cited from from other courts of appeals, the only two decisions that we were aware of from the Second Circuit, the Fay versus South Colonie School District decision, and from the Fifth Circuit, Tarka vers- versus Cunningham, both of those courts of appeals had held that FERPA was actionable under nineteen eighty-three, so again, we made...
Speaker: strategic decision...
Sandra Day O'Connor: what if we think there's a real problem with that notion under this scheme, where the whole object was to have it administratively determined and it was a funding mechanism, and under the act, the penalty for not following it is a cut-off of funding.
Jerry A. Richardson: Oh,
Sandra Day O'Connor: Do we send it back...
Speaker: [Inaudible]
Sandra Day O'Connor: let it be briefed and argued below?
Jerry A. Richardson: No, I don't believe so, Your Honor.
Speaker: Congress...
William H. Rehnquist: raise this in your petition for certiorari, though, did you?
Jerry A. Richardson: We didn't raise it, no, Your Honor, we didn't.
Speaker: In addition, FERPA...
Ruth Bader Ginsburg: about how this act is enforced on the Federal side? Have there been any fund terminations, because the only thing in the statute itself is fund termination, isn't that right?
Jerry A. Richardson: That is correct, Your Honor, and I am not aware of any any decisions.
Anthony M. Kennedy: Well, I guess we are taking you away from the question on which we granted certiorari.
Jerry A. Richardson: The respondent seems to take the position, which is contrary to what the Tenth Circuit said, the respondent seems to take the position that only e- records, only grades or scores that are re- recorded in the teacher's grade book are education records.
Antonin Scalia: What's your definition of maintain, what, a week, a month ?
Speaker: I don't think that...
Antonin Scalia: Make me an offer.
Jerry A. Richardson: Your Honor, I think that that what Congress was getting at with the word maintained, it goes back to what I said in the opening statement, which is, information that could have a long-term effect on the student's career.
Antonin Scalia: Some of my colleagues like that stu-
Jerry A. Richardson: by that argument, but Congress was concerned about things that would have a long-term effect.
Ruth Bader Ginsburg: Is there a difference between your position and the Government said, but it means, educational records means institutional...
Speaker: No.
Ruth Bader Ginsburg: The kind that would be in the principal's office or and not in the teacher's drawer.
Jerry A. Richardson: No.
Speaker: I I I don't think...
Ruth Bader Ginsburg: been the posi- position that the Government, that this FPCO has taken consistently, because wasn't there, didn't they say that the teacher's grade book...
Speaker: Yes.
Ruth Bader Ginsburg: as an educational record?
Jerry A. Richardson: Yes.
Speaker: But if if...
Antonin Scalia: if if if your definition is correct, and it's it's it's it's that limited that it's only the stuff the school keeps that will go on into the permanent record of the student, what would be the reason for that exception that the statute contains for, you know, personal notes that a teacher that a teacher makes? You wouldn't need that exception.
Jerry A. Richardson: Well, not necessarily, Your Honor, and and that that, you're referring, I believe, to the sole possession notes...
Speaker: exception...
Jerry A. Richardson: B- but that's not that's not limited to grade books.
Antonin Scalia: W- where is it? C- can we look at that? It's in the, w- what's the sect-
Jerry A. Richardson: Yes, Your Honor.
William H. Rehnquist: Where is it, in the briefs?
Jerry A. Richardson: [Inaudible]
Antonin Scalia: Appendix page four of your brief?
Jerry A. Richardson: Yes.
Speaker: memory aid.
Antonin Scalia: But my point is, you wouldn't need that exception.
Speaker: Well...
Antonin Scalia: If, I mean, that e- that e- that exception suggests that other things that are only, only held b- in the sole possession of the maker...
Jerry A. Richardson: I disagree that you...
Speaker: not need that.
Antonin Scalia: could could be within within the statute.
Jerry A. Richardson: Well, for instance, a document, a counseling record, for instance, perhaps the the student had had experienced some emotional problems, or...
Speaker: something that has...
Jerry A. Richardson: come to the attention of a counselor.
Speaker: And you think...
Antonin Scalia: that's the kind of thing that would come within your definition of permanent records, the kind of things that go on to to college admissions offices, and so forth? That's what I thought you were saying.
Speaker: Well, I I I think that's...
Antonin Scalia: even the notes, personal notes kept by a by a counselor come, would come within this statute but for that exception, right?
Jerry A. Richardson: Well, but for that exception.
Speaker: Exactly.
Jerry A. Richardson: materials like that are maintained by an educational agency or institution.
Speaker: S- so are...
Antonin Scalia: Ste- so are a teacher's grade books.
Jerry A. Richardson: I believe t- because a grade book is, in my opinion, Your Honor, more of an evaluation instrument rather than a a record.
Speaker: of records.
Antonin Scalia: notes aren't? The counselor's notes aren't?
Jerry A. Richardson: Well, I I that argument might very well apply to counselor's...
Speaker: notes as well.
Antonin Scalia: that's the problem.
Jerry A. Richardson: Well, I think that's an that's an alternative possibility, Your Honor, is that it's a belt and suspenders ap- approach that that Congress never intended grade books to be covered, but just in case somebody happened to to be inclined to read them that way, we're going to put this exception in as well.
Antonin Scalia: And we usually don't interpret statutes that way.
Speaker: Well, I I...
David H. Souter: You you started out by by referring to to maintain as implying some significant period.
Jerry A. Richardson: Yes.
David H. Souter: And it would be consistent with that argument that you say, well, a teacher's grade book is kept for the year, but it doesn't become normally part of the institutional records of the school, so it's not maintained for a substantial enough period of time to qualify, whereas, and I just don't know factually about this, maybe the guidance counselor's records are simply kept forever.
Jerry A. Richardson: I Not i- in a, no, not a a pure durational criteria.
Speaker: time that are institutional rec-
David H. Souter: maintain, then, that you're using?
Jerry A. Richardson: The definition of maintain that I would ask the Court to adopt is its common meaning, to preserve, to retain.
David H. Souter: Yes, but don't, doesn't that force us into some kind of a durational, and I'm not saying this is an objection to your argument, particularly, but I mean, doesn't this force us into some kind of a of of a durational criterion? The the the record of the of the quiz which student A corrects for student B and calls out to the teacher, the the the number that student B puts on top of the the quiz is a record for a short period of time.
Speaker: But it's not the kind...
David H. Souter: something is recorded, and you're saying, well, sure, they they can't be getting at that, but if they're not getting at that, then it's either got to be for one of two reasons, either the the kid who does the correction isn't a person who maintain-, who who makes a record by definition...
Jerry A. Richardson: Correct...
David H. Souter: or a record is something that has got to be maintained longer than the period that it takes for some kid to call a number out to the teacher, which is a durational criteri-
Jerry A. Richardson: That That's true, and and that's the same reason that a chalkboar-, work on a chalkboard would not be maintained in the meaning of FERPA, even though it might be up there not only for for a minute or two, I mean, in some college...
Speaker: May I ask you a a question...
Jerry A. Richardson: that's up there for a week...
Speaker: Do you...
John Paul Stevens: concede, or do you not, that the announcement by one student of another student's grades within the classroom and not outside the classroom is a release of information within B one?
Jerry A. Richardson: No, absolutely not.
Speaker: Because?
Jerry A. Richardson: Because it's not an education record.
Speaker: You can only...
John Paul Stevens: Assuming it was an educational record, would you say that it's a it's a release b- when it's tol- when it's realvaled [: revealed] by one student to another within the classroom?
Jerry A. Richardson: No, I don't believe, in in the context of pure grading, it would make no sense to say that one student, that it's not a release if if the student grading the paper records the grade.
Stephen G. Breyer: I'm slightly worried about that, because suppose that, I take it attendance records are are are also, they are probably are maintained, and they are records, aren't they?
Jerry A. Richardson: A- Attendance, well, again I would say that attendance records are not the kind of information...
William H. Rehnquist: Thank you, Mr. Richardson Mr. Kneedler, we'll hear from you.
Edwin S. Kneedler: Mr. Chief Justice, and may it please the Court: The Family E- Educational Rights and Privacy Act does not prohibit the common classroom practice of s- one student grading another student's paper, or other common classroom and teaching practices.
Antonin Scalia: Does does the act cover a teacher's grade book that she keeps during the term?
Edwin S. Kneedler: It a- it addresses the grade book, in our view, by by by including it, we we think ordinarily it would come within the sole possession e- exception in in the act.
Speaker: exams...
Antonin Scalia: results of the exam, you know, the big exam, mid-term exam, and the stee- student you know posts this the results on the board.
Edwin S. Kneedler: I I I think under the position we've espoused here, that would not be a violation of the act.
Speaker: violation.
Antonin Scalia: posts it before he sends it on to the to the administration office...
Edwin S. Kneedler: I- If it's posted, and this may sound technical, but this is this is where this is where the two categories we think intersect.
Speaker: and it's not for everyone...
David H. Souter: I think, saying that the that the disclosure has got to be of the record, not merely of information that may ultimately end up...
Speaker: That...
Edwin S. Kneedler: That's that's exactly true, and t- and there are analogous situations in which that's true, for instance the attorney-client privilege, that the the attorney can't disclose something that he's learned from the client, but that doesn't mean that the same information in the possession of the client...
Speaker: is privileged.
Stephen G. Breyer: I'm I the more I hear, I'm, a little there used to be schools in any case that would say, the following ten percent of the class graduates with honors, next forty percent, okay, and sort of honors, and the last sixty percent, well, they graduated, didn't they.
Edwin S. Kneedler: Yes...
Speaker: Now, is...
Stephen G. Breyer: that all forbidden now?
Edwin S. Kneedler: No.
Speaker: institution has to announce a policy.
Sandra Day O'Connor: we dealing with here? You don't have much time, and I am concerned.
Edwin S. Kneedler: All that is strictly presented in this case is the practice of s- one student grading another's paper before the before the teacher has gotten the papers themselves...
Speaker: or entered them in the grade book.
Sandra Day O'Connor: what is your succinct explanation of why it's not covered by the statu-
Edwin S. Kneedler: There's no educational record maintained by the school.
Speaker: Because it...
Sandra Day O'Connor: isn't maintained, or because it isn't a record?
Edwin S. Kneedler: Well, n- whether it's maintained is part of the definition of educational record.
Speaker: Mr. Kneedler,
Ruth Bader Ginsburg: do you do you have a position on the threshold question? Is there a claim for relief, a private claim for relief?
Edwin S. Kneedler: We we do not have a a position on that.
Edwin S. Kneedler: [Inaudible]
Antonin Scalia: Mr. Kneedler, you you you said it doesn't include the the the teacher's classroom records.
Edwin S. Kneedler: Well...
Speaker: the sole...
Antonin Scalia: possession exception?
Edwin S. Kneedler: Two different questions.
Speaker: Yes, I understand that.
Edwin S. Kneedler: That that that's not covered.
Speaker: It's covered by the sole e-
Antonin Scalia: sole possession exception?
Edwin S. Kneedler: That's correct.
Antonin Scalia: Which means it it would have been embraced by the statute, but for that...
Edwin S. Kneedler: That's probably true, but but but it's, one thing to bear in mind here is, this act was passed in one form early in nineteen seventy-four.
Speaker: duration...
Anthony M. Kennedy: don't have to be retained for forty-five days or anything like that?
Edwin S. Kneedler: If a if a request is made for them they have to be retained until the until the request is resolved, a request to inspect them, but if there's if the parent or student, adult student has not requested it, there nothing in this act requires the a- the school district to keep them.
William H. Rehnquist: Thank you, Mr. Kneedler.
Wilfred K. Wright, Jr.: Mr. Chief Justice, and may it please the Court.
William H. Rehnquist: Well, but has that ever happened? Had any teacher ever posted exam scores in the local newspaper?
Wilfred K. Wright, Jr.: Under the facts of this particular...
Speaker: No. I say,
William H. Rehnquist: was there any, any incident of that sort that had ever been called to the attention of Congress? I mean, was that really what Congress was trying to prevent?
Wilfred K. Wright, Jr.: Not that particular action, but that would be a consequence of, of finding that the education records would be just a permanent...
William H. Rehnquist: Well, it would be, a a wa- the consequence you describe would allow a teacher to do something that no teacher has ever done.
Wilfred K. Wright, Jr.: Contrary, Your Honor, I believe that the teachers, not only in this particular case, but in many cases, especially in the Kreb-, the Krebs versus the Rutgers University case, were disclosing exam scores...
William H. Rehnquist: They were posting them in newspapers?
Wilfred K. Wright, Jr.: No.
Speaker: posting them in newspapers.
William H. Rehnquist: what I asked you about because you mentioned it.
Wilfred K. Wright, Jr.: That's correct, Your Honor.
David H. Souter: If, even if we, we take the the expansive definition that you would use, what is your response to the point that came out in in my exchange with Mr. Kneedler, that the that the mere disclosure of information, which may ultimately end up in a record, but a disclosure before that information is, in fact, recorded would not be prohibited by the act?
Wilfred K. Wright, Jr.: Here we have a situation, the facts of this case, that happened simultaneously.
David H. Souter: Well, do you, d- I don't want to cut off your answer there.
Wilfred K. Wright, Jr.: If it doesn't make it into the teacher's maintenance of...
Speaker: the record.
David H. Souter: I think the assumption is it may well make it into.
Wilfred K. Wright, Jr.: I believe that the teacher is disclosing the information that she is intending to collect.
Speaker: Well, yeah, but we we don't know...
David H. Souter: whether there's a statute that covers that, and we've got a statute here.
Wilfred K. Wright, Jr.: No.
Antonin Scalia: The cau- is the calling out a record? What what does the record consist of?
Speaker: That's...
Wilfred K. Wright, Jr.: gathering the information.
Speaker: What what is the definition of...
Antonin Scalia: record? I mean, it it d- d- does...
Speaker: Records, files,
Wilfred K. Wright, Jr.: documents, something...
William H. Rehnquist: Something written...
Speaker: Yeah, but when the yeah, and when the kid when the kid...
David H. Souter: speaks, nothing has been written yet.
Antonin Scalia: Records, files, documents, and other materials.
Wilfred K. Wright, Jr.: The grade.
Antonin Scalia: The grade is not a record, file, document, or other material.
Speaker: She's making...
Antonin Scalia: You know, I say, A.
Wilfred K. Wright, Jr.: And I write it down as you shout it out.
Antonin Scalia: Oh oh, after you write it down, maybe when the teacher writes it down, a- at most when the teacher writes it down in her grade book, you say it, it then becomes a record.
Wilfred K. Wright, Jr.: That is the record that has been disclosed because the teacher is making the record.
Antonin Scalia: So you're saying the information before it becomes a, before it becomes a record, because it doesn't become a record until the child says it, and then the teacher writes it down.
Wilfred K. Wright, Jr.: If she's collecting it, yes.
Speaker: Suppose a child...
Antonin Scalia: that from the statute?
Wilfred K. Wright, Jr.: B one.
Speaker: It may well be...
Antonin Scalia: illogical, but I don't see anything in the statute that, that prohibits it, anymore, it you could say it's just as illogical to prohibit the teacher from disclosing that information, but if somebody else happens to know it, for that person to be perfectly free to say, you know, Jack Smith's kid got a D in that test.
Wilfred K. Wright, Jr.: If a teacher has a legal obligation to protect the information in the grade book, if the grade book is an education record...
Antonin Scalia: It isn't in the grade book yet.
Wilfred K. Wright, Jr.: She's making the record.
Speaker: Ah, yes.
Wilfred K. Wright, Jr.: the record.
Antonin Scalia: The teacher is making the record after the child says, A.
Wilfred K. Wright, Jr.: That is true.
Stephen G. Breyer: What about a child who, I remember in my third grade, my teacher, who thought it was her job to teach, had problems sometimes with discipline.
Speaker: Not all of those items are forbidden, Your Honor.
Wilfred K. Wright, Jr.: The Socratic method is not forbidden, Your Honor.
Speaker: forbidden, Your Honor.
Stephen G. Breyer: Let's use my examples.
Speaker: I've heard this...
Stephen G. Breyer: my example? I'd I'd like an answer to that example.
Wilfred K. Wright, Jr.: If she's making a record, I would say that would be a...
Speaker: disclosure.
Stephen G. Breyer: My next question is each morning we came in and said, present or here, and she'd keep a record.
Wilfred K. Wright, Jr.: No.
Speaker: information.
Stephen G. Breyer: they don't go through the procedures.
Speaker: I- okay...
Stephen G. Breyer: they didn't they th- the teacher doesn't announce to every parent, now we want to have a hearing for you to see whether we say to your child, here or not here.
Wilfred K. Wright, Jr.: Under your...
Stephen G. Breyer: That would be a violation in your view on the same...
Speaker: It'd be a...
Wilfred K. Wright, Jr.: violation, but it's not under the statute.
Stephen G. Breyer: Well, all right.
Speaker: Senator...
Stephen G. Breyer: disciplinary purposes.
Speaker: And i-
Antonin Scalia: and if so, do we think that the Congress agreed with Senator Buckley?
Wilfred K. Wright, Jr.: That's correct, because in answer to to to Justice Breyer, Senator Buckley specifically stated, some may argue that my amendment will create too much additional work and red tape.
Anthony M. Kennedy: So no no gold stars on the on on the paper that goes back to the student that any other student can see, or in these days, a Post-it with a happy face? the the Fe- The F- Federal Government prohibits that.
Wilfred K. Wright, Jr.: He's intending to give the parent the right to consent to the release of information.
Speaker: If I...
Stephen G. Breyer: if I don't agree with you on this and I thought my examples that I gave are extreme instances, and it doesn't cover that.
Wilfred K. Wright, Jr.: Senator Buckley said another statement.
Speaker: child. Miss Fe-
Ruth Bader Ginsburg: it gives the individual parent a veto, and that's what you're saying.
Wilfred K. Wright, Jr.: Not necessarily, Your Honor.
Speaker: Buckley Amendment.
Ruth Bader Ginsburg: any parent can make the rules for that parent's child, what that parent wants them to be, not the teacher, not the school district.
Speaker: With respect to...
Ruth Bader Ginsburg: that's what Senator Buckley meant.
Wilfred K. Wright, Jr.: Yes, with respect to education records, that is correct, especially scores on exams.
Ruth Bader Ginsburg: As long as the teacher records them, you say that.
Wilfred K. Wright, Jr.: That's possibly true, but there other means.
Speaker: court found...
Ruth Bader Ginsburg: the answer to that? Pos- Is it, is it the teacher gives a quiz, has the grades called out, but doesn't record in her grade book.
Wilfred K. Wright, Jr.: If she's not recording it in her grade book, that is not a violation.
Ruth Bader Ginsburg: And if she says, class, I want to give you an incentive to do better, so I'm going to write down these grades but I'm going to discount at the end of the term I'm going to discount the lower two-thirds of them.
Wilfred K. Wright, Jr.: It's an education record.
John Paul Stevens: Is it perfectly clear that disclosure of information within the classroom setting is a release of education records within the meaning of of of B one?
Wilfred K. Wright, Jr.: Within the meaning of B one...
John Paul Stevens: Yeah.
Wilfred K. Wright, Jr.: our interpretation is it has to be.
John Paul Stevens: Why do you say that if if it has the more formal concern about release to the public and law enforcement and so forth? It seems to me that there's an awful lot of information about special students and others that that the that that the student's classmates are inevitably going to learn about just by being in class seeing what goes on in class.
Wilfred K. Wright, Jr.: That that's correct, Your Honor.
Speaker: But this...
John Paul Stevens: particular school activity, it's not fine.
Wilfred K. Wright, Jr.: The grade that's going in the grade book is a release,
Speaker: Your Honor.
Antonin Scalia: it's especially especially mean with respect to this special e- e- special ed student who's being mainstreamed.
Speaker: The fact that a special ed...
Antonin Scalia: is that what you mean by a special aid student, a student who is receiving forty-five minutes of speech therapy once a once a week?
Wilfred K. Wright, Jr.: Yes.
Antonin Scalia: That's what you mean by a special special ed...
Wilfred K. Wright, Jr.: He was.
Antonin Scalia: Forty-five minutes a week.
Wilfred K. Wright, Jr.: No.
Speaker: Well, how would...
Antonin Scalia: speech therapy help that?
Wilfred K. Wright, Jr.: I don't know, Your Honor.
Speaker: None of those material facts were part of the record.
Antonin Scalia: paint your client as more sympathetic than he is.
Wilfred K. Wright, Jr.: I am just trying to be sensitive not only to just that one child, but even to her other children who are also part of this case with respect to their A's.
Sandra Day O'Connor: If it's an educational record as defined under the act and maintained as such, and that's really the issue, whether it it's covered at this stage of a fellow student calling out a grade.
Wilfred K. Wright, Jr.: It's covered because in the facts of this case, the teacher is using that protocol to collect...
Speaker: the information.
Sandra Day O'Connor: but that is not the text of the statute.
Wilfred K. Wright, Jr.: The literal language interpreted in the context of the parent's right to consent, in other words, keeping that information confidential.
Speaker: confidential once it's in her hands...
Antonin Scalia: they have no right to keep the information confidential.
Wilfred K. Wright, Jr.: I respectfully disagree.
Speaker: Contained in...
Antonin Scalia: the records.
Wilfred K. Wright, Jr.: She's making the record.
Speaker: Is...
Wilfred K. Wright, Jr.: interpreted in the context of what we're doing here.
Speaker: versus Roe...
Stephen G. Breyer: I'm way out-of-date probably, but a- when I, again, when I used to be in school, grades were thought of, to some degree, as an incentive, that they weren't totally private.
Wilfred K. Wright, Jr.: Congress intended that...
Stephen G. Breyer: In in the absence of some other line, I might tend to think a line should be drawn to give the teacher maximum freedom to run his or her class the way the teacher feels is best educationally.
Wilfred K. Wright, Jr.: The line is the grade that is going in the grade book with respect to this particular case.
Speaker: So what...
Stephen G. Breyer: what if you could? Suppose you were to say that.
Wilfred K. Wright, Jr.: It would be terrible.
Speaker: Mr. Wright,
Ruth Bader Ginsburg: this goes all the way through, i- I take it, in your view that th- co- take a college student.
Wilfred K. Wright, Jr.: Precisely.
Speaker: I don't want people knowing what my...
Speaker: You're out of...
Speaker: You're out of the college. I mean, that...
Ruth Bader Ginsburg: It's it's a technique that teachers do use, to have students do prepare and present each other's papers, that that's a a technique that's quite common in colleges and professional schools.
Wilfred K. Wright, Jr.: You're referring to the the the teacher assistant helping them gra-
Ruth Bader Ginsburg: No, no.
Wilfred K. Wright, Jr.: Okay.
Speaker: teacher recording and making...
Ruth Bader Ginsburg: the teacher writes down in the book the comments that the students made and she takes that into account in the final grade in the course.
Wilfred K. Wright, Jr.: Outside of the facts of this case, that may be a violation if, in fact, she's making a record and that was the intent of the teacher to make a record.
Anthony M. Kennedy: A a good alternate name for this statute would have been the Anti, the the Prevention of Mutiny Among Students Act? Su- Su- Suppo- suppose that a school district received a hundred dollars a year in in Federal funds, and this act were applied in the way you said, would that to you raise any serious concerns of federalism?
Wilfred K. Wright, Jr.: I think the funds need to be available under an applicable program, and I think the lower cases have have deemed that certain programs are applicable and certain others are not.
William H. Rehnquist: To have the student grade their own paper might have some problems with it too that y- Laughter.
Wilfred K. Wright, Jr.: I cross examined the principal with respect to that particular issue, and he said, well, we exchange papers because the students cheat.
Antonin Scalia: Well, you need two cheaters for that to work, whereas if you grade your own paper, it only takes one.
Speaker: [Inaudible]
Wilfred K. Wright, Jr.: We believe that the the the plain language governs what is an educational record and it does not mean the permanent transcript.
Speaker: to access.
William H. Rehnquist: a moment ago, from what you said, I thought the school district was telling her that she couldn't see her children's grades.
Speaker: No,
Wilfred K. Wright, Jr.: that never happened.
Speaker: But that...
William H. Rehnquist: that wasn't what happened here, was it?
Wilfred K. Wright, Jr.: That isn't what happened here, but that has happened, Your Honor.
William H. Rehnquist: Thank you, Mr. Wright.
The Marshal: The honorable court is now adjourned until tomorrow at ten o'clock.