Warren E. Burger: We will hear arguments next in 1198, Nolde Brothers v. Local No. 358. Mr. Bioff, you may proceed when you are ready.
Allan L. Bioff: Mr. Chief Justice, and may it please the court. The issue in this case is whether an employer may be required to arbitrate a dispute between the employer and a union, where the dispute, i.e., both the events which give rise to the alleged liability and the union’s claim concerning that liability, all occur after the agreement to arbitrate has ended. The facts of the case are undisputed. The Employer, Nolde, a manufacturer of bakery goods, maintained and operated a bakery plant in Norfolk, Virginia and had entered into a Labor Agreement in July of 1970 with the Respondent Union which had a term extending until July 21, 1973. However, the duration clause of the Labor Agreement provided that after July 21, 1973 the Labor Agreement would remain in effect until either a new agreement was reached by the parties or either party gave written notice to the other of cancellation. The Labor Agreement contained a severance pay provision. That provision, in general terms, stated that employees with three or more years of continuous service with the employer would be entitled to a severance payment based upon a formula set out in the contract upon the happening of certain contingencies, one of which was the permanent closing of the plant. The agreement also contained a grievance arbitration procedure. In mid-May 1973, the Union gave notice to the company pursuant to Section 8(d) of the National Labor Relations Act of its intention to negotiate a new agreement, and negotiations between the company and the union then commenced and continued for a period of some three months. No agreement was reached by the parties during this period of negotiation. On August 20, 1973 the union sent to the company, a written notice of seven-day cancellation of the contract pursuant to the Duration Clause of the agreement. That notice was sent on August 20, 1973 which meant that the Labor Agreement terminated by reason of the Union’s notice on August 27, 1973. The negotiators for the parties met on August 31, 1973, at which time the union rejected the company’s final proposal for a new contract. At that meeting, the union advised the company that unless the company accepted the union’s proposals, the union would go out on strike. After considering the union’s proposals, considering its financial position, the employer concluded that it could not survive at its Norfolk, Virginia plant in the face of a strike and it accordingly notified the union that effective that night, August 31, 1973, the employer was permanently closing its Norfolk, Virginia plant. And in fact, on that date, the employer did close permanently its Norfolk, Virginia plant and on that date it terminated the employees represented by the union. Subsequent to the plant closing, subsequent to the termination of the employees, the union made a demand upon the Company for the payment of severance pay. The employer declined to pay severance pay. The union then made a demand upon the employer to arbitrate the issue as to whether the employer was obligated to pay the severance pay. The employer declined to arbitrate. In both instances, the employer’s position was that the obligation to pay severance pay and the duty to arbitrate, both were extinguished or expired when the contract ended.
Speaker: Suppose, hypothetically, that instead of that sequence, the parties had rocked along for another year or two without a contract, as I am sure you know sometimes happens.
Allan L. Bioff: Yes, sir.
Speaker: And then after a year, a year-and-a-half, the employer closed the plant. Would you say that the right to the severance pay which you now claim was vested under the written contract would be enforceable a year–and-a-half, two years later?
Allan L. Bioff: Your Honor, are you assuming in your question that the contract had been terminated, as it was? Our position is...
Speaker: Contract terminated but employment continued and the factory continued operating.
Allan L. Bioff: But that was closed a year-and-a-half or so later? On those facts, I think we would have the same fact situation as we have in this case.
Speaker: Five years later then, it still would have to be the same, wouldn’t it?
Allan L. Bioff: Yes, our position is simply this. That under the contract the employees were not entitled to severance pay simply because there was no contract after August 27, 1973. That is not to say, and I think that this point is at the very heart of this litigation, that is not to say that the employees were automatically divested of a right to severance pay when the contract terminated, because under the National Labor Relations Act, when a contract ends, the terms and conditions of employment that are set forth in that contract continue in effect until such time as either the employer and the union agree to new terms and conditions of employment or the employer bargains away the existing terms and conditions of employment by bargaining with the union to an impasse. In this case, the record is unclear as to exactly what happened on August 31, 1973, i.e., whether the union made any demand upon the employer to negotiate with the employer over the ending of severance benefits. Thus, it is unclear whether there may have been a waiver by the union of its right to bargain over the elimination of the severance benefits. But assuming that there was no waiver of that right, and assuming that the employer simply unilaterally ended the severance benefits, that would be arguably a violation of Section 885 of the National Labor Relations Act, one of the remedies for which might have been the payment of the severance benefits. The point is here, the union never filed an unfair labor practice charge. It never filed a complaint with the Labor Board saying the employer had unilaterally terminated the severance benefits. I am not sure, Mr. Chief Justice, that answered your question but I think –
Speaker: Well, I take your answer to be that no matter how much time had elapsed, the men kept on working, the factory is open. But when, as and if the factory was closed, severance pay under the original contract would be enforceable.
Allan L. Bioff: No, Sir. Assuming the contract had been terminated, severance pay would not be enforceable under the contract because the contract no longer existed.
Speaker: Then I did misunderstand you. I thought you said at first it would be the same whether it was three days, three weeks or three years.
Allan L. Bioff: I am saying that, what I am saying is whether it is three days, three weeks or three years after the termination of the contract, there is no right to severance pay under the contract because the contract no longer exists. Consequently, there is no right to arbitrate the question of whether or not severance pay is owing, again, because there is no agreement to arbitrate and the duty, as this Court has frequently said, to arbitrate depends upon the existence of an agreement to arbitrate.
Thurgood Marshall: Two questions.
Allan L. Bioff: Yes Sir.
Thurgood Marshall: Do you have suppose the matter was in arbitration for about a week and the plant closed down and the contract was gone? Would that arbitration continue?
Allan L. Bioff: Are you referring to an arbitration over severance pay or some other issue? I would think the arbitration would continue because presumably the arbitration provision under that hypothetical case had been invoked prior to the terminal date of the agreement.
Thurgood Marshall: What if there was this man who claimed that he was not paid for the last week of work? He could maintain that under the contract, of course.
Allan L. Bioff: You are assuming that the man works Monday through Friday, the contract ends on Saturday. Can he then arbitrate the issue? I think the answer to that is probably yes, that he can. But I think –
Thurgood Marshall: It is under the contract.
Allan L. Bioff: Yes, sir. I think the difference between that case.
Thurgood Marshall: I think you better say that he can get it from work rather than out of the contract.
Allan L. Bioff: Well, I think there is a distinction between the case you put and the case that is at bar here and I think the difference is simply this. When the individual works Monday through Friday, the contract ends, the employer refuses to pay for that last week’s work. I think that issue might very well be arbitrable because all of the events giving rise to the grievance that was filed occurred while the contract existed and indeed the employer’s liability for the payment of those wages came into existence during the term of the contract. In our case, the difference is that there was no liability created for severance pay until after the contract terminated.
Thurgood Marshall: If you had severed the man on Friday, he would have had arbitrable, wouldn’t he?
Allan L. Bioff: Let us assume the contract ends on Saturday. We discharged the man on Friday. The grievance is filed on Monday. It would be our position that that grievance is arbitrable because the event giving rise to a claimed liability occurred while the contract existed. If the man was discharged on Monday and the contract expired on Saturday, it would be our position that that discharge grievance would not be arbitrable. Let me take this case, now, let us assume that there is a provision in the contract that says, “An employee with one year or more of service may not be discharged without a prior warning notice”. And let us assume that the contract expires on Saturday and the employer discharges the employee on Monday. But the employee has not had a prior warning notice. It would be our position on those facts that, that discharge is not subject to the Grievance Arbitration Procedure simply because at the time, the discharge occurred, the Grievance Arbitration Procedure no longer existed. However, that employee might very well have a claim before the National Labor Relations Board, that the employer had unilaterally changed the terms and conditions of employment after the contract ended without bargaining with the union because the pre-existing term and condition of employment was that employees would not be discharged, i.e. employees with more than a year of service, would not be discharged without a prior warning notice. After the contract ends, the employer discharges the employee without a prior warning notice, hence, there is a change, a unilateral change in terms and conditions of employment and the employee has a case before the Labor Board under 885.
Speaker: Counsel, you emphasize the critical fact being that the liability totally matured prior to the expiration of the agreement, gave rise to the duty to arbitrate, as I understand you. You say all the events supporting the claim, supporting the liability happened before the contract expired. Is it, am I mistaken?
Allan L. Bioff: That is the test.
Speaker: I am not stating it awkward.
Allan L. Bioff: That is not our case. Our case is everything happened after the contract expired.
Speaker: Oh, I understand that, but you would concede that you had a duty to arbitrate if the events occurred before the contract. Well supposing you have a vacation pay case and it is generally considered to be a vested interest, a vacation pay but the Christmas does not come until two weeks after termination of the contract. Would the claim for the pro rata share of vacation pay be arbitrable or not? I am stating it awkwardly but assume that the contract expires after ten months of vacation pay vested but before he actually gets a vacation. Could he arbitrate that?
Allan L. Bioff: If I understand your hypothetical correctly, our answer to that would be no.
Speaker: That is what I thought you would say.
Allan L. Bioff: Yes and I think the reason that it would not be is because simply the agreement to arbitrate had ended prior to the time that the liability for pro rata vacation came into existence. Now again, --
Speaker: Supposing a man was fired during the middle of the pay period. Normally you pay by the month or the week -- the contract expires in the middle of the pay period, would there be duty to arbitrate there?
Allan L. Bioff: As to the –
Speaker: Say ‘no’ again, I think.
Allan L. Bioff: As to the hours that he worked prior to the terminal date of the contract, we would say that that gave rise to an arbitrable issue because the employer’s liability was created prior to the expiration of the --
Speaker: If the right to severance pay is a vested right, your liability was created at least to the extent, to a certain extent was created –
Allan L. Bioff: Well, I think that depends, your Honor, on what you mean by a vested right.
Speaker: You can assume it is a vested right here, what duty do you have to these people, Would you have to pay them then?
Allan L. Bioff: Assuming it is a vested right, if by vested right you mean –
Speaker: You mean that they have a right to the accrued termination pay that they have earned even though a succeeding contract may not provide for it.
Allan L. Bioff: They have a right to it so long as the employer and the union have not bargained it away during the hiatus between contracts. Therein lies the whole point in this case.
Speaker: Let me put the case a little differently. Assume the contract said in words, "You will earn 'x' dollars of severance pay for so many months that you worked, and in no circumstances shall this be bargained away, taken away or any other. You get it when you leave the employer for any reason whatsoever and then you did not pay him. Would they have aright to -- clear-contract right to the money? But then you disputed over the amount or something like that. Would that be arbitrable?
Allan L. Bioff: No, and I do not think it is a contract right to the money either, because there is no contract. The right to the money stems from the fact that the severance pay obligation becomes a term and condition of employment after the agreement ends that the employer may not unilaterally change. It does not stem from a contract. The terminology “accrued right” and “vested right” as far as we are concerned is simply a label. The question is what do you mean by that? If you mean by an accrued right that the employer and the union may not bargain to eliminate it, then we do not agree there is such a thing as an accrued right because under the National Labor Relations Act, the employer and the union can bargain to eliminate any right that exists under a labor contract. Let us take the severance pay case. Let us take our case, and let us assume that instead of the employer simply notifying the union on August 31, 1973 that it was going to close the plant and it was not going to pay severance pay, assume instead the employer had come to the union and said, "We are contemplating, closing the plant. We are in poor financial condition, we do not want to pay severance pay. We want to negotiate with you about the severance pay" and they do negotiate. Now, one of two things is going to happen. The union agrees to the elimination of the severance pay and certainly the law does not say the employer and the union cannot agree to the elimination of it. And if they do eliminate it and the Employer then closes the plant, obviously no severance pay is due. But let us assume..
Speaker: I am not so sure I accept your proposition, that they -- could the union in behalf of the employees give the company some money? Could they just say, well, every employee will give you a $100 at the end of this term in order to support this failing company?
Allan L. Bioff: Could the Union agree to do that on behalf of the employees, assuming that the employees authorize the union to do it?
Speaker: But, just under the general right to bargain -- as exclusive bargaining agent, would they have the right to do that?
Allan L. Bioff: On the assumption that the union is not violating its duty of fair representation, yes. I am assuming that the union is authorized to negotiate on behalf of its membership. Certainly, Your Honor, let us take our severance pay case. There is a severance pay provision in the contract that expired August 27, 1973. Let us assume that instead of what actually occurred here, the plant remained in operation, the parties bargained for a new contract and the employer said in those negotiations, "Look, we want to eliminate the severance pay provision from the next contract." And let us further assume that the union agreed to that elimination and they entered into a contract without a severance pay provision. And the employer then closed the plant under the succeeding contract. Surely, no severance pay is due and owing under those facts.
Speaker: I am not sure, I agree.
Allan L. Bioff: That would be our position, at least. It would also be our position that, even assuming the union did not agree to the elimination of severance pay, the employer nevertheless could bargain to an impasse with the union for the elimination of the severance pay and then eliminate it. And the union recourse then would be to strike. The fundamental thing that is at the very core of this lawsuit, and it is a very important issue, is that the Fourth Circuit has confused two very distinct national labor policies. The first National Labor Policy is that when you have an existing labor agreement, the parties are encouraged to resolve their controversies and their disputes by peaceful means pursuant to a Grievance Arbitration Procedure. Indeed, that is spelled out in the Labor Management Relations Act in Section 203(d). Incidentally, the language of Section 203(d) is very interesting because it says, "Final adjustment by a method agreed upon by the parties is hereby declared to be the desirable method for settlement of grievances, grievance disputes arising over the application or interpretation of an existing collective bargaining agreement.” Now that is one very important national labor policy. But there is an equally important National Labor Policy that comes into play when a labor contract expires and during the hiatus between labor contacts. And that important labor policy is that the parties are free to bargain collectively and to utilize their respective economic strengths to obtain what they desire in those negotiations.
Speaker: The union could only strike here because the contract had expired?
Allan L. Bioff: That is correct, Sir.
Speaker: Because there was a promise not to strike in return for an agreement to arbitrate?
Allan L. Bioff: That is right, sir. During the term of the contract, the union could not have struck. The Union gave notice to the employer to terminate the agreement. There was only one reason that the union gave that notice, and that was to free them to strike. And so what the Fourth Circuit is really doing here is the Fourth Circuit is saying, "the employer has a duty to arbitrate after the contract ends even though the union has the right to strike during that period" and that is my very point. That is why the two national labor policies which are very distinct -- one that exists while the contract is in force, the other that exists during the hiatus between contracts is being intermingled or confused by the decision of the Fourth Circuit in this case.
Speaker: What rates of pay and working conditions are applied during the period from August 27th to August 31st?
Allan L. Bioff: Those terms and conditions that existed under the agreement.
Speaker: Why?
Allan L. Bioff: Why, Sir? Because that is what the national –
Speaker: There was no agreement covering the -- according to your submission, the rates of pay or the working conditions during that period after the agreement had been abrogated, terminated.
Allan L. Bioff: That is correct, Your Honor, but under the National Labor Relations Act, as interpreted by the National Labor Relations Board, when a labor agreement terminates, the employer may not unilaterally change the terms and conditions of employment that existed under the expired labor contract until either 1) It negotiates with the union and the union agrees to some change, 2) It negotiates with the Union and they reach a bona fide impasse over an issue, at which point the Employer may then unilaterally change that condition.
Speaker: Well, then why doesn’t that principle apply here?
Allan L. Bioff: It does.
Speaker: I mean, apply here to effect the severance pay and the arbitration thereof.
Allan L. Bioff: Well, the point is, the arbitration clause, the Labor Board has said, and we cite the Hilton Davis case in our brief, the arbitration clause is not a term and condition of employment. The severance pay is. So the Union’s remedy here was the Labor Board, not arbitration, and that is wherein the Fourth Circuit has committed a very serious error.
Speaker: Are you conceding that it was an unfair labor practice not to pay severance then?
Allan L. Bioff: No, I am not, Your Honor, I am not conceding that.
Speaker: It seems to me that is exactly what you said.
Allan L. Bioff: Well, perhaps I have overstated my position.
Speaker: Maybe you better explain it.
Allan L. Bioff: I would say, Your Honor, that the record is not clear, there could conceivably have been a waiver on the part of the union of any right that it had to bargain over the issue of the elimination of the severance pay. Conceivably, such an argument could be made. Absent that kind of an argument, I would say that it is highly likely that an unfair labor practice was committed by the elimination of a severance pay.
Speaker: Then what is the point of all this litigation? Surely, you will have to pay it sooner or later.
Allan L. Bioff: Because the union went to the wrong forum. Because the union, instead of going to the Labor Board, went to the United States –
Speaker: Couldn’t you avoid all of this for us by simply writing them a check? How much money is involved in this case, anyway?
Allan L. Bioff: I am really not sure, I think around $15,000. But the point is, Your Honor, when the union went to the Federal District Court, and then when the Union went to the Fourth Circuit, it created some law that is extremely detrimental to the principles of Labor Law that those of us that practice in the field rely on, and so this case involves not money, but principle. A very important one, I might add. The other point that I would like to make before closing about the Fourth Circuit’s decision is that obviously it rewrites the contract, the parties’ contract. The Labor Agreement and the Duration Clause says that after July 21, 1973, that either party, upon seven days written notice could terminate the agreement and I think it said could terminate this agreement. Now, this agreement means every provision in the agreement, not some of them, but all of them.
Speaker: Let us assume that the contract had said expressly in the Arbitration clause, and this Arbitration Clause shall apply to the settlement of any rights accrued prior to the expiration of this contract. And it is perfectly clear that they intended to arbitrate any dispute over an accrued right, even though the dispute arose after the termination of the contract.
Allan L. Bioff: I would have no problem with that.
Speaker: You have no problem now. Is it not possible to read the Court of Appeals opinion as just reading the contract that way?
Allan L. Bioff: Yes, that is the way they read it.
Speaker: So it is an interpretation, why should we disagree with their interpretation of a collective bargaining contract? That is not a great issue of law, is it?
Allan L. Bioff: Yes, it is a very great issue of law because they did not just –
Speaker: How they construed some words, is that it?
Allan L. Bioff: It was not a matter, Your Honor, of simply construing or interpreting, it was a matter of rewriting.
Speaker: No, it is not possible to read their opinion that way. You are saying that they concluded there is a duty to arbitrate on policy grounds, or some other reason rather than the terms of the contract.
Allan L. Bioff: That would be my conclusion and that is the way I would read the decision because you cannot read this contract and conclude that the Arbitration Agreement did not end on August 27, 1973.
Speaker: Well, there are some words in the Court of Appeals opinion that indicates that as they understood the contract, it was just a promise to arbitrate even after the contract was over, about a right that was arguably vested, as we might call it, before the contract was over. And the issue was whether it was vested or not.
Allan L. Bioff: Yes, well, I think, the way I read the Fourth Circuit’s opinion, and I suppose it can be read different ways by different people, but the way I read it, it says that the Court agrees that the agreement to arbitrate ended when the contract terminated but the Court’s rationale is that there are certain rights under a Labor Agreement, which they call accrued rights, which flow from the contract and hence, even though the agreement arbitrate is ended, those rights are nevertheless subject to arbitration because they flow from the contract. I do not read the Court’s opinion as saying that they...
Speaker: They say that this Court did the same thing in Wiley and in the Piano case.
Allan L. Bioff: Well, the Piano -- let us take the Piano case.
Speaker: It is a tough case for you.
Allan L. Bioff: Wiley is tougher. I do not have too much trouble with the Piano case because in the Piano case, the plant closed, the employees were terminated, the demand to rehire them at the new plant in French Lick, Indiana was made and the refusal by the employer to agree to the rehiring was all of those facts occurred before the contract ended. The only thing that occurred afterward was the fact that they did not rehire people at French Lick. In other words, Your Honor, the Piano case would be analogous to our case if –
Speaker: I know but the dispute arose at a time when on the face of it, the contract had expired, including the agreement to arbitrate.
Allan L. Bioff: It depends on, I think —
Speaker: Is not that right.
Allan L. Bioff: Well, I would not put it that way because I would say the dispute arose in that case before the contract ended.
Speaker: At the time of the refusal to hire —
Allan L. Bioff: The contract had ended.
Speaker: The contract had ended and it was at that time that arbitration was demanded.
Allan L. Bioff: That is correct, sir.
Speaker: At that time, on the face of it, there was no duty to arbitrate because the contract had expired.
Allan L. Bioff: If you read Piano Workers that way —
Speaker: It is a tough case.
Allan L. Bioff: It is a tough case for us, that is correct. I think our case would be analogous to Piano Workers if the facts in our case were, that prior to August 27, 1973, i.e., prior to the ending date of the contract, the company had closed the plant. The company had terminated the employees, the union had made a demand for severance pay. The contract then ends, the company then refuses to pay the severance pay.
Speaker: It just compares with Wiley.
Allan L. Bioff: Well your Honor, Wiley of course, can be distinguished in some ways from our situation again if --
Speaker: (Inaudible)
Allan L. Bioff: No, in Wiley, Your Honor, the operative facts, the events over which the dispute arose did occur before the contract ended. Wiley and Interscience merged before the agreement ended, some four months before it ended. Wiley refused to honor any of the provisions of the Interscience contract before the contract ended. The union filed grievances over all of the provisions of the contract before the contract ended. Wiley refused to process those grievances before the contract ended, and the suit to compel arbitration under Section 301 occurred before the contract ended. So in that sense, the case is quite different than ours, where the case gives us trouble as the Court’s language about accrued rights, the union relies on very strongly here. I believe, Your Honor, my time is up.
Warren E. Burger: Yes, it is. Mr. Rosenberg? We would like to finish this case tonight and get back to wherever it is you are going.
Ronald Rosenberg: I live in Washington, Your Honor.
Warren E. Burger: Well, then it is your friend’s problem, not yours.
Ronald Rosenberg: May it please the Court. I think that the issues here are clearly drawn by the questions that have come from the Court. Essentially what we have is the proposition advanced by the petitioner in this case, that it is extremely detrimental to the National Labor Policy to have contractual rights vindicated in the contractual forum, that in some way, using the arbitral forum that this contract provided violates the National Labor Policy. That argument, of course, is absurd. It does not give full credit to this contract between the parties. It does not give full credit to the presumption of arbitrability that this Court has many times declared. It pays no attention whatsoever to the repeated decisions of this Court, most particularly, the Wiley and Piano Workers case, Your Honor, and Wiley is indeed directly on point.
Speaker: Do you agree with the language in Wiley as applied to this case that the question of arbitrability is one for the Court to decide?
Ronald Rosenberg: Certainly, Your Honor. Just for the moment, if I may, the Fourth Circuit rather, did discuss the question of the arbitrator’s own duty upon remand. That issue is not before this Court. The dissenter in the Fourth Circuit indicated that there was a procedural arbitrability question. That question is not presented in the Cert Petition or argued here. The question here is exclusively arbitrability qua non. I think that Wiley and Piano Workers are directly in point. The one part of Wiley that is never discussed either in this argument or in the briefs by the petitioner is that element of Wiley that specifically refers to the question about the accrual of rights for the realization thereafter. In Wiley, the lawsuit was essentially a declaratory judgment brought --
Speaker: Do you say that any time, at least arguably, a right has accrued under a labor contract, the Arbitration Clause will survive the termination of the contract unless there is some specific provision against it?
Ronald Rosenberg: Yes, Your Honor.
Speaker: You think that is Wiley?
Ronald Rosenberg: I think that is Wiley, I think that is the Steelworkers trilogy, I think that is Piano Workers.
Speaker: I do not know about the Steelworkers. What about the rule that in order to force an employer or a union to arbitrate, there has to be a promise to arbitrate?
Ronald Rosenberg: Here there is unquestionably a promise to arbitrate.
Speaker: I know, but you have to find that the promise was intended to apply after the termination of the contract in which the promise is included.
Ronald Rosenberg: There is no indication whatsoever that it was not intended to apply to all contractual disputes.
Speaker: That is not my point, my point is where do you get the notion that a month after a contract has expired, that a right that is accrued prior to the termination of the contract has to be arbitrated?
Ronald Rosenberg: From the very language of the Arbitration Clause and from the presumption of arbitrability.
Speaker: I know, but the contract has expired. Those words are now gone.
Ronald Rosenberg: The contract has not expired in totality, if rights survive under that contract.
Speaker: If -- the question is, is there a right to arbitrate? That is the question.
Ronald Rosenberg: The question rather, Your Honor, is whether there was a right to severance pay.
Speaker: Oh no, well, you can do that in 301 suit.
Ronald Rosenberg: If there is a right to severance pay, a vested right to severance pay, then the proper forum for the resolution of such a dispute is arbitration and that the Court.
Speaker: I understand that is your position but in order to sustain it, you have got to show that there was a promise to arbitrate.
Ronald Rosenberg: There was unquestionably, a promise to arbitrate in the broadest marginal (ph) language. My opponent just characterized its agreement to arbitrate as admittedly broad. It contains no exclusion.
Speaker: But the promise has expired.
Ronald Rosenberg: The promise has expired no more than the right to vested severance pay or vested earned wages. The hypotheticals that were presented to my opponent during his argument made clear that there are obviously rights which over accrued or earned right nature which survived the normal expiration of the agreement.
Speaker: I agree with that. I could agree wholly with that without also agreeing that any disputes about those rights have to be arbitrated.
Ronald Rosenberg: But if you look to the Arbitration Clause, this Arbitration Clause does not remove any contractual dispute from arbitration. If there is to be a dispute about that substance of right, it is must be determined by an arbitrator, not by a Court. Otherwise, we would have a ludicrous situation in which there would forum shopping as between courts and arbitrators depending upon the fertility of the date of termination. We assert rights that are based upon this contract.
Speaker: Well, I suppose you would concede that the Arbitration Clause, and the Arbitration Clause said that this promise to arbitrate shall not apply after the termination of the contract. Did you, or you would not be making this argument.
Ronald Rosenberg: Certainly, Your Honor.
Speaker: Your client is hardly in a position to raise much question about fortuity since it was the one that gave notice of termination.
Ronald Rosenberg: But if that would be in a hypothetical situation, Your Honor, if it had occurred some other way, the question still is as to whether or not this Arbitration Clause is in any way limited, just as my opponent showed that it could have been eliminated. Given the presumption of arbitrability as announced by this Court in the Steelworkers trilogy, there must be arbitration unless it can be said, and this is the Court’s language, “With positive assurance that there is no interpretation possible under which there is to be no arbitration.”
Speaker: That was not in the context of an expired contract. That was in the context of what issues under the currently administered contract were arbitrable.
Ronald Rosenberg: Well, Your Honor, there is, of course the question in Wiley and then in Piano Workers as Justice White pointed out. In Wiley, the rights to arbitrated were rights subsequent to the expiration of the agreement. Justice Harlan, for a unanimous court in Wiley, very specifically dealt with the rights occurring, I believe it was after January 1, 1962, which was the expiration date of the contract.
Speaker: Counsel, were you bound to arbitrate, suppose when you made the demand for severance pay the employer said, let us arbitrate. Would you have been bound?
Ronald Rosenberg: Yes.
Speaker: After the termination of the contract?
Ronald Rosenberg: Yes.
Speaker: And therefore, your strike was in breach of the agreement?
Ronald Rosenberg: There was no strike here, Your Honor, because the plant was closed prior to any strike. But such a strike —
Speaker: You gave notice, wasn’t it? You gave notice that you were going to strike.
Ronald Rosenberg: We gave notice, but I think the facts might be –
Speaker: Well now, just assume that you had struck. Let us assume that the moment you gave notice you were going to strike, you struck.
Ronald Rosenberg: We struck at a time when we had no notion that the plant was to be closed. The strike would have occurred in such a circumstance that would not have anything to do with severance pay.
Speaker: The strike during the termination of the contract would have been forbidden by the contract.
Ronald Rosenberg: A strike for severance pay would have been forbidden by the contract. Here, notice was –
Speaker: You had a ‘No Strike’ clause in the contract and it was expressly in return for a promise to arbitrate.
Ronald Rosenberg: The ‘No Strike’ clause was in return for a promise to arbitrate contractual issues. What we are dealing with here is a contractual claim. The severance pay is a contractual claim. Everything stems from the fact that our claim for severance pay sounds in contract, is governed by the contract and this Court’s decision made clear that whether there is such a claim, then necessarily there must be arbitration unless, as Your Honors pointed out, there is an expressed exclusion.
Speaker: If you were bound to arbitrate, and the Arbitration Clause was still in existence, you had no business giving notice to strike.
Ronald Rosenberg: We gave that notice prior to the time that the employer indicated any intention of the plant closing. The issue of severance pay was not before anyone because so far as we understood that plant was to remain open forever.
Speaker: Was there a contract when you gave the notice to strike?
Ronald Rosenberg: We had given notice that the contract was to be out of effect following the time we would be, pardon me, part of the time that we intended to strike. We never struck. We gave notice in order to strike for new conditions. We at no point ever indicated an intention or desire to strike for old contractual conditions. We were not even aware that we had a contractual problem. We did not know that there was a severance pay question.
Speaker: You did not give notice of any intent to strike over an arbitrable issue, did you?
Ronald Rosenberg: Of course not, because we knew of no arbitrable issue. We were bargaining for the prospect of conditions. The only time that we dealt with retroactive conditions was after the employer suddenly advised us that he was closing the plant and sometime subsequent to that, denied us the right to severance pay. He in fact paid vacation pay. Some of the questions by your Honor and by Justice Marshall dealt with the question of vacation pay and it is in this Court that the petitioner is now saying it had no vacation pay obligation but yet it went right ahead and paid them. And vacation pay is indistinguishable from severance pay, and certainly as regards the arbitrability of a claim for severance pay, a claim that is based upon the contract itself.
Speaker: Though I understand that the time you gave the notice of intention to strike, there was no contractual arbitrable issue to which you were promised not to strike, apply.
Ronald Rosenberg: Of course not.
Speaker: That did not arise until the severance pay issue arose and that could not arise until the plant was shut down?
Ronald Rosenberg: We said we were going to strike in order to get a higher wage. The Company said, well, we cannot afford that, sorry, we are going to close that plant. Then we said, a week later, well you can close the plant now, pay us the money you owe us under our contract. So that the timing makes absolutely clear that any threatened strike had nothing –
Speaker: But I want to be clear. Your answer to my Brother White is, at the time you gave the notice you were going to strike, there existed no arbitrable issue? No contractual issue for arbitration to which the promise not to strike applied?
Ronald Rosenberg: That is precisely right, Your Honor.
Speaker: Am I correct in understanding that the contractual issue with respect to severance pay is simply whether or not the obligation is a vested right or not?
Ronald Rosenberg: Yes, Your Honor, however phrased, whether vested, earned –
Speaker: or accrued, whatever it is.
Ronald Rosenberg: Whatever the phrasing, I think the Fourth Circuit stated it very well. The nature of the right to severance pay is something that is determined by the parties, by their intention. The question of who is to determine the parties’ intention has been answered repeatedly, and whether it is, as here, a broad Arbitration Clause, that question as to the intent of the parties is to be answered by the arbitrator. If not, we would have a situation in which the very series of hypotheticals that were presented would all be matters for the already overburdened Federal Courts. I think, Your Honor asked a question about wages. It is very easy to say, yes, we will pay the wages that were due in the final week. But what if there is a dispute over those wages? In that circumstance, would there not then be a federal suit for $25, a difference between a claim of wages for $75 and $100? I think it is clear that, beyond any question, that that matter is one for arbitration rather than the Courts and that is what we are discussing here, because our claim is contractual in nature. If not resolved by the arbitrator, it must be resolved by the Courts. And if to be resolved by the Courts, it would inundate an already overburdened federal judiciary.
Speaker: What do you say about his argument that all he you had to do was go to the Labor Board and file an Unfair Labor Practice Charge and you would have been paid?
Ronald Rosenberg: We do not go to the Labor Board to enforce contract claims, Your Honor. We have a contract. We wanted him to live up to his contract. The Labor Board is not the place to enforce contractual claims. Section 301 is the place to enforce contractual claims.
Speaker: But, he says that by refusing to pay you, they changed the terms and conditions of employment unilaterally and thereby committed an unfair labor practice and all you had to do was file a charge and, as I understand them, they would desperately search for a defense and then pay you.
Ronald Rosenberg: I doubt that they would have said that if we had filed an unfair labor practice charge. Whether or not they would have said that there was no impasse, it is something else again. It is very easy in this Court to say that they had not bargained to impasse on the issue. They might have had an entirely different position before the National Labor Relations Board. We are perfectly prepared to submit our contract claim to the contractually provided method for adjustment. Why should we go to the Labor Board to deal with an issue of entirely different dimension? That would be ludicrous. We have a contract. We want it enforced, and we want it enforced in the way that the contract itself provides. We have a contract with an admittedly broad, to use the company’s phrase, Arbitration Clause, a clause that the Court of Appeals referred to as all-encompassing. So unlike the hypothetical presented by Justice White, we do not have an Arbitration Clause that is in any way limited. We rather have one that is as broad as can be and given that clause, and given this Court’s decisions saying that there can be no denial of arbitration in such a circumstance, unless one can say that no interpretation is available, it is clear that the Fourth Circuit’s interpretation of this Arbitration Clause and this contract as permitting arbitration, is one that must be given credence.
Speaker: How long does this Arbitration Clause survive the termination of the contract?
Ronald Rosenberg: For so long as contract claims can be made, in the same sense that a suit for severance pay in a Court of law can be made some time later, or in the same way that a suit for pension might come at some time substantially subsequent to the normal expiration of the contract. If such a claim regarding pension came up, it would obviously be a contract claim to be contractually resolved and similarly, a claim for severance pay based upon a contract must be contractually resolved even though it might come up some time, significantly subsequent in time. We do not have that issue here. The demand for arbitration followed immediately upon the notification that the plant was closed and the denial of the severance pay. I think I have used all but my opponent’s rebuttal.
Warren E. Burger: No, your opponent has no time left.
Ronald Rosenberg: Oh, he has no time, and that being so we will pass any further time, Your Honor, in the case now, unless there are any further questions.
Warren E. Burger: I hear none. Thank you gentlemen. The case is submitted.


William H. Rehnquist: We'll hear argument next in No. 87-2098, Samuel Skinner v. the Mic-America Pipeline Company. Mr. Merrill?
Thomas W. Merrill: Thank you, Mr. Chief Justice, and may it please the Court. This case concerns the constitutionality of a system of fees established by Congress in Section 7005 of the Consolidated Omnibus Budget Reconciliation Act of 1986. The District Court for the Northern District of Oklahoma, adopting the report of a magistrate, held that the statute is an unconstitutional delegation of Congress' power of taxation. The case is here on a direct appeal from that judgment. The Appellee does not argue in its brief that Section 7005 violates the general non-delegation principles articulated... articulated by this Court in its decisions beginning with J. W. Hampton and Company v. United States and most recently in Mistretta v. United States. Instead, Appellee argues that... that the case does not come within the terms of the ordinary delegation doctrine for two reasons. First, Appellee contends that the power of taxation is subject to a special and highly restrictive version of the non-delegation principle. And second, Appellee contends that the fees that were imposed by Section 7005 cannot be sustained as an exercise of any power of Congress except its power of taxation. I'd like to turn to those two arguments in a moment, but first I think it would be useful to spend a little time looking at the... the provisions of the statute that is at issue here, Section 7005, because when we do that, I think you'll see that Congress has, in fact, given the executive very little discretion in this particular statute. In fact, Congress itself made most of the crucial policy decisions implicated by this particular system of fees. Congress provided in the statute quite clearly that it was to apply to only one agency, the Department of Transportation. This is not an omnibus bill that applies to... across the board to all Federal agencies. Congress articulated quite clearly its policy. It wanted a system of fees established that would recover the costs that the Department of Transportation incurs in implementing two pipeline safety programs, the Natural Gas Pipeline Safety Act and the Hazardous Liquids Pipeline Safety Act. Subsection D of Section 7005 imposes a precise ceiling on the total amount of fees that can be collected in any given year. It cannot exceed 105 percent of the annual appropriations established by Congress for both of these pipeline programs. In Subsection C of the statute, Congress adopts another limitation providing that the fees can be used only for one purpose. They can only be used to support the agency's activities under these two pipeline programs and not for any other purpose. Subsection A(3) and Subsection D of the Act both specify exactly who is to pay these fees. They are to be paid by all natural gas pipeline transmission companies and by all liquid... hazardous liquid pipeline companies. And finally, the only area of the statute that really provides for any degree of discretion at all is the section that sets forth how the fees are to be established, and that's Subsection A(1) of Section 7005. And if we look at that section carefully, you will see that Congress, in fact, adopted no less than four constraints on the exercise of discretion by the Department of Transportation in setting the fee schedule. First of all, if the statute is read carefully, you will see that it adopts a single principle that the Department of Transportation is to follow in establishing fees. Fees are to be based on pipeline usage. Secondly--
Sandra Day O'Connor: Mr. Merrill, you keeping referring the... to these charges as fees. I guess one of the things argued by the other side is that it's a tax not a fee.
Thomas W. Merrill: --That's correct, Your Honor.
Sandra Day O'Connor: And I must say there is language in National Cable Television and other cases that would indicate that fees are imposed on identifiable beneficiaries for particular benefits. And this looks very much like a tax. I guess your argument doesn't require us to determine that it's a fee and not a tax, but--
Thomas W. Merrill: Well, as I... I mentioned--
Sandra Day O'Connor: --I find it difficult to look at this as anything but a tax.
Thomas W. Merrill: --As I mentioned very briefly, the Appellees really have to sustain two propositions in order to win here, and if they don't sustain on... sustain both propositions, they lose. The first is that Congress is subject to some special restriction on delegation under the taxing power, and the second is that this system of fees could only be justified as an exercise of the taxing power and not as an exercise of the commerce power.
William H. Rehnquist: Well, you refer... you continue to refer to it as a system of fees. But traditionally fees have been imposed on people who get some benefit from... the user fee. You know, you go to a national park. You camp overnight. You get something out of it. Here these people aren't asking for safety controls. They're subject to the safety controls.
Thomas W. Merrill: That's true, Your Honor. Recall, however, the Constitution doesn't use the word "fees" and we're talking about an issue of constitutional law. The issue of... the second issue of constitutional law presented we think is whether or not Congress had to be acting under the taxing power or whether it could be acting some... under some other power such as the commerce power. Now, it's true that the word "fee" traditionally has a connotation of something like a user fee or some exaction in return for a benefit. That's what the independent Offices Appropriations Act is about, and that's what this Court had before it in the National Cable Television case and in the New England Power case. But if you think about the Commerce Clause and what Congress can do under the Commerce Clause, I don't think it be... can be contended that the only thing Congress can enact is a fee in that technical sense of... of some charge imposed in return for a benefit. Congress passes statutes containing civil penalties, criminal fines.
William H. Rehnquist: Can it enact a tax under the Commerce Clause?
Thomas W. Merrill: I don't think that Congress could enact a... a pure tax under the Commerce Clause.
William H. Rehnquist: Why would it ever need to? I mean, if it's enacting a tax, why doesn't it proceed under the power to levy taxes?
Thomas W. Merrill: The truth is I think, Justice Rehnquist, that Congress doesn't specify what clause of the Constitution it's proceeding under when it adopts these sorts of things. And I think one of our points would be that... that this Court should not force Congress to do that and should not force courts to do that by articulating a different delegation standard that would apply depending on which power Congress is, in fact, operating under. That's one of the reasons why we think it doesn't make sense to say that there are two radically different standards of delegation and which one you apply would depend on which power of Congress we determined Congress to be acting under.
William H. Rehnquist: Well, then you should have no hesitancy in referring to these exactions as taxes.
Thomas W. Merrill: Well, I refer to them as fees because Congress referred to them as fees.
Speaker: That's what the statute--
Thomas W. Merrill: That's what the statute says.
Speaker: --says. Well, don't we at least have to know whether they are taxes in order to determine whether the bill properly originated in the house? Did this bill originate in the House?
Thomas W. Merrill: This bill did originate in the House, Justice Scalia, but no claim has been raised in this case under the Origination Clause. The Appellee--
Antonin Scalia: But I'm saying there... there is at least that constitutional reason to have to determine whether Congress was proceeding under the taxing power or under the Commerce Clause.
Thomas W. Merrill: --Yes. There... there may be reasons that arise in the Constitution that require the Court to determine what a tax is, although the cases I believe under the Origination Clause have been very reluctant to define with any precision exactly what a tax is. All I'm saying is that in this case I don't think the Court has to come up with some constitutional definition of what a fee is. The Constitution doesn't use the word "fee". The Constitution grants Congress broad power under the Commerce Clause. xxx.
John Paul Stevens: Of course, the Origination Clause doesn't use the word "tax" either. It's a bill for raising revenue.
Thomas W. Merrill: Revenue. That's correct.
John Paul Stevens: Yes. And the question I suppose is... one of the preliminary questions is whether this is a bill for raising revenue or not.
Thomas W. Merrill: That could potentially be a question.
John Paul Stevens: And you submit it is not I gather.
Thomas W. Merrill: The word "revenue" conceivably could have a different scope than the word "tax". I understand, for example, that the House traditionally argued that revenue included appropriations as well as taxing bills. The Senate disagreed with that. So, there's... there are a lot of untested issues that could conceivably be raised by the Origination Clause. But again, no claim has been made in this case that this particular provision violates the Origination Clause. The Origination Clause came in through the side door in Appellee's brief in order to try to substantiate its more general argument about delegation. Let... let me, if I can, though just... just complete noting the provisions in the statute that govern the setting of these fees because I think it is an important point. The statute sets forth a single criterion for determining fees: pipeline usage. It's not a multiple choice test in the sense that the Appellees suggest. The statute does go on to set forth three factors that the agency can look at in trying to determine pipeline usage, but the ultimate standard that Congress enunciated was pipeline usage. The statute also says that... that in... in determining pipeline usage by those factors that there must be a reasonable relationship between those factors and the determination of pipeline usage. And finally, the statute says that in establishing the schedule, the Secretary shall take into account... take into consideration the allocation of departmental resources. So, what we have here really is a... is by modern standards a highly precise statute, one that sets forth a number of constraints on the discretion of the Secretary of Transportation, and sets forth really four limitations on the type of... the schedule of fees that can be adopted. I don't think that any serious claim could be made that this statute violates the intelligible principles standard of the J. W. Hampton case which this Court has most consistently applied in delegation cases.
Sandra Day O'Connor: Mr. Merrill, do you think Congress could determine the total amount it needs each year for all government services and obligations and then tell IRS to determine a rate and figure out how to raise the money?
Thomas W. Merrill: That, obviously, would be a far cry from what we have before us in this particular case. Our contention... and I... I will get to it presently is that there should be no distinction in terms of the delegation standard that this Court applies to taxes as opposed to fees.
Sandra Day O'Connor: So, you think Congress could do that.
Thomas W. Merrill: If Congress set forth a standard to confine the discretion of the agency and... and indicated its policy and did so in a way that meant that the agency's actions were subject to meaningful judicial review, yes, I think Congress can do that. That strikes us as odd. That strikes as sort of different from the traditions that we've come to expect in the area of taxation.
Antonin Scalia: Me too. You... me too. You... you'd want us to review the... the... the assessment of taxes?
Thomas W. Merrill: Well, I don't know that I would want the Court to review it under the delegation doctrine any differently than the Court has... has reviewed other major enactments under the delegation doctrine. I think it... it strikes us as odd under our traditions, but those traditions have not been developed under the compulsion of any holding by this Court about the meaning of the power of taxation and how far Congress has to go in... in legislating with specificity under the taxing power. The... Congress itself is responsible for having generated that tradition, and there's no reason to think at this point that Congress is about to abdicate or to give away that... that power which it has rather jealously protected over the years.
Antonin Scalia: Well--
Thomas W. Merrill: Certainly nothing in this statute suggests that Congress is about ready to abdicate in its... in its powers.
Antonin Scalia: --One can say that all other delegations of... of authority can be... can be connected to some executive activity. And you can say it's really just giving the executive discretion with respect to the performance of some distinctively executive activity. Whereas taxation is... is so... so utterly independent of the performance of any executive duties. Well, Congress gives the Internal Revenue Service discretion in implementing the tax codes. There's a great deal of discretion exercised there. In interpreting the... the tax code, but not--
Thomas W. Merrill: And in promulgating regulations, including legislative regulations in some circumstances.
John Paul Stevens: --But not fixing rates.
Thomas W. Merrill: Generally, yes. Congress does not tell the IRS to fix rates. But I don't think that fixing rates can somehow be singled out or zeroed in on as... as a... as a... as a unique function as to which there can be absolutely no delegation by Congress whatsoever. After all, fixing rates was exactly what was at issue in the J. W. Hampton case.
John Paul Stevens: Nor does Congress tell IRS how much money to raise.
Thomas W. Merrill: Nor does Congress tell IRS... Congress did not tell the DOT how much money to raise in this case either. DOT can... is... has... is subject to a fixed limitation in any given year of 105 percent of its annual appropriations, and over time--
John Paul Stevens: Yes, but they're supposed to get 100 percent of their costs of operating the program, aren't they? Isn't the... the purpose of the fee schedule to reimburse the agency for its costs of operation.
Thomas W. Merrill: --That's correct. If the fee schedule works correctly, if they're not... if the collection of the fees is reasonably complete, over time the agency will recover 100 percent of its appropriated costs.
John Paul Stevens: See, if this... if this program is permissible, this is a way of raising additional revenues without increasing taxes, isn't it?
Thomas W. Merrill: Yes.
John Paul Stevens: Yes.
Thomas W. Merrill: And, in fact, the legislative history... I would have to be candid... suggests that the primary motivation for enacting the statute was concern with the Federal deficit. But I don't think that that means it's unconstitutional as an unconstitutional delegation of power because if you look at the statute, the... the discretion is channeled quite narrowly here. And we see no principal basis in the Constitution for a distinct delegation doctrine with respect to taxes as... as opposed to the regulation of interstate commerce.
Antonin Scalia: And user fees have the same effect too and the same attraction and are often imposed for the same reason.
Thomas W. Merrill: Yes.
Antonin Scalia: Instead of raising taxes, you impose user fees.
Thomas W. Merrill: Yes, yes. I mean, if you look at the history of the IOAA, for example, in 1952, there's a footnote in the National Cable case which recites a little bit of that history and indicates that Congress' motivation there was to reimburse the government for some of the expenses that it was incurring in providing benefits, privileges and licenses to people. What Congress thought here was we have an industry which is engaged in an inherently dangerous activity, transporting natural gas and oil through pipelines. We've adopted a regulatory program, and in order to try and limit those dangers, and doesn't it makes sense that the costs of doing that should be borne by the industry?
William H. Rehnquist: Well, one can certainly agree wholly with that judgment, but regret that Congress can't make up its own mind about some of these things.
Thomas W. Merrill: Congress made up its mind in this case. If you... if the principle that Congress is operating under is that it wants an industry to bear the costs of a program, it seems sensible to me for Congress to direct the agency to establish the schedule of fees that is going to apportion those costs according to the degree to which each company in the industry is, in fact, creating the costs. Congress could do it by some kind of fixed formula saying that the fees shall be X percent or something like that, but that would be more rigid and in a sense make less sense than simply telling the agency to do it. And the agency's discretion here is not... is not broad. They're supposed to do it according to pipeline usage.
William H. Rehnquist: Well, but you speak as if rigidity were something to be scorned. But basically, the idea of legislation and administration suggests that, you know, there is going to be some rigidity in the legislation, that it doesn't entirely just lop over to the administrator.
Thomas W. Merrill: I agree with that. And in the... in the taxation area, pure and simple, when we're talking about raising revenues in order to support public goods like defense and the national welfare system, rather than recovering the costs that... that the government has incurred in a particular program, that type of... of... of rigidity and... and setting of fixed rates based on broad distributional considerations and other factors makes complete sense. And Congress, in fact, routinely does that. But when Congress decides that it wants to recover the costs of a particular program from the persons who are responsible for that program, for the... for the need for that program, I don't think it's inappropriate for Congress to say that... that some discretion should be given to the agency in the apportionment of those costs among the people responsible for the... giving rise to the need for the program in the first place.
Antonin Scalia: What about Congress telling an agency to raise such taxes or such funds as may be in the public interest, convenience and necessity, which is a standard we've... we've approved in other contexts?
Thomas W. Merrill: Well, Justice Scalia, at some point, obviously, you would start bumping up against--
Antonin Scalia: Is that the point?
Thomas W. Merrill: --the limitations that the Court identified in the Schechter Poultry case, for example. I mean--
Antonin Scalia: Well, but... but that... but we've... we've approved that language in other contexts. Is that language okay for taxes too?
Thomas W. Merrill: --I... our submission--
Antonin Scalia: If not, then there's a different standard for taxes.
Thomas W. Merrill: --Our submission is that the same standard that the Court has articulated in the non-delegation context generally should be applied to exercises of the power of taxation.
Antonin Scalia: So, your answer is yes. You could say raise taxes or raise... raise funds to the degree and in the manner that is in the public interest, convenience and necessity.
Thomas W. Merrill: Well, if that's all the statute said, I think it would raise questions--
Antonin Scalia: That's all the Federal Communications Act says.
Thomas W. Merrill: --Well, it says more than that. I mean, it--
Antonin Scalia: Not really.
Thomas W. Merrill: --That... that's a particular standard for award of licenses.
Antonin Scalia: Not really, for when broadcasting licenses are to be issued. There's not much more.
Thomas W. Merrill: The standard for setting... awarding a license or setting a rate, but that standard appears within the context of a whole administrative mechanism which has been set up by Congress with general statements of purpose--
John Paul Stevens: Well, yes, but the standard that Justice Scalia suggests would also appear in the history of... history of appropriations and the agency spent a certain amount of money over the years, and that sort of... they could decide what degree of activity of their own was in the public interest. xxx.
Thomas W. Merrill: --Yes. I will admit that... that these... these... these problems are troubling, that they seem to be contrary to the traditions that we've operated under. But I would... I would remind the Court about some of the reasons that... that the Court has cited for not applying a highly strict delegation standard in the commerce context and would suggest that those same reasons would also apply in the context of taxation. Now, the two primary reasons I think, first of all, are just simple a practical problem that when you're operating a government the size of the Federal Government, Congress can't make all the policy decisions itself. It has to utilize the executive branch or the... or executive agencies to decide supplementary issues of policy. That has been a primary factor that has been cited in this Court in its cases. The second is a definitional problem. If you're going to draw the line between somehow fundamental policy issues and non-fundamental policy issues, how can the Court develop a workable standard for differentiating between those two types of questions. That's... those sort of considerations have haunted the delegation doctrine in... in the context... in the traditional context. And I think they would be equally applicable here. Appellees say, well, it's different when we're talking about the allocation of the tax burden. That's somehow special. But the allocation of the tax burden is not just simply a function of tax rates. It's a function of the definition of income. It's the function of what's deductible. It's the function of what kind of credits you get. And the Internal Revenue, for example, has to exercise a lot of discretion in a lot of areas in determining those things. And so, the ultimate allocation of a tax burden is not something that Congress itself can make every... every... every single decision about. And so, we... we just... Appellees have not suggested really a meaningful intermediate standard for delegation that would apply to the taxation [inaudible], but not to the--
John Paul Stevens: How much... how much damage would be done to... to our prior history in cases if we simply held that the taxing power is non-delegable?
Thomas W. Merrill: --If you held that the taxing power was non-delegable?
John Paul Stevens: Yes.
Thomas W. Merrill: Well, I don't know what that would mean. I mean, the taxing power is non-delegable. The commerce power is non-delegable.
John Paul Stevens: Rules for raising revenue have to originate in the House and follow the procedure. That's all.
Thomas W. Merrill: Semantically I don't think the correct reading of this Court's cases is that any of Congress' powers are delegable in the sense that the entire power can be transferred to somebody else. The issue this raises is how much discretion can Congress give to the executive in implementing statutes that it enacts pursuant to its multiple powers. We think in answering that question, how much discretion can you give before you have somehow deemed to have delegated or deemed to have abdicated that the Court... that the only standard we can think of... the only standard that anybody has really suggested is the standard of J. W. Hampton and Schechter Poultry and so forth. And... and for the Court to somehow suggest that taxation is different would send us down the road of having to consider all sorts of challenges to tax statutes in a variety of contexts based on the need, first of all, to come up with an abstract definition of taxes as opposed to something else and then, secondly, to try and figure out what this new delegation standard actually means. Appellees have identified nothing in the text of the Constitution that would differentiate the taxing power from the commerce power. They certainly don't suggest that Article I, Section 8, Clause 1, which sets forth the power to lay and collect taxes itself, provides a textual basis. They focused almost exclusively on the Origination Clause. I think there are three reasons why the Origination Clause cannot plausibly be cited as a source for some kind of hyper delegation standard that applies only to taxation. First of all, the Origination Clause doesn't say anything more about the degree of precision that Congress has to use in passing tax statutes than does Article I, Section 8, the Taxing Clause itself. Secondly, insofar as the Origination Clause can be read as reflecting a policy judgment by the Framers that issues of taxation should remain closer to the people than other types of decisions, the Framers provided a procedural mechanism for realizing that policy. They said that tax bills had to originate in the House. This bill did originate in the House. There's no dispute about that, and so the procedural mechanism that Congress adopted to vindicate its policy has been satisfied. Finally, appellees have quoted to the Court the first half of the Origination Clause which says that "all bills for raising revenue shall originate in the house of representatives. " but they haven't quoted or relied on the second half of the Origination Clause which says "but the senate may propose or concur. " in "amendments as on other bills". So, unlike the British tradition, for example, where the House of Commons got to initiate revenue measures and the House of Lords could only approve or disapprove, vote up or down on that, the Framers rejected that and gave the Senate the power to amend or propose alternative measures even though the bills are originated by the House. This is a much more diluted principle of popular accountability than one would have under the British system or that one would have if all you had was the first half of the Origination Clause. And we don't understand how you get from that diluted principle of accountability, how you make the logical leap from that to the proposition that Congress can give the executive no discretion in implementing the tax laws. There seems to be too much of a... of a gulf there in order to sustain the proposition the Appellee wants to sustain. Let me turn to the second--
Anthony M. Kennedy: I'm not... I'm not sure I... I followed all of that argument of--
Thomas W. Merrill: --Well--
Anthony M. Kennedy: --It doesn't... it doesn't apply to the delegation doctrine. The delegation doctrine, we see if the legislature is delegating its powers.
Thomas W. Merrill: --The Appellees have argued, Justice Kennedy, that you can find this policy in the Origination Clause that says that matters of taxes have to be kept close to the people. The House of Representatives at the time the Constitution was framed was directly elected, but the Senate was not. And so, Appellees concluded from that matters of tax have to be decided by what today are... are both the House and the elected Senate to a greater extent than can be decided by an executive branch agency which is only--
Anthony M. Kennedy: We still have to identify a revenue bill and we still have... we still have to identify a revenue bill and we still have to make sure that it originates in the House.
Thomas W. Merrill: --The Origination Clause, of course, still applies. They're not... and they're not disputing that it was violated in this case. They're trying to find this policy in it. And all I'm suggesting is--
Anthony M. Kennedy: And you're not saying it has no policy reason.
Thomas W. Merrill: --No. All I'm suggesting is that if there is a policy of popular accountability, It's not the dramatic one they suggest. It's a qualified one because the Senate, at the time the Constitution was adopted, was not directly elected and that the Framers contemplated that the Senate would have the power to propose amendments to revenue bills which, of course, today the Senate is directly elected by the people, and so we have perhaps more accountability than the Framers even anticipated under the Origination Clause. Let me make just one quick point about the second issue: Is this a tax or is this a fee? I don't think that's the correct way to ask the question. The correct way to ask the question is could Congress adopt this provision under its commerce power. And I think if you think quickly about two hypothetical... or two statutes, you can see my point that Congress ought to be able to have the power under the Commerce Clause to enact this particular statute. One statute would impose strict liability on all pipelines for accidents caused by the pipeline... fires, explosions and so forth... and would require the pipelines to pay damages to persons that are injured. The second statute would adopt a scheme of regulation setting the safety standards and enforcement to ensure that accidents don't happen, and then imposes on the pipelines the costs of paying for that scheme of regulation. The second statute is really what we have in this case. I can't see any question that the first statute would be sustainable under the commerce power, and if that's the case, I think the second ought to be sustainable under the commerce power as well. I'd like to reserve the balance of my time for rebuttal, if I might.
William H. Rehnquist: Very well, Mr. Merrill. Mr. McMillan?
Richard McMillan, Jr.: Mr. Chief Justice, and may it please the Court. The issue in this case, of course, is not whether the Framers were committed to the proposition that taxation and legislative accountability for taxation were important. That proposition, that elected representatives should be accountable for their votes on tax matters, was accepted by everyone. The issue is whether or not that deeply held belief was actually incorporated into the text of the Constitution so that it actually binds Congress today when Congress is not so sure it likes the idea of that accountability. The Constitution says that "all bills for raising revenue shall originate in the house of representatives. " And when the Constitution says "all bills", it is using in constitutional language the only word that meant law making. You couldn't pass... you couldn't make a law without introducing a bill. And it might be sufficient to just stop there and accept the Constitution at its word, that all revenue-making bills or laws must originate in the House of Representatives.
Sandra Day O'Connor: Well, this one did.
Richard McMillan, Jr.: Section 7005 originated--
Sandra Day O'Connor: Right.
Richard McMillan, Jr.: --but the decision that we're complaining about did not. The decision that we're complaining about is setting a tax rate. You can't have a revenue-raising bill without setting a revenue rate or a tax rate. That decision was not made by Congress. That decision was made in the Department of Transportation.
Antonin Scalia: Hasn't the President been given the power on some occasions to establish the... the levels of... of importation fees on oil and on other matters as well? Isn't that... isn't that a revenue-raising measure?
Richard McMillan, Jr.: Well, if we take the Hampton case, for example, in Hampton, Congress said that they wanted a tariff equal to the difference between the cost of production at home and abroad. And it asked, and properly asked, the executive to become involved in the implementation of that statute to determine over time what the cost of abroad--
Antonin Scalia: Right.
Richard McMillan, Jr.: --of production abroad and at home were. But that arithmetic calculation was... was no more than that. So, in that case, no. There was not specific rate of duty imposed.
Antonin Scalia: Why is this one less... less arithmetic? Because the particular individuals to pay it are not... are not as well identified? Is that--
Richard McMillan, Jr.: No. This case is not arithmetic because the agency was given four ways to set the tax rate. They could choose one of four rates in effect. They could base the rate on miles, on volume miles, on revenues or some combination. And it makes a big difference whether you choose miles or volume miles.
Antonin Scalia: --Well, I guess in Hampton there were a lot of different ways of competing whether the goods were being subsidized abroad or whether... you know, whatever the President had to determine there. There were probably a dozen different ways of going about making that factual inquiry. And the President could have decided to do it in one way or another.
Richard McMillan, Jr.: There is a basic difference we think between establishing a rate of tax. We're talking about revenue raising under the... under the Origination Clause. We think there is a basic difference between establishing that rate of tax in the context of taxation and making determinations about findings of fact, case-by-case determinations in response to changing conditions over time. That's what was happening in Hampton. It was a case that involved regulation of commerce. It involved the imposition of duties on foreign commerce as a way of regulating foreign commerce. It did not involve the setting of tax rates for purposes of funding the Federal Government.
Antonin Scalia: Doesn't the President have... he has all sorts of powers under the Trading with the Enemy Act. But I recall that the President has, on his own, established import... import fees on... on oil. Hasn't... hasn't... hasn't that happened?
Richard McMillan, Jr.: I don't know.
Antonin Scalia: Do you think the President could... could be given the authority in the event of a... if he thinks the national interest requires it, to impose an import fee on... on petroleum?
Richard McMillan, Jr.: I think the President... let me give two answers to that. First of all, I think that if the President is acting under some power other than the taxing power, under the war powers power, for example, then perhaps he could do that under that power.
Antonin Scalia: Well, here he's acting under the commerce power, but your... your argument is, yes, he may be acting under the commerce power, but this is raising revenue. Now, the hypo I gave you... it's the same. He's acting under the war power, under all sorts of powers, but he's raising revenue by... by imposing a... an import fee on... on oil. What I'm suggesting is it's very hard to adopt an absolute rule that the executive cannot be given discretion as to whether to raise revenue or not.
Richard McMillan, Jr.: To me, Your honor, the rule basically boils down to whether or not it's a zero sum game. Revenue raising... let me... let me just take the New England Power case as an illustration of that zero sum game principle, and New England Power I choose because that involved natural gas pipelines, just as this case involves natural gas pipelines. In New England Power, there was a set of regulations. And the government came in and made the argument that they're making today; namely, those regulations benefit these pipelines. And the Court said fine. If you can point to a benefit that you are conferring on a specific individual or company by your regulatory action, fine, then charge them for it. There's a quid pro quo involved there. Something goes this way and you pay a fee in return for it. But it what you are doing is raising revenue for the public purpose, if you are doing something other than simply trying to make entrepreneurs rich, which was the language Justice Douglas used, and are going beyond that to satisfy a public purpose, then you are raising revenue, and when you are raising revenue, you come under constitutional concerns that are different. I think we can take that much away from National Cable and New England Power. What the difference is we are here today to decide. And the first place we need to look is the Origination Clause. We can look at the structure of that clause. It is the first enumerated provision in Section 7 of Article I which contains not only the Origination Clause, of course, but the Presentment Clause and the principles of bicameralism. It has words that are meaningful. Bills were the constitutional term for law making. And "originate" in a dictionary at least means to bring into being. Tax law making must be brought into being through bills in the House of Representatives. And we know from looking at the history of this clause, that it symbolized legislative accountability for tax matters. It was part of the great compromise. It was ardently championed by some of our most famous forbearers. And it was a proposition not simply that the executive should not be involved in raising taxes, but that not even the Senate should play the role of originating that idea.
Sandra Day O'Connor: But it doesn't say that the rates have to be fixed in those bills, does it?
Richard McMillan, Jr.: It... well, this Court will have to decide what a bill to raise revenue means. If this Court thinks you can raise revenue without setting a rate, then a bill to raise revenue that said nothing about rates wouldn't be covered by the Origination Clause. But if the notion of the Framers, if the history of this clause means anything... that is, that the basic decisions about taxes have got to be made by Congressmen... then the decision about rates is the central issue, perhaps the number one issue that you have to find in that bill before you can move past the Origination Clause and even worry about whether there are intelligible principles for doing something else.
Antonin Scalia: xxx. What do you do about Treasury Department regulations which... which assuredly determine who will pay taxes and what rates will be for particular individuals?
Richard McMillan, Jr.: There is a--
Antonin Scalia: A lot of discretion as... as to how to write them.
Richard McMillan, Jr.: --There is a profound difference in fact between the regulations of other agencies which this Court has approved as lawmaking or quasi lawmaking and Internal Revenue regulations which, as Your Honor mentioned in Mr. Merrill's argument, are interpretive. There is a big difference between the IRS' role which is to interpret what Congress had... had to say in a way not binding on this Court and an independent legislative sort of lawmaking function that... that we've seen with other agencies. So, I think--
Antonin Scalia: You think... you think that's a constitutional line between interpretive regulations and... and legislative regulation.
Richard McMillan, Jr.: --I--
Antonin Scalia: So, you... you think this one would be okay if instead of what they said, Congress simply said you shall raise a reasonable amount of money assessed... by assessing... assessing these charges in a reasonable fashion. Then the agency would have been interpreting the word "reasonable" and it would have been okay.
Richard McMillan, Jr.: --No, absolutely not. I think--
Antonin Scalia: Well, then... then the constitutional line has nothing to do with interpretive or not.
Richard McMillan, Jr.: --No. I believe the constitutional line does. There is a distinction between giving the agency a lawmaking function and an interpretive function. In the interpretive function situation, the only lawmaking body remains Congress. And--
Antonin Scalia: That depends on... on how broad the word you're interpreting is. I mean, in some agencies, the... the word is "reasonable". And if that's going to satisfy you that the Constitution has been complied with, so long as you say, instead of spelling out what they spelled out here, which I think it is a lot better, if the... if the Congress had simply said, you know, impose a reasonable... reasonable fees in a reasonable fashion, then it would all be interpretive and it's all okay.
Richard McMillan, Jr.: --Let's take that hypothetical and be specific about it. Congress passes a law that says the IRS set just and reasonable taxes. There are two things wrong with that. First of all, a point that I was trying to make and apparently haven't made very successfully is that the interpretive function, which is all the IRS does... the interpretive function asks Congress... I mean, asks the agency to decide what did those words mean just... what did those words mean. That's something... that interpretation then has no law-making function and certainly couldn't rise to the level, we don't think, of establishing a rate, a rate for tax. But even if there was... even if they said just and reasonable rates, there's a... there's a fundamental problem with whether or not Congress has made the decision.
Antonin Scalia: I agree with that. I'm not... I'm not questioning that. I'm just questioning whether you can say that the critical distinction is between whether it's interpretive or non-interpretive because depending upon how... how vague the word you are supposedly interpreting it is, you can... you can achieve equally undemocratic results either way.
Richard McMillan, Jr.: At a practical level, perhaps. I... I was only trying to make the point that we're here to decide where the law-making function ought to reside for purposes of taxation. And giving an agency interpretive power does not transfer that law-making function away from an agency. Giving it law-making... legislative rule-making powers does. We know why this concept of legislative accountability for taxation was so important. We see it in the newspapers regularly. We... we saw it in a... in a somewhat different context recently when Congress voted down the congressional and judicial pay raises. We may not like that result, but we know why it happened. It happened because Congress had to vote, and when Congress has to vote on an issue as sensitive as taxation, we know it's going to affect the result, and we know that's what the Framers intended. So, we do think as a matter of the first issue that the Origination Clause is violated here, that if you look at the structure of that clause, at the words that it uses, at the history of that clause, you can only conclude that the decision made here by the Department of Transportation did not originate in a bill of the House. It originated in a notice in the Federal Register. There is a second issue which we have raised in the alternative to the Origination Clause issue, which posits the question of what if the Origination Clause is not by itself dispositive of whether or not some... someone other than Congress can tax. It has to do with what we mean by the term "execution of the laws" in the context of taxation. Let me start with a proposition that I don't think will be disputed. The Congress cannot delegate legislative power to the President is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution. That quote from Field and Clark has been quoted innumerable times in decisions of this Court. The question is does it mean anything. Without reaching the issue of taxation, the context of taxation here, I think we can begin with the proposition that whenever this Court has sustained the delegation of law making to an agency, it has always been a predicate for that ruling, that there was something to execute. There was some program to implement. There were case-by-case determinations over time in response to changing conditions or whatever. We found that in Hampton. It was true in Mistretta. In short, there has to be a program to execute, perhaps details to fill in with respect to that program, but not the central issue of how much someone is going to pay, not simply a decision to make. And we know that the--
Antonin Scalia: What was that in Mistretta? I... I don't recognize your description of what the Court said in Mistretta at all.
Richard McMillan, Jr.: --The Court in Mistretta--
Antonin Scalia: It's a good description of the dissent, but-- [Laughter] --but I don't--
Richard McMillan, Jr.: --The--
Antonin Scalia: --What... what was the executive function that was being performed--
Richard McMillan, Jr.: --The--
Antonin Scalia: --other than the making of rules?
Richard McMillan, Jr.: --The quote from Mistretta that I was referring to was this. "Developing proportionate penalties for hundreds of different crimes by virtually a limitless array of offenders is precisely the sort of intricate, labor-intensive task for which delegation to an expert body is especially appropriate. "
Antonin Scalia: Writing tax laws may be.
Richard McMillan, Jr.: The Department of Transportation has never been thought of as a expert agency on writing tax laws. This... this Court in the Lichter case and in other cases has, in looking at what we mean by execution of the law and delegation, held specifically that we ought to be concerned with the nature of the power that is being invoked. In Lichter it was a war powers situation, and the Court found that in that context, there was... it was particularly appropriate to find the delegation. And in--
William H. Rehnquist: Mr. McMillan, supposing in this case that Congress had said this safety program is costing us $100 million a year, we want the... that money raised from the pipeline companies and all of them, and we want it raised on a basis of usage of the pipelines. Now, that may be a little bit different from this case, but it's... to the extent it is a hypothetical. Is... is that unlawful delegation?
Richard McMillan, Jr.: --Yes.
William H. Rehnquist: Why?
Richard McMillan, Jr.: It... it is really precisely the New England Power fact pattern in a sense. It's really exactly New England Power.
William H. Rehnquist: Well, but didn't the Court in New England Power say that Congress had not delegated to the FPC? It didn't say Congress couldn't have delegated, did it?
Richard McMillan, Jr.: The Court didn't reach the third... they reached two issues and didn't reach a third. They found this is unquestionably taxes. They found that the label, the tax label, makes a difference for constitutional purposes, but on the third issue, what difference does it make, they didn't reach it. We're here today to argue that the taxing power, that is, the basic decisions about raising revenue, including the most central decision of all, who was going to pay how much, cannot be delegated to an agency regardless of whether or not the standard is usage or something else that's--
William H. Rehnquist: But how much... how much discretion really is delegated here if you say that there's $100 million to be raised? We want it raised from all pipeline users. Now, all the agency has to do is go out and count in that case. And we want it paid... paid by them or raised from them on the basis of pipeline usage. You could just refer to statistics. Is the--
Richard McMillan, Jr.: --Mid-America is here not because it cares how much the industry is going to pay. Mid-America is here because if you choose miles, as distinguished from volume miles, the tax we pay is very different. And there is no distinction. We talk about $100 million or $9 million. There is no distinction between the DOT program here and the Interstate Commerce Commission or the Securities and Exchange Commission or the Federal Aviation Administration or any number of other agencies.
William H. Rehnquist: --Well, that simply means we ought to get it right in this case I guess. [Laughter]
Richard McMillan, Jr.: We... we should get it right in this case. Absolutely. We should expect that the financing of a major part of the Federal Government by taxes is going to be made according to a set of basic decisions made in Congress.
William H. Rehnquist: Well, supposing in... in this case the Congress had added volume miles so that there really was very little discretion left in that area.
Richard McMillan, Jr.: If they had said volume miles, then we're... we wouldn't be here because that... there isn't any discretion. That is the selection of a formula which you go out to the industry and find out what are the volume miles which... for your pipeline, what are for you. You plug that into a pocket calculator, and out comes the number.
Antonin Scalia: Mr. McMillan, I don't... tell you the truth, I don't see what's so sacrosanct about taxes. I mean, we have... we have an agency here, the Department of Transportation, that is allowed to adopt all sorts of rules with broad discretion, that can say what I can do or what I can't do. They can make things unlawful. It's authorized even to adjudicate civil penalties against me for violating those rules. And yet, somehow we... we pass some... some threshold of impermissibility when... when they're given authority to say how much money is to be raised from... from pipelines. I... I don't feel that I'm suddenly in a... in a new world when... when that happens. I mean--
Richard McMillan, Jr.: Well--
Antonin Scalia: --Had we not given Transportation all these other powers, I could understand it. But what's so... what's so ugly about taxes? I don't understand it.
Richard McMillan, Jr.: --Well, with all due respect, Your Honor, I don't... it's not a question of whether you feel uncomfortable or I feel uncomfortable or even whether the Framers felt uncomfortable. The question is what does the Constitution require, and there is no way of understanding the Origination Clause and where it traces from without understanding that as a symbol of legislative accountability in the tax area.
Antonin Scalia: Well, no, not legislative accountability. House accountability. What it says is when there is a tax bill, it has to be... originate in the House, just as in other areas it says when there is a bill on anything, it has to pass both houses and has to be presented to the President. But neither of those two says when there has to be a bill. It just says what must happen when there is a bill.
Richard McMillan, Jr.: It means legislative accountability and House accountability. It means not only will the executive not be involved in this decision, but even the Senate's involvement will be limited. That's the... that's what the Framers had in mind and that's what's--
Antonin Scalia: If that decision is to be made by... by law, as opposed to having it made by the executive. Yes. When that is so, it must be done that way, just as you can say in other areas, whenever the decision is to be made by law, the Senate has to agree to it and the House has to agree to it and the President has to sign it. But that doesn't speak to whether it must be made by law or can instead be delegated to the President.
Richard McMillan, Jr.: --We are here today arguing that the decision about what Mid-America is going to pay, what its tax rate is going to be can only be made by law. I don't think that's a particularly surprising provision. That's what the Constitution says.
Antonin Scalia: xxx so. I don't see anything so... so quite different about taxes as opposed to... to offenses that... that can be made unlawful by... by the President without... without a law.
Richard McMillan, Jr.: Offense... offenses are a zero sum game in the way that revenue raising isn't. If you do something wrong, your... you pay back for it. You... you pay to make it right, so to speak. That's a zero sum game that comes in under a different sort of a... of a constitutional power. When you raise revenue for the public good for discretionary spending, that is a issue that is covered by a discrete set of constitutional provisions. There's no way to get away from the fact that the Constitution treats taxation differently than it treats other powers, not only in the Origination Clause but in other clauses. Taxation is different under the Constitution. Mid-America is here sharing some of the... some of those original concerns. Tax should be called a tax. If someone is going to decide what Mid-America is going to pay to support this program, it ought to be Congress. It ought not to be an invisible employee of the Department of Transportation.
John Paul Stevens: May I ask? Under your view if the Congress delegated to the Department of Transportation the decision of which roads in the Federal highway system should become toll roads and to set the right rates in an effort to reimburse the government for the cost of the roads, would that be permissible? And they charge a user fee in the form of tolls, but the purpose of the user fee would be to pay back the government for building the roads. And now would that be different from this?
Richard McMillan, Jr.: The Court in National Cable I think found that if you are talking about a user fee, it doesn't rise to the level of something that the constitutional concerns associated with taxation are concerned about.
John Paul Stevens: So, that would be all right.
Richard McMillan, Jr.: Yes.
John Paul Stevens: Yes.
Richard McMillan, Jr.: In closing, I would just go back to a point that I started with that the decision we are talking here originated in the Department of Transportation. There is a difference between bills for raising revenue and notices in the Federal Register. Thank you.
William H. Rehnquist: Thank you, Mr. McMillan. Mr. Merrill, do you have rebuttal? You have three minutes remaining.
Thomas W. Merrill: Two quick points. First, with respect to the argument that the DOT regulations violate the Origination Clause in this case because the regulations didn't originate in the House of Representatives, that argument would call into question the validity of every single regulation issued by the Treasury Department. And it's simply not the case that all Treasury regulations are interpretive regulations. One of them, which is cited in Appellee's brief at page 19, Section... under Section 1502 of the Internal Revenue Code, specifically provides authority to the Secretary to adopt legislative regulations. And it's not true that that's some kind of esoteric housekeeping provision. It has to do with establishing standards for allocating income and expenses among affiliated corporations when they file a consolidated return. And those regulations and the decisions made under them have an extremely major impact on the allocation of the tax burden among affiliated corporations, how much income tax they pay and what kind of capital gains they're subject to. And with respect to Justice Scalia's question about the President's imposing a fee on imported oil, yes, under the Trade Expansion Act in the early 1970s, the decision was made by President Ford to substitute for a system of oil import quotas a system of oil import fees. And this Court unanimously sustained that against a non-delegation challenge in the case of FEA v. Algonquio which is at 5426 of the United States Reports. Thank you.
William H. Rehnquist: Thank you, Mr. Merrill. The case is submitted.