William H. Rehnquist: We'll hear argument now in Number 02-306, the Beneficial National Bank versus Marie Anderson. Mr. Waxman.
Seth P. Waxman: Mr. Chief Justice, and may it please the Court: The complaint in this case alleges that a national bank charged excessive interest. This Court has held repeatedly and consistently since 1875 that section 30 of the National Bank Act of 1864 provides both the exclusive standards governing the interest that a national bank may charge and the exclusive judicial remedies for any violation. And as a result, any claim that a national bank charged excessive interest necessarily arises under Federal law, whether that claim is brought in State court or Federal court. Any well-pleaded complaint would reflect that, and therefore, any claim of usury against a national bank, whether pleaded well or mistakenly or deceptively, falls within the original jurisdiction of the Federal courts and may either be filed there by a plaintiff or removed there by a defendant.
Antonin Scalia: Mr. Waxman, normally when the Federal Government creates a cause of action that preempts State causes of action, it attaches an element to that cause of action that does not exist under some of the State causes of action. Let's say, it... it creates a cause of action against the owners and... and managers of nuclear facilities, but the cause of action must be based on something more than mere negligence. It has to be intentional malfeasance or gross negligence. Okay? Now, what if somebody comes in and brings a cause of action in State court, alleging mere negligence by the owners of the nuclear facility? Is it your position that that case is removable even though it wouldn't... it wouldn't survive a motion to dismiss for failure to state a claim under... under Federal law?
Seth P. Waxman: Justice Scalia, with respect, I don't think that I would concede the premise of your question, that is, that a Federal cause of action ordinarily has an additional element.
Antonin Scalia: All right. Well--
Seth P. Waxman: But leaving that aside--
Antonin Scalia: --Leaving... in my hypothetical... create one--
Seth P. Waxman: --Your... your hypothetical actually is an example of a very peculiar instance in which, with respect to nuclear incidents, Congress has imported in... has federalized the cause. It created an express Federal cause of action--
Antonin Scalia: --Right.
Seth P. Waxman: --and said expressly that State law standards will apply and it will be the law of whatever State the incident occurred.
Antonin Scalia: But take my hypothetical. What do you do in my hypothetical? Is it removable or not?
Seth P. Waxman: If... if--
Antonin Scalia: Yes or no.
Seth P. Waxman: --If... if any... I hope I can remember your hypothetical. The--
Antonin Scalia: The hypothetical is you plead a State law cause of action that does not claim all of the elements which are necessary for the Federal cause of action. So it's clear on the face of it that it is dismissable.
Seth P. Waxman: --It is definitely removable. It definitely is completely preempted if it comes within the scope of a cause of action that has been determined to be exclusive. Now, that's--
Antonin Scalia: It's very strange to say that you can remove something that on its face does not constitute a Federal cause of action.
Seth P. Waxman: --Justice Scalia, there may... in preemption cases, there are line-drawing problems at the margins about whether something is or isn't preempted. This is a heartland case and the example... the hypothetical you're giving is let's say that State of Alabama or the State of Delaware created strict liability for excessive interest. The Federal statute says it has to be knowingly under section 86. There is no question... no question... under this Court's decided cases that a claim that a national bank charged excessive interest, with whatever state of mind or lack of state of mind, is governed exclusively by Federal standards and an exclusive Federal cause of action and that--
Antonin Scalia: Right, but the question is whether the consequence of that is that the State law cause of action must be dismissed by the State court because it's preempted, or rather, the consequence is that you can remove into Federal court a pleading that plainly on its face does not... does not claim a Federal cause of action.
Seth P. Waxman: --Well, the--
Antonin Scalia: It just seems very strange to me.
Seth P. Waxman: --The... the pleading... the complaint in this case on its face does satisfy the Federal cause of action and--
Antonin Scalia: I understand that. We're... we're not talking about what happens here. But I... with regard to the general principle that you want us to set forth.
Seth P. Waxman: --I think--
Antonin Scalia: That's... what's... what I'm concerned about. Is it that all cases automatically come, or is it only those that... that set forth a Federal cause of action?
Seth P. Waxman: --It has to be one that if well pleaded... I mean, a... on a removal... on a notice of removal, the Federal court is obligated, like any court determining its own jurisdiction, to read the complaint as if it were well pleaded. And if, when the court reads the complaint, it says there is a Federal question necessarily presented in here which has been inartfully not pleaded, the court then proceeds to adjudicate on the merits that claim. If the answer is no, if the answer is, hey, this guy pleaded a claim under State law and I have well pleaded it and it still doesn't raise a Federal question, then you remand. And it's that... that's sort of... I didn't mean to quibble with you, but the principle that we suggest is very straightforward is simply an application of this Court's decided jurisprudence, under arising-under jurisdiction, that removal jurisdiction follows original jurisdiction.
Ruth Bader Ginsburg: Mr.... Mr. Waxman, is what you're saying essentially there is a Federal claim or there is no claim? Certainly the plaintiff doesn't want there to be no claim. If there is a claim, it is necessarily Federal.
Seth P. Waxman: Yes.
Ruth Bader Ginsburg: And that's what makes it removable. It is treated as though it were well pleaded, when, in fact, it's badly pleaded.
Seth P. Waxman: Indeed. And the... the perplexing thing about this case is the sort of almost Kafkaesque situation that we have that's exemplified by the amicus briefs on both sides where this particular instance where the plaintiff says usury under State law even though the Supreme... this... this Court has decided, since 11 years after the act was passed in the Civil War, that there is no such State claim, we now have a... a group of plaintiffs lawyers from California urging this Court to establish a right to plead something that in their own case they say is only, quote, defensively preempted.
Ruth Bader Ginsburg: If they had--
Seth P. Waxman: And no one has... I'm sorry.
Ruth Bader Ginsburg: --If they had pled it correctly, they could still be in State court, but the defendant could remove. In other words, this is not... although it's a Federal claim... it arises only under Federal law... it could be brought in State court or Federal court.
Seth P. Waxman: Correct. There is concurrent jurisdiction as there... as is the norm, as this Court has explained. And there are instances in which these cases are litigated to the merits in State court and instances in which they're litigated in Federal court either because they're brought there by the plaintiff, as the plaintiff could have here, or they're removed there as the defendant. And the other principle that this case reflects, as I said, is not just the importance of parity in Federal question jurisdiction between giving plaintiffs and defendants parity in invoking the Federal courts if they choose, but the requirement that this Court has stated over and over and over again that in... in determining its own jurisdiction, the Federal court will construe the complaint as well-pleaded.
Antonin Scalia: Mr. Waxman, one thing that troubles me about... about the proposal that you make and that the Government makes is that it seems to me in the LMRA case that established this principle and in the ERISA case, which is the only other case that has... has held to the same effect, those cases refer to this as being an extraordinary, an unusual event. But I don't think it's going to be an unusual event if we say that whenever there is created a Federal cause of action, and at the same time, State causes of action are preempted, it may be removed to Federal court. I don't think that will be unusual at all-- And I sort of looked upon the... the Labor Management Relations Act case as really sort of a... a platypus, I mean, a very strange case in which the courts just didn't want these labor things to go into State courts because they didn't trust State courts. And so they said, boy, we're going to have Federal courts create this whole new law of... of contracting, of collective bargaining. That's how I always regarded it. And now you're telling me it's really just a little piece of a much broader proposition which is not at all... not at all narrow.
Seth P. Waxman: No. Justice Scalia, I think it actually is very, very narrow. And we can go through in detail, but almost all of the statutory schemes that the... the State's amicus brief cites are not, in fact, examples of complete preemption. But it... it comes up only in the instance where there is not only substantive preemption by Federal law and the creation of a Federal cause of action, but the determination that that cause of action is, in fact, exclusive. And that is the difficult and close question that this Court--
William H. Rehnquist: Well, was... was that true in the Farmers' and Mechanics' case? The... the Court certainly said that when you're suing for usury, that was all you could get with the... that wasn't, of course, a... a removal case at all, was it?
Seth P. Waxman: --No, it wasn't a removal case. And in fact, depending on when in 1875 it was decided, there may or may not have been--
William H. Rehnquist: There wasn't Federal... there wasn't Federal question jurisdiction.
Seth P. Waxman: --there may not have been removal.
William H. Rehnquist: But it is not a white horse case for you, that one.
Seth P. Waxman: I think it is a... if I understand the reference, I think it is a white horse case in the sense... in this sense, Mr. Chief Justice. We're not contending that the 1864 act evinced an intent to make these causes of action removable, even if pleaded under State law, because there was no general Federal question jurisdiction, and it wasn't provided in the law. The relevant question and the relevant question that this Court deemed to be close in Metropolitan Life in the ERISA context is whether... okay, fine, Federal law has substantively preempted the field or by conflict or whatever. Is the creation of the Federal cause of action of such force that it should be deemed to be exclusive? And that, I think, is what this Court decided first in Farmers' and Mechanics' Bank by saying to the borrower in that case... the borrower was maintaining that under New York State law, it was entitled to void not... to forfeit not just the interest, but the note. And this Court said, look, New York State law has nothing to do with this. This is a claim of usury by a national bank. The Federal standards are exclusive, and the Federal penalty expressly will not permit forfeiture of the note. Only the interest.
William H. Rehnquist: But... but certainly under the... the statute itself did not preclude the possibility of that action having been brought in State court.
Seth P. Waxman: Not at all. And in fact, it was expressly contemplated. Then as now, these actions can be brought and are often brought in State courts. All that the--
Ruth Bader Ginsburg: So can 3... 301 suits. The two cases that we have so far where we have recognized that there is only a Federal cause of action, that cause of action could have been brought just as well in State court, but it's up to the defendant to remove it. So we're not talking about an exclusive Federal forum.
Seth P. Waxman: --That... that's correct, Justice Ginsburg. And the same is true for the types of ERISA claims that were at issue in Metropolitan Life.
David H. Souter: And... and I suppose one reason... I was surprised when I went through. I thought there would be a whole lot of exclusive Federal cause of action, and... and there are very few. But I suppose one of the reasons we don't get it very often is just what Justice Ginsburg said. There are other provisions where there's an exclusive Federal forum.
Seth P. Waxman: Correct. For example, the Copyright Act.
David H. Souter: Which is... which is not this case.
Seth P. Waxman: The Copyright Act certainly is an example of complete preemption, but there's a statutory provision that--
Antonin Scalia: Okay, why didn't we express this... this principle before instead of... instead of adhering so narrowly? I mean, even the ERISA case, it didn't express this... this broad theory. It says, this is... this is very much like the section 301, and the legislative history referred specifically to 301, and therefore we come out the same way. Pretty... pretty narrow.
Seth P. Waxman: --Here's... here's why, Justice Scalia. The very difficult... this Court made clear in Metropolitan Life, if it wasn't clear before, that it wasn't going to infer from congressional silence very lightly that when Congress created a Federal cause of action, it meant it to be exclusive so that it would displace State causes of action. There's a very strong and longstanding presumption to the contrary. But that difficult question was decided in the context of section 30 of the National Bank Act beginning in 1875 for reasons that are explained in this Court's opinion and in the Comptroller's report that the Government cites that precipitated the enactment of section 30, which is that this was war legislation. This was a... the creation of the national banks was hoped by Congress and President Lincoln that it would provide the means with which the Government could continue to fund the war, and national banks would knit the country together when the war was finished. And the one thing that comes out of the history of this case and is reflected in this Court's opinions is that they feared, based on their experience with the first bank of the United States and the second bank of the United States, that jealous States, States that were jealous of their State-chartered banks, which were issuing paper at the time, would engage in predations against the national banks that were created at the very same time that section 30 was enacted and, in essence, smother this important Federal infant in its crib.
David H. Souter: I started to call you General Waxman. [Laughter]
Seth P. Waxman: Thank you.
David H. Souter: Like the old days.
Seth P. Waxman: R-18.
David H. Souter: Assume... assume that I... I agree with you that... that on... on complete preemption, this... this case passes muster. But assume also that in writing an opinion, I... I want to say something to indicate why we do not have a gathering snowball here. I mean, we... first, we had the labor management reporting. Then we got in some ERISA cases. Now we recognize this. Is there any criterion that you see in... in at least the cases on those three points so far, that... that... or any language that points to a criterion for when preemption, particularly field preemption, for example, becomes complete and when it doesn't?
Seth P. Waxman: Yes. There has to be substantive... Congress has to supply the exclusive substantive standards. It has to create a cause of action to remedy violations of those standards, and this is the hard part. And it also has to make clear that that... that judicial remedy is, in fact, exclusive, that is, that it will not permit the existence or operation of State law causes of action, even those that import the Federal standards and my--
David H. Souter: Okay. Why in other cases? Again, assume you... you made your point on... so far as this statute is concerned. Why in other cases aren't courts going to be, in effect, remitted to doing what the... the Court tried to do here, and that is, say, let's find out what Congress had in mind? And we don't find anything in the legislative history that makes it clear, and therefore it doesn't apply.
Seth P. Waxman: --You... you have to find out what Congress had in mind, but I think this Court has made clear in Metropolitan Life that it is going to be the rare, rare, rare day when the Federal courts will infer from congressional silence that a Federal cause of action is to be exclusive. And the other examples in... in which... in the Federal law in which there is, in fact, complete preemption, the FELA or the Carmack Amendment as an example, Congress has gone ahead and expressly made those actions nonremovable. May I reserve the balance of my time?
William H. Rehnquist: Very well, Mr. Waxman. Mr. Roberts, we'll hear from you.
Matthew D. Roberts: Mr. Chief Justice, and may it please the Court: For more than 125 years, it has been clear that the National Bank Act provides the exclusive cause of action for a claim of usury against a national bank. Because the National Bank Act provides the sole available avenue of relief, any claim that a national bank has committed usury can arise only under that Federal law. The National Bank--
Antonin Scalia: Can I ask you the same question that I asked Mr. Waxman? What if... what if the pleading makes a claim of usury, but it does not contain all of the elements necessary to make out a Federal cause of action? Is that removable?
Matthew D. Roberts: --A failure to state a claim on which relief is granted does not deprive the Federal court of jurisdiction over the claim. So the simple failure to state a claim wouldn't prevent it from being removable if the... if the claim was within the scope of the Federal cause of action, if it was a colorable claim. Now, if... if the claim--
Antonin Scalia: Well, it's not colorable. I mean, one of the elements is just not there.
Matthew D. Roberts: --If... if the claim was not colorable--
Antonin Scalia: It... it claims usury when... when what they charged was 3 percent and that would not violate the Federal statute.
Matthew D. Roberts: --Well, here... here we... we don't have that situation, Your Honor.
Antonin Scalia: I understand that. I want to know--
Matthew D. Roberts: That--
Antonin Scalia: --We... you're... you're asking us to set forth a new general proposition, which we haven't set forth before. We've... we've treated 301 and ERISA as... as distinctive cases. Now you want a general proposition. I want to know what does this general proposition cover. Is the State court going to have to... or is... before removal is granted, is the court going to have to decide whether a cause of action is properly stated, or... or, you know, whether... whether it could be dismissed on... on a motion to dismiss?
Matthew D. Roberts: --When it's removed, the Federal court decides whether there's jurisdiction under Federal law, whether there's arising-under jurisdiction, and decides whether the... the complaint is properly pleaded, the true nature of the complaint states a claim under Federal law. And--
Antonin Scalia: So if it doesn't, then it stays in State court.
Matthew D. Roberts: --If it doesn't, then it can remand the State... the case back to State court, but it would have decided, in essence, that the claim should be dismissed at the same time by deciding--
John Paul Stevens: What happens... what happens if the cause of action is for misrepresentation under State law, and the misrepresentation is that the interest rate was lawful and the plaintiff alleges it was unlawful because it was usurious?
Matthew D. Roberts: --Well, to the extent that the State claim requires the decision that a... a determination that there were excessive interest charges by a national bank, then the claim would fall within the scope of the cause of action. But that wouldn't mean that there couldn't be claims for misrepresentation that--
John Paul Stevens: Well, in... in my... would this removable? This is the only thing in the complaint.
Matthew D. Roberts: --The complaint--
John Paul Stevens: It seems to me this might be like Gully in that it... the... the nature of the cause of action was really a State cause of action even though it involves an inquiry into what the Federal law--
Matthew D. Roberts: --The State cause of action is just misrepresentation.
John Paul Stevens: --That's it.
Matthew D. Roberts: Then that would not be removable.
John Paul Stevens: It's unlawful, and the only misrepresentation is it's unlawful and it's unlawful allegedly because it's usurious.
Matthew D. Roberts: Yes. I don't think that would be removable, Your Honor.
Ruth Bader Ginsburg: There were related claims here that were strictly State claims.
Matthew D. Roberts: That... that--
Ruth Bader Ginsburg: But they fell into--
Matthew D. Roberts: --Yes, but the existence of pendent State claims doesn't defeat removal jurisdiction just as it doesn't defeat original jurisdiction. There were pendent State claims in the Metropolitan Life case, yet--
Ruth Bader Ginsburg: --And they'd come up under 1367. They would travel with the 13--
Matthew D. Roberts: --Exactly, Your Honor. The supplemental jurisdiction statute, 1367, expressly provides for Federal court jurisdiction in those instances. They would come with... with the claim to Federal court.
Ruth Bader Ginsburg: --But if you had this same complaint and it didn't have the usury claim and it just had those State law claims, then there's nothing removable.
Matthew D. Roberts: That's... that's right, Your Honor. The... the misrepresentation claim and the suppression claim are both species of fraud claim under State law. They don't come within the... the scope of the cause of action in the National Bank Act, and they're not, on their own terms, arise under Federal law and they would not be removable.
John Paul Stevens: Mr. Roberts, can I go back to your answer to Justice Scalia's question? I wonder if you really meant the answer you gave. Assume a case in which the plaintiff alleges that 3 percent is usurious as a matter of Alabama law, and under Federal law it must be at least 5 percent, say. As I understand it, that would be removable because he's making a usury claim and would be dismissable, that is, under your... your theory of the case. But I thought you said that would have to be dismissed in State court.
Matthew D. Roberts: What... what... I tried to distinguish between failure to state a claim, which I agree the simple failure to state a claim is... is not a ground for lack of Federal jurisdiction, Your Honor.
John Paul Stevens: If you fail... you failed to state a Federal claim, but you do state an Alabama claim.
Matthew D. Roberts: There is no Alabama claim because the only claim can arise under Federal law. So it... so it is removable and then the Federal court would assert Federal jurisdiction, which it has over the claim and dismiss it.
John Paul Stevens: And the Federal court would dismiss, yes.
Matthew D. Roberts: Yes. Yes, Your Honor. But... but that was the initial question that I... that I understood Justice Scalia to be asking. But then he said, if it's not colorable on the face of the complaint, what happens then? But I don't think it makes a practical difference.
John Paul Stevens: Well, that's my... my hypothetical. It's 3 percent and the Federal law clearly says anything under 5 percent is not usurious. What happens with that case?
Matthew D. Roberts: The critical... you have to know--
John Paul Stevens: I've given you all the facts.
Matthew D. Roberts: --There still... there still could be a colorable claim under--
John Paul Stevens: Well, is it a colorable claim or isn't it when it doesn't allege a--
Matthew D. Roberts: --We don't know what the rate--
John Paul Stevens: --percentage rate that's usurious under Federal law?
Matthew D. Roberts: --You don't know what the rate is, Your Honor, under Federal law without... without more facts about the complaint because the National Bank Act provides the... the possibility the national bank can charge any of three rates. But the--
Ruth Bader Ginsburg: And one was a State rate.
Matthew D. Roberts: --the fundamental... the fundamental point is that... that it's removable if there's jurisdiction in the original jurisdiction of the Federal court.
John Paul Stevens: Well, I still don't understand your answer. My... my hypothesis is the Federal law says no cause of action unless it's over 5 percent. He pleads 3 percent and he... and he says this violates State law. He says that and the defendant comes in and says, well, there's no State law cause of action. It's a Federal claim.
William H. Rehnquist: I want to remove it. Does the judge remove it or not?
Matthew D. Roberts: If... if there is... if the claim properly pleaded states a claim over which there's Federal jurisdiction, if it was pled as a claim under the National Bank Act--
John Paul Stevens: No, it's... that is a matter of State law in usury and--
Matthew D. Roberts: --No.
John Paul Stevens: --and you say there is no such animal. But then do you get to remove it or don't you? I don't understand your answer.
Antonin Scalia: I don't think there's authority to remove it, if--
Stephen G. Breyer: --The answer is yes, isn't it?
John Paul Stevens: You can remove it.
Matthew D. Roberts: You can--
John Paul Stevens: He might be able to remove it because he doesn't have confidence in what the State judge will do.
Matthew D. Roberts: --No... no, Your Honor. You can remove it if there's... if there's original... would be original jurisdiction over the complaint. And that doesn't matter whether it's characterized as a... as a complaint under State law, which doesn't... doesn't exist because it's been entirely displaced, or if it's properly pled as a... as a claim under Federal law. You could just as easily ask if they state the claim--
John Paul Stevens: I... I still don't know whether you're telling me yes or no to my hypothetical.
Matthew D. Roberts: --I'm telling you that if the... if there's no colorable claim--
John Paul Stevens: Well, I've told you what the claim is. Is that colorable or not?
Matthew D. Roberts: --Well--
John Paul Stevens: He says 3 percent. Federal law is 5 percent, and Alabama says I'll... I'll do it on 3 percent. Can he remove it or not? He... I would think he could remove it and get it dismissed, but I'm not sure you agree with that.
Stephen G. Breyer: The question... can I ask you a standard on this? I mean, I thought the standard is to ask this question. Is this... i.e., the State claim... the kind of claim in respect to which Congress intended the Federal action to be the exclusive substitute therefor? If the answer to that question is yes, you can remove it even if it doesn't state a Federal cause of action. Now, have I got it right what your argument is or not?
Matthew D. Roberts: --Yes, that's correct, Your Honor.
Speaker: Then the answer to Justice Stevens, if I have the right standard, would be yes, because Congress did intend the Federal cause of action to be an exclusive substitute for those State actions which allege that 3 percent is usurious.
John Paul Stevens: How does this removal statute read?
Stephen G. Breyer: I mean-- --Is that right or not?
Matthew D. Roberts: The... the removal statute gives the... gives the... the Federal courts... gives the defendant the right to remove to a Federal forum any claim that arises under the laws of the United States--
John Paul Stevens: Arises under the law.
Matthew D. Roberts: --and so... so the question is whether it arises under, whether there's original jurisdiction in the Federal court.
John Paul Stevens: And could we please answer Justice Breyer's question?
Stephen G. Breyer: I want to know if I'm right or not--
Matthew D. Roberts: Yes.
Stephen G. Breyer: --because I'm not asking just to hear my standard. I'm asking--
Matthew D. Roberts: I'm... I'm sorry, Your Honor. Yes.
Stephen G. Breyer: --I'm right, okay, in your opinion.
Matthew D. Roberts: Yes, you're right.
Stephen G. Breyer: Okay. Okay, and by the same token, if Justice Stevens' question had been asked about a subject that is not under the banking act or labor management reporting or that part of ERISA which has been held to be complete preemption, I take it your answer would be that if a... a claim was pleaded that omitted one element of the Federal cause of action in the State court, and you didn't start with the assumption that there was complete preemption for extraneous reasons, it wouldn't be removable.
Matthew D. Roberts: Yes. If there... if I understand the hypothetical, it's not a situation where it arises under the exclusive cause of action for usury under the National Bank Act.
Stephen G. Breyer: Right. We don't start with the assumption of complete preemption. What he states is, in fact, a Federal claim but for one element. Is that removable?
Matthew D. Roberts: Yes.
Stephen G. Breyer: He leaves out an element.
Matthew D. Roberts: The Federal... the Federal claim would be removable to... to Federal court, yes.
Stephen G. Breyer: But it's not a Federal claim. He's left out one element. Would that be removable?
William H. Rehnquist: Answer yes or no, and then sit down.
Matthew D. Roberts: Yes. Yes, Your Honor, it's removal. Thank you.
Speaker: Thank you, Mr. Roberts. Mr. Clark, we'll hear from--
Brian M. Clark: Mr. Chief Justice, and may it please the Court: Federal jurisdiction is necessarily limited jurisdiction. Federal removal jurisdiction is limited by statute to those cases that arise under the Constitution or laws of the United States. Plaintiffs have brought no cause of action on the face of the complaint that arises under the... the Constitution or laws of the United States. As such, there's no Federal jurisdiction under long-held jurisdiction--
Sandra Day O'Connor: Oh, but it's a claim of usurious interest charged by a national bank.
Brian M. Clark: --It is a--
Sandra Day O'Connor: So under the theory of the Government, that is a Federal claim.
Brian M. Clark: --Under the theory of the Government, it... the claim, as pled, is under Alabama Code section 8-8-1. And any interposition of Federal law at all is necessarily interposed by the defendant in this case. And under this Court's decisions in Gully, which was a National Bank Act case, Caterpillar, MetLife, Franchise Tax Board, the imposition of a Federal defense does not create--
Ruth Bader Ginsburg: This is not a Federal defense, Mr.... Mr. Clark. This is like... suppose you have a case in State court and the plaintiff says, we're both from the State of Alabama. Defendant removes it, says, I was from... I am, was from Georgia. Now, doesn't the defendant have a right to remove that case even though plaintiff pled it as though it were a case that could be only in State court? Said we're both from--
Brian M. Clark: --Are you talking about where the... where the... a... a complaint is pled by... by an... by a Georgia plaintiff against an Alabama corporation, it will be removed because--
Ruth Bader Ginsburg: --Plaintiff is from Alabama.
Brian M. Clark: --because there's diversity?
Ruth Bader Ginsburg: Plaintiff says defendant is from Alabama.
Brian M. Clark: Right.
Ruth Bader Ginsburg: Defendant removes because defendant is, in fact, from Georgia.
Brian M. Clark: Right. Well, in that case you have a... you have a... you have factual inaccuracy in the pleading. In this case, we're not talking about their basis for removal is not some factual inaccuracy of the pleading, it's that they're saying that your legal theory, plaintiff, which you, under the well-pleaded complaint rule are allowed to choose your own legal theories, you've decided to travel on the Alabama statute--
Ruth Bader Ginsburg: You're not allowed to choose a theory that doesn't exist.
Brian M. Clark: --Well--
Ruth Bader Ginsburg: The notion is that there simply is no claim under State law for usury against a national bank. It doesn't exist. No such claim. If the plaintiff chose to stand on such a claim, it would have to be dismissed because the only exclusive claim for relief... although it can be brought in State or Federal court, the exclusive claim is one under Federal law. That's the argument here.
Brian M. Clark: --The argument that they are making is that there's no claim is... is misstating. There is a claim. What... what Your Honor is discussing is the principle of ordinary preemption. Whether or not that Alabama State law claim may proceed is a question of ordinary preemption as to be... to be distinguished from complete preemption. And the Court held in... in Caterpillar that... that a case may not be removed on a Federal defense, including the defense of preemption, even if the defense is anticipated by both parties.
Ruth Bader Ginsburg: Of course. And there's one case... I was surprised you didn't cite it in your brief. It's very... makes that point very nicely. The Rivet case against Regions Bank, which was featured on the other side... you didn't mention it at all in your brief.
Brian M. Clark: That's an ordinary... ordinary preemption case... case also.
Ruth Bader Ginsburg: That... that distinguishes between a claim for relief and a defense. And that case involved a defense.
Brian M. Clark: Right, and--
Ruth Bader Ginsburg: The defense of preclusion.
Brian M. Clark: --Right, and that's exactly what they have in this case, a mere defense in this case. And--
Stephen G. Breyer: Because?
Sandra Day O'Connor: Do you... do you disagree that section 86 of the National Bank Act provides the sole source of the cause of action?
Brian M. Clark: --It does not provide the sole source of the cause of action that the plaintiffs have pled in this case, and that's the difference here is... is the source of sort of organic law as to where the... where the complaint comes from. Assume there were... the defendants never brought up this... this claim or this defense of Federal preemption. The Alabama case would... the Alabama usury claim would go forward under Alabama law and would be decided under Alabama law. So it's important to... to see the distinction between... between what's being... what's being pled and a defense to what's being pled. Now, as... as was stated--
Stephen G. Breyer: Wait. Don't leave that point because you're... you win if you're right on that. I mean, you win if your particular claim is not preempted by this Federal statute, you win... and they admit it... if this particular Federal statute is not intended by Congress to be the exclusive vehicle for bringing the kind of claim that you have brought. So now, explain to me. You just said it isn't. Why isn't it?
Brian M. Clark: --Why isn't... Your Honor, why isn't... why isn't the... the cause of action we've brought--
Stephen G. Breyer: Why, in your opinion, is the State cause of action that you brought... you say it is not true that Congress intended the Federal cause of action as the exclusive vehicle, excluding your kind of claim.
Brian M. Clark: --Well--
Stephen G. Breyer: They say it did. You say it didn't. Now, all I want to hear is your arguments for saying it didn't because they pointed to a lot of Federal cases going back to 1886 which say usury claims are to be brought under the Federal statute. The State power in respect to a national bank has no power. Okay? Now, your reply to that is what?
Brian M. Clark: --As this Court stated in the Caterpillar case under note 4, the question of the breadth of the--
Stephen G. Breyer: I don't see what Caterpillar could possibly have to do with it since it isn't a bank case.
Brian M. Clark: --Well, but the question of the breadth--
Stephen G. Breyer: Is it?
Brian M. Clark: --of the remedy provided--
Stephen G. Breyer: I'm not asking you that. I asked you to tell me about banking law.
Brian M. Clark: --Right.
Stephen G. Breyer: I want to know is it the case in your view... you concede it. You seem to contest it. I'll repeat it for the third time. Is it the case that this Federal cause of action is intended by Congress as the exclusive vehicle excluding your State cause of action under the Supremacy Clause of the Constitution?
Brian M. Clark: Under Supremacy Clause--
Stephen G. Breyer: Is the answer to my question yes or no?
Brian M. Clark: --That is... yes, that is what those cases hold. However--
Stephen G. Breyer: Okay. Well, then--
Brian M. Clark: --however--
Stephen G. Breyer: --then you can't make the argument you just made.
Brian M. Clark: --However, the question of whether or not a claim is preempted ordinarily is a... a wholly different question from whether or not there's jurisdiction in the Federal courts.
Stephen G. Breyer: All right. You... you really want... you conceded you have no State claim. It's preempted by the Federal statutes. Is that right? Is that what you're conceding?
Brian M. Clark: We... it appears that there is no... there is no State claim on the usury.
Stephen G. Breyer: All right. There is no State claim. So then the question in this case is even though you concede, as I take it you have... I don't know if you really mean to.
Speaker: [Laughter]
Stephen G. Breyer: But... but I take it you just did concede that the Federal cause of action is the only possible cause of action that your client could have.
Brian M. Clark: Well, if the... if my client... if we decided to travel under the Federal cause of action... and what this goes back to is the well-pleaded complaint rule. Plaintiffs in... in cases are allowed to choose their remedies. And in this case the plaintiffs chose a remedy under the Alabama usury statute, be--
Ruth Bader Ginsburg: The problem with it is your complaint isn't well-pleaded if the only source of law is Federal, which you conceded on your brief and again here. There is no well-pleaded Alabama claim because the Alabama claim or the State law claim doesn't exist. The only claim that exists against a national bank for usury is a Federal claim.
Brian M. Clark: --Well, and again, that is a defense... the claim... as the Court said in MetLife, the touchstone is not whether or not preemption is obvious, but the question is whether or not that creates removal jurisdiction.
David H. Souter: No, but the... the--
Brian M. Clark: And that has to appear from the face of the complaint.
David H. Souter: --But I--
Ruth Bader Ginsburg: --But the face of a well-pleaded complaint. And there's a difference between preemption as a defense to a claim that is well pleaded and here where you have badly pleaded a complaint that can arise only under Federal law that simply can't arise under State law.
Brian M. Clark: The problem with that test is it's not a... it's not a test. It adds another layer of... of litigation to... to almost any claim. And what you're going to have is, instead of following the well-pleaded complaint rule that for years has served this Court, you're going to have all manner of State law causes of action all of the sudden removed and then you're going to have this litigation over... over, well, does it state a cognizable cause of action under... under State law or is it part of--
Ruth Bader Ginsburg: We have one simple question. Has Congress provided for exclusive Federal law to govern this claim? That's not a complicated question.
Brian M. Clark: --Congress has not provided for exclusive Federal cause of action to govern an Alabama usury claim.
Stephen G. Breyer: So then you are not conceding-- --Then you just withdrew your concession. [Laughter] --complete preemption as opposed to ordinary preemption.
Brian M. Clark: As a matter of ordinary preemption, and maybe--
Stephen G. Breyer: You're conceding ordinary preemption, but not complete preemption.
Brian M. Clark: --Exactly. And if I... if I understood the question, then I misunderstood the question.
Stephen G. Breyer: I'm sorry. It probably was--
Brian M. Clark: As a matter of ordinary preemption, it may very well be that... that--
Speaker: --Congress--
Brian M. Clark: --the State claim and Congress... and Congress intended that.
Speaker: --Let him finish answering the question that somebody else asked. Oh, I'm sorry.
Brian M. Clark: But as a matter of complete preemption, under... under what I was saying in the MetLife and the Caterpillar case, those do not jurisdiction make. In the Gully... Gully case itself, it said a suit brought upon a State statute dues not arise under an act of Congress because prohibited thereby. That is exactly the situation that we have here. We have a State law cause of action. We have the defendant interposing a defense saying, your State law cause of action is prohibited by that... by that... by the Federal act, and now we want to create removal jurisdiction because of that. It's interesting. This Court has always found--
Ruth Bader Ginsburg: Mr. Clark, I'm... can we go back to... you just cited Gully and maybe I have it wrong, but I thought that that was a suit to collect a State tax under State law.
Brian M. Clark: --Yes.
Ruth Bader Ginsburg: That the source of law that was applied to the private actor was State law, the State tax.
Brian M. Clark: Yes.
Ruth Bader Ginsburg: And here, the source of law that would be applied is Federal law, not State law.
Brian M. Clark: The... the source of law pled in the complaint is Alabama State law. Now, the fact that it may be ordinary... ordinarily preempted is something that... that the defendants can raise and the State courts can decide. And the State courts have often... often decided matters of Federal preemption.
John Paul Stevens: I just-- --May I ask... may I ask this one question? It seems to me there's a slight difference in the text of section 85 and 86. And section 85 reads as a defense, and if that's all there were here, I would understand your argument completely. But I think one can read section 86 as creating an affirmative Federal cause of action, and one can argue that that's the only cause of action that can be prosecuted. Now, if that's true, would there not be... would it not... not... would you not have to say then that the affirmative remedy in... under the Federal statute is exclusive?
Brian M. Clark: Well, in... in... there are many Federal statutes that would run concurrently with State regulation of... of business. And if... if the question is, is the fact that there's a Federal remedy provided, in addition to the State remedy... does that provide... provide removal jurisdiction, the answer would be... would be no to that question.
John Paul Stevens: It's not only that there's a Federal remedy provided, but it's been construed to be the exclusive remedy.
Brian M. Clark: Right.
John Paul Stevens: That those are the only remedies that one can get.
Brian M. Clark: Again, I would--
John Paul Stevens: Doesn't that distinguish it from some of these other hypothetical cases?
Brian M. Clark: --Well, again, I would go back to this Court's concept of federalism wherein the... the State courts are allowed to make that call. And in Avco, which established the... this platypus of... of field preemption or complete preemption is very limited to... to those actions construing the collective... collective bargaining agreements. And then it was reluctantly extended by this Court in the Metropolitan Life and Taylor cases, and--
Sandra Day O'Connor: Well, the argument of the Government is that this is another one of those rare cases. That's their whole point.
Brian M. Clark: --But this--
Sandra Day O'Connor: And if it is, then you're just wrong about it being only a defensive maneuver.
Brian M. Clark: --This... if this another case, it is a wholly separate and... and distinguished... distinct way to go because the National Bank Act carries with it none of the indicia of the intent of Congress to completely preempt that the LMRA does.
Sandra Day O'Connor: But it's been interpreted by a number of cases to have precisely that effect.
Brian M. Clark: To have ordinary preemptive effect which--
Sandra Day O'Connor: No. That was not the interpretation. You want us to overrule earlier cases about--
Brian M. Clark: --Absolutely not.
Sandra Day O'Connor: --the meaning of the National Bank Act?
Brian M. Clark: No. But in the... in the LMRA context, you have specific jurisdictional grant to the district courts of the United States. Then when ERISA came along, with Taylor you have... you have specific legislative history saying that this is to be interpreted under the Avco rule, which is to... which is to... to have a body of Federal law deciding all cases, no matter where brought, under... under ERISA or deciding all cases under collective bargaining. In this case, there's no... in National Bank Act, there's no... there is no body of Federal law that could ever arise, and it's because the nature of the National Bank Act is really more of a hierarchy of State laws. It says, National Bank Act, you can... you can charge either the interest rate in the State in which the claim is brought, you can charge the interest rate in the State in which the bank is located, or you can charge... and there's a default Federal interest rate. So what you're going to have here is sort of a patchwork of State law decisions concerning the State... State law of Delaware versus Alabama versus Kentucky versus Michigan.
Stephen G. Breyer: I'm still trying to get back to my... I'm beginning to see what I think your answer is, but please don't agree with me if you really disagree. All right. First, if I were to ask the question, is there Federal law in the area? Yes. Ask the question, does Federal law preempt State law?
Brian M. Clark: Ordinarily.
Stephen G. Breyer: Yes, here. Yes, well, you'll say right here, but wait. So you... if I ask this question, is this State... Federal cause of action... did Congress intend it to preempt a State cause of action substituting the Federal cause of action therefor? I think now you're prepared to say the answer to this question is yes.
Brian M. Clark: Ordinarily preempt.
Stephen G. Breyer: But you will answer the following question no. Is there an intent here by Congress that this Federal cause of action that preempts the State cause of action by substituting an exclusive Federal remedy... is there an intent of Congress to allow removal when it's pleaded? The answer is we have no evidence of that.
Brian M. Clark: The answer to that question is no.
Stephen G. Breyer: And what they're saying on their side... and now this is exactly the issue between them and the lower courts. And indeed, there's language that's unclear in the lower cases... is that we need evidence of that latter point. That's what you're saying. And they're saying no.
Brian M. Clark: Well--
Stephen G. Breyer: They're saying, look, all you have to have are the first three things I mentioned. Stop after you decide that Congress has created a Federal action with the intent that it provide an exclusive substitute for this State action. Stop there. Don't ask for any further evidence of anything. One, because you'll never get it. Congress never thinks of this sort of esoteric issue. And second, because there's just no reason. Now, okay. Now I get the... the clash, and now I can get the answer.
Brian M. Clark: --I'm sorry if I... I misunderstood your question before.
Stephen G. Breyer: No, no. It's my fault. I didn't get it.
Brian M. Clark: And in fact, in the... in Justice Brennan's concurring opinion in the MetLife/Taylor case, he said, you know, that... that congressional intent is the touchstone here, and that this Court would be well served not to infer removal jurisdiction unless there is some clear evidence of congressional intent to do so like in an ERISA case or like in the LMRA case.
Antonin Scalia: Mr. Clark, I should perhaps have asked this question of the other side, but they're not going to have a lot of time left when they get back up. I assume that it... it is a given that merely setting forth all of the elements of a Federal cause of action in a complaint is not enough to provoke removal. That is to say, if there is both a Federal cause of action and a State cause of action which has the same elements, if you plead those elements, which would constitute a Federal cause of action, but you protest that you are not asserting a Federal cause of action, you are only asserting a State cause of action, that would not be removable. Would it?
Brian M. Clark: No, it would not be. And that--
Antonin Scalia: Okay. So we're... we're talking about a... a distinctive rule here that where you set forth the elements of a... of a cause of action that you do not assert to be a Federal cause of action, we are going to allow it to be removed nonetheless. Right?
Brian M. Clark: --If... if what the defendants are arguing, it would be a new rule. And it... it is a departure from--
Ruth Bader Ginsburg: But may I understand this further point? What Justice Scalia's described seems to me quite common. You have State human rights laws. You have Federal human rights laws. The same facts that I was discriminated against. If I make my choice that I want to bring it under, say, New York law rather than Title VII, that's my prerogative. And the defendant certainly can't remove that case by saying, well, you could have pleaded those same facts as a Title VII case. Quite different. That's where there's concurrent lawmaking authority, both State and Federal. Here the argument is there is no State lawmaking authority. There is no parallel source of law, State and Federal, and that's what makes it different from the ordinary case where you plead the facts and they would state a claim under either State law or Federal law. The pleader has her choice.
Brian M. Clark: --There... there is concurrent lawmaking authority. However, because of the Supremacy Clause, the courts have held that... that there is ordinary preemption in this case. But that does not answer the question whether or not should... there should be removal jurisdiction in the case. And it's... in other words, the Alabama legislature certainly has the right to make... make law regulating Federal banks. In fact, this Court decided way back in 1870 that national banks are subject to State law regulation. And in fact, the quote from the case something like in their daily activities, they're regulated much more under--
Ruth Bader Ginsburg: But not usury. I mean, you... it's a question of how you characterize this, but I think you agree that on the question of usury, the Federal legislation is conclusive and it was done, indeed, for the very purpose of having national banks escape from whatever jealous, mean legislation the State might pass. So the only law... I mean, the choice would be if you want to say, yes, I want to stick with Alabama law, no Federal 85, 86 for me, that case must get dismissed. You can't get past the door because there is no such claim.
Brian M. Clark: --If... if the preemption, ordinary preemption, is... is applied, it... it would... applied as it has been, it would be dismissed. However, that is a wholly separate question from whether the case arises under Federal jurisdiction. It is a question of ordinary preemption that the State courts--
Ruth Bader Ginsburg: Why would a plaintiff want to bring a... a suit that inevitably must be dismissed?
Brian M. Clark: --Well, and... plaintiffs have different reasons for pleading the things they do. Under the well-pleaded complaint rule, of course, it's their prerogative to rise and fall on the causes of action that they choose to plead. However, I go back to the MetLife case which the Court said it's not the obviousness of preemption defense but the intent of Congress. And I think in answer to the question over there, is why... why go that extra step? Well, because this Court has decided in MetLife that that extra step is necessary to stop this slippery slope down where every case that is removed out of a State court, you now have this other layer of... of litigation over, well, is there another cause of action and... and perhaps that we have to find some... we have to litigate over whether it's an exclusive cause of action. And the answer to that is this Court has provided, for right or for wrong, since 1887 that we follow the well-pleaded complaint rule and it follows the language in the... at the end of the Gully opinion saying that what you need is a clear bright line limitation. And only where we find some clear congressional intent, such as in the LMRA situation, such as in the ERISA situation, do we make this extreme and extraordinary grant of field preemption or complete preemption or whole preemption. If there are no further questions, I will sit down.
William H. Rehnquist: Thank you, Mr. Clark. Mr. Waxman, you have 3 minutes remaining.
Seth P. Waxman: Justice Scalia, the answer to your question is yes, if there are--
Speaker: What was my question? [Laughter]
Seth P. Waxman: --Your question was if... if you... you said this would take time, and it will. You pleaded all the elements of a Federal cause of action, but it also... it also satisfies a State cause of action. If the Federal cause of action is not exclusive except in that rare instance, it is not removable. Justice Breyer, yes, indeed we say that you stop at point 3. That is, you determine whether or not this is the rare instance in which there's not only substantive preemption but exclusive Federal remedies. And the reason you stop is because we have Federal question jurisdiction. It says that removal is tied to original jurisdiction, and therefore, the question is, does the complaint well-pleaded necessarily state a cause of action? Justice Holmes indicated in a statement that is oft repeated and, if it's anything, is under-inclusive, as this Court indicated I think in Merrell Dow, that a suit arises under the law that creates the cause of action. If the cause of action is exclusively Federal, in that rare instance, it's under arising-under jurisdiction. Justice Kennedy I think asked what for me is the most difficult question in this Court's sometimes not fully explicated arising-under jurisdiction, which is the question that was addressed in Merrell Dow and in particular in footnote 1 in this Court's opinion in Merrell Dow, which is if you have a State cause of action misrepresentation, but it has embedded with it as a necessary matter a conclusion about whether Federal law was or was not satisfied, does that State claim arise under Federal jurisdiction? In Franchise Tax Board, this Court repeated dicta that suggests that the answer is yes. And in Smith versus Kansas City Title and Trust, this... this Court seemed to indicate yes. But in Moore versus Chesapeake... the Chesapeake and Ohio Railway, the Court suggested that the embedded Federal question has to be central to the State cause of action and really important. And the result, as I... as I think things stand now, is we have a very long footnote 1 in this Court's opinion in Merrell Dow that says many people have difficulty resolving our jurisprudence in this area, but in the Merrell Dow context, where there was a State tort claim that could... may I finish my--
William H. Rehnquist: Thank you, Mr. Waxman. The case is submitted.
Speaker: The honorable court is now adjourned until Monday next at 10 o'clock.


Warren E. Burger: Wengler v. Druggists Mutual Insurance Company. Mr. Reid, you may begin whenever you are ready.
John W. Reid, II: Mr. Chief Justice, and may it please the Court: The question presented in this particular case is whether the 1976 Revised Statutes of Missouri Section 287.240 which authorizes worker's compensation death benefits for the spouse of a male worker without regard to dependency but conditions benefits for the spouse of a female worker upon mental and physical incapacity or proof of dependency discriminates impermissibly on the basis of gender in violation of the Equal Protection Clause of the Fourteenth Amendment of the United States Question. This case arose at the death of Ruth Wengler on February 11, 1977. Thereafter a workman compensation claim was filed by the claimant for the death of his wife. The referee and the Industrial Commission of the State of Missouri held that they did not have the authority to declare a Missouri statute provision on the death benefits unconstitutional and therefore disallowed the claim. The claim was appealed to the Circuit Court of Madison County where the Circuit Judge there held that due to the Missouri Constitution and the Federal Constitution the Equal Protection Clause, the death benefits to the workman compensation for Paul Wengler had been denied and therefore ruled in favor of the claimant and indicated that the benefits should be applied to Mr. Wengler for the death of his wife. Thereafter Druggists Mutual appealed this decision to the Missouri Supreme Court and there in a divided opinion the Missouri Supreme Court reversed the Circuit Court of Madison County, holding that they would not apply the strict scrutiny test as it had been applied by members of this Court in appropriate sex discrimination cases but instead applied the other test that have been applied, the substantial relation test. And held that under the substantial relation test that Equal Protection Clause had not been violated by the Missouri workman compensation benefit statute. But Justice Donnelly in a concurring opinion basically indicated that he was troubled because he didn't know what the supreme law of the land was and Justice Sieler in his opinion -- which was a dissenting opinion, the sole dissenting opinion -- pointed out that the majority opinion even though it applied the substantial relation test that the -- in his opinion that this Court would have found that the Missouri workman compensation death benefit violated the Equal Protection Clause of the Fourteenth Amendment of this Constitution. And pointing out that members of this Court had applied the substantial relation test and therefore the substantial relations test and the strict scrutiny test both would not pass the Missouri workman compensation death benefit as it applied in the State of Missouri in the Wengler case. And the dissenting opinion was held in favor of the claimant. After this case was accepted and briefs started being written, we received a telephone call from the Department of Justice and also the American Civil Liberties Union and they both filed amicus curiae briefs on behalf of the claimant. And I thought that this was very strange when I received the phone call from the Department of Justice, because the American Civil Liberties Union and the Department of Justice had been litigating these matters before this Court in the Social Security cases, Federal cases. And after obtaining the amicus curiae brief from the Department of Justice I found out that what happened after the Goldfarb cases, the Social Security case which was a 5-4 decision, that Congress thereafter instructed the Department of Justice to go through the Social Security laws and to advise Congress how the gender discrimination in the Social Security law could be corrected. And according to the brief of the Department of Justice they have complied with that public law which is on page 3 of the amicus curiae's brief and in February 1979 they had made a report back to Congress of how the gender-based discrimination can be corrected by Congress. So that I think this is an expression by Congress that they want to correct the gender-based discrimination that still is in the Social Security laws.
William H. Rehnquist: Did Congress do anything in response to that report?
John W. Reid, II: Justice Rehnquist, I think that this report took place in February of 1979 and to my knowledge, and what I have is from the amicus curiae brief, Congress has not passed any law at this time. I think that it is the claimant's position that the Missouri majority misread and misapplied the tests that have been applied by this Court. And to be quite fair with the Missouri Supreme Court, there were some cases that came down about the same time as the Missouri decision last term, this Court, the Orr case and also the Westcott case. And in those cases the plurality of the Court held that the alimony statute of the State of Alabama violated the Equal Protection Clause and also a portion of the Federal statute on aid to dependent children, also violated the Equal Protection Clause where it only applied benefits to the father who was unemployed and not to a mother that was unemployed. I think the American Civil Liberties Union -- of course I have a client and not a cause -- the American Civil Liberties Union would like to see the Court adopt the strict scrutiny test. Quite frankly I don't believe that the decisions of this Court in the last decade would have been any different if the strict scrutiny test which Justice Brennan has written about in many decisions in 1970 would have been applied by the Court. The Court has held in the Kahn case, the decision written by Justice Douglas, that in the area of taxation that the Constitution and this Court has given States great leeway and this is a particular area where they have done. And I think that under that particular decision that applying the strict scrutiny test that that decision would stand. The Schlesinger v. Ballard case involved a decision involving up and out of the Armed Forces. A member of the Armed Forces who was an officer had to move up or be booted out of the service and this Court held, the plurality, that in that particular case that the Constitution gave to Congress the authority to man the services and that this was of germane purpose and that the Court would not use the Equal Protection Clause to take away that duty and that power that is delegated to Congress. In Califano v. Webster which was a pro curiam decision of this Court and there was a provision of the Social Security Act which gave benefits to a woman by deducting three years off of her earnings requirements for benefits that this was a specific Act of Congress to do away with some past discrimination that women had been shackled with over the many years.
John Paul Stevens: Mr. Reid, do you think the Missouri statute discriminates against men or against women?
John W. Reid, II: I think it discriminates against both, Justice Stevens. I think it discriminates against a working woman and I think perhaps a few decades ago it was the place for the woman to remain in the home and take care of the children. Today, with inflation, with our way of life, a number of women work outside the home and raise the family. And so by denying the workman compensation benefits it does discriminate against not only males but also females.
John Paul Stevens: It doesn't deny any women the benefits in this case, does it?
John W. Reid, II: It does deny her family benefits. In the event she would pass away, her family would be discriminated against; whereas if the husband passed away, she would be entitled to benefits for her and the children. But she, on the other foot, if the wife passes away -- the mother -- then the father has a void there.
John Paul Stevens: We are talking members of the family other than the spouse, aren't they treated alike, aren't the children treated as dependents in both cases?
John W. Reid, II: Yes.
John Paul Stevens: There isn't any discrimination against anybody except the opposite spouse, is there?
John W. Reid, II: Other than the fact that the opposite spouse could use the money that would be entitled -- that he would be entitled to to help raise the family.
Byron R. White: Do you have any difficulty at all with the claim that this system is unconstitutional because it discriminates against both men and women?
John W. Reid, II: No, Your Honor.
Byron R. White: I must say I do.
John W. Reid, II: You mean it would have to discriminate --
Byron R. White: I mean how could something discriminate against both, let us say aliens and non-aliens?
John W. Reid, II: It would discriminate against -- in this case it would discriminate against the man, the male the way the statutes are written in this particular set of facts.
Byron R. White: You mean in some cases it might discriminate against women and in other cases it might --
John W. Reid, II: I see what Justice Stevens is saying, that in this case because the wife is the one that is deceased she is never going to receive --
Byron R. White: The point is that in some cases discrimination might be against women and in other cases it might be against men. Is that it?
John W. Reid, II: It --
Byron R. White: That is it's against women if you think of them as wage earners.
John W. Reid, II: Right.
Byron R. White: And against men if you think of them as beneficiaries.
John W. Reid, II: Right.
Byron R. White: Is that it?
John W. Reid, II: Right.
Byron R. White: So it would depend in each case upon whether the male or the female were the wage earner and which spouse was the beneficiary.
John W. Reid, II: That is correct, Your Honor.
John Paul Stevens: Does the wage earner in this case contribute to the fund that provides the benefit?
John W. Reid, II: Your Honor, I think indirectly he does, or she does in this particular case. I realize that Druggist Mutual's brief correctly states what the law in Missouri is, that the employer is the one who pays the benefits on the workman compensation. But indirectly all wage earners pay into that fund.
John Paul Stevens: But until there is an injury I take it there is no discriminations as between wage earners of different sexes. They both pay the same percentage; neither of them has any deduction from his salary and there is no difference.
John W. Reid, II: No, Your Honor, there would be no deduction from the salary other than the fact I think when you think about the total amount of labor that the employer would take this into consideration, how much he is paying in for the workmen compensation benefits.
John Paul Stevens: Well but he pays in the same amount for a female worker as he does a male worker.
John W. Reid, II: That is correct, Your Honor.
John Paul Stevens: And if the female and male workers are single and have no dependents at all, so they only would get benefits for disability, they are treated alike.
John W. Reid, II: That is correct.
John Paul Stevens: I don't see any discrimination against anybody except a male in this case. I don't understand the theory of discrimination against the female.
John W. Reid, II: Well, it has been advanced I think in the American Civil Liberties brief and pointed out in some other cases that it does discriminate against against the working woman for her family. And that would be the discrimination. That theory has been advanced.
John Paul Stevens: You mean because the husband is the wife of a woman -- is the spouse of a woman he is discriminated against, so that is a discrimination against the woman.
John W. Reid, II: The woman would be discriminated because of her ability to support her family in the event that she had passed away. That is the theory of the argument that is used.
Byron R. White: That her employment is worth less than the man's.
John W. Reid, II: That is correct, Your Honor. That is the theory that I got. This Court has held that the following classifications violate the Equal Protection Clause. In the Reed case to eliminate hearings on appointment of administrators Justice Burger in his opinion indicated that that was not a legitimate classification, giving preference to a male over a female. Also in the Reed come to avoid inner family controversy, that was not a valid classification. Administrative convenience in one decision by Justice Brennan in the Frontiero decision was not a valid reason for the classification. In the (Inaudible) decision, Justice Brennan's opinion, the fact that the women were the -- the males were primary supporters, the fact that the women were given benefits in the event of a husband's death to take care of the children, which is very close to this case, that benefits should be paid to the male in the event of the wife's decease. And in the Craig case Justice Brennan points out that statistical data is not very helpful in deciding Equal Protection cases. The accident of birth -- and that is what this is -- sexual classification, gender classification, it is an accident of birth. And in the Goldfarb case, which is very similar to this one, a Social Security case. And I would say that the dissenting opinion in those cases indicated that this was social legislation. The workmen compensation benefit cases are not social-type cases legislation on that Justice Rehnquist was writing about in his dissent. And finally, in the Westcott case Justice Blackburn indicated that the one-step test that was advanced in the dissenting opinion in Goldfarb no longer would be followed by the Court. I would also point out to the Court that the strict scrutiny test is based upon race and that was an amendment to the Constitution by the Fifteenth Amendment. And some 50 years after that an amendment was passed, the Nineteenth Amendment, and that gave women the right to vote. And in this classification I think that this could be a suspect classification, strict scrutiny should be applied to sexes as well as race because sex is an even broader term than race, alienage or national origin. All races have two sexes become extinct. This is a law of nature. Justice Powell indicated in a concurring opinion in the Craig decision that due to the fact that the Equal Rights Amendment is pending the Court should not go ahead and apply the strict scrutiny test at this particular time. I would point out that the race and the sex are both amendments to this Constitution and perhaps as the American Civil Liberties Union has stressed that it is time to apply the strict scrutiny test in these gender classification cases.
William J. Brennan, Jr.: The scrutiny test, so-called, in every case simply is shorthand for saying you are going to invalidate the statute, isn't it?
John W. Reid, II: I think that didn't happen in the --
William J. Brennan, Jr.: I mean that is a way of telegraphing the result, isn't it?
John W. Reid, II: Yes. In the Webster case that didn't happen. And also I think Justice Brennan in the Bott case held that he would not use a strict scrutiny standard to invalidate that. Of course that was a race case, it was not a sex case. But that is the stricter standard, that is correct.
William J. Brennan, Jr.: Well, then isn't what I asked in my question basically correct?
John W. Reid, II: Yes.
William J. Brennan, Jr.: Do you know of a single case in which any court has ever applied the so-called strict scrutiny test that it has not ended up by invalidating the statute before it? it.
John W. Reid, II: I would say that the Webster case would be a close one, the pro curiam opinion of this Court.
Byron R. White: Mr. Reid, you rely a good bit on the fact that the statute is an old one, it dates back to the year --
John W. Reid, II: 1925, Your Honor.
Byron R. White: Suppose there was a distinct legislative record to the effect that the legislature wanted to compensate widows for deprivations of the past. Would you be here today?
John W. Reid, II: I think I would if the Court would apply the strict scrutiny standard; yes, Your Honor.
Byron R. White: I repeat Mr. Justice Stewart's question: Doesn't the strict scrutiny standard really speak to the result. Once you take that standard the result is inevitable.
John W. Reid, II: Yes, Your Honor, I would say that it would be.
Byron R. White: It is like a compelling State interest. We have used that up here many times and every time we use it it indicates a result.
Speaker: Well, we have -- a couple of voting cases a restriction has been sustained over that kind of a test and I suppose the origin in race cases was in the Japanese relocation case which was sustained.
William J. Brennan, Jr.: Of course they did not involve the Equal Protection Clause.
John W. Reid, II: That involved the Fifth Amendment.
William J. Brennan, Jr.: The Fifth Amendment and involved Federal action long before it had been perceived that the Due Process Clause of the Fifth Amendment contained some Equal Protection ingredient.
John Paul Stevens: Mr. Reid, can I return for a minute to this case. I take it there are alternate remedies that would be permissible if you prevail; either they could require proof of dependency from survivors of both sexes or eliminate proof of dependency. Is that right?
John W. Reid, II: That is correct.
John Paul Stevens: And if they require proof of dependency from both sexes that wouldn't cause any harm to male applicants but it would cause a lot of female applicants to lose the benefits.
John W. Reid, II: That is correct, Your Honor.
John Paul Stevens: And if it took the converse it would give a lot of money to male applicants and take nothing away from female applicants.
John W. Reid, II: That is correct, Your Honor.
John Paul Stevens: So either way male applicants as a class will benefit, won't they, if you prevail?
John W. Reid, II: If we prevail, yes; that is correct. I would like to reserve the remainder of my time for rebuttal.
Warren E. Burger: Very well, Mr. Reid. Mr. Kleinschmidt.
Ralph C. Kleinschmidt: Mr. Chief Justice, and may it please the Court: I will try not to restate anything that appears in the briefs but I would like to make some points that I don't think have been emphasized by the briefs. We are talking in this case about a Workmen's Compensation law, I think possibly the first time that this Court has had an industrial accident law in the context with gender discrimination. Most of the cases in this area have arisen out of Social Security laws or Federal welfare laws of one type or another and they have not arisen out of Workmen's Compensation laws. There are differences between these laws and I think the difference may well influence the case. So I would like to go back and talk about the history and the origin and the philosophy that underlies a Workmen's Compensation law. As you recall, these laws came into being in the early part of the century in Missouri in the 1920's and they came into being because of a distinct need which had arisen in an industrialized society. People were getting hurt in the factories. Unfortunately the remedy available to them, the common law remedy of master servant was not sufficient at the time. Statistically about 30 percent of these people received any recovery -- recoveries were received. It was an uneven handling of it, many received nothing at all because the common law defenses of master servant contributory negligence fellow servant rule barred claims from being made and the result created not only a terrible problem for the injured working person but for society itself because these people had to -- became wards or tended to become wards of society when people were hurt or killed in industry. It was in response to that need that the Workmen's Compensation concept was worked out. The objective of the compensation concept was to pass on to industry, which is the area where people get hurt, the cost of these injuries. The notion was to get certain benefits and with prompt payment into the hands of the injured working people. The method that was used to achieve this result was a bargain method. That is important. All of these rights and duties and liabilities that appear in Workmen's Compensation laws and certainly in the laws of Missouri are bargained rights and liabilities. That is exactly how the law was put together there. The trade associations, labor unions representing the working people on the one hand, various management organizations representing management through the public forum of the legislature, and everybody had to give up something to get something. The result in Missouri and elsewhere was a law that provided a brand new remedy wholly substitutional, an exclusive remedy before an administrative tribunal. The benefits the law granted were limited to economic loss. This was the only thing to be paid under Workmen's Compensation and everything else was given up. One of the great things the employees had to give up in order to obtain liability without fault and reparation for economic loss was the opportunity to obtain the general damages, damages for anything other than economic loss. But the whole Workmen's Compensation concept is based upon reparation of economic loss to the employee or to the employee's dependents. The workmen's Compensation scheme measures this economic loss by medical payments on the one hand, weekly benefits for temporary disabilities, amounts for permanent disabilities rated by weeks and in cases of death the formula used is based upon dependency. The point of all of this is that in this kind of a law which incidentally the employee contributes nothing to it, specifically by statute is now allowed to in Missouri. Of course I suppose you would call it a fringe benefit, it is a cost but the cost of this is borne by the employer. The net effect of all of this is that the purpose of the Workmen's Compensation law is to pay for economic loss only, nothing else. And so if a death occurs, as in this unfortunate case here where there is no economic loss and it stipulated there is no economic loss, this law was never meant to provide Mr. Wengler --
Thurgood Marshall: If a man dies.
Ralph C. Kleinschmidt: Beg pardon?
Thurgood Marshall: If a man dies you don't have to show it, do you; you don't have to show economic loss, do you?
Ralph C. Kleinschmidt: No. That is a conclusive presumption that brings us here today.
Thurgood Marshall: Well, I mean suppose the man is making $5,000 a year and his wife is making $50,000, if he dies she collects.
Ralph C. Kleinschmidt: There is no question about that.
John Paul Stevens: Mr. Kleinschmidt, I didn't understand that there was a stipulation that there was no economic loss. I thought there was a stipulation that the husband was not dependent on the wife.
Ralph C. Kleinschmidt: I equated the two because under the scheme --
John Paul Stevens: They are not equivalent, are they?
Ralph C. Kleinschmidt: -- under the scheme in Missouri statute they are.
John Paul Stevens: Well, let us assume we did not have a Missouri statute. Would it not be true that if you have two working spouses and both contributing to the household and you lose the income of one that there is an economic loss for the pair?
Ralph C. Kleinschmidt: Well economic losses would be the final balance sheet. Some expenses are going to be there either, so the balance sheet might end up equally. From an economic loss standpoint, a pure balance sheet standpoint, no there might not be any economic loss.
John Paul Stevens: Do you think if a family is supported by both parents and one of them dies and that income is taken away from the family there is no economic loss suffered by the family, as a matter of tort law or any other --
Ralph C. Kleinschmidt: Certainly if we are going to extend this to a family I --
John Paul Stevens: Well, just the two, do you think -- you don't think there is economic loss? You have mortgage payments to meet and all the rest and you depended on both incomes to meet them.
Ralph C. Kleinschmidt: I think maybe this can be in the mind of the beholder and as I behold it, I visualize two people in a family making $5,000 apiece, each of them have to spend $5,000 to live. One dies --
John Paul Stevens: Well, in any event the stipulation is not that there is no economic loss. The stipulation is there is no dependency.
Ralph C. Kleinschmidt: You are certainly correct; yes, sir.
Warren E. Burger: This statute creates a conclusive presumption --
Ralph C. Kleinschmidt: Yes, sir.
Warren E. Burger: -- so it precludes any inquiry under the economic realities.
Ralph C. Kleinschmidt: Yes, sir; it does indeed. Yet we feel comfortable with this statute in light of the decisional law or this Court, most of which has been made within the last decade. The cases we rely on primarily are Kahn v. Shevin, Schlesinger v. Ballard and Califano v. Webster. In this series of cases and in others every member of this Court has upon occasion agreed that there are some gender classifications which are constitutionally permissible. There has been agreement among all the members of the Court as to what the requirements are for that constitutional basis. It has been agreed by the members of the Court as I understand it unanimously, that where there is a proper governmental purpose and the law is substantially related to the achievement of that purpose, it is constitutionally permissible. And this Court has agreed that a proper governmental purpose is the reduction of past disparity to women caused by longstanding discrimination. All of those things, all of those things fit into the Missouri scheme of Workmen's Compensation.
Byron R. White: Why does it fit in to treat women in one way and men in another?
Ralph C. Kleinschmidt: Well, by designation if you are going to justify a gender classification on the basis of a legitimate governmental purpose in reducing past disparity, to that extent that you are reducing past disparity, then you are not treating by definition females equal with the males. But there is a permissible reason for --
Byron R. White: I know but you are doing it by classification. Why don't you have individual determinations? If you had individual determinations every person who was entitled to it would be recognized, every person who was actually dependent.
Ralph C. Kleinschmidt: Another recognized governmental purpose is administrative convenience. By administrative convenience, I am not talking about the saving of court personnel time but I am talking about the certain of determination of the promptness of payment of benefits. And if we had individual determinations, we would lose that. And that is an important factor, Your Honor. Anybody that has ever walked into an Industrial Accident Board anywhere in this country knows of the redtape and what occurs in the -- you have got to have a certainty of the payment of benefits and promptness of that payment. This is an administrative convenience. It justifies in part along with the reduction of past disparity the distinction of genders in this case.
Byron R. White: Well, if you give one remedy rather than the other, if you didn't require proof of dependency for either sex, that would be administratively more efficient than the present scheme, wouldn't it?
Ralph C. Kleinschmidt: Yes, but as the Missouri Supreme Court pointed out there is a delicate balance in these Acts. It has cost money. The District of Columbia, I see in your local press this morning, is facing that right now. Nobody was intended to get anything under the Missouri scheme except for economic loss. If Mr. Wengler in this case and all others situate similarly were to be paid, a large cost comes into these things. Each death case today takes a reserve in six figures now. That is from an insurance company standpoint. And there is a lot of money involved on that account for a purpose that was never the legislative purpose. If they would change the Act and, incidentally, the fact is there is a brand new Workmen's Compensation law pending today in the legislature in Missouri and if passed this problem would not arise. I don't know whether it is going to pass or not but it changes a lot of things in the law. These things go on. I am just saying that under this particular law certainly it was permissible --
Thurgood Marshall: Is increased cost to the employer something we can take into consideration?
Ralph C. Kleinschmidt: Beg pardon?
Thurgood Marshall: Is the increased cost to the employer something we can take into consideration, the fact that you would have to pay out more money if the statute is changed?
Ralph C. Kleinschmidt: Well, I was making it in response to a question here. Of course I think no, of course not; technically from a constitutionally standpoint, no.
Thurgood Marshall: Well, then I misunderstood you. I am sorry.
Ralph C. Kleinschmidt: No. I was simply trying to answer that question, Your Honor.
Byron R. White: Just as a matter of curiosity Mr. Kleinschmidt, under the new bill will they require proof of dependency in all cases or in no cases?
Ralph C. Kleinschmidt: Under the new bill as I understand it -- I read it briefly on the airplane coming up -- apparently there is going to be a conclusive presumption for both genders.
Byron R. White: I see. Yes, a presumption of dependency.
Ralph C. Kleinschmidt: Yes, yes. There has been no attempt to make an argument in this case that I have heard that the classification used in this case was not a proper governmental purpose and was not substantially related to the achievement of the purpose. That is the test. That is the present law that this Court has announced. The thing that bothers -- that is worrisome is that it is obvious that to reverse the Missouri decision it seems to me this Court will have to strictly scrutinize the law, which is a method of saying - I certainly agree that when you strictly scrutinize you are invalidating the law. Certainly that is what amicus the American Civil Liberties Union wants. They want this Court to issue that clarion call that all sex discrimination cases shall be inherently suspicious and in effect make absolute and inflexible standards out of these gender classifications.
Byron R. White: What standard do you think Boren suggest?
Ralph C. Kleinschmidt: I am not prepared to respond.
Byron R. White: Do you think there is some standard between -- in our cases between just rationality and strict scrutiny? It is hard to say, I --
Ralph C. Kleinschmidt: It is very difficult to say, Your Honor, it is in the mind of the beholder, really. The only thing that we in the field out there get is that we do talk about classifications which are shorthand really sometimes meaning what the result will be. The only thing I can be certain of is that I know -- I know that this Court has accepted some classification. I know that some classifications make common sense. I believe in this classification, it doesn't harm anybody, this man has not been harmed and he sustains no loss. Yet by putting this into the Act these widows are benefited. And the class of widows that are benefited I think --
Thurgood Marshall: Is there anything in the record to show that there was never a nickel put --
Ralph C. Kleinschmidt: It stipulated that there was just absolutely no dependency.
Thurgood Marshall: Yes.
Ralph C. Kleinschmidt: And that is the economic loss rule in Missouri.
Thurgood Marshall: And that is the harm.
Ralph C. Kleinschmidt: I haven't been talking in terms of harm, Your Honor. We could talk about that, of course we could say there is harm; you lose a wife, my golly, how could we say otherwise. I am talking about the economic loss as measured by the Missouri scheme of --
Thurgood Marshall: I know you are talking about economic loss. You are talking about what it cost the Government, I know that, I recognize that.
Ralph C. Kleinschmidt: Well, in any event it seems to us that if this Court were to reverse the Missouri court in this case it would be sending out a signal itself that it has been prepared to move, to sound this clarion call that ACLU looks for. And I think it is terribly unwise to do that at a time when the Equal Rights Amendment is pending in the legislatures of this land. This Court is going to be faced so soon inextricably with the questions of draft, registration, golly knows what else. It seems to me that the thing to do is to stand on this case and affirm this judgment right now and take up the cases of true importance as they come. That is my argument, Your Honors.
Warren E. Burger: Do you have anything further, Mr. Reid?
John W. Reid, II: Yes. Just a couple of moments for rebuttal, Your Honor. The statute that is pending before the Missouri legislature is a result of this case and a result of the editorial that was written by the two metropolitan papers in St. Louis and Kansas City. I would respond to that. And Mr. Kleinschmidt is correct that under that proposal that both spouses would be presumed to be dependent. And I would state in closing that irregardless of whether the substantial relationship test or the strict scrutiny test is used that under the decisions in the Seventies of this Court Mr. Wengler should prevail. I thank you.
Warren E. Burger: Thank you, gentlemen. The case is submitted.