William H. Rehnquist: Do you pronounce your name "Stare-ing"?
Graydon S. Staring: "Starring".
William H. Rehnquist: "Starring", okay. They have two dots over the "a" and I wasn't sure just how that figured out.
Graydon S. Staring: I'm not sure how they got there. Mr. Chief Justice, may it please the Court: Narrowly viewed, this case arises from a dispute over a supply contract between two foreigners abroad. A different and broader view was taken of the case by the Respondent and by the California Supreme Court, as a case affecting the potential tort and indemnity claims of Californians. Even if this Court were to decide the case upon the narrowest of grounds, we think it could not very well ignore the implications which the case might have for the tort suits of injured parties in America. I therefore do not address the case with the intent to neglect that broader issue, but instead would propose to address it on that issue, rather than the narrower one. Both parties here start with World-Wide Volkswagen. That case, as you well know, is an interstate case rather than a case involving an international relationship or a foreign defendant. I think that members of this Court have not been completely at ease with the emphasis upon the concept and term "sovereignty" in the analysis of the problem in World-Wide Volkswagen. That analysis can probably be validly taken as a reverse view of the individual rights which are intended to be preserved by the due process clause, and indeed I have seen that view taken. Here in this case, however, by contrast with World-Wide Volkswagen, we have an attempted projection of state power internationally. We have, I think, therefore an authentic case for analysis in the traditional terms of sovereignty, as we are dealing not only with an express clause of the Constitution, albeit a terse one, but with the problem of considering standards of international law and comity. Perhaps the conclusion that we urge here could be reached on the basis of such international standards and without reference to the due process clause. We don't urge that. We see no need to, and we don't think it's desirable. Questions which arise domestically and questions of personal jurisdiction which arise internationally should, if possible, be resolved with similar analyses. These analyses in our view would be inconsistent only in respect of the element of this Court's power to control reception and enforcement within the United States and this Court's function of distributing to some extent the judicial business within an interstate federal system. And of course, therefore, in the international case it would be necessary, we think, to take account of the lack of that power and the lack of that function in the international sphere, and in that sphere to give some heed to the views of others abroad in connection with our international powers.
Harry A. Blackmun: Mr. Staring, straighten out a couple of details for me. Are there any other cross-claims filed against you in this case by California citizens?
Graydon S. Staring: There are none in this case, but there are other cross-claims in other cases not before the Court, not this identical case. They exist.
Harry A. Blackmun: And it has nothing to do with this accident?
Graydon S. Staring: Yes, they arise from this accident.
Harry A. Blackmun: I see.
Graydon S. Staring: Yes.
Harry A. Blackmun: Is there a choice of law clause in the contracts between your client and Cheng Shin?
Graydon S. Staring: We have no knowledge of that.
Harry A. Blackmun: Thank you.
Graydon S. Staring: The record shows nothing as to it. We are not suggesting, by the way, that this Court in this case should announce a rule of international law or a standard of international conduct. That would be uncalled for. It is, I suppose, a proposal of that nature which the Respondent suggests in urging the affirmance below at one point in its brief. What we do say is that international considerations call for a heightened scrutiny of the necessary contacts, ties, or relations to establish personal jurisdiction, and we do urge that a case of this character is not one in which the scope of the jurisdiction of our state courts over manufacturers abroad should be extended. We would not even urge that there should be such an extension if our client were a domestic manufacturer of components, but that is not the situation here. It is a foreign, an alien manufacturer, and we think this is not... such a case is not a case for an extension such as the Supreme Court of California has given to World-Wide Volkswagen.
Harry A. Blackmun: Would you be making the same argument if the original Plaintiff had not settled?
Graydon S. Staring: Yes. Yes, I don't see why not. May I add, Justice Blackmunn, that the original Plaintiff did not sue my client Asahi here.
Harry A. Blackmun: Yes, that's correct.
Graydon S. Staring: But had it done so, we would be making the same argument. As I said at the outset, I did not wish to take refuge solely in the narrow view, in the narrow issue in this case raised by the fact that it pertains to a contract between two parties in the Far East. I do not waive that issue, but I think the broader issue has to be seen by the Court. The focus of attention under World-Wide Volkswagen in this case has been on the stream of commerce doctrine. We don't know where the headwaters of that stream are and we have no map to show us. But we assume for our purposes here that Asahi delivered products into that stream or some tributary of it. We don't accept, however, the Respondent's further suggestion, that a component maker in the position of Asahi here is somehow or other especially responsible for that stream, as though it were the original spring. That is an unrealistic view, we suggest, both commercially and legally. This Court in referring to the significance of delivering products into the stream of commerce in World-Wide Volkswagen added, however, the important qualification that they must be so delivered with the expectation that they would be sold to consumers in the forum state. The Court went on to say that foreseeability or mere foreseeability of their reaching the forum state was not enough. The Supreme Court of California chose to deal with the case not in terms of foreseeability, the term "foreseeability" which this Court had used, but rather in terms of awareness, and there has been some argument in the briefs about the difference between the two. I would not bandy words here about foreseeability and awareness, but would suggest instead that at this point we look at the evidence, the very brief, the very simple evidence in the record, which was found sufficient below to sustain jurisdiction in California, because it illustrates a problem which is inherent in cases which will arise under the standard which the California Supreme Court has adopted.
Sandra Day O'Connor: Mr. Staring, do you concede that it was foreseeable that the valves would reach California?
Graydon S. Staring: No, I do not concede that it was foreseeable. The evidence on it--
Sandra Day O'Connor: You argue that foreseeability alone is not enough, anyway.
Graydon S. Staring: --Yes, we argue that foreseeability alone is not enough. And let me retract that. I think that we're prepared to argue this case and present this case to the Court in terms of foreseeability, mere foreseeability.
Sandra Day O'Connor: By that what do you mean, that that should be the test?
Graydon S. Staring: No, but that that should not be the test and that that is the very most, the very most which could be shown by the record here.
Antonin Scalia: You may as well give that away, because the California court found foreseeability. You don't expect us to reverse that on this record, do you?
Graydon S. Staring: I don't ask this Court to review the facts as found by the California court.
Antonin Scalia: And they found foreseeability.
Graydon S. Staring: On whatever record.
Antonin Scalia: Right.
Graydon S. Staring: I don't know whether they found it. They found something that I think was at least that. And as I say, I don't want to bandy words about what awareness is and foreseeability. They went pretty far with the thin record they had. I want to go into that record, though, for a special reason.
Sandra Day O'Connor: Do you think there has to be a different test for a component manufacturer than the primary manufacturer?
Graydon S. Staring: I do not think that there's any different principle which applies. I think the principles which this Court has laid down apply to both. We think, however, that the situation of component manufacturers is likely in most instances to be very different, and that it is possible therefore to frame a test with respect to component manufacturers which is consistent with the same principles applying to everyone else, and we have tried to do that in our brief. The record here was very short so far as knowledge or awareness or foreseeability was concerned. There is an affidavit which shows some conversations, unspecified. Some time in those conversations, information was given to Asahi that Cheng Shin sold tubes worldwide and that some unspecified number or type were sold in the United States. That's it. Now, Asahi's knowledge of those meager facts is absolutely undated in reference to contract, production, delivery, or even the accident in this case, which occurred in 1978, the first year of six years in which the Plaintiff Cheng Shin collected statistics to use against Asahi in this case. Now, that shows, we think, what kind of murk, what kind of fog, we are likely to get into in component cases under the standard which has been followed by the California Supreme Court. We could, I suppose, have had a battle of affidavits, which could have been two or three or more affidavits. We have one affidavit full of fog. We could have had several foggy affidavits. And if you think about the distinction between the component manufacturer's situation and the situation of the ultimate manufacturer and exporter, you will see how likely this area is to be foggy all the time. In the case of the ultimate manufacturer--
Antonin Scalia: Where do you want to end the fog? Where would you draw the line? Suppose I am the ultimate manufacturer, but not the exporter? That is to say, I manufacture washing machines, the totality of them, including all of the components, and I sell the washing machine to... let's say in Japan, to a company which I know exports them, and I know they export them to the United States, and indeed I know they export them to California.
Graydon S. Staring: --I wouldn't draw the distinction just on the basis of whether it was an ultimate manufacturer or an exporter. I think the critical thing is that, whichever one it is, it seek to serve the California market, as was said in World-Wide Volkswagen, that there be some act, some act by which it positively seeks to serve that market and direct its products into that market. And so it will depend upon the facts in every case. But I would say that if a manufacturer had nothing more to go on than a bit of conversation, of undocumented conversation, that an exporter sent products to the United States as well as other places, that is not the kind of activity of direction toward the California market which we think this Court intended in World-Wide Volkswagen and which is consistent at least with other decisions of the Court.
Antonin Scalia: If I understand you, I have to be the one who sends the thing into the market. Is that where you're drawing the line? I have to be the one that sends it? It's not enough that I know I am delivering it to someone who will send it there? The sending of it there has to be my doing?
Graydon S. Staring: No, Justice Scalia, I do not contend that. I do say, though, that you must at least do some act by which you encourage the sending of it there, by which you seek to serve that market. You must do something more than respond to an order which is unspecific as to where the product is going to go.
Antonin Scalia: Well, now you're getting foggy. See, I suddenly don't see the line any more. Why isn't it encouraging the sending it there to deliver the equipment knowing that once I deliver it it's going to be sent there? If we had a law of accessory applicable to this, I'd certainly be an accessory to the sending of it there, wouldn't I?
Graydon S. Staring: I must beg off any response on criminal law. But I would have thought that to be an accessory under the criminal law it would be necessary to have more knowledge, more scienter than that. I don't know.
Byron R. White: Well, does the record show what percentage of Cheng Shin's... is that the name, Cheng Shin?
Graydon S. Staring: Cheng Shin.
Byron R. White: Cheng Shin's valves are purchased from your client?
Graydon S. Staring: It does not show it.
Byron R. White: So that it does show that Cheng Shin bought from other suppliers?
Graydon S. Staring: Yes.
Byron R. White: So your client just supplied part of the demand--
Graydon S. Staring: That's right.
Byron R. White: --for that particular company?
Graydon S. Staring: That's right.
Byron R. White: And so some of his valves might have gone to California and perhaps none of them did?
Graydon S. Staring: Exactly. That is exactly the situation. We don't know from the record what portion of valves were bought from us and what portion were bought from--
John Paul Stevens: We do know there were quite a few, don't we? We do know it was something like a quarter of a million that were sold in California?
Graydon S. Staring: --We don't know that from this record, no.
Byron R. White: Not their valves.
Graydon S. Staring: Beg your pardon?
Byron R. White: There were that many tires sold.
Graydon S. Staring: Tires, I think.
John Paul Stevens: And didn't they all have your client's valves?
Graydon S. Staring: No, we don't know the number of valves.
John Paul Stevens: Wouldn't your client know that?
Graydon S. Staring: No, because the component manufacturer puts his valves in inventory, he ships them to the ultimate manufacturer, they go through his inventory. At some time or other, he takes them out and sends them on.
John Paul Stevens: He must have some idea what's going to happen to those. I mean, you have salesmen who talk to your customers, I suppose, and they find out what their needs are and what kind of products they need, don't they?
Graydon S. Staring: I think that the realistic situation in an industrial situation of this sort is a little different, and that there are more likely to be supply contracts and shipments from one country to another under supply contracts, rather than door to door salesmen.
Harry A. Blackmun: Well, doesn't the record show an investigation and finding of your valves in California?
Graydon S. Staring: The record contains affidavits in which a lawyer in Sacramento has said that he identified quite a number of our valves on tires in California.
Harry A. Blackmun: Is that improper material in the record?
Graydon S. Staring: Yes, we think so. We think this is really to be disregarded. And we don't think that, incidentally, that the lower court or that the California Supreme Court indicated any great reliance upon that.
Harry A. Blackmun: I'm not sure about great reliance, but does the record show the presence of your valves in the state of California?
Graydon S. Staring: The record shows that valves identified as ours have been found in the state of California in the year 1983. I believe that's the year in which they're said to have been found.
Harry A. Blackmun: That's my impression.
Graydon S. Staring: That's right, 1983. This accident happened in 1978, and we are talking, I hope, about contemporaneous knowledge when we seek to impose jurisdiction upon someone for--
John Paul Stevens: Well, if you find the registered agent today you could serve him today, couldn't you? I mean, for personal jurisdiction isn't it your presence at the time you're sued?
Graydon S. Staring: --Well, that is not, however, at the heart of the stream of commerce doctrine as we understand it. We don't deal here with any question of general jurisdiction over Asahi in California, and I don't think there's any contention that anyone even would dare to contend that the presence of some Asahi valves in California would constitute Asahi's presence there. So it's necessary here for Cheng Shin to prevail, if it does at all, on the stream of commerce doctrine, and that involves--
Byron R. White: Well, your client at least knew that Cheng Shin's tires were being sold in the United States?
Graydon S. Staring: --The record shows that we were told that at some time.
Byron R. White: Yes, and the only thing... and you knew that there's a chance then that some of your valves would get to California. But there was a chance... there also was a chance, I suppose, that none of them would, because you didn't supply all of the valves for Cheng Shin?
Graydon S. Staring: It must be taken... yes, it must be taken that we had a mere... an awareness of a mere likelihood, and that is all, a mere likelihood at most that some valve of ours might find its way to California. And the statistics gathered afterward show that on the probability basis it was unlikely, rather than likely. We have no more than that.
John Paul Stevens: Unlikely? I thought the evidence was there were 500,000 of your valves that were sold by Asahi to Cheng Shin in one year. And you think it's unlikely that any of those went to the United States when you know they're doing business in the United States?
Graydon S. Staring: Well, the evidence of that--
John Paul Stevens: Wasn't there a sampling of one county and about half of the valves there came from your client?
Graydon S. Staring: --There was an affidavit showing, as I said, that in 1983--
John Paul Stevens: I understand.
Graydon S. Staring: --there were a number of valves found which were identified as Asahi's, tentatively by the way. I would like to point out, because this is, again, one of the vices inherent in this sort of thing, that it is still disputed whether the valve in this case was ever made by Asahi. Asahi has now inspected the valve and says, no, it's not ours. So we have yet to get, presumably, to some point in a trial where it may finally be established whether the component was or wasn't made by the component maker. And then perhaps if the answer is no we can get out on a lack of jurisdiction. I don't know.
William H. Rehnquist: Well, I don't see where you'd get out on a lack of jurisdiction. I mean, supposing I sued the Ford Motor Company in California and I said, this car that you made for me is really loused up, and their answer is, well, it's not a Ford. Well, it may turn out not to be a Ford, but that doesn't mean the California courts didn't have jurisdiction over Ford. It means I lose the case on the merits.
Graydon S. Staring: I agree with you, Chief Justice Rehnquist. And this really heightens the injustice of it, that jurisdiction should be established on such a thin premise.
William H. Rehnquist: Well, don't you have a right to test... supposing you think this affidavit is foggy or you think it doesn't say as much as you think it ought to. You have a right to take that person's deposition, don't you?
Graydon S. Staring: Yes, we do, Your Honor.
William H. Rehnquist: And did you choose to avail yourself in this case?
Graydon S. Staring: And we did not do it. We did not do it, and I repeat that I think what the record here shows is the inherent fogginess of this kind of case. We would have gotten simply more vague and speculative indications.
John Paul Stevens: But Mr. Staring, isn't the fogginess partly due to the fact that the affidavit of Asahi's president is perhaps not as detailed as it might have been? Couldn't he have spelled out in detail just how much knowledge they had of the ultimate destination of these valves? And didn't do that. He just said he knew he sent some to Taiwan, and he doesn't say anything about what he knew was going to happen later. Isn't that right, or maybe I'm misstating the affidavit?
Graydon S. Staring: No, I think, Justice Stevens, that you're correct. But I think you have to look at the limitations upon one executive in an affidavit which, if it's to serve any purpose, has to be inherently negative. Someone comes in and says: Over the lunch table, I told these people once this. And what do we do? We come back and say, I never heard it, I don't remember it, I don't remember this incidental fact? If the... when we turn by contrast to the case of the primary manufacturer and shipper and to cases where jurisdiction has been found in the past, we find objective... we're going to find objective acts, objective documented transactions. We're not going to find this kind of foggy situation.
John Paul Stevens: Well, let me ask you this question. As a legal matter, supposing your opponent took the president's deposition and said: Mr. President, what do you know about the distribution of your products in the United States? And he said: Well, we don't ship anything directly to the United States; we send everything to Taiwan; we do understand that they send about 100,000 or 200,000 or a million dollars worth of our product into California. That's purely at their decision, but we do know that happens. Would there be jurisdiction or not?
Graydon S. Staring: I think there would not, Justice Stevens.
John Paul Stevens: So there doesn't have to be fogginess. You have a real cleancut position if you want to make it. You're not arguing that.
Graydon S. Staring: If you have that situation, yes. But I don't think there would be jurisdiction, and I don't think--
Byron R. White: So that would be the same if your client knew that they supplied 100 percent of the requirements of the tire manufacturer and they knew that every tire that that manufacturer sent into California had your valve in it? You would say no jurisdiction? That's the same question as Justice Stevens asked.
Graydon S. Staring: --If I may repeat it to be sure I understand it, this is that we have knowledge we supply all the valves to Cheng Shin--
Byron R. White: Yes.
Graydon S. Staring: --and we have knowledge that they ship their tires with our valves into California.
Byron R. White: And that every tire that they ship to California has your valve in it.
Graydon S. Staring: All right. I will say that in that case we have certainly foreseeability and we have more than mere foreseeability.
Byron R. White: Well, that's the same question, though, that Justice Stevens asked you.
Graydon S. Staring: But there is another... I do not concede there is jurisdiction because we have to look at other possibilities. Suppose that all we do is to supply valves which are in accordance with the specifications which are given us. It is not realistic, it is not reasonable, it is not consistent with International Shoe, it is not fair play and substantial justice, to require everyone who supplies a part abroad in response to an order or specifications to make inquiries and to attach the ultimate legal and jurisdictional significance to the possibilities of where those parts may go.
John Paul Stevens: Well, maybe that's a defense on the merits, that you just did exactly perform your contract. But supposing you knew they filled the specifications, you also knew that they were going to explode as soon as they were put in motion on a motorcycle, or there were fireworks or something. Would you still say no jurisdiction at all?
Graydon S. Staring: The difficulty as a practical matter with that, Justice Stevens, is that you don't know what the ultimate manufacturer is going to do or how he's going to do it, what products he's going to put it into and what products he's going to say it should be used on, a bicycle or a high speed motorcycle. You are very far out of control of all of those things. If I have a minute, I should like to say that I submit that this situation of Asahi does not conform to that fair play and substantial justice which this Court has said is the principal guideline in cases of this sort. Thank you.
William H. Rehnquist: Thank you, Mr. Staring. We'll hear now from you, Mr. Haven.
Ronald R. Haven: Mr. Justice Rehnquist, members of the Court: I'd like to point out first of all, getting right into the factual background of this case, that the record is totally devoid of there being any contract whatsoever between the parties. There's no indication of anything more than the fact of a sale, the terms of which have not been made a part of this record. Let me point out that when the motion to quash was initially heard back in 1983, the last declaration to come in in support of the motion to quash was from Mr. Matsoko in support of the motion. He is with Asahi. There was never any mention made of any contract in the course of his affidavit, nor in his affidavit were there any denials of any kind that Asahi was aware of the fact that Cheng Shin and other manufacturers distributed in the United States and in California. He had ample opportunity to make that denial if he chose to do so, and it was never done. Therefore, up until the point of the reply brief in this case it has always been taken by the court as a given, if you will, that Asahi was well aware of the distribution system of Cheng Shin, which included the United States and California. It was also taken by the court as a given that Asahi was fully aware of the fact that the distribution system of Honda, Bridgestone, Yokahama, IFC, and others included the United States and California. It is also a matter of common knowledge. It would be commercially unreasonable to accept the proposition that Asahi is selling one and a quarter million valves to Cheng Shin over the course of a five year period, 150,000 in '78, 500,000 in '79, 500,000 in 1980--
Speaker: How many tires did they make?
Ronald R. Haven: --How many tires did Cheng Shin make? I don't have that information. I don't know what percentage of Asahi's valves went onto Cheng Shin's tires.
Speaker: Well, it might have been only half of one percent.
Ronald R. Haven: It might have been a half of one percent, but that's still a lot of valves.
Speaker: It might be a lot of valves, but it certainly reduces the chance that any of those valves got to the United States, especially when only 20 percent of the business of Cheng Shin came from California.
Ronald R. Haven: 20 percent of Cheng Shin's business in the United States comes to California.
Speaker: Well, how does anybody know that any of--
Ronald R. Haven: Nobody could say absolutely that they knew that one of their valves would in fact--
Speaker: --The odds are even against it.
Ronald R. Haven: --I beg your pardon?
Speaker: The odds are against it, just on the figures.
Ronald R. Haven: The percentage odds are against it. However, we found that a lot of them are here, or a lot of them are in California, anyway.
Speaker: Maybe ten.
Ronald R. Haven: No, there's a lot more than that, something like 267.
Speaker: Nevertheless, in terms of whether Asahi should have anticipated that its products were regularly going to arrive in California, that's a different question.
Ronald R. Haven: If Asahi knows that Cheng Shin and other worldwide distributors of tire tubes are distributing in the United States and specifically in California, and Asahi continues year after year after year to sell--
Speaker: To sell.
Ronald R. Haven: --they take advantage of a systematic method of distribution that they know covers the United States and California, and I think that rises to the level of an expectation.
Speaker: Does Cheng Sing, is it?
Ronald R. Haven: Cheng Shin, I believe.
Speaker: Cheng Shin, sell its tires in the United States to motorcycle manufacturers, or does it put them directly on the tire market?
Ronald R. Haven: To the best of my knowledge, they sell replacement tubes. I know that they also sell some bicycle tubes that come on Schwinn bicycles.
Speaker: These are tubes that go inside of tires?
Ronald R. Haven: Right. We're talking about the tube. We must remember that the valve is really the only mechanical part of the tube. It's a very significant part. The rest of the tube is nothing other than an air-filled rubber donut. The one mechanical part is the valve that goes on it. And the valve stem itself is supplied to Cheng Shin already attached to an oval rubber base, and it's that rubber base that is melded into the tube itself. And in this case, the question of fact at the time of trial is going to be whether there's a defect solely within the valve unit itself.
Speaker: Well, who does Cheng Shin... does it sell to tire manufacturers?
Ronald R. Haven: Cheng Shin does sell to some tire manufacturers, yes. It also sells replacement parts that are stocked directly in distributors' warehouses, such as the Hon Cycle Center in Sacramento County, which was the subject of one of our inspections.
Speaker: So it's valve to tube to tire to motorcycle?
Ronald R. Haven: Well, the tube goes inside the tire. The tube is not... the tube and the tire are not sold as one unit.
Speaker: Yes, but the tube is manufactured separately from the tire.
Ronald R. Haven: That's true, that's true. And it is placed on the rim of a motorcycle, and then there is a tire placed on top of the tube. And the tube pokes in through the rim and that's how you put air in it, just like on your bicycle.
Speaker: Now, how is this foreseeability or whatever you want to call it, awareness of the possibility, any different in kind from the awareness that the seller, that an automobile dealer has when he sells automobiles in New Jersey that they are very likely to be driven in Oklahoma?
Ronald R. Haven: Substantial difference. I think your dealer in New Jersey seeks to serve a certain marketplace. He's at the opposite end of the stream of commerce, if you will, from the component part manufacturer or the primary manufacturer. The primary manufacturer relies, depends on for its existence service of a much wider market. It doesn't seek to serve just New Jersey in most case. We're talking about somebody at the other end of the spectrum, somebody who has to serve a much broader marketplace in order to sell a lot of the product.
Speaker: The equivalent of the person serving the marketplace is the person who buys the Volkswagen in New Jersey, and I know I'm selling these cars to people who travel and I know that they're going to travel, among other places, to Oklahoma. Yet we've held that Oklahoma can't base its jurisdiction over the New Jersey company simply on the ground that somebody who bought a Volkswagen in New Jersey travels in Oklahoma with it.
Ronald R. Haven: Well, I suppose you can say that it's foreseeable that anybody who has any kind of a vehicle could end up in any state of the Union and perhaps Canada, Mexico, or someplace else. But the point is that your New Jersey dealership did not seek to serve the Oklahoma marketplace, unless you find that there's some other element.
Speaker: So you think Volkswagen should have come out the same even if the seller of the vehicle had said, oh, you want a new car, where are you going? I'm going to Oklahoma. Have a good trip.
Ronald R. Haven: Well, if he's doing something to take advantage of the Oklahoma customers and getting them to come to him--
Speaker: No, no. This is just a New Jersey customer of his that says he's going to go visit his daughter in Oklahoma. But that nevertheless, it still leaves a New Jersey fellow who is not seeking to serve the Oklahoma market.
Ronald R. Haven: --I don't think that you can say that the New Jersey automobile dealer sought to serve the Oklahoma marketplace because an Oklahoman by chance, some fortuity, walks into his dealership.
Speaker: Or some New Jersey person buys the car and says, I'm going to Oklahoma.
Ronald R. Haven: It's still a mere fortuity. He's not... the dealer is not seeking to serve that marketplace.
Speaker: Well, nor was Asahi here. Asahi couldn't have cared less where these valves went. It happened to know that it was very likely they were going to go to California, but they couldn't care less where they went once they unloaded them and got the money for them. They weren't seeking to serve California any more than the Volkswagen dealer could have cared less where the person was driving his Volkswagen. He knew he was going to probably go to Oklahoma. In the hypothetical that Justice White just gave you, the fellow says: I am going to go to Oklahoma. The dealer says: Well, good luck. You're right, he doesn't care whether he goes to Oklahoma or not. So he's not trying to serve the Oklahoma market.
Ronald R. Haven: That's right.
Speaker: And it's the same here.
Ronald R. Haven: And the dealership is not systematically again and again seeking to serve the Oklahoma marketplace in your analysis.
Speaker: Asahi was not seeking to serve California, either. It was just selling valves. It couldn't care less where the valves went.
Ronald R. Haven: That's right, they couldn't care less. They just happened to sell valves to a whole bunch of manufacturers of tire tubes that they knew serviced this marketplace.
Speaker: Just the way the Volkswagen dealer knew that these people were going to be driving the car in Oklahoma.
Ronald R. Haven: No, no. The New Jersey dealer in your hypothetical sells one automobile to somebody who happens to be going to Oklahoma. In this hypothetical or in this case, Asahi sells over a million valves to just one worldwide producer of tire tubes, knowing that its product is going to come to California, and it sells... in ten different years, it sells valves to Cheng Shin. It is, as a matter of a distribution system it is indirectly benefiting from what's going on in California. Now, you're never going to get a case--
Speaker: Even in VW, some of us were in dissent.
Ronald R. Haven: --I beg your pardon?
Speaker: I say even in VW, some of us were in dissent.
Ronald R. Haven: That's very true. But I think VW is a case that is distinguishable based on the fact that we're at a different end of the marketing spectrum. The two entities, the local dealership and the component part manufacturer, have to serve, seek to serve different marketplaces as a matter of the way business works. You're never going to get a component part manufacturer case where the component part manufacturer has a direct sales relationship with the consumer, because the component part manufacturer makes nothing other than the component part that has to be put into something else before it can be utilized. Therefore, we're in a position where the component part manufacturer can be insulated by the nature of his business unless he's responsible in those cases where there's a systematic advantage being taken of a marketplace by that component part manufacturer.
Speaker: He's not insulated. He's just not able to be sued everywhere in the world where his component parts go. He's liable. He can be sued where he can be found.
Ronald R. Haven: He could be sued in Japan.
Speaker: We're not talking about not being able to obtain redress against the person who makes a defective valve. It's just a question of where you can obtain it, whether you can obtain it wherever the valve happens to turn up or whether you have to go to some place where he is located to sue.
Ronald R. Haven: Wherever the valve happens to turn up, that's California.
Speaker: That's what you're saying, wherever the valve turns up.
Ronald R. Haven: Not wherever it turns up. I'm not suggesting that. I'm suggesting much more. I'm suggesting much more activity being required of the component part manufacturer. I am suggesting that the mere fortuity that one... a valve could end up on your car from New Jersey. Let's say that's an Asahi valve and it happens to roll into Oklahoma or California. That's a fortuity. But where you have a manufacturer of a component part who's never going to have direct contact with the forum because he's only going to sell to other manufacturers, when that component part regularly and systematically, because of the known distribution system of the primary manufacturer, ends up in California or some other state, that's a different ballgame than the one isolated instance. I would submit under the one isolated instance jurisdiction probably is not appropriate. That would be consistent with Volkwagen.
Speaker: Mr. Haven, you're going to get to the second prong of the argument, aren't you, having to do with fair play?
Ronald R. Haven: Yes.
Speaker: In light of the fact that what's left in this case are two foreign corporations, really foreign corporations, the California residents, the original Plaintiffs, are out?
Ronald R. Haven: The problem again that I have is the fact that we're dealing with a component part manufacturer who, at least in this case, does all of its business in Japan, which means to me that if in those cases where the injured party perhaps has only one available Defendant, the valve manufacturer, that that Plaintiff may have to go to Japan to seek any redress at all. Now, I admit that's not this case. We're talking indemnity. The Plaintiff has settled out. The Defendants didn't have to settle with the Plaintiff, by the way. We could have drug the Plaintiff through all of this. We settled, we're seeking our indemnity, and I think California has a substantial interest in promoting not only settlements, but also promoting the indemnity which the law in California permits. Now, in footnote one of the Petitioner's brief is a fairly thorough summary of what the nature of the cross-complaint is. You'll see the cross-complaint is an equitable cross-complaint for indemnity or apportionment, as allowed by California law. It is not a contractual indemnity cause of action. The state of California has a substantial interest for many reasons: the accident happened there, the goods were bought in California, California has an interest in making sure safe goods come into the state, as do all the states in this Union. There's a lot of those that are very obvious. But in terms of fair play and substantial justice, I think in balancing the interest of the state versus balancing the interest of Asahi weighs favorably in that of the state, because again I come back to the same notion, that Asahi regularly over the course of ten years and over the course of five years sold well over one and a quarter million valves to Cheng Shin with knowledge of its distribution system, made money off of Californians, subjected Californians to the potential of harm. It's the legal system in California that allows Asahi to do the business that it does there indirectly, and I don't see why Asahi can't come to California and defend its case.
Speaker: But what interest of California remains now that the original Plaintiffs have settled?
Ronald R. Haven: Well, for one thing, the interest that California has--
Speaker: Possible future injuries?
Ronald R. Haven: --I beg your pardon?
Speaker: Possible future injuries?
Ronald R. Haven: Well, that's one thing. But another thing is the transaction took place in California, and under California law... Cheng Shin, by the way, submitted to the jurisdiction of California. Cheng Shin is entitled to the benefits and the burdens of California law. Why can't Cheng Shin, if it's subject to those benefits and burdens, bring its indemnity action there in California, where the main action was?
Speaker: This is Cheng Shin the American subsidiary of the Taiwanese company?
Ronald R. Haven: No, there's a Cheng Shin U.S.A. which goes out and sells tubes to distributors, and then Cheng Shin of Taiwan sends the tubes in directly to the distributors. So Cheng Shin U.S.A. is nothing more than an order taker. It's a separate California corporation.
Speaker: Yes, but wasn't it a party to the case?
Ronald R. Haven: It was a party to the case.
Speaker: And I assume--
Ronald R. Haven: And it's still out there and has a cross-complaint of its own.
Speaker: --I assume... and I don't know what the facts are in this particular case. I assume in the typical situation here your American company probably has an American insurance carrier who probably settled with the Plaintiff and has a subrogation claim against the manufacturer.
Ronald R. Haven: Well, that's actually an indemnity claim. But actually, Cheng Shin of Taiwan was the one that settled, because Cheng Shin U.S.A. was in an indemnity position vis a vis Cheng Shin of Taiwan.
Speaker: Normally that company... normally we'd really have an insurance company that would have an interest in this.
Ronald R. Haven: At least have an option to do so, yes.
Speaker: This particular juncture in this litigation.
Ronald R. Haven: Now, I would also point out that the retailer of the tire, of the tube more appropriately, had a cross-action against Asahi, which is not before the Court at this time because of some technical problems in terms of service and so forth, time of service and all of that. But it's the best of my knowledge there is another action out there waiting for the determination of this Court, because they didn't want to go through the same appellate process that we were going through. So there is an interest of some other California residents out there.
Speaker: Of course, if you're right that an indemnity claim such as Cheng Shin's is always going to be able to bring in a person further back in the stream, presumably Asahi could make the same argument, if we sustain you here, if it wants to file an indemnity action against the steel manufacturer somewhere in Hong Kong from whom it bought the steel. Somewhere the chain has got to get too thin.
Ronald R. Haven: Well, and I think you probably hit the nail right on the head right there, because if you have a producer of a natural metal who is pulling it out of the ground and sending it to the valve manufacturer, sending it to Asahi for whatever purpose Asahi wants to make for it or make out of that particular metal, that's a great deal different.
Speaker: Well, how different is it? I mean, this person just sends steel bars from Hong Kong to Japan, and the same conversations took place. Asahi tells him: Yes, we send a lot of our stuff to Cheng Shin and Cheng Shin sends a certain amount to the United States. And do you know that your steel is all over California.
Ronald R. Haven: Your steel is all over California, and you know that your steel is being made into valve stems.
Speaker: Yes. Well, if you don't know, we're telling you.
Ronald R. Haven: Okay. Like in the last case, valve stem headed for California.
Speaker: And it cracks. And last week what really failed in an accident was your steel.
Ronald R. Haven: Well, to the extent that a metal producer is subject to product liability law... and I'm not sure that steel itself constitutes product liability. But to the extent that there is bubbles in the metal or it's not tempered properly or whatever the process is--
Speaker: So your answer is yes, he should be suable--
Ronald R. Haven: --Yes.
Speaker: --in California?
Ronald R. Haven: If he knows it, if he's taking advantage of it on a regular basis, if he's making money off it and he knows and he continues to sell and he doesn't do anything to protect himself from suit in California. I don't see why he shouldn't be answerable in California. He has the same opportunity to get insurance to cover him here, because he has knowledge that--
Speaker: So it is never too far, it is never too remote?
Ronald R. Haven: --Never say never. I wouldn't say that.
Speaker: Just never find out where the person you're selling something to intends to resell it. I mean, that's all he has to do to protect himself, right?
Ronald R. Haven: Well, if you--
Speaker: Ask not where your valves go.
Ronald R. Haven: --If you stick your head in the sand, you can't be sued where you're making a lot of money from. I'm not sure that that's right, either. I think where as a matter of commercial reality your producer has to know that he is making money from a marketplace on a regular, systematic, continued basis, I don't see why there shouldn't be jurisdiction.
Speaker: But at least the seller of the finished product, he will always know where his products are going.
Ronald R. Haven: And this is a valve. A valve is a valve. It's got one purpose, is to be a valve, nothing more, nothing less. Now, if he's got a valve that's manufactured for bicycles and is wrongfully put in a motorcycle tube, that's a matter of liability and misuse. However, if that valve... he's sending valves, which is a finished, complete product that cannot be used for anything other than a valve. We're not talking metal. We're talking a valve is a valve, and it can only go into a tire tube and it's not good for anything else. That's the case we have here, and under these circumstances, where so many valves are in question, where so many valves were actually found in California... I want to break the train of thought for just a second here. There has been a suggestion made that some lawyer found some valve stems that he identified as Asahi, and the implication obviously is he doesn't know an Asahi valve from some other valve. The declaration from Wally Chen, who is the person from Cheng Shin, is offered as Exhibit A to the Respondent's brief, and in that appendix it specifically stated that Asahi's logo is a capital Mr. Shepard, my partner. As indicated in appendix B and C, that's how he identified those valves. There has never been any denial in any affidavit submitted on the record that the logo is not a capital "A" that is totally encircled. There has never been any kind of an affidavit that the identification was somehow wrong based on the affidavit of Mr. Shepard. So we know that there is 267 of those valves in California in 1983. This accident happened in 1978. What I'm proposing to the Court is that the continued systematic taking advantage of Cheng Shin's system of distribution--
Speaker: What evidence is there of continuous taking advantage of California?
Ronald R. Haven: --I believe the affidavit of Asahi's president said that they had done business with Cheng Shin over a ten year period. And there is also a declaration--
Speaker: What about, what's the evidence that Asahi consciously was taking advantage of the California market over a period of years?
Ronald R. Haven: --Well, they didn't say that.
Speaker: Well, what evidence is there?
Ronald R. Haven: Well, the evidence is that they, number one, knew or at the very least should have known that Cheng Shin, Honda, and others regularly serve this market. They're an important cog--
Speaker: Isn't know enough?
Ronald R. Haven: --No, I'm saying the declarations say that they knew that Cheng Shin did.
Speaker: I know that.
Ronald R. Haven: I'm also saying that it would be unrealistic to expect that they didn't.
Speaker: We're back to where we were a while ago, that there is still the missing component of how... what percentage of Cheng Shin's tubes contained Asahi's valves. You don't know that?
Ronald R. Haven: No, I don't know that. I don't know that. As I was going to point out, however, the sampling that we did in northern California shows that approximately 25 percent of the valves--
Speaker: Well, wasn't there a finding... was there a finding below that Asahi over a course of years was consciously taking advantage of the California market?
Ronald R. Haven: --There is specific language in the California Supreme Court decision at at least three places--
Speaker: That that's the case, is that it?
Ronald R. Haven: --Yes, that there was an awareness. Asahi was aware of the distribution system's operation and knew that it would benefit economically from the sale in California of products incorporating its components. That's page C11 of the appendix.
Speaker: Yes, if any of them were sold there. That's a very general statement. I mean, obviously they knew they would benefit from the sale of products containing their components anywhere, including California. But that does not say to what extent it thought they were being sold or knew they were being sold in California.
Ronald R. Haven: I can't tell you what the percentage of tire tubes were that came into California. I just don't have a record of that. What I can--
Speaker: Why wouldn't Cheng Shin have know how many Asahi valves were sold and distributed in California in the year 1978? Why wouldn't they have put an affidavit in the record for the year that is most critical here?
Ronald R. Haven: --The year that's most critical--
Speaker: Or '77, whatever you want.
Ronald R. Haven: --'78, we do know that there were 100,000 valves sold to Cheng Shin in that year.
Speaker: But how many of those came to California? Cheng Shin ought to know.
Ronald R. Haven: Cheng Shin might very well know. That's something that I just didn't get the declaration on.
Speaker: They probably don't know, that's the point.
Ronald R. Haven: Well, they may very well know. They may know that a certain percentage of their tire tubes contained Cheng Shin--
Speaker: Right. And they know how many tubes went to California. But they don't know how many tubes... they might not know how many tubes went to California containing Asahi valves.
Ronald R. Haven: --They might not know that, I can't deny that.
Speaker: But they ought to know what the percentage. First of all, they ought to know the percentage, and if you just extrapolate you ought... but they didn't give us those figures, did they?
Ronald R. Haven: I beg your pardon? No, I don't have those figures. I just don't have them.
Speaker: So the burden really is en you to sustain jurisdiction. So it's a hole in the record.
Ronald R. Haven: It's true, it's my burden, it's my burden. I can't offer you that, but I can offer you what was actually there in '83. And what I was going to say a minute ago is that, whether or not this accident or this valve came into California at the beginning of the time of this systematic distribution of the product or at the end of it shouldn't matter.
Speaker: It just seems to me it's such a strange way to get this evidence, to have your partner going out looking through a bunch of valve assemblies five years later.
Ronald R. Haven: We wanted to establish that they were in fact in California.
Speaker: Yes.
Ronald R. Haven: The only thing I would ask is that the Court take cognizance of the cases below, all of which are cited in the briefs, which point out the significance of awareness of distribution systems and consider those facts in coming to your decision. In closing, I can only say that it doesn't seem to me to be appropriate, where in fact the component part manufacturer who is in a unique position can insulate itself from having to appear within the forum simply because it will never have contact directly with the forum. A component part manufacturer is in a unique position. It makes all of its sales some place else. It's never going to be selling directly to the consumer. And it's necessary for the Court to devise a way or certain circumstances under which those people can be held accountable for the safety of their products in our state and in all the states. And I would suggest--
Speaker: That can always happen with somebody that doesn't know that it's going to be brought in. I mean, you can have somebody who is negligent as can be in the manufacture of something more dangerous than a valve, let's say an airplane, okay, and he doesn't know that the airplane's going to be used in the United States, and he sells it to someone who then brings it to the United States and it's used here. Now, it's very easy for that to hurt somebody in the United States, and you wouldn't assert that the mere fact that he manufactured the product that was used here is enough to enable him to be sued here, right?
Ronald R. Haven: --No, not at all, not at all. But where that company manufactures those airplanes knowing that they're going to be coming here, it's a different ballgame. That's a different set of circumstances, and if you've got--
Speaker: And it isn't the fact that the injury occurred here alone that makes it an appealing case.
Ronald R. Haven: --I'm sorry?
Speaker: It isn't the fact that the injury from the defective product occurred here, it is not that fact that makes it an appealing case for the assertion of jurisdiction.
Ronald R. Haven: Not that alone.
Speaker: There has to be some voluntary--
Ronald R. Haven: There has to be more.
Speaker: --submission to the jurisdiction.
Ronald R. Haven: There has to be purposeful availment, are the key words I believe, of the benefits and protections of the laws of the state. And I am submitting that awareness and continued, the continued taking advantage, the continued selling of these valves to Asahi, with the awareness that they were coming into the state, which is I think what the declaration says, I submit that that is purposeful availment within the meaning of due process.
William H. Rehnquist: Thank you, Mr. Haven. Mr. Staring, you have one minute left. Do you wish to use it?
Graydon S. Staring: Just a few seconds of it, if I may make one final observation. And that is that the doctrine laid down by the California Supreme Court and urged of course by the Respondent here is one which places Cheng Shin or any manufacturer similarly situated in complete control of the question of jurisdiction over the component maker, according to whether it discloses or doesn't disclose some seemingly incidental fact. And we submit that that is not consistent with the predictability which this Court has held is supposed to be preserved by the due process clause. Thank you very much.
William H. Rehnquist: Thank you, Mr. Staring. The case is submitted.
Speaker: The honorable court is now adjourned until Monday next at ten o'clock.


William H. Rehnquist: We'll hear argument next in Number 99-8576, Paul Glover v. United States. Mr. Waldman. Mr. Waldman, after reading the briefs it seems to me that the Government has pretty well conceded the question presented here, and is asking for affirmance on alternate grounds. Now, we don't decide cases on the basis of concessions, but you might be well advised to save a good deal of time for rebuttal.
Michael L. Waldman: Thank you, Your Honor. Mr. Chief Justice, and may it please the Court: In this case, the district court and then the court of appeals concluded that an additional 6 to 21 months in prison caused by counsel's deficient performance was not sufficiently significant to satisfy the prejudice prong of the ineffective assistance of counsel standard. We believe the lower court's attempt to transform this Court's prejudice analysis under Strickland into a requirement that defendant show a significant increase in their term of imprisonment is misplaced. This Court should reject a significant prejudice test as inconsistent with Strickland and this Court's prior treatment of the prejudice test, as inconsistent with this Court's prior holding in Argesinger v. Hamlin that the right to counsel applies where any term of imprisonment is imposed, and because a significant prejudice test is unworkable and unfair. Also in this case, as Mr. Chief Justice has noted, the Government agrees with Glover on the basic issue that the Seventh Circuit's significant prejudice test is incorrect. The Government, however, raises a host of alternative grounds for affirmance in its brief on the merits. Because these new Government arguments were not raised by the Government in the court of appeals, not addressed by any lower court, not encompassed within the question presented in the petition for certiorari, and not persuasive even when examined on their own merits, this Court should not reach these new arguments, but should leave them to the lower courts to be addressed on remand.
Ruth Bader Ginsburg: Would it also be open to the lower court on remand to reassess its initial position on Glover's leadership role if it knew what it knows now about the... that the Seventh Circuit's test is incorrect? Could the sentencing court then say, but we didn't give extra points for leadership last time around, now we want to reassess that and give him the extra points?
Michael L. Waldman: Your Honor, I think the issues as to what arguments have been waived, what arguments... by the Government or by Mr. Glover, whether to do a recalculation is something that would have to be sorted out by the Seventh Circuit, and I think that is one of the very reasons why remand to the lower court is appropriate in this case. In Strickland v. Washington, this Court established the prejudice prong for demonstrating ineffective assistance of counsel. It stated that a defendant must show that but for counsel's unprofessional errors the results of the proceeding would have been different. In numerous decisions since Strickland, this Court has quoted and adhered to this difference in result language from Strickland. The court of appeals erroneously derived the significant prejudice test by misreading this Court's decision in Lockhart v. Fretwell. The circuit court misinterpreted Lockhart v. Fretwell as modifying the normal Strickland test by purportedly adding a new, more rigorous prejudice requirement. Last term, in Williams v. Taylor, this Court rejected the proposition that Lockhart has announced a new higher standard for showing prejudice. This Court in Williams reiterated that Strickland's difference-in-result test remained the standard to be applied in virtually all cases. Williams emphasized that, in its own words, a mere difference in outcome was sufficient to satisfy the prejudice prong. Here, Mr. Glover's counsel's ineffective performance led Mr. Glover to receive an additional 6 to 21 months in prison, clearly a difference in outcome. We also believe that this Court should be guided by its decision in Argesinger v. Hamlin. There, the Court held that any term of imprisonment, no matter how short, implicates the constitutional right to counsel. Consistent with Argesinger and its progeny, this Court should not tolerate 6 to 21 months of undeserved imprisonment caused by the ineffective performance of counsel. Furthermore, as the Government itself notes in its brief, a significant prejudice test is unworkable. One sees this problem in the decision of the district court below, where the district court struggled to figure out whether 6 to 21 months in prison was sufficiently significant. Although the court of appeals has employed the significant prejudice test for a number of years, it remains unclear whether the significant increase in sentence refers to some percentage change, some absolute number of months, or some other factor. For example, if significance is measured in offense levels, as some courts have stated, the two offense levels such as occurred in Mr. Glover's case, a two-offense-level change can be as much as 8 or 9 additional years in prison in some cases, depending on the crime and the characteristics of the offense.
Sandra Day O'Connor: Mr. Waldman, is your client still incarcerated? Does this case affect his actual incarceration?
Michael L. Waldman: Yes, Your Honor. He has served approximately 5 years of his term, but he has another 13 months remaining, so a favorable result on a section 2255 motion would allow him to be released. We don't believe that one can seriously argue that 8 or 9 additional years imprisonment which are undeserved, and caused only by counsel's errors, can ever be considered insignificant. Moreover, we would make the more basic point, the point which we believe lies at the core of Argesinger, of Strickland, and the right to counsel cases, which is that any term of imprisonment which is undeserved and resulted from a lack of effective counsel cannot be permitted to stand. Turning to the new arguments in the Government's brief on the merits, although now agreeing with Mr. Glover that the lower courts erred in applying a significant prejudice test, the Government goes on on its brief on the merits to raise a variety of new grounds for affirmance. The Government argues that Mr. Glover's counsel did not perform deficiently at all. The Government now argues that the Wilson case requiring grouping offenses such as Mr. Glover's, that that case was wrongly decided by the court of appeals and should be overruled by this Court. Finally, the Government now argues that correctly recalculated under Wilson, in its view, Mr. Glover's sentence would actually be increased. However, these alternative grounds were not properly raised previously in this case, and should not be addressed by this Court in the first instance. First, these various Government arguments were never presented to the court of appeals. The Government argued only one issue in the court below, that 6 to 21 additional months in prison did not satisfy the significant prejudice test established by the Seventh Circuit, and we attach, in our... as Appendix A to our reply brief, the Government's brief to the court of appeals.
William H. Rehnquist: Well, the Government... you, of course, were appealing against the decision of the district court, were you not?
Michael L. Waldman: That's correct, Your Honor.
William H. Rehnquist: And so how much is the Government expected... as an appellee, how many of these things do you expect it to raise, when you're appealing?
Michael L. Waldman: Well, Your Honor, they obviously had the right to raise whatever arguments they wanted to affirm the district court below, alternative grounds for affirmance at that court. Our position is not that they were... it was... they were required to raise these arguments, but in failing to raise them to the court of appeals and now raise them to this Court, that it's not appropriate for this Court under its rules of procedures to address them in the first instance.
Ruth Bader Ginsburg: That's all you're saying. You're not saying that they were waived. You're saying that's a decision for the Seventh Circuit to make on remand.
Michael L. Waldman: That's correct, Your Honor. Second, neither the district court nor the court of appeals ever addressed any of these various new Government arguments. The lower courts relied on only one ground, that petitioner could not satisfy the significant prejudice test of the Seventh Circuit. Third, these Government arguments are very different from the issue that we presented for review by this Court in our petition. The question presented by petitioner focused exclusively on the validity of the significant prejudice test which was relied on in the decisions below to dismiss Mr. Glover's petition. In these circumstances, this Court should not reach out to address the alternative grounds for affirmance now raised in the Government's brief on the merits. This rule's... this Court's rules of procedure, as well as the numerous cases that we cite at pages 7 and 8 of our reply brief, make clear that the practice of this Court is not to address issues which appear for the first time in the merits brief to this Court. There are no extraordinary circumstances here which demand that this Court diverge from its usual practice. The Government's arguments do not raise pressing issues of constitutional significance, or issues of great national import. Rather, the Government's new arguments involve complicated and detailed applications of the sentencing guidelines and lower court procedures and decisions. These are precisely the types of issues which this Court should not be addressing. As this Court noted in Braxton v. United States, this Court should be, in its own words, restrained and circumspect in resolving sentencing guidelines interpretation issues, since Congress expressly provided the Sentencing Commission with the power to resolve issues involving conflicts in interpretation of the sentencing guidelines. Here in particular, the Sentencing Commission has announced that as one of its priorities this year it will be examining the guidelines interpretation of section 3(d)1.2, which is the very section which the Government is asking the Court to review. This Court will also occasionally resolve issues which were not raised below, where there is an obvious plain error which this Court can quickly and easily dispose of. That also is not the case here. As we demonstrate at pages 12 through 20 of our reply brief, not only are these issues not easily resolved, but the Government's new arguments at the end of the day are simply without merit. The Government argues that there was no deficient performance by Glover's counsel, yet Glover's counsel on appeal never raised the issue of grouping the kickback and money laundering offenses. The probation officer's report had recommended grouping, and at least three circuits had ruled in favor of such grouping. This was a pure legal issue. It was a strong viable claim that his appellate counsel should have raised, and which, as the Wilson case shows us, would have prevailed. This grouping issue was far superior to the two claims which were raised by Mr. Glover's counsel on appeal. These two claims involve challenges on evidentiary and fact findings by the district judge where the standard of review required Glover's counsel to make his case by clear error. Ultimately the court of appeals found that these two claims raised by Glover's counsel were wholly unfounded, in its words, involved no error whatsoever, let alone clear error, and also again in the opinion it says it was not a... these are not a close call. Comparing the grouping claim with those claims which he did assert, we submit that Glover's appellate counsel clearly acted outside the scope of a reasonably competent attorney in not raising this grouping issue on appeal. We also believe that it was clearly deficient performance to not bring the Wilson case, a... the Seventh Circuit's new case which controlled this issue and was directly on point, to not bring it to the attention of the panel in Mr. Glover's case, even though that case was still pending when Wilson was decided. As to the Government's other elaborate challenges to the sentencing guidelines calculation, we believe that the Seventh Circuit's decisions in Wilson I and Wilson II are controlling and correct. The Government has offered no compelling justification for this Court to review these decisions, or to overrule their sound reasoning.
William H. Rehnquist: Was Glover's counsel on the first appeal, was it retained counsel or furnished by the Government?
Michael L. Waldman: Retained counsel, Your Honor. In summary, the Government's various new arguments are inappropriate for this Court to address in the first instance. They involve complicated fact specific and detailed issues which are best sorted out by the lower courts. The issue which this Court accepted for review was whether 6 to 21 additional months in prison due to counsel's ineffective performance constitute prejudice under the Strickland test. This Court's precedent and elemental fairness requires that this Court reject the significant prejudice test applied by the Court below. If the Court has no further questions, I'll reserve the remainder of my time.
William H. Rehnquist: Very well, Mr. Waldman. Mr. Dreeben, we'll hear from you.
Michael R. Dreeben: Mr. Chief Justice, and may it please the Court: We agree with petitioner that the Seventh Circuit erred in adopting a significant difference test for measuring the prejudice inquiry under Strickland v. Washington. We believe, however, that the judgment in this case is correct, because petitioner's counsel at trial and direct appeal neither rendered deficient performance nor gave rise to prejudice.
Sandra Day O'Connor: Mr. Dreeben, why didn't the Government tell us this in the response to the petition for certiorari?
Michael R. Dreeben: Justice O'Connor, at the stage when we responded to the petition, we told the Court that we thought the judgment was correct. We did not defend the rationale of the Seventh Circuit and, in fact, indicated that the Seventh Circuit might wish to reconsider it in light of this Court's intervening decision in Williams v. Taylor and a Fifth Circuit decision that had criticized it, but we had not formally concluded our analysis of whether at the end of the day we would or would not defend the approach that the Seventh Circuit adopted at the time we filed our response to the certiorari position. After we told the Court not to grant the case, and the Court disagreed and granted it, we then undertook a complete analytical review of the Seventh Circuit's approach and concluded that we could not submit that this Court could affirm that approach consistent with its own cases and principles governing the ineffective assistance analysis, but we continued to believe that the judgment in this case as rendered by the Seventh Circuit was correct on alternative bases.
Sandra Day O'Connor: But those grounds would be hard for us, really, to address here for the first time, at least on the grouping question. There's a five to five split below, and the Sentencing Commission is considering a change, particularly hard for us to deal with.
Michael R. Dreeben: I agree, Justice O'Connor, that the sentencing guidelines question and the intricacies related to whether money laundering should be grouped with the underlying offense are both complicated and the kind of issue that this Court would ordinarily properly leave to the Sentencing Commission to resolve, particularly since the Sentencing Commission is aware of it. We presented that analysis on the prejudice prong of the case in order to illustrate how very complicated the guidelines decisions that counsel faces are when deciding whether to raise a particular claim or not to raise a particular claim. These are intricate matters that are quite complex in Federal criminal law, and more complex than most decisions that counsel has to make, and it is therefore highly relevant to what this Court says, if anything, about the proper analysis and performance when counsel is charged with having failed to raise a sentencing guidelines claim that the client later believes that he should have raised. The Seventh Circuit--
William H. Rehnquist: That would come up, Mr. Dreeben, only if we dealt on the merits with your effort to affirm on an alternate ground.
Michael R. Dreeben: --That's correct, Mr. Chief Justice. The fundamental point that the Seventh Circuit was trying to make in adopting its significant difference test was that there are a multitude of guidelines questions that confront counsel who is handling a sentence or a sentencing guidelines question on appeal, and that if it were the case that any guidelines error could support collateral relief, the defendant would often get the chance for two full bites at the apple at sentencing questions, first at trial and on direct appeal, and second on collateral review, and--
Stephen G. Breyer: That may be, but it's hard to say that's what the Seventh Circuit was talking about. They say Glover, to win on ineffective assistance he'd have to show his counsel performed below a constitutional threshold and that the deficient performance prejudiced him. Even if we were to assume that Glover's attorneys performed inadequately, the second prong, prejudice, is missing here, and then they go on to discuss that, so it seems to me they didn't say one single word about was, what was or what was not inadequate performance.
Michael R. Dreeben: --I quite agree, Justice Breyer, and my point is that the considerations that drove the Seventh Circuit to adopt its rule on prejudice are actually far more pertinent to analyzing the performance prong. Sentencing guidelines claims, as the Court knows, are not only complex but can have unpredictable outcomes, and can--
Ruth Bader Ginsburg: But Mr. Dreeben, may I just stop you there to confirm that you recognize the Second Circuit did not pass on the adequacy of the performance. It said, we will assume, for purposes of this decision, that the performance was inadequate. Even so, there was no prejudice. So we don't even have an answer in the first instance on the deficiency of the performance from the Seventh Circuit. Why should we handle such a question as a matter of first view?
Michael R. Dreeben: --I think, Justice Ginsburg, the reason why it is relevant for the Court to say something about the performance issue, which was not addressed squarely by the Seventh Circuit... we did argue it in the district court and the district court didn't address it either, so it has not been resolved by the courts below, but it is highly interrelated with the prejudice inquiry in a sentencing guidelines ineffective assistance collateral attack, and the point that the Seventh Circuit was trying to make was to give courts a way to weed out these collateral attacks in an efficient way.
Ruth Bader Ginsburg: Well, why not let the Seventh Circuit make it, because looking at its current decision, all it said is, we're going to assume for purposes of this decision that counsel's performance was inadequate.
Michael R. Dreeben: I agree that the Seventh Circuit hasn't resolved it, but this Court is going to announce a decision that will be influential in the way that the lower courts address comparable sentencing guidelines ineffective assistance of counsel cases, and I think that it would be useful for the lower courts to have some guidance from this Court as to some of the relevant considerations and factors that ought to be brought to bear on the performance inquiry.
Antonin Scalia: There's really nothing novel about the points you make concerning adequacy of counsel's performance. You say, you know, these are complex issues, you can't raise too many either at the trial level or especially on appeal, you have to pick your good targets, this wasn't a good target... I mean, it's all standard analysis, it seems to me. I could understand it if you were presenting to this Court some novel new theory of counsel inadequacy that we have to signal to the lower courts, but there's really nothing bizarre about the arguments you're making. They're standard adequacy of counsel arguments, aren't they, and can't we leave them to the Second... Seventh Circuit to figure out?
Michael R. Dreeben: Well, I hope they're not bizarre, but I do think that the arguments that we've made have gone a little bit beyond what you, Justice Scalia, have just accurately described as where this Court has thus far gone in analyzing the performance inquiry. Clearly, counsel has to be selective in raising the issues that it chooses to present to an appellate court especially, and clearly, as this Court stated in Smith v. Robbins last term, just because a claim might look good in hindsight doesn't mean that it's the kind of claim that counsel should be deemed obligated to have raised. But there is a unique feature to the sentencing guidelines claims, as well as a generally relevant point to appellate advocacy that I think the Court could do well to clarify. In these sentencing guidelines claims, there can often be ambiguity about whether a particular claim will indeed help the defendant when it is raised on appeal and prevails and, if so, by how much. In this case, most starkly, our view is that if petitioner got the grouping that he asked for, his offense level should actually go up, not down, because the grouping would have required that all of the financial harm that he inflicted on the various victims be aggregated into one group, so a counsel who was looking at a sentencing guidelines claim, unlike claims that would simply result in a reversal of a conviction, has to be cognizant that there can be unintended adverse effects. In addition, and this was the insight that I think the Seventh Circuit was most concerned with, sentencing guidelines claims can produce sometimes only very modest benefits, and the length of the benefit that would be produced is a relevant factor in considering whether reasonable counsel would elect to raise a relatively long shot claim, or a claim that's not established.
William H. Rehnquist: Well, Mr. Dreeben, I take it we have three choices here. We could say something on this issue that helps the Government. We could say nothing. We could say something that hurts the Government. You would rather us have us say nothing than say something that hurts the Government, I take it.
Michael R. Dreeben: Correct, Mr. Chief Justice. [Laughter] I'm here seeking to affirm the judgment, and if I can't affirm the judgment, at least get some guidance that would be useful to the lower courts that have been grappling with this problem. Now, petitioner has, of course, pointed out that it is unusual for the Court to go beyond the scope of the question presented and address grounds that were not decided below and the Government, of course, fully agrees with that. We recognize that it's unusual. It's certainly not unprecedented for the Court to decide a case on grounds that weren't decided by the lower court or that were not fully addressed.
John Paul Stevens: If I understand you correctly, you're asking us either to affirm on grounds not relied on below or, alternatively, to write an advisory opinion on the general subject matter.
Speaker: [Laughter]
Michael R. Dreeben: I would call it giving guidance, Mr. Justice Stevens. [Laughter] The Court similarly believed that it was appropriate to give guidance to the lower courts by showing how the rule of law applies to the particular facts in Brook Group v. Brown & Williamson, a 1993 decision where the Court took a novel antitrust principle and then applied it to the very intricate and specific facts of that case. In Siegert v. Gilley, a 1991 decision, the Court actually affirmed the judgment on a ground that the lower court had not reached at all. There, the lower court had said there was a heightened pleading requirement for qualified immunity. This Court decided the case on the grounds that there was no underlying constitutional right that was asserted in the Bivens action at all, and in that case not only was that not the question presented, but the parties hadn't even briefed it or addressed it. So--
Speaker: There's... on occasion... I... it seems to me that case... opinion perhaps represents a decision that a particular claim is logically antecedent to another one, and it seems to me you have a hard time saying that here.
Michael R. Dreeben: --I do have a hard time saying it's logically antecedent, but the third case that I would refer the Court to involves the elaboration of the additional implications of a claim that the court decided. That is Colstad v. American Dental Association, which was decided in 1999, and there the Court elaborated a standard for punitive damages in Title VII actions and then went on to give guidance to the lower courts about how agency principles apply, but then remanded--
Speaker: And some members of the Court were rather critical of that particular development, I would say. [Laughter]
Michael R. Dreeben: --I am relying on the majority's disposition in the case.
David H. Souter: Your brief was very effective on the points you're raising.
Michael R. Dreeben: The Seventh Circuit obviously could resolve these issues, and if this Court chooses to give the guidance that we think is appropriate, it will help the overall administration of the judicial system, because we believe, on the one hand, that when a defendant has not had adequate assistance of counsel, constitutionally effective assistance of counsel in litigating the sentencing guidelines claims, and he can show a reasonable probability of a different outcome, then he has satisfied the elements of a constitutional claim.
Stephen G. Breyer: Okay, so what you want us to say is, we assume for argument's sake that the present defendant's present interpretation of how this all works, the multiple count thing is correct. We'd have to say that, otherwise we'd have to get into who's right and who's wrong about multiple counts, wouldn't we?
Michael R. Dreeben: I think--
Stephen G. Breyer: We'd have to say, we assume they're right, I think.
Michael R. Dreeben: --I think that the Court could--
Stephen G. Breyer: Or do you want us to get into multiple counts, which is... I know multiple counts. It's like Hagel on his death bed. He said, only one person has ever understood me, and even he didn't understand me.
Speaker: [Laughter]
Michael R. Dreeben: --That's perhaps why the Sentencing Commission is going to clarify this. I think it's also perhaps why counsel should not be quickly branded ineffective.
Stephen G. Breyer: All right, so you want us to say, we assume for argument's sake that they're right on the merits of multiple counts, a thing you don't really believe, but you want us to say that they're right, for assumption.
Michael R. Dreeben: No. I actually would like the Court to say that the Seventh Circuit applied the incorrect test for prejudice, but a properly analyzed performance and prejudice inquiry would produce the conclusion that petitioner's counsel is wrong. That would be my first choice. My second choice is for the Court to do no harm to the arguments that I'm making about ineffective assistance, and that those are really the only two choices that I'd like to submit to the Court at present. [Laughter]
William H. Rehnquist: Is there any difference in the legal standard applied to a performance by retained counsel as opposed to appointed counsel for ineffective assistance of counsel purposes?
Michael R. Dreeben: No, Mr. Chief Justice. There is a constitutional floor that applies regardless of whether counsel is retained or appointed. The only place where there's a different standard is where counsel is waived altogether and the defendant represents himself. He can then not charge himself with ineffective assistance of counsel. There is one legal point that has not been clarified in this Court's cases regarding appellate assistance by counsel that could also be usefully clarified, and that is that we think the proper inquiry would look to the state of the law facing appellate counsel, rather than having an evidentiary hearing that would analyze in great depth how much legal research the particular counsel did in anticipation of filing his appellate brief. The inquiries here are essentially whether the defendant's lawyer did not present a claim that was sufficiently strong that it was ineffective for him not to present it. We think that that is an objective inquiry that should be measured by the state of the law that was confronting the appellate counsel at the time, and should be resolved based on the legal precedents that are in existence.
Ruth Bader Ginsburg: But isn't the suggestion here that sometime between the oral argument in the Seventh Circuit and the Seventh Circuit's decision this intervening decision in Wilson came down, so that any competent counsel would have said to the Seventh Circuit, may I file a supplement including this decision, which bears very much on a case that is sub judica before you.
Michael R. Dreeben: Well, I think the answer is no, for several reasons, Justice Ginsburg. First of all there's no authority that I know of that says that competent counsel is required to continue to survey the developing law on issues that he decided not to raise to appeal to an appellate court to determine whether there has been some change of law on an issue that he abandoned. I don't think that competent counsel is required to stay abreast of the law in that fashion. Second, as we have pointed out, competent counsel may well conclude that, rather than risking the ire of the court of appeals by raising a claim that he had previously abandoned and is now exploiting only because some other defendant had successfully raised it might cost him credibility with the court of appeals and is therefore not appropriately done. There was no authority in the Seventh Circuit at the time, as there is today, that says that counsel has a right to present new issues that are based on intervening law.
Ruth Bader Ginsburg: Do we know what the Seventh Circuit practice is? Does it generally receive such supplemental briefs based on intervening changes in the law?
Michael R. Dreeben: I have spoken to the U.S. Attorney's Office about that question and I have not received a clear answer, because it doesn't come up all that often, but I will say that the Seventh Circuit is a procedurally strict circuit and it does make every effort to ensure that parties get review only on those issues that they've elected to raise in their opening brief. Now, there is one piece of stray dictum in a Seventh Circuit case that suggests that, of course, if the law changes, maybe parties can raise new issues. Other circuits are divided on that issue, so it's hardly something that I think competent counsel should be presumed required to do in order to meet the minimal constitutional standard of adequacy. And the final reason why in this case I don't think competent counsel was deficient even if he knew about Wilson and didn't raise it to the court of appeals is because Wilson, under its grouping analysis, produces this strange anomaly of requiring more financial harm to be included in each of the offenses that is grouped, and for reasons that as Justice Breyer has pointed out, very few people understand but we've attempted to lay out in our brief, the offense level would actually go up, and it would have a counterintuitive result. This actually happened in the Wilson case. The judge on remand from Wilson I, the case that petitioner says should have been cited to the panel, resentenced the defendant to a higher sentence, faithfully applying the guidelines as he understood them. The court of appeals then reversed, saying, well, the Government had waived its right to argue the increased offense level in that manner. We don't agree with the Seventh Circuit's waiver analysis, but the more salient point here is that no counsel could have foreseen that the Seventh Circuit would later apply a waiver analysis, and thus, if counsel had actually read the Seventh Circuit's decision and said grouping is required under subsection (d) of the sentencing guidelines, section 3(d)1.2, and had asked for that, the sentence could go up, and that lawyer would not be assured that there would be any purpose served by raising that kind of an argument only to his client's ultimate detriment. So taking into account the complexities of the guidelines, the potential for adverse results that can occur, and the state of the law which hardly suggested that this was, as Judge Easterbrook has called in another context, a dead bang winner on appeal, we don't think that there was any deficient performance by petitioner's counsel that would merit ineffective assistance relief on collateral review. If the Court has no further questions--
William H. Rehnquist: Thank you, Mr. Dreeben. Mr. Waldman, you have 16 minutes left.
Michael L. Waldman: Thank you, Your Honor. I will be brief. The Government has said that it wants this Court to issue guidance. I wrote down, an advisory opinion would be useful to clarify some points. This Court has procedures as to when it will take cases in the first instance. It says that it will only do so in extraordinary, rare circumstances. This Court... there are reasons for those procedures of this Court, and the cases that we cite at page 7 and 8 of our reply brief. This Court benefits from the thinking of the lower court. It benefits from the refinement and sharpening of issues by the lower courts. None of that occurred here, and the Government has not identified any issue that is so pressing, that is so... such an issue of concern for the lower courts that guidance by this Court is essential. It hasn't reached that extraordinary circumstance requirement which this Court has set for dealing with issues at the first instance. There is nothing at core... as Justice Scalia said, this is standard analysis. There is nothing unusual about these arguments being made by the Government here concerning the sentencing guidelines. They are complicated arguments. They are detailed arguments. They are arguments which are best sorted out by the lower courts here. As to whether the Seventh Circuit would accept the Wilson case if offered after briefing and oral argument, we cite a number of cases in footnote 14 indicating that we believe they would, but that's an issue which the Seventh Circuit is in the best situation to resolve, not this Court in the first instance. We would also note, again, this Court's decision in Braxton v. United States, that it should restrained and circumspect in dealing with sentencing guidelines issues. This sentencing guideline issue in particular is in front of the Sentencing Commission, and we don't see any reason for this Court to engage in advisory opinions or clarifying issues that have not been addressed and dealt with by the lower courts.
William H. Rehnquist: Thank you, Mr. Waldman. The case is submitted.