William H. Rehnquist: We'll hear argument next in Number 93-1318, Interstate Commerce Commission v. Transcon Lines. Spectators are admonished not to talk until you get out of the courtroom. The court remains in session. You may proceed, Mr. Wallace.
Lawrence G. Wallace: Thank you, Mr. Chief Justice, and may it please the Court: Since 1920, the Interstate Commerce Act has prohibited common carriers from delivering freight on credit except pursuant to regulations adopted by the Interstate Commerce Commission governing credit transactions, and that prohibition was extended to motor carriers when they came under the ICC's jurisdiction in the Motor Carrier Act of 1935. Prior thereto, it was focused on railroads, of course. The ICC first adopted credit regulations in 1920 and from 1920 until 1988 those regulations contained no authorization of liquidated damages for late payment of freight charges. The only authorized remedy was to collect the prescribed rate for a timely payment plus interest for the delay. In rulemakings in the late 1980's, the ICC for the first time, at the behest of the American Trucking Association and other carrier interests, authorized liquidated damages for collection expense charges in the regulations, and those are set forth beginning at page 83a of the appendix to our petition, subpart g of the regulations, entitled "Collection Expense Charges". In an amicus brief filed in our support by the Health & Personal Care Distribution Conference and some other shipping associations, on page 4 and 5, the course of the rulemaking proceedings is recounted and the citations are given. The shipping interests were, of course, participants and quite concerned about unfairness to them that may eventuate and, because of that, the ICC included initially in the 1988 regulations and added in the revised regulations in 1989 certain conditions for the collection of these liquidated damages which, it is undisputed, were not complied with in this case. Those include from, beginning with the provision that was in the original 1988 regulations and was retained, a requirement that the original bills advise shippers of the consequence of late payment. That is set forth on page 86a. It's subpart (c). And the two provisions that were added in 1989 to further protect shippers from the unfair practices are set forth first on page 85a, and that is subpart (g)(2)(vi), that revised bills have to be issued within a 90-day period after the original credit period had expired. That also admittedly was not complied with. And then on page 84, subpart (iii) of (g)(2), it says that the loss of discount, or the liquidated damages, cannot be applied on an aggregated basis but can only be applied on separate and independent freight bills. There are obviously great economies of scale in aggregate collections, and there was concern that aggregate collections would be made, particularly after carriers became insolvent, and there's a specific reference in that provision to a bankruptcy trustee attempting to collect on an aggregate basis. So what we are concerned with here is an effort that was made by respondent, as the trustee for this insolvent carrier, to bill shippers from several years earlier and collect additional payments, including these very heavy liquidated damage charges, an effort that was specifically foreseen by the Commission in adopting the regulations authorizing credit transactions, and--
Ruth Bader Ginsburg: Mr. Wallace, could you clarify for me what this... what you've been calling the liquidated damages which the respondents call the bureau rate, when, other than in the context of liquidated damages for failure to pay on time, would this bureau rate apply, and in connection with that, what rate would apply to someone who is shipping these same goods on these same routes who pays on delivery, who doesn't get credit terms? That wouldn't be the bureau rate, would it? It would be some--
Lawrence G. Wallace: --That is correct. It would be the same discount rate that applies to the credit transactions, plus there can be a service charge for the delayed payment in the--
Ruth Bader Ginsburg: --But wouldn't... I'm positing no delay in payment. Wouldn't there be something even more favorable than the discounted rate? The shipper who pays on delivery, who's not asking even for 30 days, is that also--
Lawrence G. Wallace: --That could be, and as far as I'm aware was, the same discount rate, although there might be some further discount for cash payment which is not reflected in anything I've read in this case. Perhaps Mr. Gumport could clarify that.
Ruth Bader Ginsburg: --So does the bureau rate... it certainly doesn't apply to one who pays promptly. Does it apply to anything other than this liquid... as a liquidated damage--
Lawrence G. Wallace: So far as I'm aware, it does not. There's no indication that it does. It is not... it is a source from which the real rates, the real filed rates are... the discount rates, it's a source from which the discount rates are calculated. So that it's a source... it's a rate bureau source that determines the proportionality of what are the real rates, which are the discount rates, and the only way that this record reflects that those rates come into play at all is not as what I think are accurately regarded as rates for transportation, but as the measure of the liquidated damages for collection costs that is authorized under these regulations under the collection expense charges in little point (ii) at the top of page 84a of the appendix. That is one method of calculating liquidated damages that is authorized under this rule, if the rule is complied with. Now, the rule was designed specifically to forestall precisely the problem that arose here by conditioning the availability of these liquidated damage charges on compliance with certain safeguards for the shippers.
Anthony M. Kennedy: --Well, could the trustee, in an action brought by the shipper, raise this as a defense?
Lawrence G. Wallace: Well, ordinarily it's... it's the other way around that it occurs. The shippers have made their payments and would not be bringing an action. It's the trustee who is trying to get additional payments from the shippers through the bankruptcy proceedings. He has made claims against them, and the... this Court's holding in Southern Pacific Transportation Company v. Commercial Metals suggests that the shippers cannot themselves raise a defense, and we have briefed the case on that assumption.
Anthony M. Kennedy: Well, I was going to ask you, do you have a position as to whether or not the defense is available in the action itself?
Lawrence G. Wallace: We have briefed the case on the assumption that it would not be available to the shippers under the rationale of the Commercial Metals case, but I think in candor an argument could be made that Commercial Metals should not extend that far because what was directly involved in Commercial Metals was an effort not to pay the transportation rate itself, which--
Anthony M. Kennedy: Well, if it's an invalid rate, then under our K Mart line of... under the K Mart case, it would seem to me that it's just a nonenforceable rate in the court, and it would seem to me that that would almost have to be the premise if you're to prevail here. I'm not quite sure why there should be a difference.
Lawrence G. Wallace: --Well, we do take some solace from the K Mart case. I don't want to overdraw the analogy, because the Court determined there that there was no valid, filed rate. There was a rate that could be ascertained from tariff filings and the Court said that that could not prevail over a violation of the Commission's regulations, and in that way the case is very analogous to our case. But Commercial Metals held, in the context of an effort by the shipper not to pay the transportation charge at all, the transportation rate, that the shipper could not raise that as a defense, that if there's to be a challenge to it because of violation of the Commission's credit regulations, and that is the only case of this Court that deals with a claim of violation of the credit regulations, that is to be enforced in the courts by the ICC. The reason I think that an argument could be made by shippers that Commercial Metals doesn't extend as far as this case is because in this case what is sought to be collected is not the rate for transportation or services that the statute requires to be in a tariff as a rate filing. That rate is what would be payable in the transaction if the payment were made promptly, plus whatever interest there would be for delay in payment, precisely what the ICC's requested injunction would limit the trustee to collecting here. What is sought to be collected in addition are these liquidated damages called collection expense charges authorized by the regulation beginning on page 83a, which are in the tariff, but not because the statute requiring the rates for transportation or services require it to be in the tariff... those statutes we've set forth in our brief on page 74a and 75a of the appendix to the petition... but instead it's because the regulation itself requires that those liquidated damage rates be in the tariff. They're entirely a creature of the regulation, and that is on 84a of the petition appendix under 2(i), "Shall be described in the tariff rule. " and (ii) says, "Shall be applied without unlawful prejudice and/or unjust discrimination. " Those requirements are creatures of the regulation, just as the authorization to collect these charges at all are creatures of the regulation, and the Commission, as I started to say at the outset, is acting in an area where Congress expressly relied on the Commission's regulations to set the rule. Congress proscribed altogether any credit transactions here except pursuant to regulations which the Commission may adopt, so the Commission was acting really at the zenith of its regulatory powers in fulfilling a mandate that Congress expressly relied on the Commission and only the Commission to fulfill here. So regardless of whether the shippers could raise a defense, what Commercial Metals looked to was an even more venerable provision of the act that dates back to the original Interstate Commerce Act in 1887, the statutory authority for the Commission to bring an enforcement action in Federal court, and the Court in Commercial Metals emphasized that that could be an injunctive action to enforce the credit regulations. It should be remembered that at the time of the Commercial Metals decision in 1982, the credit regulations did not yet authorize this liquidated damages for the cost of collection, and the only defense being made by the shipper was a defense not to have to pay the filed rate for transportation itself. So there might have been anticipation that the Commission would be unlikely to bring an injunctive action which would say that the carrier should not be paid at all for the transportation, even in the circumstance where the carrier did not fully comply with the credit regulations, but at least as the Court interpreted the act, that was to be left to the Commission's enforcement authority rather than an equitable defense by the shippers. Well, since the conditions admittedly were not complied with for assessing the liquidated damages, it might seem obvious, in light of Commercial Metals and the Commission's enforcement authority in 49 U.S.C. 11702 that I've referred to, that the Commission's action to enjoin this belated effort of the trustee acting in perfect good faith to try to enhance the value of the estate, to enjoin this effort to collect liquidated damages when these very carefully constructed conditions had not been complied with to the obvious prejudice of the shippers whom the conditions were designed to protect, and that the trustee, standing in the shoes of Transcon, should be relegated to the historic remedy that existed from 1920 to 1988 of the transportation charge plus interest for any lateness in the payment, obviously a remedy that could not be said to be incompatible with the act. The court of appeals, however, said no, that that rather obvious conclusion should not be reached because of the filed rate doctrine as it understood that doctrine to have been applied by this Court in Maislin Industries v. Primary Steel. Now, we think that this was misconceived by the court of appeals from the outset, and the first thing to be said is that Maislin, in contrast to this case, involved an effort to enforce an unfiled rate, the negotiated rate which was never filed, but under the Commission's then negotiated rates policy was to be enforced in preference to the actual filed rate. And Maislin itself, in footnote 11 of the Maislin opinion, pointed out that the case was therefore different from prior decisions of the Court in which the question was which of two filed rates should be applied, rather than an effort to depart from the filed rate schedule altogether. And we think that that footnote applies a fortiori in this case, because here it's not a choice between two filed rates for transportation, it's a choice between the filed rate for transportation, which the Commission says the trustee is entitled to, and this other charge of liquidated damages that is not a filed rate for transportation within the meaning of the statutes that require rates for transportation and services to be provided, but as I previously explained is entirely a creature of the regulations which is required to be in the tariff only because the regulations require it to be in the tariff. That is the source of the obligation. Then this Court decided Reiter v. Cooper after the court of appeals' initial decision, which we thought made the error more manifest because Reiter established quite clearly the principle that Maislin did not mean that the filed rate doctrine would preclude claims and defenses that are specifically accorded by the act itself, such as the Commission's express statutory authority to bring an action for an injunction to enforce its credit regulations. So when we petitioned for certiorari for the first time in this case, we suggested that the judgment be vacated and the case remanded for reconsideration in light of Reiter v. Cooper, which is the course that the Court took, but on remand the court of appeals reached the same conclusion, basically holding that the ICC statutory enforcement authority should be subordinated to its view of the filed rate doctrine, which is--
Ruth Bader Ginsburg: Mr. Wallace, did that occur in the Ninth Circuit after reargument and fresh briefing, or when the response to Reiter--
Lawrence G. Wallace: --It was rebriefed, I'm told. I have to get some help from the--
Ruth Bader Ginsburg: --and reargued before the same... not reargued, just rebriefed.
Lawrence G. Wallace: --Not reargued, just rebriefed, apparently. So it seemed to us that what the Court held was merely, to the contrary of Reiter, that the express statutory provision should be subordinated to the Court's view of the filed rate doctrine, which is just the opposite of the way the Court came out in Reiter. And it also... in its rationale on remand it seemed to us the Court intruded into and effectively nullified the ICC's enforcement discretion with respect to what remedy it can seek among the remedies expressly given to the Commission for the credit regulation violations, and the Ninth Circuit said other remedies will suffice. But those other remedies, while they might suffice against operating characters... carriers because of their prospective nature, would be of little assistance, if any, in the context of the trustee in bankruptcy, who is trying to dun shippers for these charges years after the shipment.
Antonin Scalia: Mr. Wallace, I'm not sure I quite understand what the Government's position is regarding provisions that are in rate filings because they are required to be there by these regulations. Is it your position that somehow they do not enjoy the protections that other provisions of the rates enjoy?
Lawrence G. Wallace: Well, I wouldn't say quite that they don't enjoy the protections, but it is important that they're not required by statute to be filed rates that govern, rather than any contract to the contrary, the payment for transportation and services, and--
Antonin Scalia: Aren't there a number of things that might be optionally included in rates but do not have to be included in rates?
Lawrence G. Wallace: --We think that these are rules relating to the rates, rather than rates themselves, rules about what is to be done in the nonpayment, but part of the relevance of this in the case is that respondents are arguing in some of their amici that there would be discrimination if these rates were not evenhandedly applied to all shippers, even though long after the fact and even though there were violations of these regulations, but the prohibition--
Antonin Scalia: Do you think that's because of enforcement discretion, because you could move against some and not against others?
Lawrence G. Wallace: --Well, I don't want to make their argument for them. What I'm trying to point out is that the prohibition against unjust discrimination that is involved here is only the prohibition in the Commission's own regulations, which the Commission is entitled to considerable deference in construing, since these charges are entirely a creature of these regulations to begin with. I'd like to reserve the balance of my time, if I may.
William H. Rehnquist: Very well, Mr. Wallace. Mr. Gumport.
Leonard L. Gumport: Mr. Chief Justice, and may it please the Court: The Government concedes in its brief in this Court that the loss of discount tariff provision is lawful. The Government also concedes in its brief in this Court that the regulations still do not create a defense to payment of the filed rate assertable by shippers. This is therefore a simple case, because Congress has explicitly addressed the issue in the statute. It's much easier than Maislin. The carrier, unless and until this tariff is rendered ineffective, set aside, or suspended, must, under pain of civil and criminal penalties, enforce the concededly lawful loss of discount tariff provision. The Government's position to the contrary is contradicted by the express language of the statute, it's contradicted by the legislative history of the statute, it's contradicted by the decisions of this Court from the 1907 Texas Abilene decision through this Court's 1994 decision last term in MCI Telecommunications, and it's contradicted by the ICC's own interpretation of its credit regulations.
Ruth Bader Ginsburg: Not if you read the filed rate as the discounted rate, and the liquidated... what you call the bureau rate, what they call the liquidated damage provision, if you read that as simply a credit term, not... the filed rate, the rate is the discounted rate. Then, if you don't pay up on time there's this liquidated damage provision.
Leonard L. Gumport: Justice Ginsburg, if one could reasonably do that, that would be right, but in this case it was impossible to do that, and there's at least four reasons why it's impossible. First of all, the tariff is unambiguous. There's no dispute that under the express terms of the tariff a shipper is not entitled to the discount unless it pays the tariff charge within 90 days, and only then... only then is it entitled to the discount, and when certain shipper amici tried to argue to the contrary, they had to change the language of the tariff to make that argument.
Ruth Bader Ginsburg: Why shouldn't the Commission's own rules be treated as a supplement to the tariff, since admittedly you can have this higher rate, bureau rate, liquidated damage rate, you can have it only by virtue of the credit provisions, so why not say, as a supplement to this tariff, we read in the ICC conditions, forgetting the liquidated damages, put it in the bill, 90 days passes, send them another notice... why shouldn't those ICC credit regulations in effect be treated as a supplement to the tariff?
Leonard L. Gumport: There are several reasons, Your Honor. First of all, it's contrary to this Court's decision in Davis v. Portland Seed, where a carrier had filed a tariff that contained a higher rate for the shorter route than for the longer route, and the tariff was arguably unlawful on its face. It was contrary to the express provisions of the statute, and this Court said, it doesn't matter, it's the filed rate, and unless and until the ICC suspends or sets it aside--
Antonin Scalia: That was for the purpose of a defense by the shipper, isn't that right--
Leonard L. Gumport: --Yes, Your--
Antonin Scalia: --not for purposes of suit by somebody else. It seems to me it just can't be that the Interstate Commerce Act means anything that you put... you know, any provision you put in your rate filing has to be executable. I mean, suppose you say, you know, any shipper who doesn't pay within 90 days, the CEO shall be shot. You're going to say, well, there it is, it's in the filed rate, the ICC didn't get around to striking it down, so we have to go ahead and perform it. I mean, obviously it's unlawful and you can't perform it.
Leonard L. Gumport: --Your Honor, first of all the ICC could retroactively reject that kind of tariff, it could reject it, it could suspend it, and that is not this case.
Antonin Scalia: But until it did that, you are entitled to go ahead and execute the contract, in fact obliged to, as you'd say, under--
Leonard L. Gumport: Your Honor, let's take your hypothetical, precisely your hypothetical. If that was executed and somebody was killed under the terms of the tariff provision, there would be criminal penalties for doing that, and indeed, in Maislin, in the Maislin decision--
Antonin Scalia: --How can you have criminal penalties for complying with Federal law? You're telling me that you're obliged to perform that contract by the legislation--
Leonard L. Gumport: --Yes.
Antonin Scalia: --because it's there in the rate and it hasn't been set aside by the ICC?
Leonard L. Gumport: Your Honor, it's--
Antonin Scalia: Surely... I mean, I think the law against murder is just a State law, and this is Federal law, which supersedes it. [Laughter]
Leonard L. Gumport: --Your Honor, it's a question of remedy, because in the Maislin case there was no question, and the Court pointed out in footnote 12 of its decision that if the carrier was lying to shippers about what it's real rates were, it was a crime, and nevertheless in Maislin the Court held that the ICC could not have a valid policy which created a remedy that operated to prevent the carrier from enforcing its filed rate. And in this case we don't dispute that the ICC has a remedy. The ICC could criminally prosecute people who knowingly extended credit in violation of its regulations. We don't dispute that. What the--
Ruth Bader Ginsburg: But here there is another rate, and that does make it different.
Leonard L. Gumport: --Your Honor, let me--
Ruth Bader Ginsburg: Let me ask you just to clarify this point, which I think is clear, but if it's not, tell me. The only reason that you can have this two-track system, the discounted rate which applies originally and the liquidated damage rate, the only reason you can have that liquidated damage rate is because of the ICC's credit regulations.
Leonard L. Gumport: --We disagree, Your Honor.
Ruth Bader Ginsburg: Where do you get the authority to put in the two-track system, other than the credit regulations?
Leonard L. Gumport: Your Honor, there is nothing in the regulations of the ICC that says you can't have a loss of discount tariff provision except under our credit regulations. There's nothing in those regulations that say that, nothing at all. Let me return to your earlier question.
Ruth Bader Ginsburg: Please clarify for me, then, the extent to which you disagree with Mr. Wallace, who said this was not possible until the eighties rulemaking. Until then, you got the interest for late payment, it was only that rulemaking that brought in the credit regulations, and one way of calculating the liquidated damages was having this additional tariff. Is it true that you had these two-track systems, the discounted rate and the higher rate, before there were any credit regulations?
Leonard L. Gumport: Your Honor, in 1985, the ICC authorized the filing of tariffs giving discounts for early payment, and in that 1985 regulatory decision they said, we're not sure you can do this, but we're now specifically authorizing you to do it. This denial of discount, I would submit, is no different, so that--
Ruth Bader Ginsburg: I'm sorry, I don't know that you've answered my question. Did you... were there these two-track tariff systems before the eighties rulemaking?
Leonard L. Gumport: --Your Honor, I don't know. Let me return to your question as to whether there are two filed rates. There's only one filed rate. The ICC, in its 1988 decision authorizing the filing of loss of discount tariff provisions, said that under the filed rate doctrine the carrier must enforce the loss of discount tariff provision. In the trial court, before Judge Hill heard the issue that he disposed of by summary judgment, he specifically asked the ICC's counsel whether it agreed that the loss of discount tariff provision, which is a part of the rules tariff, whether the ICC agreed that the rules tariffs were a part of the carrier's filed rate within the meaning of Maislin, and the ICC's counsel responded, yes, I don't take issue with that. The ICC also put in a declaration from a tariff expert, a Mr. Manning, on November 8, 1991, in support of its cross motion for summary judgment, and he said in his declaration that Transcon's TCON 625, which is the discount tariff, is governed by Transcon's TCON 103, which is the rules tariff, in which the loss of discount tariff provision appears. So there is no dispute, and there was no dispute in the trial court, and the evidence was only on one side on this issue, that this loss of discount tariff provision governs the rate. It sets the rate.
Antonin Scalia: You don't consider it a liquidated damages provision. It's just a rate.
Leonard L. Gumport: It's a rate. It doesn't matter what it's called, Your Honor, it's a rate, and even if it was unlawful--
Antonin Scalia: Well, indulge me. I mean, suppose I think it makes a difference what it's called. Is it liquidated damages or is it just a different rate?
Leonard L. Gumport: --Your Honor, I think arguments could be made either way. My position would be it's a liquidated damages provision, but I think it's a rate. That's the important thing. It is a rate.
Ruth Bader Ginsburg: You say it's both.
Leonard L. Gumport: Excuse me?
Ruth Bader Ginsburg: The credit regulations said one way of calculating liquid damages is what you have put in as the bureau rate, and you have followed that way of calculating liquidated damages, so was your answer to Justice Scalia that it's both?
Leonard L. Gumport: My answer is, it doesn't matter, but my answer... when put to the test of how would you characterize it, I would say it's a liquidated damages provision. I would also say, it doesn't matter, because it is a rate, and the issue before this Court is the remedy, and Congress has said what the remedy should be.
Stephen G. Breyer: I'm curious abut the statute. Isn't there a statute here? I may not understand it correctly, but if I do, I thought that the... there is a statute that governs the tariff, and it says that you can't have a tariff that allows a person credit, except "under regulations of the Commission", so the statute seems to say the only reason you could have this provision in the tariff is because you will file, follow, regulations of the Commission. And now I take it what the Commission said is, you did follow regulations of the Commission when you put that in, you did follow regulations of the Commission when you accepted the freight on credit, but you did not follow the regulations of the Commission when you sought damages, because you can't seek damages aggregate, and you have to present your bill within 7 days, or something like that, under the regulations of the Commission.
Leonard L. Gumport: But Your Honor, the question isn't whether the regulations were violated. The question is, what is the remedy for the violation of the regulations?
Stephen G. Breyer: I know. I'm asking about the statute. It seems to me there is a difference between this and the other cases, because here there is a statute that specifically governs. Now, maybe it doesn't. That's what I'm asking, though.
Leonard L. Gumport: This statute's language says one important thing about what's to be in the regulations. It says that the regulations are to be regulations "preventing discrimination" and that--
Stephen G. Breyer: Maybe I don't have it right. Mine says, "governing the payment for transportation and service and-- "
Leonard L. Gumport: --"# and preventing discrimination".
Stephen G. Breyer: --Yes, but I take it this was governing the payment for transportation.
Leonard L. Gumport: Your Honor, there's no question that it's governing the payment, but the question is, what is the remedy, and the statutory language tells us not only that they govern payment but that they are to be regulations "preventing discrimination", and preventing discrimination is a judicially defined term. It was judicially defined in this Court's Texas & Pacific Railway Company decision, v. Abilene Cotton, in 1907 before these... this statute was enacted, and in that case, which was quoted with approval in the MCI case--
Stephen G. Breyer: You mean their regulations are unlawful because they don't deal with discrimination?
Leonard L. Gumport: --They are unlawful insofar as they are applied to create a judicial injunction preventing the carrier from performing its statutory duty to collect the filed rate, and that's because, just as in Maislin, there was a broad grant of power to the Commission to prohibit unreasonable practices. Here we have a statute that uses the words, ICC cannot provide for in its regulations is the remedy of directing the carrier not to adhere to its tariff rate.
William H. Rehnquist: And that's simply because of the term... the statute says one of the things is preventing discrimination? You place all that weight on those two words?
Leonard L. Gumport: I don't just place all that weight on those two words, which have been defined... were defined by this Court before those words were put in the statute, and the definition was reaffirmed. I also place weight on the absolutely clear legislative history, which confirms that Congress meant what it said. The legislative history, which was explained by this Court in the Commercial Metals case, was that the credit rules of the Commission serve three basic purposes. One is, they exist for the benefit of the carrier, and the ICC in its brief in this Court doesn't deny that, but here it's seeking to enforce the credit rules for the benefit of the shipper, and the credit rules are also to serve the additional two purposes of preventing discrimination, which this Court has always held, right through MCI, last term... that there is an indissoluble unity. That's... those are the words of the Court in the Texas & Pacific case, those are the words of the Court in MCI Telecommunications, that there's an indissoluble unity between a carrier's duty to adhere to the filed rate and the statutory goal of preventing discrimination. In addition, the Court also explained in Commercial Metals that the other purpose of the credit rules is to protect the working... the capital structure of the carrier, yet here, the credit rules are to be applied to prevent the carrier from recovering funds that it needs to pay its creditors.
William H. Rehnquist: Well, why shouldn't the Commission have considerable discretion in interpreting its own regulation?
Leonard L. Gumport: Because under Chevron, Your Honor, the Commission has no discretion to interpret its regulations when Congress has specifically addressed the issue, and in this statute, which uses the words, "preventing discrimination", which is a judicially defined term--
William H. Rehnquist: That seems to... I still think that just puts a great deal of weight, that it won't bear, on two words in a fairly long statute.
Leonard L. Gumport: --Your Honor, I can only... I can only refer--
William H. Rehnquist: Well, I realize. I simply disagree with you on it, and you also rely very heavily on Maislin, but there have been two cases since then which suggest that Maislin, you know, is not the be-all and end-all in this thing.
Leonard L. Gumport: --This case is a far more compelling case than Maislin. Maislin involved a statute that was unqualified. The Commission has the power to prevent unreasonable practices, and this Court said if a carrier commits an unreasonable practice the Commission can criminally prosecute the carrier, but what the Commission can't do because of the utterly central filed rate provisions which are subject to civil and criminal penalties for disobedience to, what it can't do is create basically a agency-made injunction against a carrier's enforcing the filed rate.
Anthony M. Kennedy: Mr. Gumport, can I just clarify one thing? Are you contending that the credit regulations are invalid?
Leonard L. Gumport: Invalid as applied, not on their face.
John Paul Stevens: What... are there any valid applications of the regulations?
Leonard L. Gumport: Absolutely. The historical application of the credit rules, and the case law reflects this, is suing a carrier prospectively to not extend credit to shippers who won't pay the carrier's filed rate, because these regulations--
John Paul Stevens: So the Commission's only remedy is to an injunction against future extensions--
Leonard L. Gumport: --Absolutely not, Justice Stevens. Other remedies include the right to award reparations to any shipper who can show that the bureau rate as applied is unreasonable--
Anthony M. Kennedy: --Let me just... I want to be sure I understand your position. You're not contending the regulations are invalid, merely the particular remedy is not authorized by the statute?
Leonard L. Gumport: --Absolutely. That's exactly it.
John Paul Stevens: The regulations on their face do command conduct that the ICC can command.
Leonard L. Gumport: Yes, Your Honor.
John Paul Stevens: And your client has not obeyed that command?
Leonard L. Gumport: Your Honor, that's not--
Anthony M. Kennedy: Is that true?
Leonard L. Gumport: --That's not accurate, Your Honor. My client is the bankruptcy estate of Transcon Lines. Transcon Lines shipped... Transcon Lines' bankruptcy estate shipped no freight.
Anthony M. Kennedy: Let me just shorten it a little. Are you contending that you complied with the credit regulations in all respects?
Leonard L. Gumport: I'm... no, I am not, Your Honor.
Speaker: Okay.
Leonard L. Gumport: My position is, and I concede Transcon shipped freight before its bankruptcy. It shipped no freight after its bankruptcy. I concede that when--
John Paul Stevens: What remedy is available today for the violations of the credit regulations by the carriers?
Leonard L. Gumport: --As to Transcon, there are multiple remedies. First, there is an award of reparations, and the ICC says in its brief in this Court that those can't be awarded, but it said in its 1988 decision reparations can be awarded if the bureau rate is unreasonable. In addition--
John Paul Stevens: No, that's if the rate is... for violation of the credit regulations, what would the reparations be?
Leonard L. Gumport: --Well, reparations, reparations are to the extent that the rate being imposed is unlawful, reparations can be awarded. If this is an unlawful rate, let the Commission say so. It's simply not doing its job of saying what the rate should be.
Ruth Bader Ginsburg: Let's see about the "if". We--
Leonard L. Gumport: Okay.
Ruth Bader Ginsburg: --We... it's conceded that the invoices when they were sent out did not have the credit terms. It's conceded that the 90-day notice was not sent out. Okay. Let's take those violations, Transcon now in bankruptcy court. What remedies does the ICC have for its admittedly valid credit regulations?
Leonard L. Gumport: It can impose civil and criminal penalties on everyone who knowingly participated in those violations. It can do that, and on Transcon as well. What it can't do--
John Paul Stevens: Could it impose a penalty equal to the amount you seek to collect?
Leonard L. Gumport: --Your Honor--
John Paul Stevens: I mean, that's--
Leonard L. Gumport: --the penalties are a per-day penalty.
Speaker: --All right.
Leonard L. Gumport: The penalties are a per-day penalty, and it's... I--
John Paul Stevens: Well, could it calculate a per-day penalty that would bring out that result and say, once you get to this limit, you can't collect anything more?
Leonard L. Gumport: --Your Honor, I don't know whether it could under the law. I think that... I think one thing I would emphasize on that is, that... it just doesn't matter from the standpoint of my case. I don't... I don't care one way or the other.
John Paul Stevens: Well, the thing that I'm puzzled about is, there's a valid regulation out there that's been violated, and the Commission says they want this remedy, and you're saying, well, there's some other remedy, but the other remedy that you describe is the functional equivalent of this one, as I understand it.
Leonard L. Gumport: It's not, Your Honor, because under the Interstate Commerce Act so long as the rate is in effect there is a civil and criminal duty to comply, and the one remedy that they're asking for is what the statute commands they can't have. They can fine Transcon. They can criminally prosecute the people who knowingly participated in this--
Ruth Bader Ginsburg: But the only one who's here at the moment is the trustee, so the ICC practically... practically, what can the ICC do to say, here's our credit regulations plainly violated, and we want to do something that will realistically enforce these rules?
Leonard L. Gumport: --Your Honor, I don't... it seems to me that the ultimate sanction of the Government for people who violate its rules is to throw them in jail, and the people who used to run Transcon are all still around running another trucking company, and it would have a salutary effect on the trucking industry, if the ICC really wants to stop, make people comply with their regulations, to go out and prosecute them.
Ruth Bader Ginsburg: How about the trustee, because of the bill... they were sent out with average balances instead of aggregating, instead of making a separate--
Leonard L. Gumport: Your Honor, that's... first of all, the regulations as interpreted by the ICC only apply to the following situation, and this is reflected in the decisions: a trustee or somebody else sends out a whole slew of bills in an envelope and says, unless you pay these right away within the 90-day time period, I'm going to deny you the discount and impose the higher bureau rate. There's no evidence in the record, and in fact it's the case that that was never done in the Transcon case. All that happened in Transcon was, Transcon shipped freight before it went under, it went into bankruptcy, and more than 90 days later, rate auditors were hired, and people were sued saying, you didn't pay the bills for the freight within 90 days, and therefore the... by the unequivocal terms of Transcon's tariff, you must pay the bureau rate, which--
Ruth Bader Ginsburg: --So the trustee gets the benefit of the sweep that Transcon did, it has this higher rate, but it's not saddled with any of the, even going to jail, that the Transcon people would have had.
Leonard L. Gumport: --Your Honor, if I was violating the credit regulations, I could go to jail, and if the rate imposed is an unlawful rate, and the Government concedes it is not an unlawful rate, the ICC could say, this is just too high. It's unlawful. You can't collect this money.
Antonin Scalia: Mr. Gumport, why shouldn't it be considered impliedly part of any rate whatever the Commission's regulations demand with regard to that rate? Why shouldn't it simply be considered part of the filed rate? Even if you leave it out it's implied that, of course, the other conditions required by the Commission's regulations apply?
Leonard L. Gumport: Because that argument proves too much, Justice Scalia.
Speaker: Okay.
Leonard L. Gumport: Under that argument, the ICC could promulgate regulations just like it issued a negotiated rates policy in Maislin saying no carrier shall collect its filed rate, period, and Maislin should have come out the other way. It should have--
Ruth Bader Ginsburg: If Transcon had put in--
Leonard L. Gumport: --come out the other way.
Ruth Bader Ginsburg: --No, no, no, that's-- --just copied into its tariff the ICC's credit regulations, then you would lose, is that right?
Leonard L. Gumport: I would be out of luck. I couldn't be here. What's interesting, Your Honor--
David H. Souter: I thought it would be discriminatory as applied even in that case.
Leonard L. Gumport: --Your Honor, it would be... that tariff would be invalidated by the court of appeals on Hobbs Act review under then-Judge Scalia's decision in Regular Common Carrier Conference v. United States in 1986, where the D.C. Circuit wrote, you can't have a tariff that really doesn't allow the shipper and the carrier to figure out what rate will really apply. And the Commission was aware of that decision at the time it issued its decision approving these credit regulations. It didn't want, it knew that it couldn't have a tariff that had all these discretionary provisions in it. That's why it doesn't want to suspend this tariff, because there's lots of these out there. The carriers are using them. This isn't the only loss of discount tariff that's like this. The Commission is in here not because it wants to stop carriers from disobeying its credit regulations, because there's lots of other--
Stephen G. Breyer: I'm still curious about... go back to the statute for one second. Regulations of the Commission governing payment for transportation and service and, you say, preventing discrimination.
Leonard L. Gumport: --Correct.
Stephen G. Breyer: Well, fine. The Commission says we want notice given of these things because otherwise big shippers with big lawyers know and little shippers with little lawyers don't. We want to have no aggregate, because we think otherwise the people who are customers of the trustee in bankruptcy will have to pay, the other guys won't. We want to be certain, whatever the third one was, that you don't give, years later, notice, because we don't want them picking and choosing, all there to stop discrimination as well as transportation. How do you respond to that?
Leonard L. Gumport: And I'm saying they can enforce that any way they want to, except in one way, and that is to sue the carrier to prevent it from performing its statutory duty to charge and collect its filed rate unless and until--
Stephen G. Breyer: Even the filed rate that discriminates, because it does discriminate, since it violates these regs.
Leonard L. Gumport: --Your Honor, I would disagree, because the Court has defined discrimination as being per se occurring when a carrier is disregarding its tariff rate. That is the teaching of the filed rate doctrine from Texas & Pacific Railroad v. Abilene Cotton through MCI Telecommunications. The rule of this Court has always been, it is discriminatory when a carrier departs from its filed rate unless and until the ICC sets it aside, and in your hypothetical, Justice Breyer, the Commission could prosecute people for wilfully disobeying the credit regulations. It could also sue a carrier prospectively saying, you've got to send out these reminder notices, you have to let people know, and it could get contempt penalties for violation of that injunction. What it couldn't do is to say, you violated our credit regulations. Therefore, even though we've done nothing with your tariff, even though we concede that your tariff is lawful, even though the statutory provisions of the act say you must charge and collect your tariff provision and you shall go to jail if you disregard it, we still want an injunction against you stopping you from doing what the statute commands. This is really a case about remedy. It's not about--
Ruth Bader Ginsburg: Suppose the credit regulations were written into the statute. You already told me if they were written into the tariff you'd be... you'd have no case. Suppose they were written into the statute as distinguished from being regulations, would that make a difference?
Leonard L. Gumport: --It would make no difference, Your Honor, under Davis v. Portland Seed. It would make no difference. A tariff can be blatantly unlawful on its face, and unless and until the ICC suspends it, rejects it, cancels it, does something like that, the carrier must comply. Now, I think, to go back to Justice Scalia's hypothetical, if I was the trustee and I found that there were some tariffs on file saying go out and kill people, I would petition the ICC to strike that tariff. That's what would happen. But I would have been duty bound to enforce it, unless and until they set it aside. I'd immediately start an enforcement proceeding. But this is a case about remedy, and the one remedy that they cannot have under--
Antonin Scalia: You're a hard man, Mr. Gumport. [Laughter] You better seek counsel before you do that.
Leonard L. Gumport: --Thank you. I can appreciate those remarks. But it is a case about remedy, and the one remedy that they cannot have is an injunction to set... directing a carrier permanently to disregard a filed rate, and Mr. Chief Justice, those words, "preventing discrimination", as construed by this Court are controlling. In Maislin, there weren't those words in the statute, and the Court still found that the remedy could not be created that would force the carrier to depart from its filed rate. Thank you very much.
William H. Rehnquist: Thank you, Mr. Gumport. Mr. Wallace, you have 3 minutes remaining. Mr. Wallace, tell me why this is different from the case where... that Justice Ginsburg asked about. Even if the filed rate violated the statute, the filed rate doctrine would apply, and it would have to be set aside before it could be collected, and you're coming in and saying, ah, but if it violates a regulation, that's different.
Lawrence G. Wallace: Well--
Antonin Scalia: That doesn't seem to make much sense.
Lawrence G. Wallace: --that isn't the only thing that I'm saying. It's... the suggestion that the Commission could strike this provision is really a rather impractical one. There's nothing on its face that's incompatible with the statute or the regulation. This, the liquidated damages provision as it appears in the tariff could have been lawfully enforced if the conditions that were not complied with had been complied with, so there was no basis for striking it from the tariff. If the tariff had also said, and these liquidated damages can be assessed on an aggregated basis, not merely on an individual basis, that would have been a provision that the Commission could have struck from the tariff. But what good would it have done the Commission to strike that from the tariff when under the respondent's submission the same result could be reached anyway, because the liquidated damages provision itself remains in the tariff, and that has to be enforceable regardless of violations of the safeguards that were placed in the Commission's regulation. And I want to say, in response to a question raised by Justice Ginsburg, on page 33a of the petition for certiorari appendix the court of appeals discusses the meager case authority, in the first paragraph on that page, that existed about efforts to try to include liquidated damages provisions before they were authorized by regulation. The Commission took the position in this litigation that those cases striking down those efforts to have them solely as a creature of tariff were correctly decided. They were... only one of the district court decisions was reported, but that was all there was on the subject. The great controversy that took place over a period of 3 years in the late eighties would have been rather meaningless if carriers had been free to prescribe this for themselves in their tariff filings without authorization from the Commission. That's what the controversy in the rulemaking was about.
William H. Rehnquist: Thank you, Mr. Wallace. The case is submitted.
Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.


William H. Rehnquist: We'll hear hear argument now in number oh oh six oh two nine, Tracy Ragsdale versus Wolverine World Wide. Mr. Sutter. [Inaudible]
Luther O. Sutter: Mr. Chief Justice, and may it please the Court. The FMLA guarantees much more than twelve weeks of absence from work. The FMLA guarantees a specific bundle of statutory rights that an employer must grant eligible employees. In many cases, the company's leave plan, as is the case here, may provide different rights from the bundle of rights that in the FML- that the FMLA grants eligible employees. Eight twenty-five two oh eight and eight twenty-five seven hundred A implement the statute in an in an important way. Under the regulations, eight twenty-five two oh eight and seven hundred, if the employer wants a period of absences or leave to count against a worker's annual FMLA entitlement, the employer must do three things. First, the company must decide to grant the worker this bundle of rights that the FMLA grants him or her. Second, the employer must tell the employee that they have these bundle of rights, and third, the employer must tell the employee that the employ- the employer has elected to count this period of leave against the FMLA. [Inaudible]
Sandra Day O'Connor: Does the act require the posting of some general notice in the place of employment about the Family Leave?
Luther O. Sutter: Yeh- yes, Justice O'Connor, it does. Twenty-nine USC twenty-six nineteen provides that each employer shall post a general notice in the form that the Secretary shall prescribe, so Congress painted in in in broad brush brush strokes and intended that the Secretary had the ability to provide what information is provided to employees. [Inaudible]
Sandra Day O'Connor: Well, can the Secretary then provide that it has to be done by personal communication?
Luther O. Sutter: Well, Your Honor, that is just as this Court noted in the F in F in the FDA case, just simply because the Secretary has spoken and required posting in this instance does not mean that the Secretary cannot fill the gap, as it were and require personal notice if the Secretary determines that such notice is reasonably necessary to implement the act. In this case, Justice O'Connor, I think all would agree that it is difficult to exercise a right that one does not know that one has, and in this case the Secretary decided that the employer must first choose to that the FMLA that the worker will get the FMLA rights, and then tell the employee, and this regulation promotes communication, communication between the employer and the employee. [Inaudible]
Ruth Bader Ginsburg: Mr.
Ruth Bader Ginsburg: Sutter, Mistuh-
Ruth Bader Ginsburg: may I ask if in this case, as I understand it, the employee initially did not qualify for the FMLA leave because she hadn't been there long enough.
Luther O. Sutter: Justice Ginsburg, the thrust of my argument is, is that the FMLA is more than just twelve weeks.
Speaker: Yes, I well,
Ruth Bader Ginsburg: that's a that's a separate question, but let's assume that there's no difference in the rights under each, and in this case I don't know that that bundle that you describe is any different under the company plan as far as continuing the insurance and the pension payments, but is it your contention that she would therefore, because she didn't have enough to qualify her for the FMLA leave, she would get sixteen weeks...
Speaker: Yes, Your Honor.
Luther O. Sutter: Yes.
Ruth Bader Ginsburg: So it's a little odd that when she didn't qualify she gets extra time than if she had already been there long enough to qualify, in which case it would be only twelve weeks.
Luther O. Sutter: Well, I can see where one might believe that it is a bit odd, but again, Justice Ginsburg, the company leave plan in this case did not provide her with all of the FMLA bundle of rights.
Speaker: Why didn't it?
Luther O. Sutter: Because the the l- leave plan in this case, for example, did not allow her to have intermittent leave.
Speaker: twelve...
Antonin Scalia: wasn't able to have intermittent leave anyway, as I understand it.
Luther O. Sutter: Well, Justice Scalia, the doctor only had two options.
Speaker: You you mean you mean the...
Antonin Scalia: doctor skewed his medical advice and and told her you can't work at all only because the employer hadn't told her she could work intermittently? I ca- I can't imagine that.
Luther O. Sutter: Well, an...
Speaker: it's -- it's been...
Antonin Scalia: problem I have with your case is is not not the i- the rule that the employer has to give notice.
Luther O. Sutter: Well, Justice Scalia, we it is difficult, looking three, four years later, to determine whether or not Ms. Ragsdale would have been able to work intermittently.
Speaker: having said that the Secretary's regulation...
Antonin Scalia: of the act you have to prove that.
Luther O. Sutter: Well, certainly the district court did not address the issue of prejudice.
Speaker: But but as Justice Scalia...
Anthony M. Kennedy: points out, the em- em- employee under your view gets even more that she's entitled to the under the act under certain circumstance.
Luther O. Sutter: Right.
Anthony M. Kennedy: And also give twelve additional weeks.
Luther O. Sutter: No, no Justice Kennedy, I do not believe that we are, because in this case, while the statute explicitly requires twelve weeks of leave in any period, twenty-six twelve B one also allows employees to extend that twelve weeks over a calendar year using intermittent leave, so looking at this case as simply a calculation of weeks is inaccurate.
Anthony M. Kennedy: But I I I I put you the case in which she I I would think would be entitled to th- i- i- back to s- compensatory damages for not having paid for medical benefits, and in addition, so that during the period that she took off the government counts that for purposes of monetary liability, but it doesn't count that for purposes of accrued leave, so she's entitled to monetary r- i- c- r- compensation for the benefits that weren't paid during the unnoticed leave period, and she's entitled to an additional twelve weeks.
Luther O. Sutter: Well, Justice Kennedy, the s- specific issue here is what happens when the employer provides the employee with less rights w- than the FMLA bundle of rights provides.
Speaker: And the answer...
Anthony M. Kennedy: is that she ends up with more than what the Family Leave Act would have provided.
Luther O. Sutter: In this case, Justice Kennedy, in terms of time I believe the Court is correct.
Speaker: entitled to specifically.
Antonin Scalia: agree that that's the issue.
Luther O. Sutter: The Secretary may have reasonably required that this analysis occur after the need for for intermittent leave arose.
Speaker: It's a prophylactic...
Antonin Scalia: rule that the Secretary's adopted, even though the statute itself, in the provisions that it that it sets forth for where the employer has failed to comply with the act, does not adopt a prophylactic rule.
Luther O. Sutter: Under either a morning prophylactic rule, or the interpretive powers granted the Secretary under Chevron, we believe the regulation is entirely appropriate because the issue of notice is not addressed.
David H. Souter: Well, may I go back to the question of of what the damages are? On your view, or on the Secretary's view, does the employee get another twelve weeks of leave if the employee does not need another twelve weeks of leave?
Luther O. Sutter: If the employee does not need...
David H. Souter: Let's assume the employee is cured.
Luther O. Sutter: Not unless, for example, she is involved in a a serious car accident,
Speaker: and in another serious...
David H. Souter: is that whatever the reason for the leave was, sickness or pregnancy leave, whatever, it's it's over, so that I take it that the the additional twelve weeks, are only an additional twelve weeks, if the person still has some medical or social need for the leave.
Luther O. Sutter: That's exactly correct, Justice.
Ruth Bader Ginsburg: As I understood what Judge McGill said in the Eighth Circuit, he did say that he there could be cases where it would be appropriate for this regulation to apply if she could show that she was that she was disadvantaged by not being given the option, and he so he left that door open if there were some disadvantage.
Luther O. Sutter: Yes, and that's an that's an entirely reasonable interpretation, a a reasonable alternative to what the Secretary did here, but that is not the Just- i- Judge McGill did not give the Secretary the appropriate deference that she is entitled to in promulgating this regulation.
Ruth Bader Ginsburg: But his reason, i- I understand, was that Congress said twelve weeks, and to interpret that statute that says twelve weeks to mean twenty-four weeks, or in this case even more than that because the company leave was thirty weeks, right?
Luther O. Sutter: The company granted four weeks pre- FMLA eligibility and twenty-six weeks post.
Speaker: So so he's...
Ruth Bader Ginsburg: his view was that the regulation conflicted with the statute.
Luther O. Sutter: Well, and y- as this Court recognized in F in in the FDA case, you cannot read one statute in isolation.
William H. Rehnquist: Very well, Mr. Sutter.
Malcolm L. Stewart: Mr. Chief Justice, and may it please the Court.
Speaker: their determin --
Sandra Day O'Connor: do you think that that can be met by just posting some general notice saying that any leave taken by an em- an employee is going to require taking FMLA leave first?
Malcolm L. Stewart: No, we don't, Your Honor.
Speaker: That's fine,
Antonin Scalia: but but where the employee has no FMLA rights, that is to say, where the leave that the employer provides gives the employee everything that the employee would have under the F FMLA, why should the employee get another twelve weeks?
Speaker: Well First, it's it's not --
Antonin Scalia: is is not the requirement of i- t- to my mind i- is not the requirement of notice that a- a- at the beginning of the leave.
Malcolm L. Stewart: Well well, first it's not clear in many cases, and it's not clear in this case, whether in fact the leave that the employer provided complied with all the requirements of the act.
Antonin Scalia: Well I'm I I I agree that that that those are questions, but it seems to me those are questions that that that have to be answered by by the person who is seeking to impose a liability on the employer.
Malcolm L. Stewart: But the thrust of the Secretary's regulation is that it is better to have a bright line rule than to require the courts to engage in after the fact speculative inquiries regarding what might have been done months or years earlier if the requisite notice had been given and and this, to the extent this is harsh, it is harsh in the same way that a statute of limitations is harsh.
Speaker: likely to produce --
William H. Rehnquist: of limitations are not imposed by regulation.
Malcolm L. Stewart: Certainly, statutory li- statutes of limitations by by definition are imposed by the legislature, but there are instances, and we've cited one in our brief, in which an administrative agency that is given authority to resolve complaints under an act may be authorized to promulgate reasonable procedural regulations to implement that directive, and that might include the requirement that a claim be filed within a certain number of...
Speaker: What...
Speaker: cases are they?
Malcolm L. Stewart: Do you have our our brief This is on page twenty-four of our brief in footnote six.
Ruth Bader Ginsburg: But here there's there's something really strange about it.
Malcolm L. Stewart: Well, first the the regulation specific- she she was not entitled to FMLA leave at the time of her first request, but in fact the the DOL regulations specifically require that if an employee requests leave for an FMLA-covered purpose but is not yet eligible for the protections of the FMLA, the employer is required to notify the employee of the time when she will become eligible, and second, at any rate, when the employee made her first request for extension of leave she had passed the the twelve month period and she was eligible for the protections of the act, and it's true that in terms of the sheer number of weeks of leave that it was willing to give, the company was more generous than the act required, but the fact that an individual or a business goes beyond the requirements of the law in some respects doesn't excuse its noncompliance with other aspects of the law.
Ruth Bader Ginsburg: I don't see any noncompliance.
Malcolm L. Stewart: Well, that that the intermittent leave is itself important, and and again there may be a substantial question as to whether this particular employee could have made effective use of the FMLA right to intermittent lead leave had she known she had it, and the Secretary might, as the Eighth Circuit suggested, have adopted the regulatory approach under which that would be the dispositive inquiry, but instead the Secretary has chosen to promulgate a bright line rule.
Antonin Scalia: A prophylactic rule, an- and e- which the statute itself does not do.
Malcolm L. Stewart: Well, in this case the statute not only gives the agency general rulemaking authority but also provides that it will be a violation of the act for an employer to interfere with or restrain an employee in her exercise of FMLA rights and and, by its nature, that language presumes that there will be instances in which employer conduct is not in terms prohibited by the act, but is likely to have the practical effect of dissuading or preventing employees from effectively exercising their...
Speaker: statutory --
Antonin Scalia: had no rights, he's not guilty of that.
Malcolm L. Stewart: Well, sir- un- under the the NLRB, under the NLRBs approach to implementation of the NLRA, the question of whether employer conduct has interfered with or restrained the exercise of protected rights is not resolved by asking whether particular employees were, in fact, deterred from engaging in protected conduct.
Speaker: if a suit is filed --
Anthony M. Kennedy: statue of limitations, if i- i- if a district judge throws out a suit because a two year statute has run and then the appellate court said no, you've there was three weeks available there and it was filed on time, we don't give them a whole new two years.
Malcolm L. Stewart: bu- the analogy to the statute of limitations is really that, if the statute of limitations has expired, we don't ask whether the defendant could have done anything differently, or whether the defendant was prejudiced by the absence of notice within the two year period.
Speaker: Mr.
Ruth Bader Ginsburg: Stewart, suppose somebody has worked for five months but the company has leave that kicks in that early, and then seven months later would qualify for the F M L L but or has already had much more than the twelve weeks of leave, hasn't been given notice because there wasn't any eligibility, what happens then?
Malcolm L. Stewart: May I answer? Mister...
William H. Rehnquist: Yes...
Malcolm L. Stewart: There's a separate provision in the statute that makes eligibility for FMLA benefits contingent upon having worked twelve hundred fifty hours in the preceding calendar year and, therefore, it's likely that an employee who had worked only five months and then had been on leave for seven months would fail to satisfy that requirement.
William H. Rehnquist: Thank you, Mr. Stewart.
Richard D. Bennett: Good morning, Mr. Chief Justice, may it please the Court.
Stephen G. Breyer: I suppose I suppose that the government didn't think of what it was doing as giving an extra twelve weeks of leave.
Richard D. Bennett: Again, the issue, as Justice Scalia has pointed out, is not is not the requirement...
Stephen G. Breyer: That's what I'm assuming.
Richard D. Bennett: Congress specified a monetary penalty.
Speaker: penalty...
Stephen G. Breyer: it, would have been a better remedy if the agency had said, and if you don't tell them, you have to pay them ten thousand dollars cash.
Richard D. Bennett: I think the some employers may object to the to the amount of the penalty, Your Honor.
Stephen G. Breyer: Oh well,
Speaker: let's say five...
Stephen G. Breyer: thousand.
Richard D. Bennett: I I...
Speaker: believe...
Stephen G. Breyer: thousand dollars cash to any employee because the notice provision wasn't given, and all small employers, large employers, any time they fail to to now, would you have but you would have preferred that remedy.
Richard D. Bennett: Well, aside from constitutional issues as a p- penalty, I believe we have to look at what Congress intended.
Stephen G. Breyer: I'm just trying to make to to try to understand, to put you in the position of the agency.
Richard D. Bennett: [Inaudible]
Stephen G. Breyer: count it as leave.
Richard D. Bennett: I believe the agency does have a range to choose what's reasonable, Your Honor, but I don't believe...
Ruth Bader Ginsburg: Would the could the agency choose a a monetary penalty? Could the agency as a matter of administrative discretion impose a a penalty, or would that have to come from the is is that even within the realm of choice that the agency would have?
Richard D. Bennett: Well, again, one of the contingents we raise, Your Honor, is that Congress specifically spoke to notice, all the notice that's required under the statute.
Speaker: primary focus was the leave...
Ruth Bader Ginsburg: let's assume that it would be permissible for the Secretary to say, give them notice that the leave counts as this for this purpose, that that would be permissible.
Speaker: Then...
Ruth Bader Ginsburg: w- what does the Secretary have in her arsenal to put teeth behind that, if if if not the extension of the period?
Richard D. Bennett: Again, u- the Secretary can exercise the discretion to determine a fashion a reasonable remedy for the company's failure to to provide this u- this notice, but that remedy, Your Honor, cannot...
Speaker: exceed...
Ruth Bader Ginsburg: what would be reasonable? Y- i- th-
Speaker: The fine question maybe a...
Ruth Bader Ginsburg: question was the Secretary has authority to do it.
Richard D. Bennett: Your Honor, I I believe the o- the penalty that de- u- that the Secretary should have granted in this particular case, or authorized under this regulation, would be a monetary penalty.
Anthony M. Kennedy: Would there ever be an instance in which the Secretary, on a case by case basis, could say that we are g- i- ordering you to grant additional family leave? I I E, suppose the employee knows that his wife is going to have a difficult pregnancy and he says, I'm I'm going to take some time off u- under the company plan at the early stages and I'll save my family leave for later, he makes a mistake, and the mistake is compounded by the fact that there was no notice.
Richard D. Bennett: Your Honor, I'm not sure that there would be.
Speaker: interfered with...
Anthony M. Kennedy: could that remedy ever consist of granting additional leave?
Richard D. Bennett: I suppose, in those...
Speaker: situations --
Anthony M. Kennedy: employee was prejudiced in a in in of in a case such as I suppose on a case-by-case basis.
Richard D. Bennett: What we con- we contend, Your Honor, they could not.
Speaker: wage. If they do --
Anthony M. Kennedy: all we're talking about is dollars.
Richard D. Bennett: Correct, Your Honor, but if,
Speaker: indeed, if we have...
Anthony M. Kennedy: currency that the agency has to deal with, a- and and you say under no circumstance may the the Secretary, however reasonable the employee's reliance was, however faulty the notice was, under no circumstance may they ever give additional leave.
Richard D. Bennett: Provided the leave already granted provided provided the employee had already been given twelve weeks of leave under the conditions contained within the statute, Your Honor, that is our contention.
Speaker: suppose...
Antonin Scalia: not sure I'm not sure it's it's incumbent upon you to to write a regulation for the agency.
Richard D. Bennett: Your Honor, that's not our s- u- specific case, that's correct.
Anthony M. Kennedy: W- Well, but it might be it might be the case if if we stipulate that in some instances al- additional leave must be granted.
Speaker: i- It could be the case --
Anthony M. Kennedy: we s- if we stipulate that.
Speaker: [Inaudible]
Anthony M. Kennedy: Then what the agency, what the i- u- the government is going to say, Department of Labor is, well, since in some instances you can do ooh grant leave it's just administratively simpler for us to do it this way and you wi- you always get the leave.
Speaker: Again, Your Honor --
Anthony M. Kennedy: does make a difference t- in answering the question whether or not leave can ever be in effect a standard.
Richard D. Bennett: Your Honor, we i- again, under the statute, if you read the statute, and you look at the legislative history surrounding the statute, im- prior to the enactment of this statute Congress specifically noted in the legislative history that United States stood alone in the industrialized world as not having leave for these particular types of conditions.
Speaker: That was what Congress --
Ruth Bader Ginsburg: argument in the brief that that that she could have initially had the company leave when she wasn't eligible yet, and then she could have said at that point, four weeks later when she became eligible for the FMLA leave, she could say, okay, company, stop the company leave.
Richard D. Bennett: Y- Your Honor, we n- n- n- n- that is a a a good point that Your Honor makes.
Speaker: What if...
Antonin Scalia: what if the employer's leave doesn't precisely mirror the statutory requirements? For example, what if the employer's leave does not allow intermittent leave? It says, you've got to take your your twelve weeks in in one big lump.
Richard D. Bennett: The statute deals with that, Your Honor, in the u- section d- dealing with interference.
John Paul Stevens: Of course the employee has to know about the tha- that particular right in order to invoke it.
Richard D. Bennett: Yes, Your Honor, we posted the statutory notices, and as a matter of fact, because my client has a i- its own company provided leave policy, this is within a collective bargaining agreement, and it's also within the employee handbook, so the employees were aware of it through the collective bargaining agreement, through the employee handbook which was handed out along with the collective bargaining agreement to all employees.
John Paul Stevens: But did that that notice describe the collective bargaining agreement.
Richard D. Bennett: I do not believe there was any specific reference to the FMLA notice posting, Your Honor.
Speaker: So that to the extent...
John Paul Stevens: that there may have been a difference between the statutory requirement and the company policy, they would not have been advised of the statutory requirement.
Richard D. Bennett: Not by the company, Your Honor, but the statute doesn't require that.
Ruth Bader Ginsburg: If the if the requirement was so difficult to deal with, one would expect there would have been some comment to that effect.
Richard D. Bennett: I believe there was there was a notice on these regulations when they came out initially, and then they issued final regulations, and u- I can't speak d- directly as to the comments that were all the comments that were made about this one particular regulation, but I believe the DOL in their brief does mention that there was not an objection specific objection by employers to that, and I I believe that to be accurate, Your Honor, but I don't believe and I I n- n- I can attest for my client's purpose that we did rec- r- recognize from reading that that that what we were going to have to do was grant additional leave, additional leave, that we're not going to be able to grant additionally, that we're going to have to grant addition leave over an- above what we've given.
Speaker: But why wouldn't they recognize...
Ruth Bader Ginsburg: that, because that's what the regulation said.
Richard D. Bennett: No, Justice Ginsburg, it was not.
Speaker: for leave under this --
David H. Souter: there- s- fore saying that even the notice provision i- is is beyond the St- Secretary's power?
Richard D. Bennett: Your Honor, we have taken the position that i-
Speaker: the statute --
David H. Souter: I thought that's what what you were suggesting a moment ago.
Speaker: The the notice --
David H. Souter: cannot even require a notice?
Richard D. Bennett: Correct, Your Honor.
Antonin Scalia: What if the employer's leave does does not does not comply with all of the conditions, all right, that that are required by the act, and the employee goes off on that leave, and there's no notification that the employee could get more, could have the benefits continued or what not.
Speaker: Does that...
Antonin Scalia: leave count? It doesn't count as as as statutory leave, does it?
Richard D. Bennett: If the employee was given the leave, Your Honor, I believe that the leave counts.
Speaker: Okay.
Richard D. Bennett: you didn't hold their job open...
Antonin Scalia: Then the damage provision would cut...
Speaker: in. Twelve so...
Richard D. Bennett: the it's not like, as if the leave doesn't count.
Speaker: The leave --
Richard D. Bennett: an additional twelve weeks plus damages...
Speaker: for not...
Richard D. Bennett: giving them their job back.
Speaker: But this regulation --
Ruth Bader Ginsburg: there was a requirement that went beyond what the Federal act requires.
Richard D. Bennett: Your Honor, the s- the regulations promulgated by the Department of Labor provide that if an employer s- excuse me.
Speaker: days, which...
David H. Souter: period chosen in this case because the employer's regulation says we'll only do it for thirty days at a time?
Richard D. Bennett: That is true, Your Honor.
Antonin Scalia: So you you're saying it's it's it's a false it's a false question as as as to whether, when the employee takes leave, he's taking F L M FMLA leave or employer's leave, that that that that there aren't two categories?
Richard D. Bennett: No, sir, they're they're i- tha- tha- that's...
Speaker: correct, Justice Sca- --
Antonin Scalia: give the notice in order that the employee can know which of the two leaves he's taking.
Richard D. Bennett: That's correct, Your Honor.
Speaker: is FMLA leave.
David H. Souter: there's no provision, but neither is there any clear answer to the question, and I suppose one of the the arguments in favor of the Secretary's regulation here is that it really was a gap filling regulation with respect to unpaid company leave.
Richard D. Bennett: Your Honor, I believe the statute itself creates a default rule.
David H. Souter: For for unp- when when the company's leave is unpaid?
Richard D. Bennett: For the unpaid.
Speaker: it creates --
David H. Souter: What is it, the default rule, again?
Richard D. Bennett: I- in twenty-six twelve C and twenty-six twelve D one, the statute specifically talks about unpaid leave, that leave shall be unpaid.
David H. Souter: No, but that that as I understand it, that addresses the the issue of w- b- the character of the leave, if there isn't a full twelve weeks provided, but as I understand it also there is no clear default provision when we have a situation in which there could be concurrent i- in which the leave could be seen either as unpaid company leave or as leave under the act.
Richard D. Bennett: i- t- That's true, Your Honor.
Speaker: And their argument is that...
David H. Souter: because the statute didn't talk about that, there has g- or it is reasonable for the Secretary to come up with a rule that tells us whether it counts against the act or whether it doesn't in the unpaid case.
Richard D. Bennett: The- i- their assumption is that there's a gap and that it's reasonable for them to step in.
Speaker: That's right.
Richard D. Bennett: position, Your Honor, is that Congress specifically decided not to require that.
Speaker: unpaid.
David H. Souter: Congress may not have required it, but at the end of the twelve weeks there's still the question, did this count under the statute, or didn't it count under the statute, and if the statute is silent, it would seem to be that that would be a a a subject for S- the Secretary's regulation.
Richard D. Bennett: Well Your But Justice Souter, the statute is not silent.
Speaker: leave.
Antonin Scalia: all leave counts under the statute.
Richard D. Bennett: That's...
Speaker: correct. All leave.
Antonin Scalia: under the statute.
Richard D. Bennett: Be it paid or...
Speaker: unpaid, Your Honor.
Antonin Scalia: and if you haven't provided in connection with the leave everything that the statute requires, such as a person can come back to the same job and so forth, there's a damages provision.
Richard D. Bennett: That's that's...
Speaker: correct, Justice Scalia.
Richard D. Bennett: That's In the statute, that's...
Speaker: correct.
David H. Souter: what was the purpose of having the special provisions with respect to whether it counts as statutory or company when the leave is paid?
Richard D. Bennett: There are many employers out there who such as my client who have more generous leave policies.
William H. Rehnquist: Thank you, Mr. Bennett.
Luther O. Sutter: The company never gave the doctor the option to allow Miss Ragsdale to work intermittently.
Speaker: Court --
Antonin Scalia: damages provision for that, I...
Speaker: assume.
Luther O. Sutter: Yes, Justice, but there is also a a provision for appropriate injunctive relief such as reinstatement and other and relief as the court may deem appropriate, and I would submit to you that, as one of the Justices recognized, this is not simply about money.
Speaker: power --
Sandra Day O'Connor: course, you couldn't really do it on the front end here because she wasn't eligible originally for FMLA leave.
Luther O. Sutter: Well, that's true, Justice O'Connor, but the regula- the regulatory scheme provides that the employer should have given her a date by which she would have been eligible for FMLA leave.
William H. Rehnquist: Well, that's true of most agreements, isn't it?
Luther O. Sutter: And that is why that is why that is why Congress required the FMLA...
John Paul Stevens: But it is somewhat unusual that a union wouldn't in- advise the employee its membership about their statutory rights.
Luther O. Sutter: Of course it is, and it might be entirely reasonable for me to stand up here and substitute my judgment for the Secretary's, but it is also equally reasonable that the company be allowed the benefit of making this determination, and to the to say that the requirement that employees communicate is in- is inferred, we disagree, because you see, twenty-six twelve twenty-six eleven requires communication for planning when intermittent leave is required.
Speaker: Thank you, Mr. Sutter.
Luther O. Sutter: Thank you.
William H. Rehnquist: The case is submitted.