Earl Warren: Number 495, Communist Party, U.S.A., et al., Petitioners, versus Martin P. Catherwood, as Industrial Commissioner. Mr. Abt.
John J. Abt: Thank you, Mr. Chief Justice. May it please the Court. This case is here on certiorari to review a judgment of the Court of Appeals of New York sustaining the action of New York's Industrial Commissioner in determining that the petitioners are not subject to taxation under New York's Unemployment Insurance Law and in refusing to accept further tax payments from them. In reaching its decision, the court below passed on the interpretation and constitutionality of Section 3 of the Communist Control Act and the validity of the respondent's action under the Due Process and Equal Protection Clauses of the Fourteenth Amendment. The case presents the paradox of two taxpayers, the petitioners here, who are resisting a tax exemption which the tax collector, the respondent here, insists on thrusting upon them. I think therefore at the outset I should perhaps indicate why it is that the position of the petitioners is far from quixotic. The action of the respondent injures them in two different ways. In the first place, it triples their aggregate -- aggregate liability for unemployment insurance taxes under the system of interrelated state and federal unemployment insurance taxation. This is so, because the state exemption relieves them of taxation at the rate of only seven tenths of 1% of their payrolls. While at the same time, it deprives them of a credit under the federal tax law and increases their federal tax tempo from three tenths of 1% to 3% of their payroll. The respondent does not dispute that his action had this consequence. And I spell out the details of the operation of the interrelated tax laws in -- in my brief at pages 6 and 8 -- 6 to 8. In the second place, the respondent's action handicaps petitioner in -- petitioners in securing and retaining employees by making it doubtful at this whether their employees are covered by unemployment insurance. The facts are that for 20 years following the enactment of New York's Unemployment Insurance Law, the petitioners were taxed under it and their employees enjoyed the coverage of it. In January 1957, the Attorney General of New York, responding to an inquiry from the Industrial Commissioner, issued an opinion, which appears as Appendix B to my brief. The opinion ruled that petitioners are not taxable under and that their employees are not covered by the Unemployment Insurance Law.
John M. Harlan II: Had there been any new state legislation that --
John J. Abt: None whatsoever --
John M. Harlan II: -- vacated that opinion?
John J. Abt: -- Justice Harlan. None at all. And that -- and I'll -- I'll point out at the moment. The Attorney General did not rely on any provision of the Unemployment Insurance Law itself. The ground for his conclusion was that petitioners are engaged in a criminal conspiracy to overthrow the Government of the United States and the State of New York by force and violence. And therefore, in the words of the Attorney General, and I quote them, "It would be an anomaly in law not to say a moral and against public policy for the Communist Party and its employees to enjoy the advantages and benefits of this public insurance program." Those were the sole grounds on which the Attorney General rested his opinion. Acting pursuant to this opinion, the respondent, the Industrial Commissioner denied the application of one Albertson for insurance benefits based upon his employment by the Communist Party of the United States, one of the petitioners whom I refer to as the National Party. The Industrial Commissioner also notified both the National and the State Party, both of the petitioners here, that he had suspended their registrations as employers liable to unemployment insurance contributions and that they should make no further contributions. I should explain at this point that the term "contribution" is used in the state law to denote the tax which the law levies on employers' unaccountable wages which the employers pay to their employees. And registration is simply an administrative device which the respondent, the Industrial Commissioner uses to identify employers who are liable for contributions for collection and accounting purposes. Both Albertson, the claimant for unemployment insurance, and the petitioner appeal the rulings of the Industrial Commissioner to an Unemployment Insurance Referee who consolidated the three cases for hearing. The respondent offered no evidence of the hearing but rested solely on the opinion of the Attorney General. The only evidence with respect to the nature of petitioners' activities was a testimony of Albertson that his duty is consisted in studying trends in the labor movement and analyzing proposed labor legislation. The Referee sustained the determinations of the Industrial Commissioner not on the Attorney General's criminal conspiracy theory but under Section 3 of the Communist Control Act. Section 3 provides "that whatever rights, privileges and immunities which have heretofore been granted to said party," that is the Communist Party, "or any subsidiary organization by reason of the laws of United States or any political subdivision thereof are hereby terminated." The Referee held that this Section terminated the rights of petitioners to have employees and therefore extinguish their liability to taxation as employers. The Unemployment Insurance Appeal Board affirmed, the appellate division refers unanimously holding that Section 3 did not terminate petitioners' liability to taxation as employers or the right of their employees to unemployment insurance coverage. A divided Court of Appeals reversed the judgment of the appellate division as to the petitioners. Let's say holding the petitioners who are not liable to taxation under the Unemployment Insurance Law. However, it affirmed the decision that Albertson was entitled to insurance coverage based on his employment by the Communist Party. The Court handed down three separate opinions, two judges joining in each. The seventh member of the Court did not participate because he had been the presiding justice -- presiding judge rather in the appellate division when the case was heard there. The prevailing opinion which was -- which was written by Chief Justice Desmond construes Section 3 of the Communist Control Act as terminating petitioners' status as employers under the state law for -- as Judge Desmond said, "For whatever value that status may have". The opinion holds that Section 3 as so construed as constitution -- constitutional. As to Albertson, however, Judge Desmond ruled that since his employment by the Communist Party antedated the action of the Industrial Commissioner, although it was subsequent to the enactment of the Communist Control Act, it would be unreasonably punitive to deny him his insurance. The second opinion written by Judge Van Voorhis agrees with the prevailing opinion as to the construction and constitutionality of Section 3 of the Communist Control Act. It holds however that since Section 3 deprived petitioners of the capacity to be employers and to enter into an employer-employee relationship, Albertson wasn't entitled to this insurance because he wasn't an employee. The dissenting opinion by Judge Fuld holds that Section 3 did not terminate petitioners' liability to taxation under the state law or the right of their employees to unemployment insurance coverage. Now, in as much as the judgment of the state court turned on the construction of a federal statute, I think that perhaps it was appropriate to start my discussion with an examination of the construction which has been given to Section 3 by the federal agencies having primary responsibility for the interpretation and enforcement of this federal statute. When President Eisenhower signed the Communist Control Act in August of 1954, he stated that its full impact would require further careful study. It seems apparent that such study, or any case -- apparently not such study has resulted in no action of any kind by the federal authorities to apply Section 3's fiat deprivation of rights, privileges and immunities. No action of any kind has been taken by the Federal Government. Furthermore, this has been inherent from the inception of this proceeding that the Bureau of Internal Revenue rejects the construction given to Section 3 by the respondent here and by the Court of Appeals of New York. For as the evidence showed and as both of the state courts found, the Bureau has continued to tax the petitioner as employers under the Federal Unemployment Insurance -- Unemployment Tax Act. That -- this is the position not only the Bureau of Internal Revenue, but also the Department of Justice is established by the letter from the Solicitor General to the Clerk of this Court declining to intervene or file an amicus brief in this proceeding. The letter states, and I quote it, "There is no need to file a brief describing the practice of federal agencies in interpreting the statute for this information is already set forth in the opinion of Judge Fuld in the Court of Appeals." Judge Fuld, of course, wrote the dissenting opinion. And the Solicitor General's reference as to a passage from that opinion which first restates the respondent's contention that Section 3 terminated the petitioners' status as employers and their liability for unemployment insurance, and then continues as follows, and I quote just few sentences from Judge Fuld's opinion, "This contention, referring to the respondent's contention, is unreasonable. In the first place, it is significant that the federal authorities, admittedly aware of the Industrial Commissioner's position, have taken one diametrically opposed and continued to recognize the Communist Party as an employer subject to the Federal Act."
William O. Douglas: Has there been any change in the -- this opinion was handed down in -- about a year.
John J. Abt: About a year ago, Mr. Justice Douglas.
William O. Douglas: Had there been any change in the federal rulings as to the status of the Party under the Federal Act?
John J. Abt: None at all.
William O. Douglas: I don't mean the Communist Control Act, I mean the Revenue Act, the --
John J. Abt: Revenue Act, no, sir. And -- and the Solicitor General's letter which was written to the Court on the April 10th, a few weeks ago, states flatly that the federal -- the interpretation of the Act by the federal agencies is, that is, the Communist Control Act, is that it has no effect on -- on their taxability under the Federal Tax Act. The -- the -- that -- that follows from the reference of Judge Fuld's opinion, which I have just read to the Court. The correctness of the federal interpretation of Section 3 as well as what Judge Fuld characterized as the unreasonableness of the respondent's position will appear from an examination of the text of the statute of Section 3. First, however, I think it is an order to give the Court a very brief résumé of the legislative history of this extraordinary piece of legislation. The Communist Control Act was passed in August 1954 during the closing days of the 83rd Congress just before Congress adjourned for the congressional elections and national elections of that year. It originated in Senator Butler's bill to amend the Internal Security Act by adding provisions with reference to so-called "Communist-infiltrated organizations". In the course of the Senate debate, Senator Humphrey offered an amendment in the form of an addition to the bill which was adopted. The Court will perhaps recall from the discussion in the Noto and Scales cases in this term that the heart of the Humphrey Amendment appeared as Section 3 of the Senate Bill and made membership in the Communist Party a crime. Now, the House rejected Section 3 of the Senate Bill when it was advised that that -- the Section in that form would jeopardize the registration provisions of the Internal Security Act. It substituted for the Senate version of Section 3, the text of Section 3, which now appears in the Act, the deprivation of rights, privileges and immunities. There was no Committee consideration of this Section either in the House or in the Senate. Representative Celler, who, at that time, was the senior minority member of the House Judiciary Committee, described the situation in the House in the following words, and I quote, "The Judiciary Committee never saw the instant bill. It was cropped up over the weekend. It was cut and recut, furbished and refurbished, shuffled and reshuffled. It is indeed a hodgepodge. Now, we are in a way buying a (Inaudible). What does this field really entails? Nobody really knows." A reading of the debates fully confirms Representative Celler's statement through a number of congressmen asserted their personal opinions as to what Section 3 meant. These comments, of course, would be of no weight even if they were consistent with each other. But in this instance, they were mutually contradictory consisting of Senator Morse observed, and I quote him, "of almost every possible conflicting point of view which human minds can imagine or can cut". But the legislative history does therefore and about all that it does is to document Senator, chief author's comment, and I quote him, "That we are giving a clear and impressive picture of how legislation should not be written." Nevertheless, one fact emerges from the text of Section 3 and from the legislative history, certainly, whatever else Congress may have intended by that Section's deprivation of rights, it certainly did not intend to relieve the Communist Party of its liabilities and least of all of its liabilities of taxation. Two members of the Court of Appeals and a unanimous appellate division so held. Now, they are holding as reinforced, I think, by the cases that respondent cites in his brief, the familiar cases to the effect that an activity otherwise taxable is not relieved from the taxation because the activity is unlawful. For -- under these decisions, petitioner would not have been exempt from employment taxes on the wages they pay even if Section 3 had done which it -- what it doesn't and the terms prohibited the petitioners from having employees. The respondent argues nevertheless that the obligation to pay employment taxes arises only from the exercise of a legal right, the legal right to be an employer. His contention is that Section 3 terminated this legal right of petitioners and therefore extinguished their common liability to taxation. This contention rests first of all on the proposition that the unemployment insurance tax is a tax on the exercise of a legal right to employ others and not simply on the existence of a de facto employer-employee relationship. It's unnecessary to -- I think to discuss this rather metaphysical distinction for it is clear that Section 3 does not terminate petitioners' legal right to be employers. This is two or three distinct reasons. First, Section 3 does not purport to terminate all of the petitioners' rights but only those, and I quote Section 3, "which have heretofore been granted by reason of the laws of the United States or any political subdivision thereof". Now, the right of a natural person to employ others is not a right granted by Government. On the contrary, it is a natural or inherent right, one of the inalienable rights with which, as a declaration of -- of independents declares, all men are endowed by their creator. And as the declaration also teaches, such rights are not granted by Government. On the contrary, Governments were instituted among men to secure such rights. Consequently, if petitioners were natural persons, their right to be employers would not be affected by Section 3 which terminates only rights granted by Government. Now, the fact is that petitioners are unincorporated associations. And in New York, an unincorporated association is not an entity like a corporation which owes its franchise to the State. As Chief Judge Desmond does squarely held in another and earlier case, an unincorporated association, and I quote him, "is not an artificial person and has no existence independent of its members". Accordingly, the right that is involved here is a right to petitioners' members collectively to employ others. That would be true in the case of a partnership. That right is as much of an inherent right as a right of a single individual to be an employer. And hence, it's not a right which Section 3 purports to terminate. In the second place --
Hugo L. Black: Are you arguing that the Government is without power to do a way with the employment relationship if it wants to do so?
John J. Abt: I'm not arguing the question of constitutional power here at all, Mr. Justice Black. And of course --
Hugo L. Black: Well, I thought you --
John J. Abt: -- the Government is subject to due process.
Hugo L. Black: -- I thought you're going on the basis of some kind of natural law on that theory.
John J. Abt: I'm -- I'm talking about the question of statutory construction not -- not about the constitutional question. Of course, Congress is subject to due process, other constitutional provisions has a right to regulate a natural right just as it has the right to -- to regulate right granted by the Government. That -- that's not the issue at this point. Here, I'm talking --
Hugo L. Black: I didn't think it --
John J. Abt: -- about what Congress did and not what Congress could do.
Hugo L. Black: I didn't think it was that's why I am asking you the question.
John J. Abt: Pardon.
Hugo L. Black: I didn't think it was, and that's why --
John J. Abt: Right.
Hugo L. Black: -- I didn't quite understand your argument.
John J. Abt: Well, my argument is that -- that Congress was not -- not attempting here to -- to affect a right, a so-called natural or inherent right because the language of Section 3 refers not to all rights of the Communist Party but only to those rights which are granted to it by the Government of the United States serve any political subdivision. And the right to be an employer is not a right which was granted to petitioners by Government. It's the right they enjoyed without any statutory grant or enjoy without any statutory grant.
Hugo L. Black: But that again, it sounds to me like you're saying that the Government is without power to regulate --
John J. Abt: No, sir.
Hugo L. Black: -- employment.
William O. Douglas: You have to change.
John J. Abt: I'm not talking about power -- their power to regulate. I'm talking about what Congress tried to do --
Hugo L. Black: You -- you say --
John J. Abt: -- or intended to do under -- in this statute.
Hugo L. Black: You say it's an inherent power, I gather, that the Government has nothing to do with.
John J. Abt: The Government has -- the Government doesn't grant it. A man enjoys the right to employ others quite apart from any grant of Government. It's a right that he enjoys by virtue of the fact that he is a human being, he's a man.
Charles E. Whittaker: Do we have here, Mr. Abt, a question of the right to employ? I know you've argued that.
John J. Abt: Yes, sir.
Charles E. Whittaker: But may I ask you, isn't it true that neither the Federal Act nor the New York Unemployment Compensation Act covers all employers? Some may be and are excluded, isn't --
John J. Abt: Oh, yes.
Charles E. Whittaker: -- that true?
John J. Abt: Surely.
Charles E. Whittaker: Oh, I -- now, then, isn't the question whether there may be a proper classification to exclude the Communist Party from the status of an employer?
John J. Abt: There is no contention here, Mr. Justice Whittaker, that any provision either of the New York Act or of the Federal Tax Act as such excludes the Communist Party as an employer as it excludes farmers and --
Charles E. Whittaker: No --
John J. Abt: -- and employers and so forth.
Charles E. Whittaker: No, but it is argued that that may be the effect of Section 3, isn't it?
John J. Abt: The -- the State argues that that was the effect of Section 3, and on one of my arguments that that is not the effect of Section 3 is that Section 3 purports the deal only with such rights as granted to the Communist Party by Government. And in my view, the right to employ persons is not a right that you or I or anyone else enjoys by virtue of a grant from the Government. We enjoy it because, as a declaration of independent says, it's one of the inalienable rights.
Charles E. Whittaker: For having that right, it would be within the sovereign's power if the classification was reasonable to say that particular employers were excluded from the status.
John J. Abt: Surely. I'm not -- I'm -- I'm not -- in trying to explain to Mr. Justice Black, I'm not talking about what Congress has the power to do that, I'm only talking about what Congress actually did in the question of statutory interpretation. That's my -- my only point, sir.
John M. Harlan II: Could I ask you one question?
John J. Abt: Surely.
John M. Harlan II: As I understand the Court of Appeals' opinion rested wholly on their interpretation of the Communist Control Act, isn't that right?
John J. Abt: Well, I'm not sure. I think there seems to be a Fourteenth Amendment question here, Mr. Justice Harlan. I don't -- I don't know whether your question to me is address to that proposition.
John M. Harlan II: No. I was trying to get to the basis of their holding.
John J. Abt: Well --
John M. Harlan II: There was no -- there was no provision of law, New York law --
John J. Abt: No provision of New York.
John M. Harlan II: -- independently as the Communist Control Act, it would've -- there was the basis of the Court of Appeals' decision.
John J. Abt: There are only two possible bases for the Court of Appeals' decision. The one that's emphasized most, and it's perfectly explicit, is Section 3 of the Communist Control Act. Now, it maybe, and there are some indications both in the opinion and certainly in their remittitur that the Court was saying also that quite a part from Section 3 of the Communist Control Act, we think that this was proper state action but somehow or another, the Attorney General had the power to -- to render the opinion that he did and the Industrial Commissioner had the power to -- to do what he did without any authorization, any specific authorization by the state legislature. Whether -- whether the Court really meant that or not, I don't know, but that -- that maybe a possible interpretation of their opinion. And that's how the Fourteenth Amendment question quips into the case. Now, in the second place, and I'm again -- I'm still addressing myself to the -- the question of statutory interpretation as to whether Section 3 terminates the right of the Communist Party to be an employer. And my second point in that connection is that even if the right of the petitioners here to be employers as a right granted by Government rather than a natural or inherent right, it's a right granted by New York and not by the United States and is, therefore, not affected by Section 3. Section 3 purports to terminate all rights granted by petitioners, and I quote, "by reason of the laws of the Unites States or any political subdivision thereof". As my brief shows, the States are not political subdivisions of the United States within any accepted meaning of that term. In addition, both the Communist Control Act and elsewhere, the Congress has shown that understands the distinction between a political subdivision and the State and doesn't use one term when it means the other. Additionally, a ruling that Section 3 applies to all rights grant of petitioners by state law is to be avoided because it would give rise to a great constitutional question. Congress, of course, may not regulate much less prohibited the exercise of a right which is unrelated to the execution of one of its granted powers. For example, Congress would seem clearly to lack the competence to prohibit the petitioners from implying a man to do the job that Albertson, the claimant, had been performing in this case as to say to study trends in the labor movement and analyze proposed labor legislation, not be within the competence of Congress to prohibit the employment of a man for that purpose. It appears, therefore, that constitutional considerations applicable to employment like this militate against any interpretation of Section 3 making it applicable to all rights granted under state laws.
Earl Warren: Mr. Abt, what political subdivisions do you think Congress had in mind when it used that language?
John J. Abt: It would be hard to tell what Congress had in mind about any provision of this Act, Mr. Chief Justice. But I suppose the -- the territories and possessions which are, in fact, political subdivisions. But surely, a State is not a political subdivision. I think the Attorney General of New York is, if I may say so, a little insensitive to this question of nomenclature. I can hardly imagine the Attorney General of Virginia, let us say, in getting before this Court and conceding that his State was nothing but a political subdivision of the United States.
Earl Warren: Now, but I was wondering if -- if there were any other political entities other than the insular possessions in the territories that you --
John J. Abt: I don't think so.
Earl Warren: -- could apply it to.
John J. Abt: Only -- they are the only ones that the Court need that I can't think of.
Speaker: (Inaudible)
John J. Abt: -- in the District of Columbia, of course.
Felix Frankfurter: Mr. Abt, if I may refer to the question that Justice Harlan put.
John J. Abt: Yes, sir.
Felix Frankfurter: If -- if or take your example, if the Attorney General of Virginia, as a matter of state construction-- as a matter of construction of a state statute with regard to Virginia as a subdivision of United States, there would be nothing in the Constitution of the United States so far. So that --
John J. Abt: In --
Felix Frankfurter: -- if New York has its own policy, and the Court of Appeals has its own policy, if you will flagrantly misconstrued Section 3 and made it state law, that'd be a different question, wouldn't it?
John J. Abt: But the Court of Appeals hasn't done it.
Felix Frankfurter: I'm not saying it did, as it --
John J. Abt: I might -- I'm not -- I'm not quite sure as to how it could mechanically, Mr. Justice Frankfurter.
Felix Frankfurter: Well, because --
John J. Abt: -- but it didn't hear. Certainly it didn't hear.
Felix Frankfurter: Well, the state courts have construed their state laws in conformity with federal construction of federal tax laws although they're not bound to it.
John J. Abt: New York -- the New York Court of Appeals did just the other way around.
Felix Frankfurter: Well, I'm not -- I'm-- I'm putting a hypothetical --
John J. Abt: Alright.
Felix Frankfurter: -- case and not this case.
John J. Abt: Yes. Alright. Now, on the third place, I think it's evident from the tax of the Communist Control Act as a whole that Congress did not intend to terminate the right of the Communist Party to be an employer. But on the contrary, contemplated that the Party would continue to have and to act through employees notwithstanding Section 3. I discussed the relevant provisions of the Communist Control Act in my brief and shan't repeat the analysis here. Thus, for the three reasons I've indicated, the tax of the Communist Control Act refused the respondent's interpretation of Section 3 and supports that of the Bureau of Internal Revenue and the Department of Justice. Moreover, Congress acquiesced in the federal -- in the federal interpretation in 1956 when it enacted comprehensive amendments to the Social Security Act and the Insurance Contributions Act. Before discussing these amendments, I should say that the Bureau of Internal Revenue has continued to tax the petitioners, the Communist Parties, as employers under the Insurance Contributions Act as well as under the Unemployment Tax Act. Furthermore, subsequent to the enactment of the Communist Control Act, and prior to the passage of these 1956 Social Security Act amendments, a Social Security administration referee ruled that the -- that employees of the petitioners are entitled to old-age benefits based on their employment by the petitioners. Now, if Congress had thought that the Bureau and the Referee were wrong and that Section 3 had terminated the petitioners' liability to social security taxation and the right of their employees to coverage, it could have rectified the error when it enacted the comprehensive 1956 amendments to the Social Security Act. Instead, Congress adopted amendments which are wholly consistent with the federal interpretation of Section 3 of the Communist Control Act, that is to say that that Section doesn't affect petitioners' liability to employment taxes, for what the amendments do is to exclude from social security coverage and taxations services in the employee of an organization subsequent to the date on which it is finally ordered to register under the Internal Security Act. Thus, as far as the social security amendments are concerned, the petitioner and its employees are not presently accepted from coverage either tax, that is, petitioners from taxation and their employees from old-age benefits, and they will not be accepted from coverage unless the Communist Party of the United States is finally ordered to register under the Internal Security Act. That seems pretty obvious that Congress would have not -- would not have adopted this amendment unless an agreement with the interpretation given Section 3 by the federal agencies, it believed that that Section have not affected the petitioners' liability to taxation as employers or the right of their employees to social insurance. So much for the question of the interpretation of Section 3. Of course, should the Court reject the federal interpretation of the Section and the arguments that I advance would be obliged to pay something to the underlying constitutional questions. I discussed these in my brief, and I don't propose to dwell on them now except to outline them very briefly. On its face and as applied, Section 3 violates the Constitution in a number of ways. First, it denies the petitioners' substantive due process in violation of the Fifth Amendment. The evil with which the Communist Control Act purports the deal, as stated in Section 2, is conduct of the Communist Party said to endanger the national security. There's a long recital of these dangers in Section 2. But Section 3 is not restricted to measures for the prohibition or control of such conduct. On its face and as construed below, it terminates the right of the Party to engage through employees or otherwise in an entirely peaceable and innocent activities. Hence, Section 3 violates the due process principle, which -- as Mr. Justice Frankfurter wants to put it, prohibits legislation from throwing a baby out of the bath or burning down the house to roast the pig. Section 3 also denies petitioners' procedural due process because it deprives them of valuable rights and privileges on the charge made in Section 2 that they are criminal conspirators without according them a hearing in the truth of the charge. Next, Section 3 is both a bill of attainder and an ex post facto law. The controlling question here is whether the Section imposes punishment. Section 2 of the Act finds the Communist Party by name to be guilty of seditious conspiracy and declares that it should be outlawed. The deprivation of rights which Section 3 decrees is absolute and permanent. No escape from it is possible. Impeccable future conduct by the Party will not restore the rights which Section 3 denies. Furthermore, since Section 3 scripts the petitioners of all of their rights indiscriminately, it is clear that the legislation was aimed at them and not at any particular conduct or activity. Finally, a glance at the House and Senate debates is enough to dispel any possible doubt that the purpose of the legislation was punitive. Indeed, Section 3 has every one of the indicia of punishment to which this Court has adverted in the line of cases from Cummings against Missouri to Flemming versus Nestor of the last term. The final constitutional infirmity of Section 3 I've already indicated as applied below, it is unconstitutional because it terminates rights not within the competence of Congress to affect. In conclusion, I should like to say just a few more words on the Fourteenth Amendment question which works in the case in which I've discussed briefly in answer to a question from Mr. Justice Harlan. It's in the case because there are several vague indications in the prevailing opinion below that the action of the Industrial Commissioner could be sustained, I think this is what the opinion says, I'm not sure, could be sustained as state action without regard to the Communist Control Act.
John M. Harlan II: Where -- where do you find that, Mr. Abt?
John J. Abt: Well, page 38, Mr. Justice Harlan. There's one indication. The Court says, the appellate division recognized in its opinion that the State might, by appropriate steps, prevent the Communist Parties from engaging in any activity or existence.We think that the State of New York has already done so. Now, I don't -- they're not -- they don't tell you very clearly as to what the State of New York -- how the State of New York had done so. All I say is, the Attorney General, the highest law officer, argues to us in this appeal that the unemployment insurance officers acted validly in denying for the recognition of the Communist Parties. Then, in addition to that statement, the facts that the Court distinguishes or -- or says rather that Albertson is entitled of this insurance because his employment occurred before the action taken by the Industrial Commissioner would seem to indicate that the Court was relying on something that the Industrial Commissioner did rather merely -- and merely on Section 3. And in any event, the Court in its remittitur states that it had decided that respondent's action didn't violate the Fourteenth Amendment. So, apparently, somehow or another it considered this as a matter of state action. Now, my brief shows that if -- if the respondent's action is viewed as state action, its -- his action must rest on the criminal conspiracy theory that was advanced by the Attorney General on this opinion, that is to the Communist Party as a criminal conspiracy and therefore behave more against public policy permits it and its employees to enjoy the benefits of the law. And my brief also shows that this theory contravenes the due process and equal protection guarantees of the Fourteenth Amendment. Now, the respondent's brief contains a lengthy defense of the -- this criminal conspiracy theory. But it states that respondent relies solely on Section 3 of the Federal Act of a justification for his action. Now, if the Court accepts the respondent's concession, then no state action is involved here and the Fourteenth Amendment question drops out of the case. Thank you.
Earl Warren: Mr. Sackman.
Julius L. Sackman: Mr. Chief Justice and may it please the Members of the Court.
Felix Frankfurter: Would it upset the order of argument if you have planned it and dealt with the threshold question whether this is a determination of a state law, whether the decision of the Court of Appeals may be sustained as an adjudication on the state law would then in -- in its own -- in its own good time, may raise constitutional question but in all events, whether this can be sustained as a determination of what the Court of Appeals found to be valid state law rather than the compulsion of Section 3 of the -- of the Communist Control Act?
Julius L. Sackman: I think, if Your Honor please, that I would prefer --
Felix Frankfurter: Alright.
Julius L. Sackman: -- depending upon the Communist Control Act with some incidental reference to the action of the State apart from the Communist Control Act itself. May I say at the --
John M. Harlan II: General enough, so that if you take the Communist Control Act out of it, there is nothing left in your case?
Julius L. Sackman: I think that the impact of the Communist Control Act upon the action of the Industrial Commissioner necessarily is of such character that it might conceivably weaken the case, and I would prefer to emphasize the impact of the Communist Control Act on his action first.
Felix Frankfurter: But between -- you follow your own way but I merely suggest that between using a federal act to emphasize state action and inescapably depending on a construction of a federal law are very different things.
Julius L. Sackman: I appreciate that fact, Your Honor. The Industrial Commissioner of the State of New York, as Your Honors realize by now, administers the State Unemployment Insurance Program. In him is vested the power and upon him is imposed the obligation among other things of determining whether a stated employment or a specific employer or employee comes within the coverage in the State's Unemployment Insurance Law. In making this determination, the Commissioner is, of course, governed primarily by the provisions of the Unemployment Insurance Law itself, thus, coverage may be -- may depend upon whether the employee's work is performed within the State or in certain cases upon the number of persons employed excluded from participation in the program or agricultural labor, employees who are essentially independent contractors, employees of governmental and certain non-profit making organizations, the employees under certain circumstances of federal instrumentalities, such as national banks, national banking associations, the spouse or minor child of an employer, golf caddies, baby sitters and minors engaged in casual labor. So that there isn't coverage of every employment. There are certain employments which are specifically and expressly included -- excluded under the Unemployment Insurance Law of the State of New York itself.
Earl Warren: Well, is there any excluded classification under which the petitioner would come --
Julius L. Sackman: None in the --
Earl Warren: -- on the statute?
Julius L. Sackman: None in the New York Employ -- Unemployment Insurance Law itself.
Earl Warren: Yes.
Julius L. Sackman: Now, my point is, however, that in addition to the specific criteria which governed the question of coverage under the New York's Unemployment Insurance Law, the Commissioner is, of course, bound also by other statutes, federal and state, which either are in pari materia with the Unemployment Insurance Law or otherwise exercise a governing influence upon the Commissioner's performance of a statutory duty.
Felix Frankfurter: Is there any -- is there any general clause in your Unemployment Insurance Act enabling the Commissioner to -- to broaden the -- to restrict the accepted class?
Julius L. Sackman: Not to my knowledge, sir. Now, under -- under the New York --
Felix Frankfurter: What you say -- what you're saying is that existing legislation, both state and national, may impliedly broaden its power, at least, give in power to take people off the list, is that it?
Julius L. Sackman: That's true, sir. That's true. Now, under New York Law --
Earl Warren: Do you mean as individuals or as classifications?
Julius L. Sackman: I think either as -- as individuals or as, insofar as classifications affect individuals, as classifications. For example, in this particular instance, the impact of the Communist Control Act would affect the Communist Party as an individual insofar as in -- as an individual may be an employer. If they, under the Communist Control Act, cannot have the capacity to be an employer, then this has an impact upon the Industrial Commissioner's obligation to determine whether they do come within the coverage of New York's Unemployment Insurance Law or not.
Earl Warren: Now, can you -- can you give me one -- an illustration of one person other than the Communist Party whom the -- the Commissioner would have power to exclude from coverage where -- where that party is not included in one of these exemptions.
Julius L. Sackman: I think, Mr. Chief Justice, that implicit in the power that -- to make this determination is that if any individual who seeks to be an employer is engaged in a calling and an employment which is illegal, whether in say or merely prohibit them, if it is illegal that this is to be read into the law and that such an employment would not be covered. As an illustration, which I gave as a rather farfetched illustration, assuming for the sake of argument that the Mafia was organized on a -- on an organizational basis with so-called board of directors and presidents and had employees, and it sought to protect its employees by registering under the Unemployment Insurance Law, clearly, without being specifically and expressly included -- excluded under New York's Unemployment Insurance Law, it would -- could not possibly be an employer in the very nature of things. And here, we -- we -- I make the analogy that the Communist Party, whether it is such either inherently or whether it is such by a reason of the Communist Control Act, if it is an illegal organization, if it is taken with the illegality which prevents it from becoming an employer under our law, then the Industrial Commissioner has the right to exclude him from coverage.
Felix Frankfurter: Let me ask you, Mr. Sackman, does the statute which this Court sustained in -- in Zimmerman against Brian, the Ku Klux -- the Klan statute still in -- still on the books in New York? Do you know?
Julius L. Sackman: I have no idea, Your Honor.
Felix Frankfurter: That the statute to which it said they -- you can -- you must make full -- make all sort of disclosures. Now, assuming that that (Inaudible) exists, you -- your argument is that -- since that -- since the Klan would be operating illegally under New York law impliedly your Industrial Commissioner could --
Julius L. Sackman: Exclude.
Felix Frankfurter: -- regarded as not a -- as not an employer within the Act.
Julius L. Sackman: Yes, sir.
Felix Frankfurter: That's your --
Julius L. Sackman: Yes, sir. That's my argument in that respect. Now, the right of the Industrial Commissioner to determine who is or who may not be an employer under the Act, in other words, who may participate in the benefits of the Unemployment Insurance Program is furthermore purely a matter of state law. The question of his right to determine who is an employer is a matter of state law which is not within the purview of this Court's power to review. Now, the manner in which he reviews it and the end result of that review, insofar as they may affect certain rights which arise under the Federal Constitution or concern, of course, are concededly subject to this Court's power of review.
Felix Frankfurter: But the Court of Appeals didn't intimate, as I read it, didn't suggest that this was an exercise of the discretionary part of the Industrial Commissioner not subject to judicial review.
Julius L. Sackman: The Court of Appeals expressly referred to a case called "Matter of Electrolux Corporation" which -- in which they had previously held. This was a New York Court of Appeals case which I have cited, I believe, at page 22 of my brief in which they held that -- of course, the Industrial Commissioner had the power to make this determination of who is covered and who is not covered, who may -- may or may not participate in the Unemployment Insurance Program. And if they've held that he can do that, then, of course, he has the right to exercise the necessary discretion in reaching that result.
Felix Frankfurter: But surely, it was -- it was perfectly -- perfectly more than redundant to Chief Judge Desmond to be writing this opinion if only could've -- if it could've been thrown off on the ground, this is within the ambit of non-reviewable discretion by the Industrial Commissioner.
Julius L. Sackman: Well, unfortunately, there is raised by the petitioners in this case the questions of construction of the Communist Control Act does it do what we say it is and furthermore assuming that it does do what we say it did is unconstitutional. And of course, the Court, therefore, had to go into those further questions to -- this didn't bear, therefore, Your Honor, if I may say so, upon the exercise of the discretion itself but upon whether he had the right to exercise the discretion either way.
Felix Frankfurter: Well, precisely, but unfortunately or not, if the Court could've gone off merely an exercise of discretion, they wouldn't have to -- they could've gone off on that. But both in the opinion and in the remittitur, they said what was involved and what was in issue was Section 3 of the Communist Party Control Act and its validity, isn't that true?
Julius L. Sackman: Well, they have, in effect, said that, Your Honor, when they say that this raises certain federal constitutional questions.
Felix Frankfurter: I don't get the -- I don't get the direction of your argument. Are you suggesting -- then you tell us whether you are saying this rest on a state ground and more particularly, the state ground that the determination of the classification of those who fall within the State Unemployment Insurance Act is a matter vested by New York law in the Industrial Commissioner.
Julius L. Sackman: Oh --
Felix Frankfurter: Do you take that ground?
Julius L. Sackman: Oh, no, no. I don't take -- I -- I misunderstood Your Honor. I don't take that ground. I merely state that the right of the Industrial Commissioner to make the determination, that the bear existence of that right is conceded to be state law. But that --
Felix Frankfurter: All that means -- all that -- all I get from that statement is, that in the first instance, the Industrial Commissioner must determine whether (Inaudible) subject to the Act.
Julius L. Sackman: That's right. That's exactly -- that's exactly the point I make. Now, the simple factual situation which is presented here is that the Commissioner impelled thereto by the provisions of the Communist Control Act of 1954 and upon the advice of the Attorney General of the State of New York suspended the petitioners' registrations as employers under New York's Unemployment Insurance Law. Now, in the administrative proceeding which ensued upon that determination, in establishing before the Referee a prima facie case, the Industrial Commissioner relied on the twin doctrines of judicial notice and judicial regard for legislative findings as to the character of the Communist Party as a criminal conspiracy to overthrow the Government by force and violence. The record shows that the petitioners were free to submit such evidence as they saw fit to controvert that fact but that they failed to avail themselves of that opportunity.
John M. Harlan II: What was the issue before the Commissioner? What was the issue described?
Julius L. Sackman: The issue before the Commissioner was before the Referee.
John M. Harlan II: Referee.
Julius L. Sackman: May I say this. The issue before the Referee was whether the Industrial Commissioner was justified in suspending the registrations of the petitioners as employers under New York's Unemployment Insurance Law. And my point is that he was justified by reason of the fact, one, that under the doctrine of judicial notice, it has been established what the historical character of the Communist Party is as one which seeks by advocacy and by force and violence to overthrow the Government of the United States that he could rely on this at least for the purposes of presenting one, a prima facie case under the criminal conspiracy as aspect of the argument and two, as a basis for the justification for action under the Communist Control Act of 1954. Number two, he relied also on the declarations to the same effect which will contain in the legislative findings both of the Communist Control Act and other federal and state statutes to the same effect.
Felix Frankfurter: Mr. Sackman, you would help me greatly if you could answer this question. Do you agree or disagree with the proposition that the case before us that this Court must decide whether New York was compelled by Section 3 of the Communist Party Control Act not to admit the Communist Party as an employer under the New York statute?
Julius L. Sackman: I will agree with that, Your Honor.
Felix Frankfurter: Do you think that is the question before it?
Julius L. Sackman: I -- I think that that is the predominant and probably decisive question in this case. I have sought to supplement it with the other aspects of it, but I am perfectly willing to rely on the fact that it is by virtue of the Communist Control Act that the Industrial Commissioner was impelled to do what he did and was compelled to do so.
Felix Frankfurter: Supremacy -- the Supremacy Clause of the United States Constitution require the Industrial Commissioner and the courts, more particularly the Court of Appeals, to find, to hold that the federal statute to which Section 3 of the Communist Party Control Act require this decision.
Julius L. Sackman: Yes, sir.
Felix Frankfurter: Alright. Now, I understand.
Earl Warren: Are you prepared to -- to go one step farther and say that if it were not for Section 3 of the -- of the Communist Control Act, that in the circumstances of this case, your Commissioner would not have the right to exclude?
Julius L. Sackman: I would say it would then be questionable, Your Honor, as to whether --
Earl Warren: Well do would assert to this Court that he has a power or that he doesn't? You got to take one position.
Julius L. Sackman: Yes. I -- I --
Earl Warren: Which do you take?
Julius L. Sackman: I -- I assert to this Court that he was one, compelled to do what he did by virtue of the provisions of Section 3 of the Communist Control Act.
Earl Warren: That you have said.
Julius L. Sackman: Two, that actions Section 3 of the Communist Control Act that he could make the same decision which he made by virtue of the inherent illegality of the Communist Party as an entity for the exercise of the very rights which they seek to exercise under the New -- under New York's Unemployment Insurance Law.
Felix Frankfurter: That would be a question of New York law.
Earl Warren: Yes.
Julius L. Sackman: Well, if Your Honors of the -- are of the opinion that that is New York law which is not subject within the purview of this Court's power to review, I'm willing for the purpose of my argument --
Felix Frankfurter: My question didn't say that. My question merely says that would be New York law. Whether it's valid New York law, it's a different story again.
Julius L. Sackman: Well, valid or invalid, I -- my understanding of the situation would be that if it were New York law, then it would therefore not be within the preview of this Court's review.
Felix Frankfurter: That -- that would be another lawsuit.
Julius L. Sackman: Right. Well, I --
Earl Warren: Let me ask you then, as much as you rely on that, what is your state law that you rely on, either legislative or judicial?
Julius L. Sackman: There is no legislative law referred to. I -- I take -- I stopped with the proposition on the criminal conspiracy aspect of it that by virtue of the judicial notice doctrine, the Communist Party is a criminal conspiracy for the forceable and violent overthrow of the Government of the United States.
William O. Douglas: According to --
Earl Warren: Well, that -- pardon.
William O. Douglas: (Inaudible) question on remittitur, that's the thing that puzzles me.
Julius L. Sackman: The -- the remittitur, of course, does say that there were questions raised under the -- the amendment of the remittitur points out that there were questions raised by the petitioners herein with respect to certain violations of the Federal Constitution to wit, First Amendment --
William O. Douglas: Not only raised but necessarily passed upon.
Julius L. Sackman: Well, they also say necessarily passed upon. Well, then, perhaps, I should avoid -- in view of the amendment of the remittitur, perhaps, I should save time in the argument and confine myself to the argument involving Section 3 of the Communist Control Act.
Speaker: As compelling the action (Inaudible)
Julius L. Sackman: As compelling the action of the --
Speaker: (Inaudible)
Julius L. Sackman: If you do not agree with this position, it would require a reversal of the Court of Appeals.
Felix Frankfurter: And if we agree further that that is the basis of the decision because if that is not the basis of the decision but if it can be found that it really went on New York law, then we have to pass on the validity of the New York law.
Julius L. Sackman: I --
Felix Frankfurter: Or, in the alternative as we've done in other cases, find out what the Court of Appeals really went on.
Hugo L. Black: You haven't been able to discover that to yourself here (Inaudible) [Laughter]
Julius L. Sackman: I -- Mr. Justice Black, I think --
Hugo L. Black: The court -- the court below doesn't seem to discover it but if you take it, may be we might.
Julius L. Sackman: [Laughter] I -- I'm quite satisfied that so strong was the basis of the Communist Control Act for the decision of the Court of Appeals, and I am willing to attempt to support the Court of Appeals in its determination on that basis. Now, turning to a consideration of the impact of the Communist Control Act, we find, first, recognition of the adherent illegality of the Communist Party in the clause of Section 3 which states that the Communist Party is not entitled to any of the rights, privileges and immunities which are attendant to -- for illegal bodies created under the jurisdiction of the laws of the United States or any political subdivision thereof. Now, the title of the Section and the opening clause referred to "the Communist Party, its successors and subsidiary organizations". Now, this language, standing alone, is broad enough to include the communist parties of the various States and territories. However, if there is any doubt in connection with this matter, reference maybe had to Section 4 (b) of the Act wherein the term Communist Party is defined as, "The organization now known as the Communist Party of the United States, the Communist Party of any State or subdivision thereof and any unit or subdivision of any such organization, whether or not any changes hereafter made in the name thereof." Now, the petitioners assert that the Act does not affect rights, privileges and immunities which arise under state law. They distinguish between the opening clause of Section 3 which refers to the Government of the United States or the Government of any State, Territory, District, or possession thereof and the two later clauses which deal with non-entitlement and termination of the rights created on the jurisdiction "of the laws of the United States or any political subdivision thereof." From this, they conclude that Congress demonstrated its recognition of the distinction between a political subdivision and a State. And that Congress intended by this shorthand reference to affect only jurisdictions such as the District of Columbia and federal territories and possessions which are political subdivisions of the United States. Now, in the first place, I might observe that in Casey against Boldt, 1946 decision of this Court, there was established, the rule of statutory interpretation that the mere absence of the word "State" in a federal statute does not exclude applicability of -- of that statute to the States. Secondly, it was quite clearly the intent of Congress to include in the last two phrases dealing with non-entitlement and termination of the rights in shorthand form, the same political entities as were included in detail in the opening phrase. This is apparent form the context of the latter two phrases in which the political entities which are referred to are entities which have lawmaking powers. Certainly, the District of Columbia and many of the federal possessions do not have independent or sovereign lawmaking powers under which corporations may be formed and under which statutory rights, privileges and immunities may arise. Laws for the district in such possessions were enacted generally by Congress. A State, on the other hand, has independent sovereign lawmaking powers in the respect which I have indicated. Confining the meaning of political subdivision in the last clause to the district and the federal possessions is furthermore illogical because these two were specifically referred to in the first clause. The more logical conclusion seems to be that in the first clause, the word "political subdivisions" referred to local subdivisions or units within the States and territories while the words "political subdivision" as used in the last clause, which terminates the rights of the Communist Party includes "States". Congressional intent too, as evidenced by senatorial comments which appeared in the congressional record during the debates when this Act was a bill, would appear to indicate that the Act was expected, one, to deny the party a place on the ballot, two, to deprive it of contractual capacity. Both of which depend on state law. According to the argument of counsel for the parties, the Act does apply to Hawaii and Alaska because at the time of its enactment, they were territories of the United States. Does this -- does he now claim that since these territories have attained statehood that the law no longer applies to them? And if it is -- and if it is admitted as it must be, that the law continues to apply to them, what happens to the principle that all States were admitted to the union upon an equal footing? It seems also obvious from the context of the Section as a whole that the laws, the benefit of which the petitioners have lost, are necessarily the laws of the governments, federal, State and territorial, which the petitioners threaten to overthrow. The fine splitting of hairs and the raising of the straw issue of whether the nation was made from the State or the State from the nation cannot obscure this intent which is so clearly expressed on the statute. Counsel also points out that Section 3 does not --
William J. Brennan, Jr.: The -- the only privilege here, within the terms of this statute and as you construe it, would be the privilege of paying taxes, is that right?
Julius L. Sackman: No, sir. The obligation to pay a tax is not a privilege, if it please Your Honor. And I shall come to that in just a moment, if I may, with -- in a manner which Your Honor puts it.
William J. Brennan, Jr.: I thought that the Party here was claiming that -- that it owes taxes in the State and it's claiming that it doesn't.
Julius L. Sackman: But we -- we say that that's not a right -- we agree with them that the obligation to pay a tax is not a right, privilege or immunity. But -- but we look at -- we look at the situation from an entirely different point of view and if Your Honor will bear with me with -- for just a moment, I shall --
Felix Frankfurter: But why you're sure to answer that Mr. Abt says it mean something to his clients that they should be allowed to do this? The other -- they're claiming something.
Julius L. Sackman: Well, it seems to me that --
Felix Frankfurter: (Inaudible)
Julius L. Sackman: Now, I -- I was about to discuss the fact that the petitioners make the point that Section 3 does not purport to terminate all of their rights but only those which are heretofore been granted by reason of the laws of the United States or any political subdivision thereof. And they emphasized the word "granted". They then assert that natural persons possess an inherent right to employ others, and they conclude that if the petitioners were natural persons, their rights would not be among the rights which are terminated by the Section. But the fact of the matter is that this conclusion is based upon an erroneous premise. Although not considered legal entities of common law, unincorporated associations have been statutorily invested with certain powers and capacities which stamped them unquestionably as artificial entities. They have, in some instances, been given power to act in their own names, in others, they may still act through natural persons. However, even in the latter cases, the natural persons do not act in their own right. They are merely the conduits for the effectuation of the purpose which is sought to be accomplished. Assuming however arguendo that we were dealing with the inherent rights of natural persons, we must assume that since the petitioners have distinguished such rights from rights which are granted by the State presumably by statute, that such rights refer to those which are in inexistence under the common law. There is, of course, no national common law operative as such throughout the States of the union. The adoption and application of the common law was a matter left to the several States for determination. In New York, the common law of England remains enforced except as modified by statute by force of a constitutional provision to that effect. In other words, by virtue of the constitutional provision, the common law is included in that which is granted by the State. Literally, therefore, the provision of Section 3, which is quoted by the petitioner, applies to all rights, privileges and immunities because the laws of the United States or any political subdivision thereof include the common law as well as the statute law of the States and all rights, privileges and immunities are granted by such laws since those terms describe the extent to which particular individual group claims or interest are secured by law. In any event, the use of the word "granted" in the clause which terminated the petitioners' rights, privileges and immunity, is of no particular significance and may properly be equated with the clearly broader term "attendant" which appears in the prior clause in the same section, "The Communist Party of the United States or any successors of such party are not entitled to any of the rights, privileges and immunities attended upon legal bodies created under the jurisdiction of the laws of the United States or any political subdivision thereof." Clearly, it must have been the intention of Congress to terminate those rights, privileges and immunities to which it felt that the petitioners were not entitled. And lastly, on this particular aspect of the case, I must observe that the petitioners have urged that the right to employ others is a natural or inherent right. But we are not here concerned with the right to employ others or with the general right over the right to enter to any contract as in general proposition. We are concerned with the right to be an employer within the meaning of New York's Unemployment Insurance Law. And that light unquestionably is the subject of a statutory grant. Now, the petitioners have also argued that the provisions of the Internal Security Act as Section 5 of the Communist Control Act evinced a legislative intent not to terminate the right of the petitioners to have and to function through employees. And in support, thereof, they quote the Department of Justice in the briefs submitted to this Court in Communist Party against the Subversive Activities Control Board. The reference is, of course, to the registration provisions of the Internal Security Act and to the provisions of Section 5 of the Communist Control Act which deal with the determination by a jury of membership participation or knowledge of purpose. The argument is predicated on the obvious -- obviously meaningless assumption that Congress would destroy the petitioners in one section and recognize their continued viability in another. However, analysis of the statute exposes the fallacy of the argument. Congress has effectively destroyed the Communist Party as a legal entity. Nevertheless, Congress was aware of the fact that this might drive the movement underground and that it might continue thereafter on an illegal basis.
Earl Warren: We'll recess now, Mr. --